value is extremely defective."[1] The amazing misconception here is the claim that facility of transport and physical durability have any relation to scientific value. One might as well contend that a column of gold is the best indicator for a thermometer owing to the ease with which it can be moved from the North Pole to the mouth of a volcano and to its “stability.” He is confusing physical characteristics with economic value, which is much like measuring a man’s virtue by the size of his diamond.
Since this was written by Gide we have learned by bitter experience that the “value” of the precious metals also fluctuates in short periods of time where the economic reactions are intensified, as by war.
One of the earliest practical utilizations of the phenomena of arbitrary currency was made by Gresham; and his so-called “law,” as formulated by McLeod, is that in every country where two legal moneys are in circulation, the bad money drives out the good. This has attracted attention mainly because it is stated as a paradox. But if stated in other terms it has greater significance, even though it has less charm. If money is conceded to be the power to command effort, guaranteed by government, it is obvious that if there are two tokens with equal arbitrary power of demand but different commercial value, the one of less commercial value will be employed within its own domain to obtain services, and the one of greater commercial value will be employed outside the boundaries of that domain, where arbitrary domestic mandates are not honored. What Gresham actually laid down was an equally important law—namely that there can be no uniform measure of economic value under political conditions which are fundamentally dif-
- ↑ “Political Economy,” Charles Gide. 3rd edition, 1913, pages 75, 76, 78. Translated by E. P. Jacobsen. D. C. Heath & Co., Boston and New York.
