periods the speculative nature of the industries connected with the production of money renders the cost of production an element very hard to ascertain. Another consideration which gives a peculiar feature to the problem of money-value is that in the case of other commodities a change in cost of production affects value without any actual change in the supply. The knowledge that a commodity can be produced at a lower cost will cause a reduction in its value. This is not true of money. Either the quantity or the efficiency of money must be altered to change its value. This is, of course, a result of its position as the circulating medium. When all these circumstances are taken into account it becomes clear that the most correct way to regard the question of money-value is that which looks on supply and demand, as interpreted above, as the regulator of its value for a limited time, while regarding cost of production as a force exercising an influence of uncertain amount on its fluctuations during long periods. Where the coinage of a state is artificially limited, the value of its money plainly depends on supply and demand as we
have interpreted it.The next question which arises is: What quantity of money does a nation require? What amount of the circulating medium is necessary for the proper working of the industrial organism? To this puzzling problem the earlier economists gave answers in the shape of definite formulæ. Thus, Sir W. Petty was of opinion that the amount of coin required by a country was one-half the rent of land, one-fourth the amount of building rent, and one fifty-second part of the annual wages of labour. Locke's view was that one-fiftieth of labourers' wages, one-fourth landowners' revenue, and one-twentieth of traders' yearly returns, was the proper amount. Modern statisticians, however, though having command of much greater resources, decline to attempt a quantitative answer, and content themselves with indicating the conditions which the problem involves. In fact we must first examine the work which money has to perform, and this depends on several conditions. The first of these is the population; cæteris paribus, twice as many people will want twice as much money. The second is the amount of transactions; for, if the amount of business done is doubled, the amount of money must be also doubled, unless at the same time some improvement in credit is introduced. The efficiency of money is a third element which affects the quantity needed, and this is largely dependent on the habits of the people and the facilities for communication. Other elements which can be only briefly indicated are—“the degree in which credit exists between man and man; the amount of travelling which takes place; and the commercial and banking organization which exists.”[1] Another factor which requires to be estimated is the extent to which habits of hoarding exist; for all money hoarded is withdrawn from circulation, and therefore increases the total amount needed. The habits of saving in the rural districts of France remarkably exemplify this element in the question. Again, the existence of barter does away with the use of so much money as would be required to carry on the exchanges effected by barter. The custom of paying wages in kind has a similar effect. This bare statement shows how insoluble the question is. When we contemplate the matter from an international point of view, the amount needed, after allowance is made for the cost of transporting goods, is plainly that which will keep a country's prices at a level with those of the countries with which it has commercial relations.[2] For otherwise the country would have an excess either of importation or of exportation, which would necessitate a flow of money to the country whose prices were lower than the general level. This, then, is the condition which determines comparative prices between different countries; and, prices being so determined, the quantity of money needed to keep up those prices depends on the conditions above indicated. In the case of England reliable statistics tend to show that the gold in circulation was, in 1872, about £105,000,000, and the note circulation £43,000,000. In any Continental country the amount would probably be proportionally much greater, owing to the fact that there is in England a greater development of credit.
3. Early Forms of Currency.—Up to the present we have considered money as being fully established and properly adapted to fulfil its various functions. We have now to trace the steps by which a suitable system of currency was evolved from a state of barter. It is important for a right understanding of the question to grasp the fact that exchanges took place originally between groups, and not between individuals. This explains the slow growth of exchanges, as each group produced most of the articles necessary for itself, and such acts of barter as took place were rather reciprocal presents than mercantile exchanges. Such is actually the case at present among modern savages. “It is instructive to see trade in its lowest form among such tribes as the Australians. The tough greenstone valuable for making hatchets is carried hundreds of miles by natives, who receive from other tribes in return the prized products of their districts, such as red ochre to paint their bodies with; they have even got so far as to let peaceful traders pass unharmed through tribes at war, so that trains of youths might be met, each lad with a slab of sandstone on his head to be carried to his distant home and shaped into a seed-crusher. When strangers visit a tribe they are received at a friendly gathering or corrobboree, and presents are given on both sides. No doubt there is a general sense that the gifts are to be fair exchanges, and if either side is not satisfied there will be grumbling and quarrelling; but in this roughest kind of barter we do not yet find that clear notion of a unit of value which is the great step in trading.”[3] This vivid description of what is going on at present among lower races enables us to realize the way in which money came into existence. When any commodity becomes an object of desire, not merely from its use to the persons desiring it, but from their wanting it as being readily exchangeable for other things, then that article may be regarded as rudimentary money. Thus the greenstone and ochre are on their way to being promoted to the position of currency, and the idea of a “unit of value” is all that is needed to complete the invention. “This higher stage is found among the Indians of British Columbia, whose strings of haiqua-shells worn as ornamental borders to their dresses serve them also as currency to trade with,—a string of ordinary quality being reckoned as worth one beaver's skin.”[4] These shells, therefore, are in reality money, inasmuch as they discharge its functions.
On a review of existing savage tribes and ancient races of more or less civilization we are surprised at the great variety of objects which have been used to supply the need of a circulating medium. Skins, for instance, seem to be one of the earliest forms of money. They are to be found at present among the Indians of Alaska[5] discharging this service, while accounts of leather money seem to show that their use was formerly more general. As the hunting stage gives place to the pastoral, and animals become domesticated, the animal itself, instead of its skin, becomes the principal form of currency. There is a great mass of evidence to show that, in the most distant regions and at very different times, cattle formed a currency for pastoral and early agricultural nations. Alike among existing barbarous tribes and in the survivals discovered among classical nations, sheep and oxen both appear as units of value. Thus we find that at Rome, and through the Italian tribes generally, “oxen and sheep formed the oldest medium of exchange, ten sheep being
- ↑ F. A. Walker, Money, p. 73.
- ↑ Ib., p. 57.
- ↑ E. B. Tylor, Anthropology, pp. 281–282.
- ↑ Tylor, loc. cit.
- ↑ Whymper, Alaska, p. 285.
