Value and Money

2025-01-02  |  分类：读书笔记  |  阅读量：32
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Money has this in common with measures in general, that it is a type of language, differing among different peoples in everything that is arbitrary and conventional, but of which the forms are brought closer and made identical, in some respects, by their relation to a common term or standard.
This common term which brings all languages together and which gives all tongues a basic similarity in spite of the diversity of the sounds employed, is none other than the very ideas which these words express, that is, the objects of nature represented by the senses to the human mind and the notions man has formed by distinguishing the different aspects of these objects and by combining them in a thousand ways.
It is this common foundation, essential to all languages independently of all conventions, which allows each language, each system of convention adopted as the symbols of ideas, to be used as a basis of comparison for all the other systems of convention, as one would compare to the actual system of ideas which can be interpreted by each language, that which was originally expressed in any other language, that which can, in short, be translated.
The common term of all measures of length, area or volume is only the actual size, of which the different measures adopted by different peoples are but arbitrary divisions which can in like manner be compared and reduced to one another.
One language is translated into another, one measure is reduced to another. These different expressions indicate two very different operations.
Languages designate ideas through sounds which are in themselves extraneous to those ideas. These sounds, from one language to another, are entirely different, and to explain them, it is necessary to substitute one sound for another; for the sound of the foreign language, the sound which corresponds to it in the language into which it is being translated. Measures on the contrary, measure size only by size itself. Only the choice of the size taken by agreement for the unit of measurement, and the divisions adopted to indicate the different measures are arbitrary and subject to variation. Thus there are no substitutions to make from one thing to another, only quantities to be compared, and proportions to be substituted for other proportions.
The common term to which the currencies of all nations are related is the actual value of all objects of commerce which they serve to measure. But since this value can only be expressed by the quantity of money to which it corresponds, it follows that money can only be valued in terms of other money, just as sounds from one language can only be interpreted by means of the sounds of another.
Since the moneys of all civilized nations are made of the same materials, and since they, like measures, differ among themselves only with regard to the divisions of these materials and the arbitrary determination of what is regarded as the unit, they are susceptible, in this respect, to being reduced the one to the other, just as the measures employed by the divers nations are.
We shall see below, that this reduction is made in a very convenient manner, by the expression of their weight and their standard.
But this manner of valuing currencies by the statement of their weight and standard is not adequate for an understanding of the language of commerce in relation to money. All the nations of Europe know two types of money. In addition to the real coins, such as the écu, the louis, the crown and the guinea, which are pieces of metal, marked with a known inscription and negotiable under this denomination, each nation has created a kind of fictitious money which is called money of account or numéraire, whose denominations and divisions, without corresponding to any actual coin, form a common scale, to which actual money is related, by being valued in terms of the number of parts of this scale to which they correspond. In France, this is the livre of account or numéraire, composed of 20 sous, which in turn is subdivided into twelve deniers. There is no coin which corresponds to a livre, but an écu is worth three livres, a louis is worth twenty-four livres, and thus this expression of the values of the two coins in terms of the unit of account, establishes the relation between the écu and a louis as one to eight.
Since these moneys of account, as we have seen, are only arbitrary denominations, they vary from nation to nation, and, in the same nation, they may vary from one period to the other.
The English thus have their pound sterling, divided into 20 sous or shillings, which again divide into twelve deniers or pennies. The Dutch calculate in florins, whose divisions do not correspond to those of our livre.
We have therefore to show, in commercial geography, not only the real currencies of each nation, and their evaluation by weight and standard, but also the money of account employed by each nation, and furthermore, their relation to the real money negotiable in the nation, and the relations between the moneys of account of different nations. The relation of the money of account to the actual money of each nation is determined by expressing the value of the actual money in terms of the unit of account of the same country; that of ducats in terms of florins, that of the guinea in shillings and pence sterling, of the louis and écu in livres tournois.
As for the mutual relations of the units of account customary among the different nations, the idea which first presents itself is that of deducing them from the relations between the money of account of each nation and the actual money, and from the knowledge of the weight and standard of the latter. Indeed, knowing the weight and standard of an English crown and the weight and standard of a French écu, the relation between a crown and a French écu is known, and knowing how much an écu is worth in terms of deniers tournois, the value of a crown in terms of deniers tournois may be deduced; and as the value of a crown in terms of pence sterling is also known, the equivalent of pence sterling in deniers tournois is known, and hence the relation between the pound sterling and the livre tournois.
This method of valuing the moneys of account of different nations by comparing them with the actual money of each nation, and by the knowledge of the weight and standard of the latter, would not give rise to any difficulty if all the money was made of a single metal, silver for example, or if the relative value of different metals used for this purpose, gold and silver for example, was the same among all commercial nations, that is if a certain weight of pure gold, a marc2 for example, was worth exactly the same number of grains of pure silver in all nations. But this relative value of gold and silver varies according to the abundance or relative scarcity of these two metals in the different nations.
If in one nation there is thirteen times more silver than gold, and thus in consequence thirteen marcs of silver exchange for one marc of gold, fourteen marcs of silver will exchange for one marc of gold in another nation where there is fourteen times more silver than gold. It follows from this, that if, in order to determine the value of the money of account of two nations where gold and silver do not have the same relative value, to value, for example, the pound sterling in terms of the livre tournois, gold coin is used as the term of comparison, a different result would be obtained than if silver coin had been used. It is clear that the true measure lies between these two results, but in order to determine it with complete and rigorous precision, it would be necessary to bring into the solution of this problem a multitude of extremely delicate considerations. Meanwhile, the silver trade among nations, all the negotiations pertaining to that trade, the use of paper credit for money, the operations of the exchanges and of the banks all assume that this problem has been solved.
The word money, in its first, original and proper sense, which corresponds exactly to the Latin moneta, denotes a piece of metal of a specified weight and standard, and guaranteed by the inscription placed on it by the public authority. Stating the name, the inscription, the weight and the standard of each coin of different nations, while converting this weight to marcs, is all that has to be done in order to give a clear idea of money considered from this first point of view.
But usage has given a wider and more abstract meaning to this word money. Metals are divided into pieces of a certain weight; the authority guarantees their standard by an inscription, only in order that they may be used in commerce in a satisfactory and safe manner, so that they may serve there both as a measure of value and as a store representing the value of produce; moreover, the idea of dividing and marking the metals in this way, or, in short, of coining money, has been conceived only because these metals were already serving as a measure and a common pledge of all value.
Since money has no other use, this name has come to be regarded as designating that very use, and as it is true to say that money is the measure and pledge of value, because everything which acts as measure and pledge of value can take the place of money, the name money in this wide sense has been given to everything used in this way. It is in this sense that cowries are the currency of the Maldivian islands, that livestock was the currency of the Germanic tribes and the ancient inhabitants of Latium, that gold, silver and copper are the currency of civilized people; that these metals were currency before the idea of showing their weight and standard by a legal stamp was conceived. It is in this sense that the name paper currency is given to letters of credit, which represent money. It is, finally, in this sense that the name of money fits the purely abstract denominations which serve as a basis of mutual comparison for all values, even those of actual moneys, and which are called money of account, bank money, etc.
The word money in this sense, is not to be translated by the Latin word, moneta, but by that of pecunia, to which it corresponds very exactly.
It is in this last sense, that is, as a measure of value and a pledge of value, that we are going to look at money when we follow the course of its introduction in commerce and the progress which the art of measuring value has made among mankind.
First of all, it is essential to get a clear idea of what ought to be understood here by this word, value.
This abstract noun, which corresponds to the verb “to be worth” (valoir), in Latin valere, has in everyday language several meanings, which it is important to distinguish.
The original meaning of this word, in the Latin language, denoted strength, vigor, valere also meant to be in good health, and we keep this original meaning in French in the derivations valide (healthy), invalide (invalid), and convalescence. From this use of the word valour (valeur) as denoting strength, its meaning has been diverted to signify military courage, a virtue which the ancients have nearly always designated by the same word meaning physical strength. The word “valoir” in French has taken another frequently used meaning, and one which, although different from the sense given in commerce to this word and to the word value, forms, however, its original foundation.
It expresses the suitability relative to our needs by which the gifts and the goods of nature are regarded as fit for our enjoyment and for the satisfaction of our desires. It is said that a stew is worthless if its flavor is bad, that a food is bad for the health, that one material is better than another, an expression which has no relation to its commercial value, and which only signifies that it is more suitable to the use for which it is intended.
The adjectives bad, mediocre, good, excellent, describe the different degrees of this type of value. It must be observed, however, that the noun value is not nearly as much used in this sense as the verb to be worth (valoir). But if it is used, it can only be understood to mean the suitability of an object for our enjoyment. Although this suitability is always relative to ourselves, yet we have in view, when explaining the word value, a real quality which is intrinsic to the object and through which it is suitable for our use.
This sense of the word value would be appropriate to a man in isolation, without any communication with other men.
Let us consider this man as exerting his abilities on a single object only; he will seek after it, avoid it, or treat it with indifference. In the first case, he would undoubtedly have a motive for seeking after this object; he would judge it to be suitable for his enjoyment, he will find it good, and this relative goodness could generally speaking be called value, it would not be susceptible to measurement, and the thing which has value would not be evaluated.
If the same man can choose between several objects suitable to his use, he will be able to prefer one to the other, find an orange more agreeable than chestnuts, a fur better for keeping out the cold than a cotton garment; he will regard one as worth more than another; he will compare them in his mind, he will appraise their worth. He will consequently decide to undertake those things which he prefers, and leave the others.
The savage has killed a calf, which he takes to his hut; on his way he finds a roe; he kills it and takes it instead of the calf in the expectation of eating a more delicious meat. In the same way a child, who had first filled his pockets with chestnuts, empties them in order to make room for some sugared almonds which have been given to him.
This, then, is a comparison of value, an evaluation of the different objects in the judgments of this savage and this child; but these appraisals are not permanent, they change continually with the need of the person. When the savage is hungry, he values a piece of game more than the best bearskin; but let his appetite be satisfied and let him be cold, and it will be the bearskin that becomes valuable to him.
As often as not, the savage confined his desires to the satisfaction of his immediate needs, and no matter what the quantity is of the objects for which he has no use, as soon as he has taken what he needs, he leaves the remainder, which is of no use to him.
Experience, however, teaches our savage that among the objects suitable for his enjoyment, there are some whose nature makes them capable of being kept for some time, and which he may accumulate for future needs: these keep their value even when the immediate need has been satisfied. He seeks to appropriate them, i.e., to put them in a safe place where he can hide or guard them. It may be seen that the number of considerations which enter into the estimation of this value, relative solely to the man who enjoys and desires, increases greatly through this new perspective which foresight adds to the original feeling of need. When this feeling, which at first was only transitory, assumes the character of permanence, the man begins to compare his needs, to adapt his quest for objects no longer to the swift impulse of the immediate need alone, but in accordance to the necessity and usefulness (utilité) of the different needs.
As for the other considerations by which this ranking of more or less pressing usefulness is weighed up or modified, one of the first which suggests itself is the suitability of the object, or its relative capacity to satisfy the type of need for which it is sought. It must be admitted that this degree of suitability, with regard to the estimation which results from it, falls to some extent within the order of usefulness since the pleasure of the keener enjoyment produced by this degree of suitability is itself an advantage which a man compares with the more urgent necessity of those objects whose abundance he prefers to the suitability of a single one.
A third consideration is the degree of difficulty which a man meets in procuring the object of his desires; for it is quite clear that of two things of equal usefulness and quality, he would regard that which cost him more toil to obtain as the more precious, and he will take much more care and effort to obtain it. It is for this reason that water, in spite of its necessity and the multitude of pleasures which it provides for man, is not regarded as a precious thing in a wellwatered country; that man does not seek to gain its possession, since the abundance of this element allows him to find it all around him. But in the sandy deserts it would command an infinite price.
We have not yet begun to discuss exchange, and already we have touched upon scarcity, one of the elements in the process of valuation. It must be pointed out, that the esteem attached to scarcity is still founded on a particular type of usefulness, for it is because it is more useful to accumulate a thing difficult to find, that it is more sought after and that a man puts more effort into acquiring it.
It is possible to deduce from these three considerations all those that enter into the determination of the type of value relating to man in isolation; they are the three elements which combine to determine it. To give it an appropriate name we shall call it esteem value (valeur estimative), because it is in fact the expression of the degree of esteem which a man attaches to the different objects of his desire.
It seems useful to stress this notion and to analyze what is meant by this degree of esteem which man attaches to his different wants; what is the essence of this valuation, or the expression of the unit to which the value of each particular object is compared, what is the notation of this scale of comparison and what is its unit of measurement.
Reflecting upon this, we find that the totality of things necessary for the subsistence and well-being of man form, if I may use the expression, a sum of needs which is fairly limited in spite of all their range and variety.
To obtain the satisfaction of these wants, man has only an even more limited quantity of strength and resources. Each particular object of enjoyment costs him trouble, hardship, labor, and, at the very least, time. It is this use of his resources applied to the quest for each object which provides the offset to his enjoyment, and forms as it were the cost of the thing. The man is still isolated, nature alone supplies his wants, and already he has made a first bargain with her, in which she supplies nothing unless he pays for it by his labor, the use of his resources and his time.
His capital, in this kind of exchange is confined within narrow limits; he must adjust the sum of his enjoyments to it. He must make a choice in the tremendous store house of nature, and he must divide this cost of which he can dispose among the different objects which are agreeable to him, he must appraise them on the basis of their importance to his subsistence and well being. And what is this appraisal, other than the account he renders to himself of the portion of his toil and time, or, to express these two things in a single word, the portion of his resources which he can use to acquire an evaluated object without thereby sacrificing the quest for other objects of equal or greater importance? What then is his measure of value here?
What is his scale of comparison? It is clear that he has no other than his actual resources. The total sum of these resources is the only unit of this scale, the only fixed point of departure, and the values which he attributes to each object are the proportional parts of this scale. It follows from this that the esteem value (valeur estimative) of an object, for the man in isolation, is precisely that portion of his total resources which corresponds to the desire he has for this object, or what he is willing to use to satisfy this desire. It might be said, in other words, that it is the relation of this proportional part to the total of the man’s resources, a relation expressed by a fraction, whose numerator was the unit and whose denominator the number of values or equal proportional parts which the total of the man’s resources contained.
We cannot but pause for a further reflection. We have not yet seen the emergence of exchange, we have not yet brought together two individuals, and already from this first step in our enquiries we touch on one of the newest and most profound truths which the general theory of value contains. It is this truth which l’Abbé Galiani stated twenty years ago in his treatise Della Moneta with so much clarity and vigor, but almost without further development, when he said that the common measure of all value is man. It is plausible that this same truth, half grasped by the author of a work which has just appeared under the title Essai analytique sur la richesse et l’impôt has given rise to the doctrine of a constant and unique value which is always expressed by this unit and of which all individual values are only proportional parts, a doctrine which in that book is a blending of truth and falsity, and which for this reason has appeared rather obscure to the majority of its readers.
This is not the place in which to develop for our readers the obscurities in the short statement we have just made of a proposition which merits being discussed at a length commensurate with its importance; even less should we enumerate its numerous consequences at this moment.
Let us take up the thread of the argument which has guided us so far; let us extend our original assumptions. Instead of considering only one man, let us take two; let each one have in his possession something suitable for his use, but let these things be different and suited to different wants. Suppose, for example, that on a desert island, in the middle of the northern seas, two savages land on different sides, one bringing fish with him in his boat, more than he can consume himself, the other carrying hides beyond what he can use to clothe himself and to make himself a tent. The one bringing fish is cold, the one bringing hides is hungry. It will eventuate that the latter will ask the owner of the fish for part of his provisions, and will offer to give him in return some of his hides: the other will accept. Here is exchange, here is commerce.
Let us pause for a while to consider what happens in this exchange. It is obvious from the first that the man, who, having taken from his catch enough to feed himself for a few days beyond which time those fishes would decay, would have to throw away the remainder as useless, begins to value them when he sees that these fish may be used (by means of exchange) to obtain for him hides which he needs to clothe himself. This superfluous fish acquires in his eyes a value which it did not have before. The owner of the hides will reason likewise and will himself learn to value those hides for which personally he has no need. It is likely that in this first case, where we assume that our two men are each provided more than abundantly with the thing they possess, and are accustomed to attach no price to the surplus, the discussion on the conditions of exchange will not be very animated; each would let the other take, one all the fish, the other all the hides, which he himself does not need. But let us vary the assumptions a little: let us give each of these two men an interest in keeping their surplus, a motive to attach some value to it. Let us suppose that instead of fish, one had brought corn, which may be preserved for a very long time; that the other, instead of hides, had brought firewood, and that the island produced neither grain nor wood. One of our two savages has his subsistence, the other his firing for several months; they can only replenish their provisions by going back to the continent, from which they were perhaps driven away by the fear of wild beasts or a hostile nation; they can only do so in the stormy season by exposing themselves to the almost inevitable dangers of the sea. It stands to reason that the stock of corn and wood becomes very precious to the two owners, that it has great value for them; but the wood which the one can consume in a month will become quite useless to him, if in the meantime he dies of hunger for want of corn, and the owner of the corn will be no better off if he is in danger of perishing for want of wood. They will thus make an exchange, in order that each of them may have both wood and corn until the time when the season will permit them to put to sea in order to get more corn and wood on the continent. In these circumstances both would obviously be less generous; each will scrupulously weigh all the considerations which may council him to prefer a certain amount of the commodity which he does not have to a certain amount of that which he has; that is, he will calculate the intensity of the two needs, of the two interests which he balances, one against the other, to wit, the interest of keeping corn and that of acquiring wood, or of keeping wood and acquiring corn. In short, he will very precisely determine their esteem value relative to himself. This esteem value is proportional to the interest he has in obtaining the two things; and the comparison of the two values is obviously only the comparison of the two interests. But each makes his own calculations, and the results may be different: the one would exchange three measures of corn for six armfuls of wood, the other would give him six armfuls of wood only for nine measures of corn. Independently of this kind of mental evaluation by which each of them compares the interest he has of keeping to that of acquiring, both are also animated by a general interest independent of all comparisons, that is the interest of keeping as much of their own commodity as they can, and of acquiring as much as they can of that of the other. With this in mind, each will keep secret the mental comparison which he has made of his two interests, of the two values which he attached to the commodities for exchange, and he will sound out the owner of the commodity he desires by lower offers and higher demands. Since the other will follow the same procedure, they will discuss the conditions of the exchange, and as they both have a great interest in coming to an agreement, they will finally do so. Slowly each of them will increase his offers and reduce his demands, until they finally agree to give a certain quantity of corn for a certain quantity of wood. At the moment of exchange the one who, for example, gives four measures of corn for five armfuls of wood, without doubt prefers these five armfuls of wood to the four measures of corn; he will give them a higher esteem value. But for his part, the one who receives the four measures of corn also prefers them to the five armfuls of wood. This superiority of the esteem value attributed by the acquirer to the thing he acquires over the thing he gives up is essential to the exchange, for it is the sole motive for it. Each would remain as he was, if he did not find an interest, a personal profit, in exchange; if, in his own mind, he did not consider what he receives worth more than what he gives.
But this difference in esteem value is reciprocal and precisely equal on each side; for if it was not equal, one of them would be less desirous of the exchange and he would force the other to come closer to his price by a better offer. It is thus always exactly true that each gives equal value to receive equal value. If four measures of corn are given for five armfuls of wood, five armfuls of wood are also given for four measures of corn, and consequently, four measures of corn are equivalent to five armfuls of wood in this particular exchange. These things thus have equal exchange value. Let us pause again.
Let us see exactly what is meant by this exchange value, whose equality is the necessary condition of free exchange; let us not depart from the simplicity of our assumptions, where we have only two contracting parties and only two objects of exchange to consider. This exchange value is not exactly the same as the esteem value, or, in other words, the interest which each of the two separately attached to the two desired objects, whose possession he compares in order to determine what he must give up of the one to acquire some of the other, since the result of the comparison might not be the same in the minds of the two contracting parties. This first value, to which we have given the name esteem value, is arrived at through the comparison which each separately makes between the two interests that contend with one another in his case; it exists only in the interest of each of the two taken separately. Exchange value on the contrary, is adopted by both the contracting parties, who recognize its equality and who make it the condition of the exchange. In the determination of esteem value, each man, taken separately, has compared only two interests, attached by him to the object he has and to the one he desires to have. In the determination of exchange value, there are two men who compare, and four interests (which are) compared by them; but the two individual interests of each of the two contracting parties have first been compared between themselves separately, and it is the two results which are then compared together, or rather, discussed by the two contracting parties, in order to form one average esteem value, which becomes precisely the exchange value, to which we believe we must give the name of appreciative value (valeur appréciative) because it determines the price or the condition of exchange.
It can be seen from what we have just said, that the appreciative value, this value which is equal for the two objects exchanged, is essentially of the same nature as the esteem value. It differs from it only in so far as it is the average esteem value. We have seen, above, that for each of the contracting parties the esteem value of the thing received is higher than that of the thing given up, and that this difference is exactly equal on each side; by taking half of this difference in order to subtract it from the higher value and to add it to the lower value, they are made equal. We have seen that this perfect equality is precisely the characteristic of appreciative value in the exchange. Thus the appreciative value is evidently none other than the average of the esteem values which the two contracting parties attach to each object.
We have proved that the esteem value of an object, for the man in isolation, is none other than the relation between that part of his resources which a man can devote to the quest for this object and the totality of his resources; thus the appreciative value in the exchange between two men is the relation between the sum of the parts of their resources which they would be prepared to devote to the quest for each of the objects exchanged and the sum of the resources of those two men. It is worth noting here that the introduction of exchange between our two men increases the wealth of both of them, that is, it gives them both a greater quantity of satisfaction in return for the same resources. I assume in the example of our two savages that the shore which produces corn and the shore which produces wood, are remote from each other; a single savage would be obliged to make two journeys to obtain his provisions of corn and wood; he would consequently lose much time and hard work in navigating. If on the contrary there are two of them, they would use the time and effort that would have been put into the second journey, the one to cut wood, the other to obtain corn. The total sum of corn and wood gathered would be much bigger and so consequently, the share of each man.
Let us retrace our steps. It follows from our definition of appreciative value that it is not the relation between two things exchanged or between the price and the thing sold, as some people have been tempted to think. This expression would be absolutely inappropriate in the comparison of the two values, of the two terms of exchange. It implies a relation of equality, and this relation of equality assumes two things already equal; now, those two equal things are not the two things compared, but rather the value of the things exchanged. Thus, the values which have a relation of equality may not be confused with this relation of equality which assumes that two values have been compared. There is without doubt a sense in which the values have a relation, and we have explained it above in a careful study of esteem value; we have even said that this relation, like all relations, could be expressed as a fraction. It is precisely the equality of these two fractions that constitutes the essential condition of the exchange, an equality which is achieved by fixing the appreciative value at half the difference between the two esteem values.
In commercial language, price is often confused with value without causing inconvenience, because in effect the stating of a price always involves the stating of a value. They are, however, different concepts which it is important to distinguish. The price is the thing which is given in exchange for an object. From this definition it follows that this other object is also the price of the first. When exchange is under discussion, it is almost superfluous to make this remark, and as all commerce consists of exchange, it is obvious that this expression (price) always fits both things traded, which are equally each other’s price. The price and the thing bought or, if you like the two prices, are of equal value: the price is worth as much as the purchase, and the purchase as much as the price. But the name value, strictly speaking, is no more applicable to one of these two terms of exchange than to the other. Why then do we use these terms for one another? Here is the reason; and its explanation will enable us to take a further step in the theory of value.
This reason is the impossibility of expressing value in terms of itself. It is easy to be convinced of this impossibility if only one reflects on what we have just said and demonstrated about the nature of value.
Indeed, how do we find the expression of a fraction whose first term, the numerator, the fundamental unit, is an inestimable object, which is defined in the vaguest possible manner? How can the value of an object be expressed as corresponding to the two-hundredth part of a man’s resources, and of what resources are we talking? It is essential to introduce the consideration of time in the calculation of these resources, but what interval will be chosen? Will it be a life time, or a year, a month, a day? Nothing of the sort to be sure; for man, with respect to each object he needs, must, in order to obtain it, inevitably employ his resources for periods of vastly different duration. How to estimate these intervals of time which, passing at one and the same time for all types of man’s needs, must yet only enter in unequal lengths into the calculation relative to each particular type of need. How to evaluate these imaginary parts of one continuous span of time, which flows, if I may put it in this way, along an indivisible line. And what thread could be a guide in such a labyrinth of calculations, of which all the elements are indeterminate? It is thus impossible to express value in itself; and all that human language can express in this regard is that the value of one thing equals the value of another. The benefit evaluated, or rather, felt by two men, establishes this equation in each particular case, without any one ever thinking of summing the resources of man in order to compare its total to each needed object. Interest always determines the result of this comparison, but it has never actually made the comparison, nor could it do so.
The only means of expressing value is then, as we have said, to express that one thing is equal in value to another; or, if you like, in other words to present one value as equal to a required value. Value, like size, has no other measure than itself, and if values are measured by comparison with other values, as length is measured by comparison with other lengths, then, in both means of comparison, there is no fundamental unit given by nature, there is only an arbitrary unit given by convention. Since in all exchange there are two equal values and since the measure of one can be given in terms of the other, there must be agreement about the arbitrary unit which is taken for the foundation of this measure, or, if you like, for the unit of notation of the parts which are to compose the scale of comparison for value. Suppose that one of the two contracting parties in the exchange wishes to express the value of the thing he acquires, he will take for the unit of his scale of value a constant part of what he gives, and he will express in whole numbers and in fractions of this unit the quantity he will give for a fixed quantity of the thing he receives. This quantity expresses the value for him, and will be the price of what he receives; from whence it can be seen that the price is always the expression of the value, and that thus, for the acquirer, to express the value is to give the price of the thing acquired in terms of the quantity he gives to acquire it. He will thus say indifferently that this quantity is the value, or the price of what he buys. In employing these two forms of speech he will have the same meaning in mind, and he will put the same meaning into the minds of those who hear him; which explains how the two words value and price, although expressing fundamentally different ideas, can, without causing inconvenience, be substituted for each other in daily speech, when rigorous precision is not required.
It is rather obvious that if one of the two contracting parties has taken a certain arbitrary part of the thing he gives up, in order to measure the value of the thing he acquires, the other party will have the same right in his turn to take that same thing acquired by his opponent, but given up by himself, in order to measure the value of the thing his opponent has given him, and which served as a measure for the latter. In our example, the one who has given four bags of corn for five armfuls of wood will take a bag of corn for the unit of his scale, and will say: the armful of wood is worth four-fifths of a bag of corn. The one who has given the wood for the corn, on the contrary, will take the armful of wood for his unit and will say: the bag of corn is worth one and a quarter armfuls of wood. This operation is exactly the same as that which takes place between two men who might wish to value reciprocally, the one French ells in terms of Spanish vares, the other Spanish vares in terms of French ells.
In both cases, an aliquot part of the most familiar thing, which serves to evaluate the other, is taken as a fixed and indivisible unit, and the second is evaluated by comparing it with the part arbitrarily taken as the unit. But just as Spanish vares no more measure French ells than French ells measure Spanish vares, the bag of corn does not measure the value of an armful of wood any more than an armful of wood measures the value of a bag of corn.
From this general proposition the inference must be drawn that in all exchanges both terms of exchanges are equally the measure of the value of the other term; for the same reason, in all exchanges, the two terms are both equally representative scales, that is, whosoever has corn can obtain for that corn a quantity of wood equal in value with that corn, just as the person who has wood, can, with that wood, obtain a quantity of corn of equal value.
This is an extremely simple truth, but one that is very fundamental to the theory of value, money and commerce. Obvious as it may be, it is yet frequently misunderstood by the best of minds, and ignorance of its most immediate consequences has often led the administration into the most disastrous delusions. It suffices to quote the famous system of Law.
We have dwelt for a very long time on the first hypotheses of the man in isolation, and of the two men exchanging two objects; but we wished to draw from them all the ideas of the theory of value which do not entail more complications. By thus always utilizing the simplest possible hypothesis, the ideas which result from it necessarily present themselves to the mind in a neater and more straightforward fashion.
We have only to extend our assumptions, to multiply the number of traders and things traded, in order to see the birth of commerce and to complete the sequence of ideas attached to the word “to be worth” (valoir).
Even for this last objective, it will suffice to multiply the number of men, while still considering only two single objects of exchange.
If we assume there are four men instead of two, to wit, two owners of wood and two owners of corn, it may at first be imagined that two traders meet on the one hand, and two on the other, without any communication between the four; then each exchange will be made separately, as if the two contracting parties were alone in the world. But, the very fact that the exchanges are made separately is no reason why they should be made on the same conditions. In each exchange taken separately, the appreciative value of the two exchanged objects is equal for both parties; but it must not be forgotten that this appreciative value is none other than the averaging of the two esteem values given to the objects of exchange by the contracting parties. Now, it is quite possible that this average result is radically different in the two exchanges settled separately, because the esteem values depend on the way in which each considers the objects of his needs, on the degree of usefulness which he assigns to them among his other needs; they are different for each individual. Consequently, if one only considers the two individuals on the one side and the two individuals on the other, the average result may be very different. It is quite possible that the contracting parties of one of the exchanges are less sensitive to cold than the contracting parties of the other; this circumstance is sufficient to cause them to attach less esteem value to wood and more to corn. Thus while in one of the exchanges four bags of corn and five armfuls of wood will only be equivalent to two bags of corn, which will not prevent that, in each contract, the value of the two objects is exactly equal for the two contracting parties, since one is given for the other.
Let us now bring our four men together, let us enable them to communicate with one another to learn of the conditions offered by each of the owners, either of wood or of corn. It follows that the person who would consent to give four bags of corn for five armfuls of wood, will no longer be willing to do so when he finds out that one of the owners of wood consents to give five armfuls of wood for only two bags of corn. But the latter, learning in his turn that four bags of corn may be had for the same quantity of five armfuls of wood, will change his mind too, and will no longer content himself with two. He would be quite prepared to take four, but the owners of corn would no more consent to give them to him than the owners of wood would be willing to content themselves with two. The conditions of the projected exchange will thus be changed and a new evaluation will take place, a appreciation of the value of wood and corn. It is immediately clear that this appreciation will be the same in the two exchanges and for the four dealers, that is, that for the same quantity of wood the owners of corn will give neither more nor less corn, and that for the same quantity of corn the owners of wood will give neither more nor less wood. At first glance it can be seen that if one of the owners of corn were to demand less wood than the other for the same quantity of corn, the two owners of wood would address themselves to him in order to profit from this reduction in price. This competition would urge this owner to demand more wood than he first demanded for the same quantity of corn; in his turn, the other owner of corn would lower his demand for wood, or raise his offer of corn, in order to win back the owners of the wood he needs, and this effect would take place until the two owners of corn offered the same quantity of corn for the same quantity of wood.