When a standard of value has thus been established, the necessity of double coinci dence in barter is also obviated. He who desires any particular commodity can• always obtain it, if he is able to offer the requisite number of units of the commodity which is accepted as the standard. In disposing of his own surplus goods he has therefore to look, not for persons who have the com modity that he desires, but only for some person who is supplied with the standard commodity. This will be an easy task, since every one who expects to purchase his goods will have supplied himself with the commodity which he knows will be acceptable in exchange. Awkward as it may be to carry around quan tities of tea, strings of wampum, or bottles of olive-oil, or to drive a herd of oxen to the market-place as a condition of making pur chases, it would be more economical for the producer, than for him to spend still more time in finding a purchaser who happens to be supplied with the goods that he wants.
This cumbrous method of making exchanges, though a great improvement over direct bar ter, is readily simplified by the next step in advance. If three persons have obtained an ox in exchange for some commodity that they have produced in common, and they wish to divide, each taking his own share, it will evi dently be necessary to slay the ox, and divide the carcass, — a process which may involve loss of value. If a person has two exchanges of equal amount to make in a distant village, one a purchase and the other a sale, it will evidently be an annoying and needless task for him to take the tobacco, or tea, or oxen, to the village and back again. Both of these wasteful processes, and many others besides, may be avoided if, when exchanges are made, a representative of the value standard can be pa'ssed from hand to hand, instead of the actual commodity which constitutes the stand ard. This sensible arrangement is very soon discovered and utilized. When we read that tobacco served the early Virginians as a me dium of exchange, we must not suppose that so many pounds of tobacco were actually delivered in bulk in every purchase. The tobacco which was thus used was ordinarily safely stored in a warehouse, and the owner ship of it only was transferred when an ex change was made, the owner of the tobacco giving a written order or certificate to the owner of the commodity which is given over in exchange for it.
The name given to any commodity which thus serves a community as its standard of value is money. If the commodity happens to be suitable for general circulation, it passes from one person to another with every ex change of goods. If not, or if it is desired
to economize the standard commodity, its representative is thus used. This representa tive may have a value because of its own utility, or its value may lie only in its repre sentative capacity. Gold when first introduced may not have been money, but the representa tive of money. It is asserted that the first coins were in the form of animals, indicating that they were substitutes for cattle.
The gradual increase in the use of money, and the substitution of superior for inferior kinds of money, are prominent features of the early stages of the growth of commerce. But we must guard against the danger of exaggerating their importance. Money is in dispensable as an agency of commerce, but it is an agency which men hit upon naturally, and which acts all but automatically when it has once been introduced. The causes of commerce lies in the differences in the natural conditions of the various regions, giving rise to a diversity of natural products ; in the differences among various races and commu nities, giving rise to a diversity of industries ; and in the division of labor, giving rise to a further diversity of industrial products. The interchange of commodities permits producers to reap the benefit of their natural and indus trial advantages, and to obviate the necessity of resorting, in any particular region, to those features of the environment that yield but scanty return to labor.
Commodities within each community are valued in accordance with their marginal util ity, the production of each ceasing as soon as its utility has fallen to that of the other com modities entering into the consumption. But the production of any such commodity may be extended indefinitely if, instead of being wholly dependent for its value upon its actual con sumption within the community, it may be exchanged for new goods whose utility is above the margin of consumption. If there are many such goods obtainable, and their initial utility is great, it may even become practicable to give up the consumption of the last portions of many goods which had been consumed, and, at least temporarily, to raise the margin of consumption to a higher level. Labor would be expended in the production of fewer commodities ; but a larger number would be consumed and the marginal utility of each would be higher. Every article con sumed, including those of which the surplus is exchanged, would thus have a higher sub jective value than before commerce began.