2nd. It should be a substance which is generally prized. 3rd. It should possess great value in small bulk.

It is easy to perceive that the first of these qualities, viz. uniformity of value, is of great importance with regard to the first function of money, i. e. to act as a general standard of value. It is impossible from the nature of things that there should be any absolutely invariable standard of value. It was one of the economic schemes originated by Robert Owen to make labour the standard of value, and to enact that a fixed and uniform value should always attach to an hour's labour. It is obvious, however, that the value of labour is more variable than almost anything else that could have been thought of; and that there is no reason either in justice or commonsense why an hour's labour from such a man as Sir Joshua Reynolds should exchange at an equal value for an hour's labour of the man who blacked his shoes. Owen's Labour Exchange which had a short-lived popularity in the year 1832 was soon broken up through its inherent error of valuing all labour alike.

All substances known to us are liable to variations in their value. The utmost that can be obtained, therefore, in the substance selected as money is that the variations in value should be slight and gradual. If the value of the substance selected as money fluctuated very rapidly, the terms of every monetary contract would be disturbed. Suppose, for instance, wheat was selected as a general standard of value; in this case if A borrowed 10,000 qrs. of wheat from B, promising to pay him at the end of 6 months, when the time to pay arrived the value of wheat might have increased or decreased, owing to quite unforeseen circumstances, as much as 20 or 30 per cent. If the value of wheat had increased 30 per cent. A would virtually have to repay to B 30 per cent. more than he borrowed; because the same quantity of wheat would

exchange for 30 per cent. more wealth than it would have done 6 months before. If, therefore, the value of the substance selected as money were subject to sudden fluctuations, every commercial transaction would be reduced to a gambling speculation; for no one could with certainty foretell what the value of money would be in a few months' time.

The value of Gold and Silver varies less than that of almost any commodities which also possess the other characteristics which qualify a substance to fulfil the functions of money.

The second quality which money should possess is that it should have an intrinsic value of its own. That is, that it should be valued for its own sake, and not merely in its capacity as a measure of value and medium of exchange. If money were not composed of a material which is generally prized, it would not be universally accepted in exchange for commodities. Thus, for instance, the cowrie shells, formerly used as money by an African tribe, would never have been accepted by other people as a medium of exchange; because the shells would not be valued for their intrinsic worth, but simply for their exchange power, and this exchange power did not exist except in one particular locality. From various causes gold and silver have always been greatly valued, even in the most barbarous countries and in the most remote ages of antiquity. Their brilliancy, great durability, and malleability, have caused them to be much prized for the purposes of decoration and ornament in all ages and among all nations. For these reasons gold and silver possess in an eminent degree the second of those qualities which ought to characterize the substance selected as a measure of value and as a medium of exchange.

The third quality which money should possess, viz.

great value in small bulk, has already been alluded to. The fact that gold and silver fulfil this condition in various degrees, is manifest. The difficulty of procuring gold and silver, their consequent rarity, and the fact that they are universally prized, contribute to enhance their value. There are other substances, such as diamonds and other precious stones, which contain a very far greater value in a much smaller bulk; but diamonds would be a most inconvenient substitute for money; a diamond the size of a pin's head would be worth from 20s. to 30s., and the inconvenience of handling such small objects and the danger of losing them would be insuperable obstacles to using diamonds as money instead of gold and silver. There are other objections to the use of precious stones as money; they could not be coined; if they were divided their value would be diminished, for a diamond the size of a pea is far more valuable than ten diamonds each of which is the size of one-tenth of a pea. It is therefore evident that though the substance selected as money should contain great value in small bulk, the difference between the bulk and the value of the substance should not go beyond a certain point. Gold would be extremely unfit to make small payments with. A piece of gold of the value of sixpence would be almost as inconvenient a substitute for a silver sixpence as a diamond would be for a sovereign. In the same manner silver could not take the place of our copper coinage. In India, where there is no gold coinage, the inconvenience of carrying sufficient silver money for current expenses is very great, and leads many people to carry a cheque book instead of a purse, and pay for everything with cheques.

It is some

The meaning of a Double Standard of Value. times proposed that what is called a double standard of value should be adopted. The meaning of the ex

pression 'double standard" is, that it should be legal to offer either gold or silver in payment of any debt, no matter what the amount of it may be. There are obvious disadvantages in this plan. Suppose that, owing to any circumstances, the value of silver declined between the time when a debt was contracted and when it was paid; it would then be to the advantage of the person who had incurred the debt to discharge it in silver instead of gold. But, as previously shown, if the standard of value fluctuates between the incurring of a debt and the payment of it, the terms of every monetary contract are disturbed, and a most disastrous effect is produced on commerce. For example, A lends B £25, B promising to pay at the end of a year; it is quite possible that the relative value of gold and silver may have changed before the time arrives for discharging the debt. If B is allowed to choose whether he will repay the loan in gold or silver, he may avail himself of any change that has taken place in the value of either silver or gold. If gold has declined in value, he can discharge his debt in gold; if silver is less valuable, he may pay his debt in silver. Hence, if there is a double standard, the terms of every monetary contract are liable to be disturbed by the fluctuations in the value of two substances, instead of being influenced only by one, as in those cases where there is a single standard of value.

There is not a Double Standard in this Country. It may be thought that as in this country there are gold, silver, and copper coins in circulation, there is not only a double, but a treble standard. This is not, however, the case. The silver and copper coinages are subsidiary. Their representative value is greater than their intrinsic value. If the silver contained in twenty shillings were melted down, its exchange value would be less than £1 sterling. The English silver and copper coins are issued and used be

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cause they provide a convenient means of making small payments; but they are not legal tender beyond a certain amount. No debt of more than 40s. can be discharged in silver unless the creditor consents; and, in the same way, no debt of more than 5s. can be discharged in copper.

An Illustration from M. Bastiat. With one more observation on the subject of money this chapter will be concluded. An immense number of fallacies have been committed under the idea that money is the sole source of wealth. Every one has most likely observed that the more money he has the richer he is, and this observation has led to the conclusion that the more money there is in circulation the richer will be the community which possesses it. The error of this conclusion is well illustrated by the following example of M. Bastiat :-" Ten men sat down to play a game, in which they agreed to stake 1000 francs. Each man was provided with 10 counters, each counter representing 10 francs. When the game was finished, each received as many times 10 francs as he happened to have counters. One of the party, who was more of an arithmetician than a logician, remarked that he always found at the end of the game that he was richer in proportion as he had a greater number of counters, and asked the others if they had observed the same thing. 'What holds in my case,' said he, 'must hold in yours, for what is true of each must be true of all.' He proposed, therefore, that each should have double the former number of counters. No sooner said than done. Double the number of counters were distributed; but when the party finally rose from play, they found themselves no richer than before. The stake had not been increased, and fell to be proportionally divided. Each man, no doubt, had double the number of counters, but each counter, instead of being