MONEY is the medium of exchange by which the value of commo dities is estimated, and is at once the representative and equivalent of such value.
Barter is naturally the first form in which any commerce is carried A man having produced or obtained more of any article than he requires for his own use, exchanges a part of it for some other article which he desires to possess. But this simple form of exchange ie adapted toa rude state of society only, where the objects of exchange are not numerous, and where their value has not been ascertained with precision. As soon as the relations of civilised life are established in a community, some medium of exchange becomes necessary. Objects of every variety are bought and sold, the production of which requires various amounts of labour ; these at different times are relatively abun dant or scarce ; labour is bargained for as well as its products : and at length the exchangeable value of things, in relation to each other, becomes defined, and needs some common standard or measure by which it may be expressed or known. It is not sufficient to know that a given quantity of corn will exchange for a given quantity of a man's labour, for their relative value is not always the same ; but if a standard is established by which each can he measured, their relative value can always be ascertained as well as their positive value, independently of each other.
As a measure of value only money is thus a most important auxiliary of commerce. One commodity from its nature must be measured by its weight, another by its length, a third by its cubic contents, others by their number. The diversity of their nature, therefore, makes it impossible to apply one description of measure to their several quantities ; but the value of each maybe measured by one standard common to. all. Until such a standard has been agreed upon, the difficulties of any extensive commerce are incalculable. One man may have nothing but corn to offer for other commodities, the owners of which may not have ascertained the quantity of corn which would be equivalent for their respective goods. To effect an exchange these parties would either have to guess what quantity of each kind of goods might justly be exchanged for one another, or would be guided by their own experience in their particular trades. Whenever they wanted. a new commodity their experience would, fail them, and they must 'guess once more. But with money all becomes easy ; each man affixes a price to his own commodities, and even if barter should continue to be the form in which exchanges are effected, every bargain could be made with the utmost simplicity : for commodities of every description would have a denomination of value affixed to them, common to all and understood by everybody.
But however great may be the importance of money as a measure of value in facilitating the exchange of commodities, it is infinitely more important in another character. In order to exchange his goods it is not sufficient that a man should be able to measure their value, but he must also be able to find others who, having a different description of goods to offer as an equivalent, are willing to accept his goods in exchange, in such quantities as he wishes to dispose of. Not to enlarge, however, upon the obvious difficulties of barter, which have been sufficiently indicated under BARTER, it will suffice to observe that all its difficulties are removed if some one commodity can be discovered which represents a certain amount of labour, and which all persons agree to accept as au equivalent for the products of their:own industry. If such a commodity be found, it is no longer necessary for men to exchange their goods directly with each other ; they have a medium of exchange, which they can obtain for their own goods, and with which they can purchase the goods of others. This medium, whatever it may be, is Money.
When money has assumed the character of a medium of exchange and equivalent of value, the cumbrous mebleaniam of barter gives place to commerce. But what must be the qualities of an article which all men are willing to accept for the products of their own labour ? It is now no longer like a weight or measure, the mere instrument for assessing the value of commodities ; but, to use the words of Locke, "it is the thing bargained for as well as the measure of the bargain." A bargain is complete when money has been paid for goods ; it has no reference to the price of other goods, nor to any circumstance whatever. One man parts with his goods, the other pays his money as an absolute equivalent. But though money as a medium of exchange thus differs from money as a mere standard of value, yet in both characters it should possess, if it be possible, one quality above all others—an in. variable equality of value at all tithes and under all circumstances. As a measure of value it is as essential that it should always be the same, as that a yard should always be of the same length. And unless, as a medium of exchange, its value be always the same, all bargains are disturbed. lie who gives his labour or his goods to another in exchange for a delusive denomination of value instead of for a full equivalent which he expects to receive, is as much defrauded as one who should bargain for a yard of cloth and receive short measure.