SUPPLEMENTAL READINGS IN MACROECONOMICS
 

    1. The impossibility of the existence of Commerce upon the
supposition of an equal division of lands, where every man should
possess only what is necessary for his own support.

    If the land was divided among all the inhabitants of a
country, so that each of them possessed precisely the quantity
necessary for his support, and nothing more; it is evident that
all of them being equal, no one would work for another. Neither
would any of them possess wherewith to pay another for his
labour, for each person having only such a quantity of land as
was necessary to produce a subsistence, would consume all he
should gather, and would not have any thing to give in exchange
for the labour of others.

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    4. The necessity of these preparations, bring on the exchange
of productions for labour.

    The same motive which has established the exchange of
commodity for commodity, between the cultivators of lands of
different natures, has also necessarily brought on the exchange
of commodities for labour, between the cultivators and another
portion of society, who shall have preferred the occupation of
preparing and completing the productions of the earth, to the
cultivation of it. Every one profits by this arrangement, for
every one attaching himself to a peculiar species of labour,
succeeds much better therein. The husbandman draws from his field
the greatest quantity it is able to produce, and procures to
himself, with greater facility, all the other objects of his
wants, by an exchange of his superflux, than he could have done
by his own labour. The shoemaker, by making shoes for the
husbandman, secures to himself a portion of the harvest of the
latter. Every workman labours for the wants of the workmen of
every other trade, who, on their side, toil also for him.

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    12. Inequality in the division of property: causes which
render that inevitable.

    The original proprietors would (as I have already mentioned)
occupy as much land as their strength would permit them with
their families to cultivate. A man of greater strength, more
laborious, more attentive about the future, would occupy more
than a man of a contrary character. He, whose family is the most
numerous having greater wants and more hands, extends his
possessions further; this is a first cause of inequality. --
Every piece of ground is not equally fertile; two men with the
same extent of land, may reap a very different harvest; this is a
second source of inequality. Property in descending from fathers
to their children, divides into greater or less portions,
according as the descendants are more or less numerous, and as
one generation succeeds another, sometimes the inheritances again
subdivide, and sometimes re-unite again by the extinction of some
of the branches; this is a third source of inequality. The
difference of knowledge, of activity, and, above all, the
oeconomy of some, contrasted with the indolence, inaction, and
dissipation of others, is a fourth principle of inequality, and
the most powerful of all: the negligent and inattentive
proprietor, who cultivates badly, who in a fruitful year consumes
in frivolous things the whole of his superfluity, finds himself
reduced on the least accident to request assistance from his more
provident neighbour, and to live by borrowing. If by any new
accident, or by a continuation of his negligence, he finds
himself not in a condition to repay, he is obliged to have
recourse to new loans, and at last has no other resource but to
abandon a part, or even the whole of his property to his
creditor, who receives it as an equivalent; or to assign it to
another, in exchange for other valuables with which he discharges
his obligation to his creditor.

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    39. All merchandize has the two essential properties of
money, to measure and to represent all value: and in this sense
all merchandize is money.

    These two properties of serving as a common measure of all
value, and of being a representative pledge of all other
commodities of equal value, comprehend all that constitute the
essence and use of what is called money; and it follows from the
details which I have just now given, that all merchandize is, in
some respect, money; and participates more or less, according to
its particular nature, of these two essential properties. All is
more or less proper to serve as a common measure, in proportion
as it is more or less in general use, of a more similar quality,
and more easy to be divided into aliquot parts. All is more or
less applicable for the purpose of a general pledge of exchange,
in proportion as it is less susceptible of decay or alteration in
quantity or quality.

    40. Reciprocally all money is essentially merchandize.

    We can take only that which has a value for a common measure
of value, that which is received in commerce in exchange for
other properties; and there is no universal representative pledge
of value, but something of equal value. A money of convention is
therefore a thing impossible.

    41. Different matters are able to serve and have served for
current money.

    Many nations have adopted in their language and in. their
trade, as a common measure of value, different matters more or
less precious. There are at this day, some barbarous nations, who
make use of a species of little shells, called cowries. I
remember to have seen when at college, some apricot stones
exchanged and passed as a species of money among the scholars,
who made use of them at certain games. I have already spoken of a
valuation by heads of cattle; some of these are to be found in
the vestiges of the laws of the ancient German nations, who
over-ran the Roman empire. The first Romans, or at least the
Latins, their ancestors, made use of them also. It is pretended
that the first money they struck in brass, represented the value
of a sheep, and bore the image of that animal, and that the name
of Pecunia has obtained from pecus. This conjecture carries with
it a great probability.

    42. Metals, and particularly gold and silver, are the most
proper for that purpose, and why.

    We are now arrived at the introduction of the precious metals
into trade. All metals, as they have been discovered, have been
admitted into exchange, on account of their real utility. Their
splendor has caused them to be sought for, to serve as ornaments;
their ductility and their solidity have rendered them proper for
utensils, more durable and lighter than those of clay. But these
substances cannot be brought into commerce without becoming
almost immediately a universal money. A piece of any metal, of
whatever sort, has exactly the same qualities as another piece of
the same metal provided they are both equally pure. Now the ease
with which we can separate, by different chemical operations, a
metal from other metals with which it is incorporated, enables us
to bring it to a degree of purity, or, as they call it, to what
standard we please; then the value of metal differs only as to
its weight. In expressing, therefore, the value of any
merchandize by the weight of metal which may be had in exchange,
we shall then have the clearest, the most commodious, and most
precise expression of value; and hence it is impossible but it
must be preferred in practice to all other things. Nor are metals
less proper than other merchandize for becoming the universal
token of all value that can be measured: as they are susceptible
of all imaginable divisions, there is not any object of commerce,
great or small, whose value cannot be exactly paid by a certain
quantity of metal. To this advantage of accommodating itself to
every species of division, they join that of being unalterable,
and those which are scarce, as gold and silver, have a great
value, although of a weight and size little considerable.
    These two metals are then, of all merchandize, the most easy
to ascertain their quality, to divide their quantity, and to
convey to all places at the easiest expence. Every one,
therefore, who has a superfluity, and who is not at the time in
want of another useful commodity, will hasten to exchange it for
silver, with which he is more certain, than with any thing else,
to procure himself the commodity he shall wish for at the time he
is in want.

    43. Gold and silver are constituted, by the nature of things,
money, and universal money, independent of all convention, and of
all laws.

    Here then is gold and silver constituted money, and universal
money, and that without any arbitrary agreement among men,
without the intervention of any law, but only by the nature of
things. They are not, as many people imagine, signs of value;
they have an intrinsic value in themselves, if they are capable
of being the measure and the token of other values. This property
they have in common with all other commodities which have a value
in commerce. They only differ in being at the same time more
divisible, more unchangeable, and of more easy conveyance than
other merchandize, by which they are more commodiously employed
to measure and represent the value of others.

    44. Other metals are only employed for these uses, in a
secondary manner.

    All metals are capable of being employed as money. But those
which are too common have too little value in a large bulk to be
employed in the current uses of commerce. Copper, silver, and
gold, are the only ones which have been brought into constant
use. And even copper, except among people to whom neither mines
nor commerce have supplied a sufficient quantity of gold or
silver, has never been used but in exchanges of small value.

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    72. False ideas on lending upon interest.

    The rate of interest is by no means founded, as may be
imagined, on the profit the borrower hopes to make, with the
capital of which he purchases the use. This rate like the price
of all other merchandize, is fixed by the circumstances of buyer
and seller; by the proportion of the sum offered with the demand.
People borrow with every kind of view, and with every sort of
motive. One borrows to undertake an enterprize that is to make
his fortune, another to buy an estate, another to pay his losses
at play, another to supply the loss of his revenue, of which some
accident has deprived him, another to exist on, in expectation of
what he is able to gain by his labour. but all these motives
which determine the borrower, are very indifferent to the lender.
He attends to two things only, the interest he is to receive, and
the safety of his capital. He never attends to the use the
borrower puts it to, as a merchant does not care to what use the
buyer applies the commodities he sells him.

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    74. True foundation of interest of money.

    A man then may lend his money as lawfully as he may sell it;
and the possessor of money may either do one or the other, not
only because money is equivalent to a revenue, and a means to
procure a revenue: not only because the lender loses, during the
continuance of the loan, the revenue he might have procured by
it; not only because he risks his capital; not only because the
borrower can employ it in advantageous acquisitions, or in
undertakings from whence he will draw a large profit; the
proprietor of money may lawfully receive the interest of it, by a
more general and decisive principle. Even if none of these
circumstances should take place, he will not have the less right
to require an interest for his loan, for this reason only, that
his money is his own. Since it is his own, he has a right to keep
it, nothing can imply a duty in him to lend it; if then he does
lend, he may annex such a condition to the loan as he chuses, in
this he does no injury to the borrower, since the latter agrees
to the conditions, and has no sort of right over the sum lent.
The profit which money can procure the borrower, is doubtless one
of the most prevailing motives to determine him to borrow on
interest; it is one of the means which facilitates his payment of
the interest, but this is by no means that which gives a right to
the lender to require it; it is sufficient for him that his money
is his own, and this is a right inseparable from property. He who
buys bread, does it for his support, but the right the baker has
to exact a price is totally independent of the use of bread; the
same right he would possess in the sale of a parcel of stones, a
right founded on this principle only, that the bread is his own,
and no one has any right to oblige him to give it up for nothing.

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    1. We have concluded our general survey of the requisites of
production. We have found that they may be reduced to three:
labour, capital, and the materials and motive forces afforded by
nature. Of these, labour and the raw material of the globe are
primary and indispensable. Natural motive powers may be called in
to the assistance of labour, and are a help, but not an
essential, of production. The remaining requisite, capital, is
itself the product of labour: its instrumentality in production
is therefore, in reality, that of labour in an shape. It does not
the less require to be specified separately. A previous
application of labour to produce the capital required for
consumption during the work, is no less essential than the
application of labour to the work itself. Of capital, again, one,
and by far the largest, portion, conduces to production only by
sustaining in existence the labour which produces: the remainder,
namely the instruments and materials, contribute to it directly,
in the same manner with natural agents, and the materials
supplied by nature.
    We now advance to the second great question in political
economy; on what the degree of productiveness of these agents
depends. For it is evident that their productive efficacy varies
greatly at various times and places. With the same population and
extent of territory, some countries have a much lager amount of
production than others, and the same country at one time a
greater amount than itself at another. Compare England either
with a similar extent of territory in Russia, or with an equal
population of Russians. Compare England now with England in the
Middle Ages; Sicily, Northern Africa, or Syria at present, with
the same countries at the time of their greatest prosperity,
before the Roman Conquest. Some of the causes which contribute to
this difference of productiveness are obvious; others not so much
so. We proceed to specify several of them.

    2. The most evident cause of superior productiveness is what
are called natural advantages. These are various. Fertility of
soil is one of the principal. In this there are great varieties,
from the deserts of Arabia to the alluvial plains of the Ganges,
the Niger, and the Mississippi. A favourable climate is even more
important than a rich soil. There are countries capable of being
inhabited, but too cold to be compatible with agriculture. Their
inhabitants cannot pass beyond the nomadic state; they must live,
like the Laplanders, by the domestication of the rein-deer, if
not by hunting or fishing, like the miserable Esquimaux. There
are countries where oats will ripen, but not wheat, such as the
North of Scotland; others where wheat can be grown, but from
excess of moisture and want of sunshine, affords but a precious
crop; as in parts of Ireland. With each advance towards the
south, or, in the European temperate region, towards the east,
some new branch of agriculture becomes first possible, then
advantageous; the vine, maize, silk, figs, olives, rice, dates,
successively present themselves, until we come to the sugar,
coffee, cotton, spices, &c. of climates which also afford, of the
more common agricultural products, and with only a slight degree
of cultivation, two or even three harvests in a year. Nor is it
in agriculture alone that differences of climate are important.
Their influence is felt in many other branches of production: in
the durability of all work which is exposed to the air; of
buildings, for example. If the temples of Karnac and Luxor had
not been injured by men, they might have subsisted in their
original perfection almost for ever, for the inscriptions on some
of them, though anterior to all authentic history, are fresher
than is in our climate an inscription fifty years old: while at
St. Petersburg, the most massive works, solidly executed in
granite hardly a generation ago, are already, as travellers tell
us, almost in a state to require reconstruction, from alternate
exposure to summer heat and intense frost. The superiority of the
woven fabrics of Southern Europe over those of England in the
richness and clearness of many of their colours, is ascribed to
the superior quality of the atmosphere, for which neither the
knowledge of chemists nor the skill of dyers has been able to
provide, in our hazy and damp climate, a complete equivalent.
    Another part of the influence of climate consists in
lessening the physical requirements of the producers. In hot
regions, mankind can exist in comfort with less perfect housing,
less clothing; fuel, that absolute necessary of life in cold
climates, they can almost dispense with, except for industrial
uses. They also require less aliment; as experience had proved,
long before theory had accounted for it by ascertaining that most
of what we consume as food is not required for the actual
nutrition of the organs, but for keeping up the animal heat, and
for supplying the necessary stimulus to the vital functions,
which in hot climates is almost sufficiently supplied by air and
sunshine. Much, therefore, of the labour elsewhere expended to
procure the mere necessaries of life, not being required, more
remains disposable for its higher uses and its enjoyments; if the
character of the inhabitants does not rather induce them to use
up these advantages in over-population, or in the indulgence of
repose.
    Among natural advantages, besides soil and climate, must be
mentioned abundance of mineral productions, in convenient
situations, and capable of being worked with moderate labour.
Such are the coal-fields of Great Britain, which do so much to
compensate its inhabitants for the disadvantages of climate; and
the scarcely inferior resource possessed by this country and the
United States, in a copious supply of an easily reduced iron ore,
at no great depth below the earth's surface, and in close
proximity to coal deposits available for working it. In mountain
and hill districts, the abundance of natural water-power makes
considerable amends for the usually inferior fertility of those
regions. But perhaps a greater advantage than all these is a
maritime situation, especially when accompanied with good natural
harbours; and, next to it, great navigable rivers. These
advantages consist indeed wholly in saving of cost of carriage....
In the ancient world, and in the Middle ages, the most
prosperous communities were not those which had the largest
territory, or the most fertile soil, but rather those which had
been forced by natural sterility to make the utmost use of a
convenient maritime situation; as athens, Tyre, Marseilles,
Venice, the free cities on the Baltic, and the like.

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    4. The third element which determines the productiveness of
the labour of a community, is the skill and knowledge therein
existing; whether it be the skill and knowledge of the labourers
themselves, or of those who direct their labour. No illustration
is requisite to show how the efficacy of industry is promoted by
the manual dexterity of those who perform mere routine processes;
by the intelligence of those engaged in operations in which the
mind has a considerable part; and by the amount of knowledge of
natural powers and of the properties of objects, which is turned
to the purposes of industry. That the productiveness of the
labour of a people is limited by their knowledge of the arts of
life, is self-evident; and that any progress in those arts, any
improved application of the objects or powers of nature to
industrial uses, enables the same quantity and intensity of
labour to raise a greater produce.
    One principal department of these improvements consists in
the invention and use of tools and machinery. The manner in which
these serve to increase production and to economize labour, needs
not be specially detailed in a work like the present: it will be
found explained and exemplified, in a manner at once scientific
and popular, in Mr. Babbage's well-known "Economy of Machinery
and Manufactures." An entire chapter of Mr. Babbage's book is
composed of instances of the efficacy of machinery in "exerting
forces too great for human power, and executing operations too
delicate for human touch." But to find examples of work which
could not be performed at all by unassisted labour, we need not
go so far. Without pumps, worked by steam-engines or otherwise,
the water which collects in mines could not in many situations be
got rid of at all, and the mines, after being worked to a little
depth, must be abandoned: without ships or boats the sea could
never have been crossed; without tools of some sort, trees could
not be cut down, nor rocks excavated; a plough, or at least a
hoe, is necessary to any tillage of the ground. Very simple and
rude instruments, however, are sufficient to render literally
possible most works hitherto executed by mankind. and subsequent
inventions have chiefly served to enable the work to be performed
in greater perfection, and, above all, with a greatly diminished
quantity of labour: the labour thus saved becoming disposable for
other employments.
    The use of machinery is far from being the only mode in which
the effects of knowledge in aiding production are exemplified. In
agriculture and horticulture, machinery is only now beginning to
show that it can do anything of importance, beyond the invention
and progressive improvement of the plough and a few other simple
instruments. The greatest agricultural inventions have consisted
in the direct application of more judicious processes to the land
itself, and to the plants growing on it; such as rotation of
crops, to avoid the necessity of leaving the land for one season
in every two or three; improved manures, to renovate its
fertility when exhausted by cropping; ploughing and draining the
subsoil as well as the surface; conversion of bogs and marshes
into cultivable land; such modes of pruning, and of training and
propping up plants and trees, as experience has shown to deserve
the preference; in the case of the more expensive cultures,
planting the roots or seeds further apart, and more completely
pulverizing the soil in which they are placed, &c. In
manufactures and commerce, some of the most important
improvements consist in economizing time; in making the return
follow more speedily upon the labour and outlay. There are others
of which the advantage consists in economy of material.

    5. But the effects of the increased knowledge of a community
in increasing its wealth, need the less illustration as they have
become familiar to the most uneducated, from such conspicuous
instances as railways and steam-ships. A thing not yet so well
understood and recognised, is the economical value of the general
diffusion of intelligence among the people. The number of persons
fitted to direct and superintend any industrial enterprise, or
even to execute any process which cannot be reduced almost to an
affair of memory and routine, is always far short of the demand;
as is evident from the enormous difference between the salaries
paid to such persons, and the wages of ordinary labour. The
deficiency of practical good sense, which renders the majority of
the labouring class such bad calculators -- which makes, for
instance, their domestic economy so improvident, lax, and
irregular -- must disqualify them for any but a low grade of
intelligent labour, and render their industry far less productive
than with equal energy it otherwise might be. The importance,
even in this limited aspect, of popular education, is well worthy
of the attention of politicians, especially in England; since
competent observers, accustomed to employ labourers of various
nations, testify that in the workmen of other countries they
often find great intelligence wholly apart from instruction, but
that if an English labourer is anything but a hewer of wood and a
drawer of water, he is indebted for it to education, which in his
case is almost always self-education. 

    The accumulation of capital, though originally appearing as
its quantitative extension only, is effected, as we have seen,
under a progressive qualitative change in its composition, under
a constant increase of its constant, at the expense of its
variable constituent.(11*)
    The specifically capitalist mode of production, the
development of the productive power of labour corresponding to
it, and the change thence resulting in the organic composition of
capital, do not merely keep pace with the advance of
accumulation, or with the growth of social wealth. They develop
at a much quicker rate, because mere accumulation, the absolute
increase of the total social capital, is accompanied by the
centralisation of the individual capitals of which that total is
made up; and because the change in the technological composition
of the additional capital goes hand in hand with a similar change
in the technological composition of the original capital. With
the advance of accumulation, therefore, the proportion of
constant to variable capital changes. If it was originally say
1:1, it now becomes successively 2:1, 3:1, 4:1, 5:1, 7:1, etc.,
so that as the capital increases, instead of 1/2 of its total
value, only 1/3, 1/4, 1/5, 1/6, 1/8, etc., is transformed into
labour-power, and, on the other hand, 2/3, 3/4, 4/5, 5/6, 7/8,
into means of production. Since the demand for labour is
determined not by the amount of capital as a whole, but by its
variable constituent alone, that demand falls progressively with
the increase of the total capital, instead of, as previously
assumed, rising in proportion to it. It falls relatively to the
magnitude of the total capital, and at an accelerated rate, as
this magnitude increases. With the growth of the total capital,
its variable constituent or the labour incorporated in it, also
does increase, but in a constantly diminishing proportion.... But
in fact, it is capitalistic accumulation itself that constantly
produces, and produces in the direct ratio of its own energy and
extent, a relatively redundant population of labourers, i.e., a
population of greater extent than suffices for the average needs
of the self-expansion of capital, and therefore a
surplus-population....
    But if a surplus labouring population is a necessary product
of accumulation or of the development of wealth on a capitalist
basis, this surplus-population becomes, conversely, the lever of
capitalistic accumulation, nay, a condition of existence of the
capitalist mode of production. It forms a disposable industrial
reserve army, that belongs to capital quite as absolutely as if
the latter had bred it at its own cost. Independently of the
limits of the actual increase of population, it creates, for the
changing needs of the self-expansion of capital, a mass of human
material always ready for exploitation.... 
Even Malthus recognises over-population as a necessity of modern
industry, though, after his narrow fashion, he explains it by the
absolute over-growth of the labouring population, not by their
becoming relatively supernumerary. He says: "Prudential habits
with regard to marriage, carried to a considerable extent among
the labouring class of a country mainly depending upon
manufactures and commerce, might injure it.... From the nature of
a population, an increase of labourers cannot be brought into
market in consequence of a particular demand till after the lapse
of 16 or 18 years, and the conversion of revenue into capital, by
saving, may take place much more rapidly. a country is always
liable to an increase in the quantity of the funds for the
maintenance of labour faster than the increase of
population." After Political Economy has thus demonstrated
the constant production of a relative surplus-population of
labourers to be a necessity of capitalistic accumulation, she
very aptly, in the guise of an old maid, puts in the mouth of her
"beau ideal" of a capitalist the following words addressed to
those supernumeraries thrown on the streets by their own creation
of additional capital: -- "We manufacturers do what we can for
you, whilst we are increasing that capital on which you must
subsist, and you must do the rest by accommodating your numbers
to the means of subsistence."
    Capitalist production can by no means content itself with the
quantity of disposable labour-power which the natural increase of
population yields. It requires for its free play an industrial
reserve army independent of these natural limits....

 
     WHEN the division of labour has been once thoroughly
established, it is but a very small part of a man's wants which
the produce of his own labour can supply. He supplies the far
greater part of them by exchanging that surplus part of the
produce of his own labour, which is over and above his own
consumption, for such parts of the produce of other men's labour
as he has occasion for. Every man thus lives by exchanging, or
becomes in some measure a merchant, and the society itself grows
to be what is properly a commercial society.
     But when the division of labour first began to take place,
this power of exchanging must frequently have been very much
clogged and embarrassed in its operations. One man, we shall
suppose, has more of a certain commodity than he himself has
occasion for, while another has less. The former consequently
would be glad to dispose of, and the latter to purchase, a part
of this superfluity. But if this latter should chance to have
nothing that the former stands in need of, no exchange can be
made between them. The butcher has more meat in his shop than he
himself can consume, and the brewer and the baker would each of
them be willing to purchase a part of it. But they have nothing
to offer in exchange, except the different productions of their
respective trades, and the butcher is already provided with all
the bread and beer which he has immediate occasion for. No
exchange can, in this case, be made between them. He cannot be
their merchant, nor they his customers; and they are all of them
thus mutually less serviceable to one another. In order to avoid
the inconveniency of such situations, every prudent man in every
period of society, after the first establishment of the division
of labour, must naturally have endeavoured to manage his affairs
in such a manner as to have at alltimes by him, besides the
peculiar produce of his own industry, a certain quantity of some
one commodity or other, such as he imagined few people would be
likely to refuse in exchange for the produce of their industry.
     Many different commodities, it is probable, were
successively both thought of and employed for this purpose. In
the rude ages of society, cattle are said to have been the common
instrument of commerce; and, though they must have been a most
inconvenient one, yet in old times we find things were frequently
valued according to the number of cattle which had been given in
exchange for them. The armour of Diomede, says Homer, cost only
nine oxen; but that of Glaucus cost an hundred oxen. Salt is said
to be the common instrument of commerce and exchanges in
Abyssinia; a species of shells in some parts of the coast of
India; dried cod at Newfoundland; tobacco in Virginia; sugar in
some of our West India colonies; hides or dressed leather in some
other countries; and there is at this day a village in Scotland
where it is not uncommon, I am told, for a workman to carry nails
instead of money to the baker's shop or the alehouse.
     In all countries, however, men seem at last to have been
determined by irresistible reasons to give the preference, for
this employment, to metals above every other commodity. Metals
can not only be kept with as little loss as any other commodity,
scarce anything being less perishable than they are, but they can
likewise, without any loss, be divided into any number of parts,
as by fusion those parts can easily be reunited again; a quality
which no other equally durable commodities possess, and which
more than any other quality renders them fit to be the
instruments of commerce and circulation. The man who wanted to
buy salt, for example, and had nothing but cattle to give in
exchange for it, must have been obliged to buy salt to the value
of a whole ox, or a whole sheep at a time. He could seldom buy
less than this, because what he was to give for it could seldom
be divided without loss; and if he had a mind to buy more, he
must, for the same reasons, have been obliged to buy double or
triple the quantity, the value, to wit, of two or three oxen, or
of two or three sheep. If, on the contrary, instead of sheep or
oxen, he had metals to give in exchange for it, he could easily
proportion the quantity of the metal to the precise quantity of
the commodity which he had immediate occasion for.
     Different metals have been made use of by different nations
for this purpose. Iron was the common instrument of commerce
among the ancient Spartans; copper among the ancient Romans; and
gold and silver among all rich and commercial nations.
     Those metals seem originally to have been made use of for
this purpose in rude bars, without any stamp or coinage. Thus we
are told by Pliny, upon the authority of Timaeus, an ancient
historian, that, till the time of Servius Tullius, the Romans had
no coined money, but made use of unstamped bars of copper, to
purchase whatever they had occasion for. These bars, therefore,
performed at this time the function of money.
     The use of metals in this rude state was attended with two
very considerable inconveniencies; first, with the trouble of
weighing; and, secondly, with that of assaying them. In the
precious metals, where a small difference in the quantity makes a
great difference in the value, even the business of weighing,
with proper exactness, requires at least very accurate weights
and scales. The weighing of gold in particular is an operation of
some nicety. In the coarser metals, indeed, where a small error
would be of little consequence, less accuracy would, no doubt, be
necessary. Yet we should find it excessively troublesome, if
every time a poor man had occasion either to buy or sell a
farthing's worth of goods, he was obliged to weigh the farthing.
The operation of assaying is still more difficult, still more
tedious, and, unless a part of the metal is fairly melted in the
crucible, with proper dissolvents, any conclusion that can be
drawn from it, is extremely uncertain. Before the institution of
coined money, however, unless they went through this tedious and
difficult operation, people must always have been liable to the
grossest frauds and impositions, and instead of a pound weight of
pure silver, or pure copper, might receive in exchange for their
goods an adulterated composition of the coarsest and cheapest
materials, which had, however, in their outward appearance, been
made to resemble those metals. To prevent such abuses, to
facilitate exchanges, and thereby to encourage all sorts of
industry and commerce, it has been found necessary, in all
countries that have made any considerable advances towards
improvement, to affix a public stamp upon certain quantities of
such particular metals as were in those countries commonly made
use of to purchase goods. Hence the origin of coined money, and
of those public offices called mints; institutions exactly of the
same nature with those of the aulnagers and stamp-masters of
woolen and linen cloth. All of them are equally meant to
ascertain, by means of a public stamp, the quantity and uniform
goodness of those different commodities when brought to market.
     The first public stamps of this kind that were affixed to
the current metals, seem in many cases to have been intended to
ascertain, what it was both most difficult and most important to
ascertain, the goodness or fineness of the metal, and to have
resembled the sterling mark which is at present affixed to plate
and bars of silver, or the Spanish mark which is sometimes
affixed to ingots of gold, and which being struck only upon one
side of the piece, and not covering the whole surface, ascertains
the fineness, but not the weight of the metal. Abraham weighs to
Ephron the four hundred shekels of silver which he had agreed to
pay for the field of Machpelah. They are said, however, to be the
current money of the merchant, and yet are received by weight and
not by tale, in the same manner as ingots of gold and bars of
silver are at present. The revenues of the ancient Saxon kings of
England are said to have been paid, not in money but in kind,
that is, in victuals and provisions of all sorts. William the
Conqueror introduced the custom of paying them in money. This
money, however, was, for a long time, received at the exchequer,
by weight and not by tale.
     The inconveniency and difficulty of weighing those metals
with exactness gave occasion to the institution of coins, of
which the stamp, covering entirely both sides of the piece and
sometimes the edges too, was supposed to ascertain not only the
fineness, but the weight of the metal. Such coins, therefore,
were received by tale as at present, without the trouble of
weighing.
     The denominations of those coins seem originally to have
expressed the weight or quantity of metal contained in them. In
the time of Servius Tullius, who first coined money at Rome, the
Roman as or pondo contained a Roman pound of good copper. It was
divided in the same manner as our Troyes pound, into twelve
ounces, each of which contained a real ounce of good copper. The
English pound sterling, in the time of Edward I, contained a
pound, Tower weight, of silver, of a known fineness. The Tower
pound seems to have been something more than the Roman pound, and
something less than the Troyes pound. This last was not
introduced into the mint of England till the 18th of Henry VIII.
The French livre contained in the time of Charlemagne a pound,
Troyes weight, of silver of a known fineness. The fair of Troyes
in Champaign was at that time frequented by all the nations of
Europe, and the weights and measures of so famous a market were
generally known and esteemed. The Scots money pound contained,
from the time of Alexander the First to that of Robert Bruce, a
pound of silver of the same weight and fineness with the English
pound sterling. English, French, and Scots pennies, too,
contained all of them originally a real pennyweight of silver,
the twentieth part of an ounce, and the two-hundred-and-fortieth
part of a pound. The shilling too seems originally to have been
the denomination of a weight. When wheat is at twelve shillings
the quarter, says an ancient statute of Henry III, then wastel
bread of a farthing shall weigh eleven shillings and four pence.
The proportion, however, between the shilling and either the
penny on the one hand, or the pound on the other, seems not to
have been so constant and uniform as that between the penny and
the pound. During the first race of the kings of France, the
French sou or shilling appears upon different occasions to have
contained five, twelve, twenty, and forty pennies. Among the
ancient Saxons a shilling appears at one time to have contained
only five pennies, and it is not improbable that it may have been
as variable among them as among their neighbours, the ancient
Franks. From the time of Charlemagne among the French, and from
that of William the Conqueror among the English, the proportion
between the pound, the shilling, and the penny, seems to have
been uniformly the same as at present, though the value of each
has been very different. For in every country of the world, I
believe, the avarice and injustice of princes and sovereign
states, abusing the confidence of their subjects, have by degrees
diminished the real quantity of metal, which had been originally
contained in their coins. The Roman as, in the latter ages of the
Republic, was reduced to the twenty-fourth part of its original
value, and, instead of weighing a pound, came to weigh only half
an ounce. The English pound and penny contain at present about a
third only; the Scots pound and penny about a thirty-sixth; and
the French pound and penny about a sixty-sixth part of their
original value. By means of those operations the princes and
sovereign states which performed them were enabled, in
appearance, to pay their debts and to fulfil their engagements
with a smaller quantity of silver than would otherwise have been
requisite. It was indeed in appearance only; for their creditors
were really defrauded of a part of what was due to them. All
other debtors in the state were allowed the same privilege, and
might pay with the same nominal sum of the new and debased coin
whatever they had borrowed in the old. Such operations,
therefore, have always proved favourable to the debtor, and
ruinous to the creditor, and have sometimes produced a greater
and more universal revolution in the fortunes of private persons,
than could have been occasioned by a very great public calamity.... 

 
I. Introduction

    There is a phenomenon which has from of old and in a peculiar
degree attracted the attention of social philosophers and
practical economists, the fact of certain commodities (these
being in advanced civilizations coined pieces of gold and silver,
together subsequently with documents representing those coins)
becoming universally acceptable media of exchange. It is obvious
even to the most ordinary intelligence, that a commodity should
be given up by its owner in exchange for another more useful to
him. But that every economic unit in a nation should be ready to
exchange his goods for little metal disks apparently useless as
such, or for documents representing the latter, is a procedure so
opposed to the ordinary course of things, that we cannot well
wonder if even a distinguished thinker like Savigny finds it
downright 'mysterious.'
    It must not be supposed that the form of coin, or document,
employed as current-money, constitutes the enigma in this
phenomenon. We may look away from these forms and go back to
earlier stages of economic development, or indeed to what still
obtains in countries here and there, where we find the precious
metals in a uncoined state serving as the medium of exchange, and
even certain other commodities, cattle, skins, cubes of tea,
slabs of salt, cowrie-shells, etc.; still we are confronted by
this phenomenon, still we have to explain why it is that the
economic man is ready to accept a certain kind of commodity, even
if he does not need it, or if his need of it is already supplied,
in exchange for all the goods he has brought to market, while it
is none the less what he needs that he consults in the first
instance, with respect to the goods he intends to acquire in the
course of his transactions.... Is money an organic member in the world
of commodities, or is it an economic anomaly? Are we to refer its
commercial currency and its value in trade to the same causes
conditioning those of other goods, or are they the distinct
product of convention and authority? 

                        #                   #                  #

III. The Problem of the Genesis of a Medium of Exchange.

    In primitive traffic the economic man is awaking but very
gradually to an understanding of the economic advantages to be
gained by exploitation of existing opportunities of exchange. His
aims are directed first and foremost, in accordance with the
simplicity of all primitive culture, only at what lies first to
hand. And only in that proportion does the value in use of the
commodities he seeks to acquire, come into account in his
bargaining. Under such conditions each man is intent to get by
way of exchange just such goods as he directly needs, and to
reject those of which he has no need at all, or with which he is
already sufficiently provided. It is clear then, that in those
circumstances the number of bargains actually concluded must lie
within very narrow limits. Consider how seldom it is the case,
that a commodity owned by somebody is of less value in use than
another commodity owned by somebody else! And for the latter just
the opposite relation is the case. But how much more seldom does
it happen that these two bodies meet! Think, indeed, of the
peculiar difficulties obstructing the immediate barter of goods
in those cases, where supply and demand do not quantitatively
coincide; where, e.g., an indivisible commodity is to be
exchanged for a variety of goods in the possession of different
person, or indeed for such commodities as are only in demand at
different times and can be supplied only by different persons!
Even in the relatively simple and so often recurring case, where
an economic unit, A, requires a commodity possessed by B, and B
requires one possessed by C, while C wants one that is owned by A
-- even here, under a rule of mere barter, the exchange of the
goods in question would as a rule be of necessity left undone.
    These difficulties would have proved absolutely
insurmountable obstacles to the progress of traffic, and at the
same time to the production of goods not commanding a regular
sale, had there not lain a remedy in the very nature of things,
to wit, the different degrees of saleableness (Absatzfahigkeit)
of commodities. The difference existing in this respect between
articles of commerce is of the highest degree of significance for
the theory of money, and of the market in general. And the
failure to turn it adequately to account in explaining the
phenomena of trade, constitutes not only as such a lamentable
breach in our science, but also one of the essential causes of
the backward state of monetary theory. The theory of money
necessarily presupposes a theory of the saleableness of goods. If
we grasp this, we shall be able to understand how the almost
unlimited saleableness of money is only a special case, --
presenting only a difference of degree -- of a generic phenomenon
of economic life -- namely, the difference in the saleableness of
commodities in general....

    It is very usual, in nations ignorant of the nature of commerce,
to prohibit the exportation of commodities, and to preserve among
themselves whatever they think valuable and useful. They do not
consider, that, in this prohibition, they act directly contrary to
their intention; and that the more is exported of any commodity, the
more will be raised at home, of which they themselves will always have
the first offer.
    It is well known to the learned, that the ancient laws of ATHENS
rendered the exportation of figs criminal; that being supposed a
species of fruit so excellent in ATTICA, that the ATHENIANS deemed it
too delicious for the palate of any foreigner. And in this ridiculous
prohibition they were so much in earnest, that informers were thence
called sycophants among them, from two GREEK words, which signify figs
and discoverer. There are proofs in many old acts of parliament of the
same ignorance in the nature of commerce, particularly in the reign of
EDWARD III And to this day, in FRANCE, the exportation of corn is
almost always prohibited; in order, as they say, to prevent famines;
though it is evident, that nothing contributes more to the frequent
famines, which so much distress that fertile country.
    The same jealous fear, with regard to money, has also prevailed
among several nations; and it required both reason and experience to
convince any people, that these prohibitions serve to no other purpose
than to raise the exchange against them, and produce a still greater
exportation.
    These errors, one may say, are gross and palpable: But there still
prevails, even in nations well acquainted with commerce, a strong
jealousy with regard to the balance of trade, and a fear, that all
their gold and silver may be leaving them. This seems to me, almost in
every case, a groundless apprehension; and I should as soon dread,
that all our springs and rivers should be exhausted, as that money
should abandon a kingdom where there are people and industry. Let us
carefully preserve these latter advantages; and we need never be
apprehensive of losing the former.

                        #                   #                  #

    Our jealousy and our hatred of FRANCE are without bounds; and the
former sentiment, at least, must be acknowledged reasonable and well-
grounded. These passions have occasioned innumerable barriers and
obstructions upon commerce, where we are accused of being commonly the
aggressors. But what have we gained by the bargain? We lost the FRENCH
market for our woollen manufactures, and transferred the commerce of
wine to SPAIN and PORTUGAL, where we buy worse liquor at a higher
price. There are few ENGLISHMEN who would not think their country
absolutely ruined, were FRENCH wines sold in ENGLAND so cheap and in
such abundance as to supplant, in some measure, all ale, and home-
brewed liquors: But would we lay aside prejudice, it would not be
difficult to prove, that nothing could be more innocent, perhaps
advantageous. Each new acre of vineyard planted in FRANCE, in order to
supply ENGLAND with wine, would make it requisite for the FRENCH to
take the produce of an ENGLISH acre, sown in wheat or barley, in order
to subsist themselves; and it is evident, that we should thereby get
command of the better commodity.
    There are many edicts of the FRENCH king, prohibiting the planting
of new vineyards, and ordering all those which are lately planted to
be grubbed up: So sensible are they, in that country, of the superior
value of corn, above every other product.

                         #                   #                  #

    It is not to be doubted, but the great plenty of bullion in FRANCE
is, in a great measure, owing to the want of paper-credit. The FRENCH
have no banks: Merchants bills do not there circulate as with us:
Usury or lending on interest is not directly permitted; so that many
have large sums in their coffers: Great quantities of plate are used
in private houses; and all the churches are full of it. By this means,
provisions and labour still remain cheaper among them, than in nations
that are not half so rich in gold and silver. The advantages of this
situation, in point of trade as well as in great public emergencies,
are too evident to be disputed.
    The same fashion a few years ago prevailed in GENOA, which still
has place in ENGLAND and HOLLAND, of using services of CHINA-ware
instead of plate; but the senate, foreseeing the consequence,
prohibited the use of that brittle commodity beyond a certain extent;
while the use of silverplate was left unlimited. And I suppose, in
their late distresses, they felt the good effect of this ordinance.
Our tax on plate is, perhaps, in this view, somewhat impolitic.
    Before the introduction of paper-money into our colonies, they had
gold and silver sufficient for their circulation. Since the
introduction of that commodity, the least inconveniency that has
followed is the total banishment of the precious metals. And after the
abolition of paper, can it be doubted but money will return, while
these colonies possess manufactures and commodities, the only thing
valuable in commerce, and for whose sake alone all men desire money.
    What pity LYCURGUS did not think of paper-credit, when he wanted
to banish gold and silver from SPARTA! It would have served his
purpose better than the lumps of iron he made use of as money. and
would also have prevented more effectually all commerce with
strangers, as being of so much less real and intrinsic value.

                         #                   #                  #

    Our modern politics embrace the only method of banishing money,
the using of paper-credit; they reject the only method of amassing it,
the practice of hoarding; and they adopt a hundred contrivances, which
serve to no purpose but to check industry, and rob ourselves and our
neighbours of the common benefits of art and nature.
    All taxes, however, upon foreign commodities, are not to be
regarded as prejudicial or useless, but those only which are founded
on the jealousy above-mentioned. A tax on GERMAN linen encourages home
manufactures, and thereby multiplies our people and industry. A tax on
brandy encreases the sale of rum, and supports our southern colonies.
And as it is necessary, that imposts should be levied, for the support
of government, it may be thought more convenient to lay them on
foreign commodities, which can easily be intercepted at the port, and
subjected to the impost. We ought, however, always to remember the
maxim of Dr. SWIFT, That, in the arithmetic of the customs, two and
two make not four, but often make only one. It can scarcely be
doubted, but if the duties on wine were lowered to a third, they would
yield much more to the government than at present: Our people might
thereby afford to drink commonly a better and more wholesome liquor;
and no prejudice would ensue to the balance of trade, of which we are
so jealous. The manufacture of ale beyond the agriculture is but
inconsiderable, and gives employment to few hands. The transport of
wine and corn would not be much inferior.
    But are there not frequent instances, you will say, of states and
kingdoms, which were formerly rich and opulent, and are now poor and
beggarly? Has not the money left them, with which they formerly
abounded? I answer, If they lose their trade, industry, and people,
they cannot expect to keep their gold and silver: For these precious
metals will hold proportion to the former advantages. When LISBON and
AMSTERDAM got the EAST-INDIA trade from VENICE and GENOA, they also
got the profits and money which arose from it. Where the seat of
government is transferred, where expensive armies are maintained at a
distance, where great funds are possessed by foreigners; there
naturally follows from these causes a diminution of the specie. But
these, we may observe, are violent and forcible methods of carrying
away money, and are in time commonly attended with the transport of
people and industry. But where these remain, and the drain is not
continued, the money always finds its way back again, by a hundred
canals, of which we have no notion or suspicion. What immense
treasures have been spent, by so many nations, in FLANDERS, since the
revolution, in the course of three long wars? More money perhaps than
the half of what is at present in EUROPE. But what has now become of
it? Is it in the narrow compass of the AUSTRIAN provinces? No, surely:
It has most of it returned to the several countries whence it came,
and has followed that art and industry, by which at first it was
acquired. For above a thousand years, the money of EUROPE has been
flowing to ROME, by an open and sensible current; but it has been
emptied by many secret and insensible canals: And the want of industry
and commerce renders at present the papal dominions the poorest
territory in all ITALY.
    In short, a government has great reason to preserve with care its
people and its manufactures. Its money, it may safely trust to the
course of human affairs, without fear or jealousy. Or if it ever give
attention to this latter circumstance, it ought only to be so far as
it affects the former.

Reasons Why We Should not Lower the coins now current in this
Kingdom. Occasioned by a Paper Entitled, Remarks on the Coins
current in this Kingdom. to which is added, The Rev. Dean Swift's
Opinion, Delivered by him, in an Assembly of above One hundred
and fifty eminent Merchants who met at the Guild Hall, on
Saturday the 24th of April, 1736, in order to draw up their
Petition, and Present it to his Grace the Lord-Lieutenant against
lowering said Coin.

Dublin: Printed and sold by E. Waters in Dame-street.
 Gentlemen,
     I beg you will consider, and very well weigh in your hearts
what I am going to say, and what I have often said before. There
are several Bodies of Men, among whom the Power of this Kingdom
is divided. 1st, The Lord-Lieutenant, Lords-Justices and Council,
next to these, my Lords the Bishops; there is likewise my Lord
Chancellor, and my Lords the Judges of the Land, with other
eminent Persons in the Law, who have Employments and great
Salaries annexed. To these must be added the Commissioners of the
Revenue, with all their under Officers: And lastly, their Honours
of the Army, of all Degrees.
        Now, Gentlemen, I beg you again to consider, that none of
these Persons above-named, can ever suffer the loss of one
Farthing by all the Miseries under which the Kingdom groans at
present. For, first, until the Kingdom be intirely Ruined the
Lord Lieutenant and Lords-Justices must have their Salaries. My
Lords the Bishops, whose Lands are set a fourth part value, will
be sure of their Rents and their Fines. My Lords the Judges, and
Those of other Employments in the Courts, must likewise have
their Salaries. The Gentlemen of the Revenue will pay Themselves;
and as to the Officers of the Army, the Consequences of not
paying Them, is obvious enough; Nay, so far will those Persons I
have already mentioned to be from suffering, that, on the
contrary, their Revenues being now way lessen'd by the fall of
Money, and the prices of all Commodities considerably sunk
thereby, they must be great Gainers. Therefore, Gentlemen, I do
entreat you, that, as long as you live, you will look upon all
Persons who are for lowering the Gold, or any other Coin, as no
Friends to this poor Kingdom, but such who find their private
account in what will be most detrimental to Ireland. And, as the
Absentees are the strongest views, our greatest Enemies, first,
by consuming above one half of the Rents of this Nation Abroad.
And secondly, by turning the Weight, by their Absence, so much on
the Popish side, by weakning the Protestant Interest. Can there
be a greater folly than to pave a Bridge of Gold at your Expence,
to support them in their Luxury and Vanity abroad, while hundreds
of thousands are starving at home, for want of Employment.