A Measure of Value,[224] in the ordinary sense of the word measure, would mean something by comparison with which we may ascertain what is the value of any other thing. When we consider, further, that value itself is relative, and that two things are necessary to constitute it, independently of the third thing which is to measure it, we may define a Measure of Value to be something, by comparing with which any two other things, we may infer their value in relation to one another.
In this sense, any commodity will serve as a measure of value at a given time and place; since we can always infer the proportion in which things exchange for one another, when we know the proportion in which each exchanges for any third thing. To serve as a convenient measure of value is one of the functions of the commodity selected as a medium [pg 289] of exchange. It is in that commodity that the values of all other things are habitually estimated.
But the desideratum sought by political economists is not a measure of the value of things at the same time and place, but a measure of the value of the same thing at different times and places: something by comparison with which it may be known whether any given thing is of greater or less value now than a century ago, or in this country than in America or China. To enable the money price of a thing at two different periods to measure the quantity of things in general which it will exchange for, the same sum of money must correspond at both periods to the same quantity of things in general—that is, money must always have the same exchange value, the same general purchasing power. Now, not only is this not true of money, or of any other commodity, but we can not even suppose any state of circumstances in which it would be true.
It being very clear that money, or the precious metals, do not themselves remain absolutely stable in value for long periods, the only way in which a “standard of value” can be properly established is by the proposed “multiple standard of value,” stated as follows:
“A number of articles in general use—corn, beef, potatoes, wool, cotton, silk, tea, sugar, coffee, indigo, timber, iron, coal, and others—shall be taken, in a definite quantity of each, so many pounds, or bushels, or cords, or yards, to form a standard required. The value of these articles, in the quantities specified, and all of standard quality, shall be ascertained monthly or weekly by Government, and the total sum [in money] which would then purchase this bill of goods shall be, thereupon, officially promulgated. Persons may then, if they choose, make their contracts for future payments in terms of this multiple or tabular standard.”[225] A, who had borrowed $1,000 of B in 1870 for ten years, would make note of the total money value of all these articles composing the multiple standard, which we will suppose is $125 in 1870. Consequently, A would promise to pay B eight multiple units in ten years (that is, eight times $125, or $1,000). But, if other things change in value relatively [pg 290] to money during these ten years, the same sum of money—$1,000—in 1880 will not return to B the same just amount of purchasing power which he parted with in 1870. Now, if, in 1880, when his note falls due, the government list is examined, and it is found that commodities in general have fallen in value relatively to gold, the multiple unit will not amount to as much gold as it did in 1870; perhaps each unit may be rated only at $100. In that case, A is obliged to pay back but eight multiple units, which costs him only $800 in money, while B receives from A the same amount of purchasing power over other commodities which he loaned to him. B had no just claim to ten units, since the fall of all commodities relatively to gold was not due to his exertions. On the other hand, if, between 1870 and 1880, prices had risen, mutatis mutandis, the eight units would have cost A more than $1,000 in gold; but he would have been justly obliged to return the same amount of purchasing power to B which he received from him.
§ 2. Gold and Silver, why fitted for those purposes.
By a tacit concurrence, almost all nations, at a very early period, fixed upon certain metals, and especially gold and silver, to serve this purpose. No other substances unite the necessary qualities in so great a degree, with so many subordinate advantages. These were the things which it most pleased every one to possess, and which there was most certainty of finding others willing to receive in exchange for any kind of produce. They were among the most imperishable of all substances. They were also portable, and, containing great value in small bulk, were easily hid; a consideration of much importance in an age of insecurity. Jewels are inferior to gold and silver in the quality of divisibility; and are of very various qualities, not to be accurately discriminated without great trouble. Gold and silver are eminently divisible, and, when pure, always of the same quality; and their purity may be ascertained and certified by a public authority.
Jevons[226] has more fully stated the requisites for a perfect money as—
| 1. Value. | |
|---|---|
| 2. Portability. | |
| 3. Indestructibility. | |
| 4. Homogeneity. | |
| 5. Divisibility. | |
| 6. Stability of value. | |
| 7. Cognizability. |