Chapter III.
Money In General.
Section CXVI.
Instrument Of Exchange. Measure Of Value. Barter.
Wherever the division of labor is very highly developed, the continuance of barter, or the direct exchange of one object of consumption for another, presents difficulties well nigh insurmountable. How difficult it would be always to find the person who could supply us with precisely what we wanted, and at the same time have need of what we had a surplus of.[687] But how much less frequently would it happen that one's [pg 341] want and another's surplus would correspond exactly the one to the other in quantity; that, for instance, the manufacturer of nails, desirous of exchanging his nails for a cow, should meet a cattle-dealer who should want exactly as many nails as a cow is worth! Here there is one chief difficulty in the way, viz.: that there are so many commodities which cannot be divided without causing a diminution or even a destruction of their value; and that others cannot be stored away in any quantity without becoming a very heavy burthen to their owner. How useful it would therefore be, if there was one commodity which should be acceptable to every person, at all times, especially if in addition to this, it possessed the qualities of durability, capacity for transportation and for being stored up and preserved. Any person who possessed a proper supply of this one commodity would then be certain of being able to obtain all other exchangeable commodities through its instrumentality; and every seller would be satisfied to exchange what he had to dispose of against this “universal commodity.” If two values are equal to a third, they are equal to each other. It is, therefore, a simple matter to use this most current of all commodities, with which all others are most frequently compared, as a measure of the relative values of all other exchangeable commodities. There is need of such a measure, and it is analogous to the want experienced by the mathematician who has a column of fractions to sum up, and who does it by first reducing them all to a common denominator. (Storch.)[688] A person entrusted with the duty of assessing [pg 342] the values of two hundred different articles would be obliged, if he had no such measure to use, to burthen his memory with at least 19,900[689] different ratios. With it, he need carry only 199 in his head.
Such a commodity, universally in favor, and which, on that account, is employed as an intermediary in the effecting of exchanges of the most varied nature, in the measuring of all exchange-values and as a value-carrier (Werthträger) in time[690][691] and space, we call money. (Merce universale: Berri; produit préféré: Ganilh; marchandise intermédiare; Bastiat.)[692]
The more enlightened portions of every business community gradually come to require payment in the commodity [pg 344] which has for the time being the greatest circulating capacity. If to this be added the sanction of the government, and if the [pg 345] government itself recognizes this same “universal commodity” as the means of payment of all debts, or as “legal tender” [pg 346] (puissance libératoire), where no other is expressly agreed upon, the “universal commodity” in question then becomes money in the fullest sense of the idea conveyed by the word.[693]