this were not forthcoming, some of the commodities would be without purchasers, and prices could not be kept up. Alterations, therefore, in the cost of production of the precious metals, do not act upon the value of money except just in proportion as they increase or diminish its quantity; which cannot be said of any other commodity. It would therefore, I conceive, be an error both scientifically and practically, to discard the proposition which asserts a connexion between the value of money and its quantity.
It is evident, however, that the cost of production, in the long run, regulates the quantity; and that every country (temporary fluctuations excepted) will possess, and have in circulation, just that quantity of money, which will perform all the exchanges required of it, consistently with maintaining a value conformable to its cost of production. The prices of things will, on the average, be such that money will exchange for its own cost in all other goods: and, precisely because the quantity cannot be prevented from affecting the value, the quantity itself will (by a sort of self-acting machinery) be kept at the amount consistent with that standard of prices—at the amount necessary for performing, at those prices, all the business required of it.
"The quantity wanted will depend partly on the cost of producing gold, and partly on the rapidity of its circulation. The rapidity of circulation being given, it would depend on the cost of production: and the cost of production being given, the quantity of money would depend on the rapidity of its circulation."[1] After what has been already said, I hope that neither of these propositions stands in need of any further illustration.
Money, then, like commodities in general, having a value dependent on, and proportional to, its cost of production; the
- ↑ From some printed, but not published, Lectures of Mr. Senior: in which the great differences in the business done by money, as well as in the rapidity of its circulation, in different states of society and civilization, are interestingly illustrated.
