Further, the desire for ornament is competitive. One's women must be better ornamented than the women of one's neighbors, if distinction is to be gained thereby. But this sets a faster pace for the neighbors, and the standard of social expectation is raised as to the necessary amount of ornament. It is the same sort of competition that arises among armed nations. A new battle-ship for one requires that all increase their naval strength. New armies in Germany call for new armies in France. A vicious circle is created. The desire for ornament, unlike the desire for food, becomes insatiable. And hence, the value-curve for the metal used as ornament sinks very slowly, being reduced, not by satiation of want, but by limitation of economic resources. I need not elaborate these notions further. They are of the same sort that Veblen has developed in his Theory of the Leisure Class. They rest on fundamentals in human nature, however much they differ from the psychology of the "economic man." They give assurance, I think, that, unless radical change in tastes and fashions come in, which displace gold and silver from their position as ornaments and as means of display, we may expect the value of gold to maintain itself at a high level regardless of great increase in quantity. I do not share the view which Carlile himself seems, at times, to express[464] that gold does not sink in value with the increase in quantity. It seems to me easily demonstrable that it has sunk, and does sink. But I should expect the value of gold to survive the shock that might come if gold were entirely displaced from monetary use vastly better than any commodity which serves wants of a different character could stand a similar shock. The demonetization of silver has, of course, not entirely displaced silver from the monetary employment. It has, however, made it necessary for the arts to absorb a greatly increased proportion of the new silver,[465] and not a little of the old silver. The demonetization of silver, moreover, was accompanied and followed by a great increase in silver production. But silver has stood the shock amazingly well.[466]
It is, of course, thinkable that the attitude of mankind, under new social conditions, and with new tastes and fashions, may change, with reference to gold and silver. Love of approbation and distinction, the sex impulse, and the spirit of rivalry, are eternal elements in human nature. But their manifestations may change. There have been times when love of distinction gratified itself in poverty and filth and asceticism. Almost anything may be exalted into a social ideal. Society may even reach ideals of such a sort that a man may gain social approval and the love of woman in high competition with his fellows in the service of mankind! But even here gold and silver may have a place. They are beautiful, as we now see beauty, and beauty itself is good! The world is better if it has beauty in it.
It is just as well to conclude at this point what I shall have to say regarding the value of gold as a commodity.[467] The same quantity of gold and silver may have widely varying values, depending on the distribution of wealth and power. It is not alone intensity of individual desire that controls values, but also the social weight of those who manifest the desire. And this depends on the legal and other institutional values concerned with social organization. The point is strikingly illustrated by Walker's[468] account—designed for another purpose—of the effect on the values of gold and silver of the conquests of the great Eastern empires by Alexander the Great and the Romans. The production of gold and silver, for the great Eastern empires, was like the rearing of the pyramids in Egypt. All power was centered in the hands of a few despots. Control of vast masses of laborers was in their hands. The social values—it is difficult to classify them as legal, economic and religious, since all three are blended—gave little weight indeed to the desires of the masses, and tremendous weight to the slightest whims of the despot. Thus, since the love of gold and silver was intense in these despots, and since religious considerations also called for the accumulation of great treasuries of gold and silver, enormous numbers of laborers, living miserably, toiled in the mines to produce them, and amazing stores of gold and silver were accumulated. The precious metals had, in these Eastern empires, a high value per unit, since so large a portion of the social energy of motivation attached itself to them. With the conquests by Greeks and Romans, however, a great change came. The old, gold-loving despots lost their power. The conquerors had vastly less love for gold and silver for their own sake. Moreover, the leaders among the conquerors had very much less power in their own social systems than had the oriental despots. Their soldiers were in considerable degree free mercenaries, who had a right to a share in the spoils, and who cared much less for hoards of precious metals than for many other things. In the new régime, the social centre of gravity was changed. There remained few who loved great stores of precious metals who had power enough to accumulate them. Mining on the old basis was impossible. Though slavery persisted, more and more of the labor of slaves went into the production of things that the masses of men could consume. Gold and silver sank enormously in value.
Radical readjustments in the distribution of wealth in our own day, might well make substantial changes in the value of gold, without any change in its quantity. That a more equal distribution of wealth and power, however, would lower the value of gold now, as in the case just discussed, is not so clear. The masses in the Western countries are already fed and clothed, as a rule, even in times of adversity, and usually increasing income for them means increasing expenditure to satisfy less pressing wants, and particularly to satisfy wants connected with social esteem. The laborer's wife gets an expensive cab for her baby when she can afford it. The negroes have gold fillings put in their front teeth—sometimes when the teeth are sound! The practice of giving wedding rings, and even engagement rings, is spreading among the poor. Our American rural poor, of pioneer stock, have had less concern for gold and silver ornament than the masses of the Asiatics and recent European immigrants. But among the rural poor in America, as city standards spread, the tendency to use gold and silver ornaments seems to be increasing, while we may with considerable confidence expect, I think, that the rise of the immigrant to better economic conditions will mean a larger use of gold and silver on his part. Gold leaf on ceilings and radiators would cease, doubtless, except for public buildings, if great fortunes disappeared, and the use of gold, at least, for plate, would be impossible in an economic democracy.[469] Silver might well gain in value at the expense of gold if there were radical changes in the distribution of wealth. It is notorious that prosperity among the agricultural masses of India is promptly followed by absorption of gold in that country. I venture no concrete conclusions on this point, beyond the general conclusion that a redistribution of wealth, with no change in the quantity of gold, might well be expected to alter the value of gold.
It may be added that the general impoverishment of Europe, growing out of the present World War, will probably lower the marginal value of gold in the arts (and hence as money) in considerable degree. From this cause alone, to say nothing of causes growing out of the money-employment of gold, and growing out of the values of goods other than gold, we might expect higher prices after the War than before the War, for articles of consumption.[470]
CHAPTER XXII
THE FUNCTIONS OF MONEY AND THE VALUE OF MONEY
In preceding chapters, I have spoken of the "money-service" as a source of additional value of money, under certain conditions. Before money can function as money at all, it must have value from some non-monetary source.[471] But, given this prior value, money performs valuable services. These valuable services, in certain cases, add to the value of money. Moreover, the fact that money, when made of a metal used in the arts, lessens the amount available for use in the arts, raises the marginal value of that metal there, and consequently raises its value in monetary form as well. It is now necessary to analyze the money-service, and to see in precisely what ways it does affect the value of money. And first, we must notice that the money-service is not simple, but compound; that in fact there are several services of money, in many ways distinct from one another; that not all money can perform all of these services; that most of them may be performed by things other than money, that these services are not all equally important as sources of the value of money, and that the same service varies, from time to time and from place to place, in its significance from this angle; and finally, that one of these services which is of the greatest social importance, namely, the "common measure of values" function, does not add to the value of money at all.