commodity to determine its constancy or variability, and it is inherent in the very definition of exchange value.

The values of commodities may be compared to the surface of the ocean, which, vexed by winds and tides, is never at rest, every point continually rising or falling as compared with others. As some points rise others fall, yet there is a mean level which does not vary, and by comparison with which the variations of level of any particular point may be determined. So with values, there is a mean or average which is constant, and by referring individual values to that we can determine their fluctuations.

These ideas will become clearer as we proceed to apply them concretely to the special case of money.

Although there can be but one real standard of value, invariable at all times and places, yet, as before stated, any commodity may serve as a measure of value, and the great convenience subserved, by all the people of any locality or country using the same commodity instead of a number of different ones for this purpose, early led to the adoption of some one commodity in each locality as a "money" to measure values and facilitate exchanges.

CHAPTER II.
MONEY.

Definition of Money.

Money has been variously defined by different writers. Perhaps the definition given by Prof. F. A. Walker, though lengthy, is the most comprehensive. He says: "Money is that which passes freely from hand to hand throughout the community in final discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it, and without the intention of the person who receives it to consume it, or enjoy it, or to apply it to any other use than in turn to tender it to others in discharge of debts or full payment for commodities."

This definition has been indorsed by several other writers; by some, however, the term money is restricted to coin, paper money being called currency. The distinction is perfectly proper, though not generally concurred in. People commonly use the terms money and currency indiscriminately for both coin and paper money, since they perform identically the same work where both are used together, and the paper is convertible into coin at any time. Where the paper is used alone—"inconvertible paper"—coin is really not money; it ceases to circulate as money; it is hoarded as treasure, or bought and sold as a commodity, but fails to have that general use in current transactions in that country which alone entitles any commodity to be called money.

The distinction sought to be made between paper money and coin arises largely, it is thought, from the idea that coin has a value in itself which paper money has not. This idea is erroneous. Value, as we have seen, is a ratio or relation, and though the value of anything is based on a desire for it, that desire may arise either from the satisfaction which the use or consumption of it will bring, or from the belief that it can be exchanged for some other thing that will give satisfaction in use or consumption. The value of money is due to the latter of these two causes. No one wants money except for the purpose of exchanging it for other commodities; under modern conditions it is necessary for this purpose,—it is the indispensable requisite to the satisfaction of certain human wants. Money, therefore, possesses an indirect if not a direct subjective value which forms the basis of its exchange value. Paper money possesses the power of satisfying this need for money to the same extent that coin does, under like conditions, and it has, therefore, both subjective value and exchange value, and the latter is governed by the same law of supply and demand that operates in all cases.

The fact that the material of which the money is made is, in one instance, of great cost, and, in the other, of little or no cost, is of minor consequence. The minting of gold and silver into coin may, or may not, add to its value; it really transforms it into another commodity—money—and its value is thenceforth determined by the law of supply and demand as applied to money. The same is true of paper money, the low cost in the production of which is not an element in determining its value, for its production is always a monopoly. There is no reason, then, for not considering paper currency as money, and in using the term we will consider its meaning to be that given by Professor Walker,—which is also its popular significance,—and as including both paper money and coin.

It should be considered, whether of one material or of several circulating concurrently, as a single commodity created for the purpose it fulfils, and as separate and distinct from the material of which it is made. In short, as that commodity to which, by common consent and usage, generally sanctioned by law, all other commodities are referred as a measure of value, and by means of which exchanges are effected.

The Functions and Requirements of Money.

Professor Jevons, in his valuable work, "Money and the Mechanism of Exchange," gives to money the following threefold functions, viz. as:—

A medium of exchange.

A measure of value.

A standard of deferred payments.

He also inquires if it does not perform a fourth function as a 'store of value.'

All authorities give the first two of the above as the principal money functions. Some include one or both of the others, and some omit both.

Prof. F. A. Walker objects to the use of the term "measure of value," on the ground that value, being a relation, cannot be measured but can only be expressed. He proposes, instead, the term, "common denominator of value." It is not quite clear why a relation or ratio cannot be measured,—the measure, of course, being a similar ratio,—nor does there seem to be anything gained by the change, while the term proposed seems less clear and correct than the one in general use. Money, or the value of the unit of money, is used as a measure in comparing the values of other things just as a yardstick, or the length of a yard, is used in comparing the lengths of other objects.

Money, in acting as a medium of exchange, must also act as a store of value to some extent, since it stores the value received until it is expended; but the use of money for the purpose of hoarding is not to be regarded as strictly one of its functions, at least not in the sense of requiring to be especially provided for. The fact that it is so used, however, should be borne in mind, as it interferes more or less with its other and more important functions; but in considering the qualities necessary to the best performance of the functions of money we may omit this last function, as any money which fills the requirements for the others will fulfil those necessary to this in a sufficient degree considering its minor importance. As our inquiries in this work will be confined to the money materials now in general use, viz., gold, silver, and paper, we need not consider the qualities necessary to a money material, as given by Professor Jevons,—such as portability, indestructibility, divisibility, etc.,—further than to say that the qualities he mentions are possessed by all of the money materials now in use, in a sufficient and nearly equal degree. Coin, to be sure, is more indestructible than paper; but as the