Of the Origin and Use of Money

Pure barter is inconvenient. It is not easy to find somebody who wants my product and can exchange it for the product I need.


    One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less. The former consequently would be glad to dispose of, and the latter to purchase, a part of this superfluity. But if this latter should chance to have nothing that the former stands in need of, no exchange can be made between them. . In order to avoid the inconveniency ... every prudent man ... must ....have at alltimes by him, ... a certain quantity of some one commodity ... such as he imagined few people would be likely to refuse in exchange for the produce of their industry.


Examples of goods that served in history as means of exchange: cattle, salt,  shells, dried cod, tobacco, ....


In the rude ages of society, cattle are said to have been the common instrument of commerce; and, though they must have been a most

inconvenient one, . Salt is said to be the common instrument of commerce and exchanges in Abyssinia; a species of shells in some parts of the coast of India; dried cod at Newfoundland; tobacco in Virginia; sugar in some of our West India colonies; hides or dressed leather in some other countries; and there is at this day a village in Scotland where it is not uncommon, I am told, for a workman to carry nails instead of money to the baker's shop or the alehouse.

The most convenient means of exchange appeared to be metals.


In all countries, however, men seem at last ... to give the preference, for

this employment, to metals above every other commodity. Metals can not only be kept with as little loss as any other commodity, scarce anything being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be reunited again; a quality which no other equally durable commodities possess, and which more than any other quality renders them fit to be the instruments of commerce and circulation. . Iron was the common instrument of commerce among the ancient Spartans; copper among the ancient Romans; and gold and silver among all rich and commercial nations.

Coins: Need to "affix public stamp"  to identify the metal and its quantity.


The use of metals in this rude state was attended with two very considerable inconveniencies; first, with the trouble of  weighing; and, secondly, with that of assaying them. . to  facilitate exchanges, it has been found necessary, ..., to affix a public stamp upon certain quantities of such particular metals ....  [that] gave occasion to the institution of coins, of which the stamp, covering entirely both sides of the piece and sometimes the edges too...

Inflation - government cheating by reducing quantity of metal in the coin.


... in every country of the world, I believe, the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects, have by degrees diminished the real quantity of metal, which had been originally contained in their coins.   the princes ..  were enabled, in

appearance, to pay their debts ... with a smaller quantity of silver... their creditors were really defrauded of a part of what was due to them.

Two meanings of "value" :

use value (utility)  - exchange value


The word value ... has two different meanings, ... [it] sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods ... The one may be called

"value in use"; the other, "value in exchange."














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