MONEY 1. Mecizanism of exchange.—The first form of exchange was that of goods or services for goods, which is termed barter. Such a clumsy and un wieldy procedure could be used only in a primitive community where wants were few and goods were not of great variety. The inconvenience of apply ing this method is well illustrated by the attempts to revive it which have sometimes been undertaken. Under such headings as "Mart and Exchange" there have been journals which fostered such an effort.
When we read in such columns the advertisement of a boy who has a collection of postage stamps which he would like to exchange for a tennis racket we see at once the difficulties of the situation. The boy can perhaps readily find another who wants the postage stamps, but he may not have a racket to exchange for them. Nor is it likely that the estimate of the value would be alike on the part of the two owners if finally they should be brought together. Swapping involves the time-honored usage of "something to boot." A very different state of affairs results after money has come into general use. Trades can now be made in terms of money with far greater ease, since every one wants money. But many exchanges are made without the use of money. The seller is content with a promise to pay money, which serves in many re spects the same purposes.
Thus three stages of exchanges appear, based re spectively on barter, money and credit. Money and the services which it renders in the world of . affairs will be considered in some detail in this chapter, while a subsequent chapter will treat of credit. Price is shown in the preceding chapters to be related to value. It is also definitely related to money and credit, and after these terms have been explained it will be neces sary to go back and take up the mutual relations of money, credit and prices.
2. What is monee—To some it might seem almost superfluous to ask, What is money? The word is used so frequently in daily speech that its significance might well be deemed a matter of course, but in fact the word money is used so loosely that it means many things. To the banker money is the medium of ex
change that serves as the basis of commercial obliga tions. To the workingman the word means anything which buys products, and to such a person a check is money. Another person may- include in the phrase every device that does money work, and again some one may say that it is only the gold coin of the mone tary standard. A rather careful answer to the ques tion, What is money? is necessary if confusion is to be avoided.
It is impossible to frame a definition on the basis of the material of which the money is made. Money may be either gold or `silver; the material of which money is made is in a considerable degree a secondary matter. President Hadley says, "Money is best defined as a thing which by common consent of the business community is used as a basis of commercial obligatious." Horace White declares, "Money is anything that serves as a common medium of ex change and measure of value." Professor David Kinley defines money as "that part of the. medium of exchange which passes generally current in ex change and settlement of debts, without making the discharge of obligations contingent upon the action of a third party." Money is the valuable thing or economic good which possesses in any country or community universal acceptability as a medium of exchange or means of payment.
The distinguishing of money from the main body of wealth has the advantage of clearing up some of the common erroneous ideas about it. It is to be ob served first, that money is one form of wealth among many others; second, that it is always used, not for its own sake, but for what can be secured with it—conse quently, we may have too little or too much of it, according to the amount of money work there is to do ; third, that to hoard money is to misuse it, for by nature it is expected to circulate ; and, fourth, money is not taken away from a country by trade, but is rather retained thru trading.