The difficulties of the money problem must be attacked at the point of standard-commodity mow, where it is nearest to ordinary value problems and is less complicated than when the various other kinds of money and the various money sub stitutes are included.
§ 10. Commodity money without coinage. Let us con sider the problem of money and its value as it would present itself if only one kind of commodity money were in use. This doubtless was in large measure, if not entirely, the case for a time in early societies after one material had proved itself to be the best suited for the purpose. The history of many kinds of money may, we havie seen, be traced back to a point where they were not money, but commodities with only a direct value-in-use. Such were ornaments, shells; furs, feathers, salt, cattle, fish, game, and tobacco. Each of these materials has, in each situation, a value that is the reflection of its power to appeal to choice. Now, if to the commodity-use is added the monetary use, this increases the demand for that good. No new theory is required to explain the value of a commodity as it gradually acquires the added use of a medium of trade. The money use is one that works no physical or visible change in goods except a slight unavoidable abrasion, and at any time a person receiving a piece of commodity money may retain it for its use-value as food, ornament, tool, or weapon, or may retain it for a time and then spend it as money. This ease of value is no more difficult than that of anything else having two or more uses. For example, cattle are used for milk, for meat, and as beasts of burden. Each of these uses is logically independent as a cause of value, yet all are mutually related, the value of cattle to a particular per son being determined by the consideration of all the uses united into one scale of varying gratification.
In antiquity the metals were used as money in bulk; that is, the amount was weighed at each transaction and the quality was tested whenever there was doubt.° In countries industri ally backward, payments are still made in this manner. For some time after the discovery of gold in Calfornia, gold dust was roughly measured out on the thumb-nail. In shipments of gold to-day by bankers to settle international balances, metal may be in the form of bars that bear the mark of some well-known banking house. In all of the cases of this kind the gold is money in fact, but not by virtue of any act of gov 6 "I will . . . refine them as silver is refined, and will try them as gold is tried." (Zech. xiii, 9.) "I bought the field, . . . and weighed
him the money, even seventeen shekels of silver. And I . . . weighed him the money in the balances." (Jer. xxxii, 9, 10.) A shekel was 224 grains, troy weight, which is about equal to six tenths of the pure metal in a silver dollar to-day, and worth in recent years from twenty to sixty cents in gold. At that time, however, the purchasing power of silver was many times greater than it now is.
ernment. The metal is simply a valuable good, the receiver of which values it according to its weight and fineness. This is true even when the government mint, for a small charge, tests and stamps the bars at the request of citizens.
§ 11. The money-material in its commodity uses. In the ease of a commodity-money, such as gold, the problem of its value as bullion is the same as that of the value of Pig iron or of zinc, of meat or of potatoes. The value of gold as bullion and its value as money are kept in equilibrium by choice and by substitution. The several uses of gold are constantly com peting for it: its uses for rings, pens, ornaments, champion ship cups, photography, dentistry, delicate instruments, and as a circulating medium. If the metal becomes worth more in any one use, its amount is increased there and is corre spondingly diminished in other uses.' This adjustment of the value of commodity-money to other things is made also on the side of supply, in the use of labor and material agents to produce the precious metals and to produce other things. Gold-mining, for example, is one among various industries to which men may apply their labor and their available material agents. Some mines are superior, others medium, others marginal which it barely pays to work. There is, therefore, a rise and fall of the margin of gold pro duction, with changes in prices and changes in the cost of production. Large new deposits of gold are discovered from time to time, and new methods of extracting gold are invented. If, when it barely pays to work a mine, such changes occur, gold becomes worth less, and the poorer mines eventually must go out of use. As gold rises in value some abandoned mines again come into use. A similar variation may be noted in the utilization of marginal land, marginal factories, marginal forges, and marginal agents of every 7 See I 1 and 9 2 of this chapter ; also Vol. I, especially pp. 31-38 and 353-355.
g See Vol. I, pp, 138 ff. and 361 IL