THEORY OF MONEY

continued

Essay on Money III

As a Medium of Commerce;
With Remarks on the Advantages and Disadvantages
of Paper Admitted into General Circulation.

by John Witherspoon

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2 Rarity

That which is the medium of commerce must be rare. It will not be necessity to say much upon this, because it has already received some illustration from what has gone before. It may however be observed, that the medium of commerce must not only be so rare as to bring it within commercial value in ordinary cases, but it must be more rare than most other things, that its value may be increased, and a small quantity of it may represent goods of considerable variety and bulk. If gold and silver were only twenty times as plentiful as they are at present, they would still have a proper value, could be bought and sold, and applied to many useful purposes, but they should be quite unfit for general circulation.

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3 Portability

The circulating medium must be portable. It must be capable of being carried to a distance with little trouble or expense, and be capable of passing fromhand to hand with ease and expedition. This is one of the reasons why it must be rare; but it deserves mention also by itself, because it is possible to conceive of things that may be both valuable and rare, and yet incapable of being carried about, and palling from one to another. Some precious drugs, and some curiosities, may be so rare as to have a high value, and yet may be quite improper for circulation.

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4 Divisibility

The medium of commerce must be divisible. It ought to be capable of division into very small quantities. This is necessary in order to answer the division of many commodities, and the convenience of persons of different ranks. It is of such importance, that in the calculations of a complex and diversified commerce, we find divisions and fractional parts even of the smallest coins of denominations of money, that have ever yet been brought into use.

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5 Durability

Lastly, the medium of commerce ought to be durable. I thought to have this quality on two accounts; first, that in perpetually palling from hand to hand, It may not be broken or wasted; and, secondly, that if it is preserved of laid up, as may be sometimes necessary, and often agreeable or profitable, it may not be liable to be speedily corrupted or consumed.

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All united in gold and silver

All these particulars are not of equal moment, and they have an intimate relation one to another; yet each of them is singly and separately of importance, perhaps more than will be at first view apprehended. I think it is also plain that there is nothing yet known to mankind, in which they are all so fully united, as they are in gold and silver; such is the true reason why these metals have been applied as the instruments of commerce, since the beginning of the world, or as far back as history enables us to penetrate 2.

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Gold, silver, and copper, were the most ancient metals

It will probably throw some light upon the above theory, if we take a brief view of the matter as it has taken place on face from the beginning of the world. This may be done now to the greater advantage, that the effects of particular causes, and the events that will take place on society in particular circumstances, have been so fully ascertained by the experiences of ages, and the progress of science, that were able to make a better use of the few remains of ancient history, than could have been done by those who lived nearer to the events which are recorded. It appears then, that the discovery and use of metals was one or the earliest attainments of mankind.

This might naturally be expected if they were within reach at all, because of their very great utility in all works of industry, and indeed for all the purposes of convenience and luxury. Therefore, I suppose this fact will not be doubted; but it is a truth neither so obvious nor so much known, that gold, silver, and brass, or rather copper, were the most ancient metals, and all of them antecedent to iron. (18.5) These metals being applied to all the purposes of life, came of course to constitute a great part of the wealth of the people of ancient times.

I have mentioned brass, because it was one of the metals earliest known, and upon the very principle above laid down, was in the beginning made use for money by many ancient nations. Its being now in a great measure left out is an illustration and proof of what has been already said. It is left out for no other reason than its having lost one of the necessary qualities, vis. rarity. That it was made use of for money amongst the Hebrews appears from many circumstances. We read of gold, silver and brass brought as contributions to the tabernacle service in the time of Moses, and to build the temple in David's time. That brass was used as money in the early times of the Greeks and Romans, appear both from the assertions of historians, and from the very languages of both nations, for there it is used to signify money in general. That it ceased to serve that purpose afterwards cannot be accounted for in any other way than as above, especially as the neglect of it has been just as universal as the use of it was formerly.

We are also fully supported by history in affirming that all these metals were at first estimated and passed in commerce by weight. We see that Abraham gave to Ephron for the cave of Machpelah, four hundred shekels of silver. The Greek money was of different weights from the lower sorts to the talent, which was the largest. The old Roman word pondo was, as it were, the standard, and the divisions of it constituted their different denominations. From this we see have derived the English word pound. Very soon however they came to have other coins, of at least small pieces reckoned by number. Abimelech gave to Abraham, as Sarah's brother, one thousand kefeph; and Joseph was sold for twenty kefeph, and he gave to his brother Benjamin three hundred kefeph. As the word kefeph signifies silver, they must have been reckoned by tale, and are probably very justly translated pieces. Agreeably to all this, the time when the Romans began to coin brass, and some hundred years afterwards silver and gold, is distinctly mentioned by the historians.

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Use of baser metals

It may be proper to observe here, that several antiquaries have mentioned that some barbarous nations made use of baser metals, such as lead, tin, iron, and even leather, shells and bark of trees for money. This is no way contrary to the above theory, for some nations might indeed use lead, iron and tin as things of value, upon the same principles as others used gold, silver and brass. I think it is said, and indeed is more than probable, that the nails given by our voyagers to the inhabitants of the South Sea islands, passed from hand to hand as instruments of commerce. As to leather, shells etc. I suspect some part of this is fabulous; but if it did take place in any measure, it has been a rude essay, using the sign separately from the standard, and could not be of any great extent or long duration.

We know indeed of one nation, after society had been far advanced, that made use of iron even when very plentiful, for money, vis. the Lacedemonians. But this was not at all from rudeness or ignorance; it was one of Lyeurgus's extraordinary institutions, who intended by it (and did not conceal his intentions) to banish riches, or real and proper money from the state. He indeed banished industry at the same time, for none of his citizens were allowed even to be husbandmen, or to cultivate their lands. This was left to slaves. I do not find, therefore, that there is any thing in history deserving credit, that militates against the theory above laid down. (22.2)

Continue to Essay on Money IV to discover inferences derived from the theory.

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