THE VALUE OF MONEY

Sec. 1.  Standard-commodity money.  Sec. 2.  Alternative uses of the money-good.  Sec. 3.  Money as a valuable tool.  Sec. 4.  Relative importance of money.  Sec. 5.  Concept of the individual monetary demand.  Sec. 6.  Concept of the community’s monetary demand.  Sec. 7.  The money-material in its commodity uses.  Sec. 8.  The general level of prices.  Sec. 9.  Effect of increasing gold production.  Sec. 10.  The quantity theory of money.  Sec. 11.  Interpretation of the quantity theory.  Sec. 12.  Practical application of the quantity theory.

Sec. 1. #Standard-commodity money#.  The actual money in use in almost every country to-day consists of a wide and confusing variety:  gold, silver, nickel, copper, paper in various forms, issued by various authorities under various conditions as to amount and as to seigniorage.  But among all the kinds, in each country some one kind is found standing preeminent and in a peculiar position, as the standard money to which the value of all the other kinds of money is in some manner adjusted.  Usually this standard money is composed of a material (gold or silver) which is a commodity; but there are many examples of paper money being for the time the standard.  The difficulties of the money problem must be attacked at the point of standard-commodity money, where it is nearest to ordinary value problems and is less complicated than when the various other kinds of money and the various money substitutes are included.

We mean by standard money that kind, no matter what its form, which serves in any country as the unit in which the value of other kinds of money is expressed.  The standard usually is a quantity of metal of a certain weight and fineness, which, as a commodity, has a value also in industrial uses.  Coins of this standard are called full, or real, money by some writers that deny the title of money to everything else.

Sec. 2. #Alternative uses of the money-good.# Let us consider the problem of money-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 have seen, be traced back to a point where they were not money, but commodities with 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 which is the reflection of its power to appeal to choice.  Now, if to the commodity-use is added the money-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