It will naturally begin with barter, i.e., with the direct exchange of one commodity for an other, each community parting with the com modity which it can secure upon the easiest terms, for any which is either entirely beyond its reach, or is obtainable from its own environ ment only with difficulty. When such changes have once begun, they tend to increase with ever accelerating velocity. The super fluity, which comes once as the unforeseen gift of Providence, will be secured in the future by conscious effort. The equalizing of the incre ments of consumption will henceforth be se cured, not by apportioning effort directly in accordance with marginal utility, but by ex changing for other commodities that com modity whose utility is brought below the margin of consumption by its abundance. This readjustment, by increasing the total number of goods consumed, may raise the margin of consumption, thus giving a higher utility to the last increment of each good consumed.
We are thus brought again to one of the most important questions in economics, the one perhaps about which there has been more dis cussion than about any other, but to which we have already given the answer in the preceding chapter. Upon what terms are the communi ties to exchange their products ? Each has commodities with which it is willing to part. Each has learned to desire commodities which the other is disposed to give in exchange. How shall they agree upon the terms of ex change ? This is the question of value, and the answer is the same whether. the exchange is between individuals or between nations. Each community values its goods in accordance with their marginal utility ; but all communities ex cept that which obtains the least marginal util ity will receive in the intercommunal exchange more than its own marginal utility, for it is the marginal pair whose estimates are decisive in determining the actual rate of exchange. If there are but two parties to a given exchange, the rate is determined by the amount that each must give up in order to equalize the marginal increments of its own consumption. When either of the two communities finds that the marginal utility of the commodity which it is receiving no longer exceeds that which it gives in exchange, the barter will cease, even though the other is willing that it should continue. An error of judgment on either side may force the continuance of an unfavorable exchange, but even with primitive races such errors would be less common than might at first be supposed. It is not impossible even for a savage to tell whether a week's labor will be more remunera tive, if spent in securing more of the commodity than others produce, than if spent in the sort of activity of which he secures the benefit directly.
It is obvious that barter, or direct exchange of the kind that has been described, has defi nite and quickly reached limitations whether between communities, or, in a society of a dif ferent kind, between individuals. Historically,
commerce is a growth, and whenever they have been reached, limitations have been removed in various ways ; but it will aid in appreciating the necessity of various features of our present complicated commercial organization if we try to picture the difficulties involved, in making the exchanges with which we are familiar, by a system of barter. Those who have surplus commodities of any particular sort will not readily fall in with others who desire them, and who, at the same time, possess other commodi ties that are acceptable in exchange. The im probability of this double coincidence is so great that it would at once cut off nine-tenths of our present exchanges, leaving only the rude trading of regular farmers or hunters.
A second difficulty would be found in the fact that the commodities to be exchanged would not have units of equal value. An ivory tusk, a bundle of skins, a horse and saddle, may each have a pretty clearly defined value, i.e., a clearly defined importance in the general aggregate of commodities which make up the total consumption of an individual, while there is still difficulty in making advan tageous exchanges, because there is no con venient way of expressing that value in a unit recognized in all the communities that have commercial relations.
Practically neither of these obstacles would long stand in the way of commercial progress. A unit of value is in use almost as soon as there is any consciousness of the phenom enon of value. Whatever commodity in any community is especially esteemed because of its importance in their daily life, or because of some particularly attractive qualities, be conies the standard of value ; and the value of all other commodities is intuitively ex pressed in terms of that standard. Cattle and sheep, tobacco, wampum, iron, copper and silver, and many other commodities, have served this purpose. Instinct and reason have united to dictate, at each period, and for each people, the commodity which was best suited to serve as a standard of value, and the rule is that it is one whose margi nal utility rises or falls with that of the bulk of commodities in use, whose marginal utility is therefore a fairly accurate expression of the margin of consumption of the people who use it. If two communities with different standards come into contact, there may be some friction in adjusting exchanges at first, but if permanent relations are established, the better of the two standards will gradually displace the other, and will become the ordi nary standard of both communities.