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follows that there never can be a general rise or fall in values. For the expression “a general rise in the value of commodities” implies that all commodities will exchange for more of all other commodities; and this is as absurd as saying that every tree in a garden is higher than every other tree. When there is a rise in the value of any commodity there is a corresponding fall in the value of some other commodity. Thus if it is said that the value of meat is greater now than it was twenty years ago, it is virtually affirmed that a given quantity of meat will now exchange for a larger quantity of some other commodity, such as corn, than it would twenty years ago. In this case the value of corn as compared with meat has declined. Value also implies exchange, for it is by ascertaining the number of other commodities for which any particular article will exchange, that its value is determined.

Barter as a medium of exchange. In some barbarous communities all buying and selling is carried on without the use of money, by the exchange of commodities. Thus if one man had more food than he wished to consume he would seek to exchange it with some other man who could give him in return some article which he required, such as a coat or a set of bows and arrows. This method of exchange, some modern examples of which could be suggested by any schoolboy, is called barter ; it is necessarily very clumsy, and as long as it is the sole means of exchange in any country commerce is always extremely restricted. The inconvenience arising from barter suggested the use of money. A substance was by universal consent selected to serve as a measure of the value of all other commodities and also as a medium of exchange. By the use of this substance the necessity of barter was obviated. The man who had more oxen than he required and who wished to obtain clothing or armour in exchange

for them, was no longer obliged to seek some other man who was willing to make such an exchange with him ; he simply had to sell his oxen to any one who was willing to purchase them for so much money; and with this money he could purchase the other commodities which he required from any persons who were willing to dispose of them.

A Definition of Price. The value of a commodity estimated in money is termed its price. Price, therefore, has been defined as a particular case of value ; for, as previously stated, the value of a commodity is estimated by the quantity of other commodities for which it will exchange. If therefore a commodity, such as a yard of cloth, will exchange for five shillings, it may truly be said that the value of a yard of cloth is 55.; but because money has been selected to serve as a universal measure of value and medium of exchange, it is more convenient to give another name to its exchange power. The sum of money for which a commodity will exchange is therefore called its price.

When the price of a commodity such as meat is spoken of, a comparison is made between meat and the precious metals; but when the value of meat is spoken of, a comparison is made between meat and all other commodities. Hence it is evident that though there cannot be a general rise or fall in values, there can be a general rise or fall in prices, because it is quite possible that various circumstances might cause all commodities to exchange for an increased or decreased amount of money. For instance, if the money circulating in any particular country were suddenly doubled, while population and trade remained stationary, there would inevitably be a general rise in prices.

From the above definitions it is proved that the value of all commodities except money would not necessarily be affected if prices were doubled or trebled. Such an event would not effect any change in the relations of various commodities to each other. If, formerly, a yard of velvet was worth 3 lbs. of tea, the relative value of these commodities would not be disturbed if the tea were 75. instead of 35. 6d. a lb., and the velvet 215. a yard instead of ios. 6d. It is therefore evident that a rise or fall of general prices does not affect the value of any commodity except money. If there is a rise in prices an increased amount of money has to be given in exchange for commodities; or, in other words, the value of money has decreased. If, on the other hand, prices fall, the same amount of money will exchange for an increased quantity of other commodities, or, in other words, the value of money has increased. These considerations, however, lead to a further explanation of the nature and functions of money, which must be deferred to the next chapter.

I.

QUESTIONS ON CHAPTER I. Value and Price.

What is value ? 2. Prove that there cannot be a general rise or fall in values.

3. What is meant by bartering commodities ?

4. By what means has the necessity for barter been obviated ?

5. What is Price?
6. Can there be a general rise or fall in prices?

7. If prices were suddenly doubled what would be the effect of such a change on the value of commodities ?

I. Is a rise in the value of bread resulting from a bad harvest produced by an extrinsic or an intrinsic cause?

2. Is a country richer if the prices of all commodities rise ?

CHAPTER II. On Money.

The Functions of Money. In the last chapter the inconvenience of a system of barter was described, and it was stated that the necessity of this system of exchange has been obviated in all civilised countries by the use of money. This is to say, that a substance has been selected by which to measure the value of all other substances, and also to serve as a medium of exchange. If a substance had not thus been selected as a measure of value, there would be no means of stating what the wealth of an individual was, but by repeating a catalogue of all his possessions. Thus, if it were asked what the national revenue of a country like England was, it would be almost impossible to give a reply, if it were necessary to enumerate all the articles which the nation possessed. It would also be very difficult to say how much wealth an individual possessed if there were not a measure of value. It would, for instance, be necessary, in stating the wealth of a rich nobleman, to enumerate the number and height of the trees on his estates, the amount and description of furniture in his houses, the number of horses, carriages, &c., that he possessed: it would take weeks to make an inventory of his possessions; and after all a perusal of it would afford no definite notion of his wealth.

This disadvantage is obviated by the use of money, for the wealth of individuals and nations is now measured by the standard of the precious metals, and is said to be so many thousand or so many million pounds.

The convenience of the use of money as a medium of exchange has already been dwelt upon, when the nature of barter was explained. It was then stated that a country can never reach a great commercial position until barter is superseded by the use of some more convenient method of exchange.

It is evident that the substance selected as money must be easy to carry about. A system of barter would hardly be more prejudicial to the interests of commerce than the use of a substance as money-such as wood, or iron—which does not contain great value in small bulk. If such a substance were used as money. it would be necessary, when making even small purchases, to be followed by a horse and cart carrying one's money. These considerations prove that it does not necessarily happen that the substance selected as money should be either gold or silver; these commodities have usually been chosen in civilised countries because they possess in a peculiar degree the combination of qualities desirable in any substance acting as a measure of value and as a medium of exchange.

Various Substances have been used in different countries as Money. Though gold and silver have been generally selected as the substances best fitted to be used as money, yet some countries have used other commodities in the same capacity. The Chinese formerly used pressed cubes of tea ; some African tribes use a particular sort of shells; the ancient Arabs used cattle ; salt has also been used as money in Abyssinia : and hides and dressed leather in other countries. But it may perhaps be stated, that experience has proved that gold and silver more perfectly fulfil the functions of money than any other substances. For it must be remembered that the substance selected as money must serve as :

ist. A general standard of value.
2nd. A general medium of exchange.

The Substance selected as Money should possess Three Qualities.

ist. Its value should be as uniform as possible.

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