Ifdifferentcommoditiesarequotedat15s。,20s。and36s。respectivelyinapricelist,theninacomparisonoftheirvalueboththesilvercontentoftheshillinganditsnameareindeedquiteirrelevant。Everythingisnowexpressedinthenumericalrelationsof15,20and36,andthenumeralonehasbecomethesoleunitofmeasure。Thepurelyabstractexpressionofaproportionisafterallonlytheabstractnumericalproportion。Inordertobeconsistent,Steuartthereforehadtoabandonnotonlygoldandsilverbutalsotheirlegaldesignations。Butsincehedoesnotunderstandhowthemeasureofvalueistransformedintothestandardofprice,henaturallythinksthattheparticularquantityofgoldwhichservesasaunitofmeasureis,asameasure,relatedtovaluesassuch,andnottootherquantitiesofgold。Becausecommoditiesappeartobemagnitudesofthesamedenominationasaresultoftheconversionoftheirexchange—valuesintoprices,Steuartdeniestheexistenceofthecharacteristicfeatureofthemeasurewhichreducescommoditiestothesamedenomination,andsinceinthiscomparisonofdifferentquantitiesofgoldthequantityofgoldwhichservesasastandardisconventionallyestablished,hedeniesthatitmustbeestablishedatall。Insteadofcallinga360thpartofacircleadegree,hemightcalla180thpartadegree;therightanglewouldthenmeasurenot90degreesbut45,andthemeasurementsofacuteandobtuseangleswouldchangecorrespondingly。Nevertheless,themeasureoftheanglewouldremainfirstlyaqualitativelydeterminedmathematicalfigure,thecircle,andsecondlyaquantitativelydeterminedsectionofthecircle。AsforSteuart\'seconomicexamplesoneofthesedisproveshisownassertions,theotherprovesnothingatall。ThemoneyoftheBankofAmsterdamwasinfactonlythenameofaccountforSpanishdoubloons,whichretainedtheirstandardweightbecausetheylayidleinthevaultsofthebank,whilethecoinswhichbusilycirculatedlostweightasaresultofintensivefrictionwiththeirenvironment。AsfortheAfricanidealists,wemustleavethemtotheirfateuntilreliableaccountsoftravellersprovidefurtherinformationaboutthem。[5]OnemightsaythattheFrenchassignat——\"Nationalproperty,Assignmentof100francs\"——isnearlyidealmoneyinSteuart\'ssense。Theuse—valuewhichtheassignatwassupposedtorepresent,i。e。,confiscatedland,wasindeedspecified,butthequantitativedefinitionoftheunitofmeasurehadbeenomitted,and\"franc\"wasthereforeameaninglessword。Howmuchorlittlelandthisfrancrepresenteddependedontheoutcomeofpublicauctions。Butinpracticetheassignatcirculatedasatokenrepresentingsilvermoney,anditsdepreciationwasconsequentlymeasuredintermsofthissilverstandard。
TheperiodwhentheBankofEnglandsuspendedcashpaymentswashardlymoreprolificofwarbulletinsthanofmonetarytheories。Thedepreciationofbank—notesandtheriseofthemarket—priceofgoldaboveitsmint—pricecausedsomedefendersoftheBanktorevivethedoctrineoftheidealmeasureofmoney。LordCastlereaghfoundtheclassicallyconfusedexpressionforthisconfusednotionwhenhedeclaredthatthestandardofmoneyis\"asenseofvalueinreferencetocurrencyascomparedwithcommodities\"。
AfewyearsaftertheTreatyofPariswhenthesituationpermittedtheresumptionofcashpayments,theproblemwhichLowndeshadbroachedduringthereignofWilliamIIIaroseagaininpracticallythesameform。Ahugenationaldebtandamassofprivatedebts,fixedobligations,etc。,whichhadaccumulatedinthecourseofover20years,wereincurredindepreciatedbank—notes。Shouldtheyberepaidinbank—notes£4,672
10s。ofwhichrepresented,notinnamebutinfact,100lbs。of22—caratgold？ThomasAttwood,aBirminghambanker,actedlikearesurrectedLowndes。Headvocatedthatasmanyshillingsshouldbereturnedtothecreditorsastheyhadnominallylent,butwhereasaccordingtotheoldmonetarystandard,say,1/78ofanounceofgoldwasknownasashilling,nowperhaps1/90ofanounceshouldbecalledashilling。Attwood\'ssupportersareknownastheBirminghamschoolof\"littleshillingmen\"。Thequarrelabouttheidealstandardofmoney,whichbeganin1819,wasstillcarriedonin1845bySirRobertPeelandAttwood,whosewisdominsofarasitconcernsthefunctionofmoneyasameasureisfullysummarisedinthefollowingquotation:
During\"therecentdiscussionbetweenSirRobertPeelandtheBirminghamChamberofCommerce……TheMinisterwasquitesatisfiedwithaskingthequestion,\'Whatwillyourpoundnoterepresent？\'……Whatistobeunderstoodbythepresentstandardofvalue？Is£317s。
101/2d。anounceofgold,orisitonlyofthevalueofanounceofgold？
If£317s。101/2d。beanounceofgold,whynotcallthingsbytheirpropernames,and,droppingthetermspounds,shillingsandpence,sayounces,penny—weightsandgrains？……Ifweadoptthetermsounces,pennyweightsandgrainsofgold,asourmonetarysystem,weshouldpursueadirectsystemofbarter……Butifgoldbeestimatedasofthevalueof£317s。
101/2d。perounce……howisthis……thatmuchdifficultyhasbeenexperiencedatdifferentperiodstocheckgoldfromrisingto£54s。perounce,andwenownoticethatgoldisquotedat£317s。9d。perounce？……
Theexpressionpoundhasreferencetovalue,butnotafixedstandardvalue……
Thetermpoundistheidealunit……Labouristheparentofcostandgivestherelativevaluetogoldoriron。Whateverdenominationofwordsareusedtoexpressthedailyorweeklylabourofaman,suchwordsexpressthecostofthecommodityproduced。\"[6]
Thehazynotionabouttheidealmeasureofmoneyfadesawayinthelastwordsanditsrealmentalcontentbecomesclear。Pound,shilling,etc。,thenamesofaccountofgold,aresaidtobenamesrepresentingdefinitequantitiesoflabour—time。Sincelabour—timeisthesubstanceandtheinherentmeasureofvalue,thenamesthusindeedexpressthevaluerelationsthemselves。
Inotherwordsitisassertedthatlabour—timeistherealstandardofmoney。HereweleavetheBirminghamschoolandmerelynoteinpassingthatthedoctrineoftheidealmeasureofmoneyhasgainednewimportanceinconnectionwiththecontroversyovertheconvertibilityornon—convertibilityofbank—notes。Whilethedenominationofpaperisbasedongoldorsilver,theconvertibilityofthenote,i。e。,itsexchangeabilityforgoldorsilver,remainsaneconomiclawregardlessofwhatjuridicallawmaysay。Forinstance,aPrussianpaperthaler,althoughlegallyinconvertible,wouldimmediatelydepreciateifineverydaycommerceitwereworthlessthanasilverthaler,thatisifitwerenotconvertibleinpractice。TheconsistentadvocatesofinconvertiblepapermoneyinBritain,therefore,hadrecoursetotheidealstandardofmoney。Ifthedenominationsofmoney,pound,shillingandsoon,arenamesforadeterminateamountofparticlesofvalue,ofwhichsometimesmore,sometimeslessareeitherabsorbedorlostbyacommoditywhenitisexchangedforothercommodities,thenthevalueofanEnglish£5note,forinstance,isjustaslittleaffectedbyitsrelationtogoldasbyitsrelationtoironandcotton。Sinceitsdesignationwouldnolongerequatethebank—noteintheorytoadeterminatequantityofgoldorofanyothercommodity,itsveryconceptwouldprecludethedemandforitsconvertibility,thatisforitsequationinpracticewithadeterminatequantityofaspecificthing。
JohnGraywasthefirsttosetforththetheorythatlabour—timeisthedirectmeasureofmoneyinasystematicway。[7]Heproposesthatanationalcentralbankshouldascertainthroughitsbranchesthelabour—timeexpendedintheproductionofvariouscommodities。Inexchangeforthecommodity,theproducerwouldreceiveanofficialcertificateofitsvalue,i。e。,areceiptforasmuchlabour—timeashiscommoditycontains,[8]andthisbank—noteofonelabourweek,onelabourday,onelabourhour,etc。,wouldserveatthesametimeasanordertothebanktohandoveranequivalentinanyoftheothercommoditiesstoredinitswarehouses。[9]Thisisthebasicprinciple,whichisscrupulouslyworkedoutindetailandmodelledthroughoutonexistingEnglishinstitutions。Graysaysthatunderthissystem\"tosellformoneymayberendered,atalltimes,preciselyaseasyasitnowistobuywithmoney,……productionwouldbecometheuniformandnever—failingcauseofdemand\"。
Thepreciousmetalswouldlosetheir\"privileged\"positionincomparisonwithothercommoditiesand\"taketheirproperplaceinthemarketbesidebutterandeggs,andclothandcalico,andthenthevalueofthepreciousmetalswillconcernusjustaslittle……asthevalueofthediamond\"。
\"Shallweretainourfictitiousstandardofvalue,gold,andthuskeeptheproductiveresourcesofthecountryinbondage？
or,shallweresorttothenaturalstandardofvalue,labour,andtherebysetourproductiveresourcesfree？\"
Sincelabour—timeistheintrinsicmeasureofvalue,whyuseanotherextraneousstandardaswell？Whyisexchange—valuetransformedintoprice？
Whyisthevalueofallcommoditiescomputedintermsofanexclusivecommodity,whichthusbecomestheadequateexpressionofexchange—value,i。e。,money？
ThiswastheproblemwhichGrayhadtosolve。Butinsteadofsolvingit,heassumedthatcommoditiescouldbedirectlycomparedwithoneanotherasproductsofsociallabour。Buttheyareonlycomparableasthethingstheyare。Commoditiesarethedirectproductsofisolatedindependentindividualkindsoflabour,andthroughtheiralienationinthecourseofindividualexchangetheymustprovethattheyaregeneralsociallabour,inotherwords,onthebasisofcommodityproduction,labourbecomessociallabouronlyasaresultoftheuniversalalienationofindividualkindsoflabour。ButasGraypresupposesthatthelabour—timecontainedincommoditiesisimmediatelysociallabour—time,hepresupposesthatitiscommunallabour—timeorlabour—timeofdirectlyassociatedindividuals。Inthatcase,itwouldindeedbeimpossibleforaspecificcommodity,suchasgoldorsilver,toconfrontothercommoditiesastheincarnationofuniversallabourandexchange—valuewouldnotbeturnedintoprice;butneitherwoulduse—valuebeturnedintoexchange—valueandtheproductintoacommodity,andthustheverybasisofbourgeoisproductionwouldbeabolished。ButthisisbynomeanswhatGrayhadinmind——goodsaretobeproducedascommoditiesbutnotexchangedascommodities。Grayentruststherealisationofthispiouswishtoanationalbank。Ontheonehand,societyintheshapeofthebankmakestheindividualsindependentoftheconditionsofprivateexchange,and,ontheotherhand,itcausesthemtocontinuetoproduceonthebasisofprivateexchange。AlthoughGraymerelywants\"toreform\"themoneyevolvedbycommodityexchange,heiscompelledbytheintrinsiclogicofthesubject—mattertorepudiateoneconditionofbourgeoisproductionafteranother。Thusheturnscapitalintonationalcapital,[10]andlandintonationalproperty[11]andifhisbankisexaminedcarefullyitwillbeseenthatitnotonlyreceivescommoditieswithonehandandissuescertificatesforlaboursuppliedwiththeother,butthatitdirectsproductionitself。Inhislastwork,LecturesonMoney,inwhichGrayseekstimidlytopresenthislabourmoneyasapurelybourgeoisreform,hegetstangledupinevenmoreflagrantabsurdities。
Everycommodityisimmediatelymoney;thisisGray\'sthesiswhichhederivesfromhisincompleteandhenceincorrectanalysisofcommodities。
The\"organic\"projectof\"labourmoney\"and\"nationalbank\"and\"warehouses\"
ismerelyafantasyinwhichadogmaismadetoappearasalawofuniversalvalidity。Thedogmathatacommodityisimmediatelymoneyorthattheparticularlabourofaprivateindividualcontainedinitisimmediatelysociallabour,doesnotofcoursebecometruebecauseabankbelievesinitandconductsitsoperationsinaccordancewiththisdogma。
Onthecontrary,bankruptcywouldinsuchacasefulfilthefunctionofpracticalcriticism。Thefactthatlabourmoneyisapseudo—economicterm,whichdenotesthepiouswishtogetridofmoney,andtogetherwithmoneytogetridofexchange—value,andwithexchange—valuetogetridofcommodities,andwithcommoditiestogetridofthebourgeoismodeofproduction,——
thisfact,whichremainsconcealedinGray\'sworkandofwhichGrayhimselfwasnotaware,hasbeenbluntlyexpressedbyseveralBritishsocialists,someofwhomwroteearlierthanGrayandotherslater。[12]ButitwaslefttoM。Proudhonandhisschooltodeclareseriouslythatthedegradationofmoneyandtheexaltationofcommoditieswastheessenceofsocialismandtherebytoreducesocialismtoanelementarymisunderstandingoftheinevitablecorrelationexistingbetweencommoditiesandmoney。[13]
FOOTNOTES1。Lockesaysinteralia:\"……callthataCrownnow,whichbefore……wasbutapartofaCrown……whereinanequalquantityofSilverisalwaysthesameValuewithanequalquantityofSilver……Foriftheabating1/20ofthequantityofSilverofanyCoindoesnotlessenitsValue,theabating19/20ofthequantityoftheSilverofanyCoinwillnotabateitsValue。Andso……asinglePenny,beingcalledaCrown,willbuyasmuchSpice,orSilk,oranyotherCommodity,asaCrown—Piece,whichcontains[20or]60timesasmuchSilver。\"Allyoucandoistoraise\"yourMoney,……givingalessquantityofSilvertheStampandDenominationofagreater\",but\"\'tisSilverandnotNamesthatpayDebtsandpurchaseCommodities\"。
\"Theraisingbeingbutgivingofnamesatpleasuretoaliquotpartsofanypiece,viz。thatnowthesixtiethpartofanouncestillbecalledapenny,maybedonewithwhatincreaseyouplease。\"InreplytoLowndes\'sarguments,Lockedeclaresthattheriseofthemarket—priceabovethemint—pricewasnotbroughtaboutbyanincreaseinthevalueofsilver,butbyadecreaseintheweightofcoins。Seventy—sevenclippedshillingsdidnotweighmorethan62shillingsofstandardweight。FinallyLockeisquitecorrectinemphasisingthat,irrespectiveofthelossofsilversufferedbythecoinsincirculation,acertainriseinthemarket—priceofsilverbullionoverthemint—pricemightoccurinEngland,becausetheexportofsilverbullionwaspermittedwhereasthatofsilvercoinwasprohibited（seeop。cit。,pp。54—116passim）。LocketakesgoodcaretoavoidthevitalissueoftheNationalDebt,justasheequallyprudentlyrefrainsfromdiscussinganotherticklisheconomicproblem,i。e。,thataccordingtotheevidenceofboththeexchangerateandtheratioofsilverbulliontosilvercoin,thedepreciationofthemoneyincirculationwasbynomeansproportionaltotheamountofsilveritlost。Weshallreturntothisquestioninitsgeneralforminthesectiondealingwiththemediumofcirculation。InAdiscourseConcerningCoiningtheNewMoneyLighter,inAnswertoMr。Locke\'sConsiderations,London,1696,NicholasBarbonvainlysoughttoenticeLockeontodifficultground。
2。Steuart,op。cit。,Vol。II,p。156。
3。TheQuerist,loc。cit。Incidentally,thesection\"QueriesonMoney\"
isratherwitty。AmongotherthingsitcontainsthetrueobservationthatthedevelopmentoftheNorthAmericancolonies\"makesitplainasdaylight,thatgoldandsilverarenotsonecessaryforthewealthofanation,asthevulgarofallranksimagine\"。
4。Steuart,op。cit。,Vol。II,pp。102—07。
5。InconnectionwiththelastcommercialcrisisacertainfactioninEnglandardentlypraisedtheidealAfricanmoneyaftermovingitslocationonthisoccasionfromthecoastintotheinteriorofBarbary。Itwasdeclaredthatbecausetheirbarsconstitutedanidealmeasure,theBerbershadnocommercialandindustrialcrises。Woulditnothavebeensimplertosaythatcommerceandindustryaretheconditiosinequanonforcommercialandindustrialcrises？
6。TheCurrencyQuestion,theGeminiLetters,London,1844,pp。266—72
passim。
7。JohnGray,TheSocialSystem。ATreatiseonthePrincipleofExchange,Edinburgh,1831。Cf。thesameauthor\'sLecturesontheNatureandUseofMoney,Edinburgh,1848。AftertheFebruaryRevolution,GraysentamemorandumtotheFrenchProvisionalGovernmentinwhichheexplainsthatFrancedidnotneedan\"organisationoflabour\"butan\"organisationofexchange\",theplanforwhichwasfullyworkedoutintheMonetarySystemhehadinvented。TheworthyJohnhadnoinklingthatsixteenyearsafterthepublicationofTheSocialSystem,theingeniousProudhonwouldbetakingoutapatentforthesameinvention。
8。Gray,TheSocialSystem,p。63。\"Moneyshouldbemerelyareceipt,anevidencethattheholderofithaseithercontributedacertainvaluetothenationalstockofwealth,orthathehasacquiredarighttothesaidvaluefromsomeonewhohascontributedtoit。\"
9。\"Anestimatedvaluebeingpreviouslyputuponproduce,letitbelodgedinabank,anddrawnoutagainwheneveritisrequired,merelystipulating,bycommonconsent,thathewholodgesanykindofpropertyintheNationalBank,maytakeoutofitanequalvalueofwhateveritmaycontain,insteadofbeingobligedtodrawouttheself—samethingthatheputin。\"Op。cit。,pp。67—68。
10。\"Thebusinessofeverynationoughttobeconductedonanationalcapital\"（JohnGray,TheSocialSystem,p。171）。
11。
\"Thelandtobetransformedintonationalproperty\"（op。cit。,p。298。）
12。See,e。g。,W。Thompson,\"AnInquiryintotheDistributionofWealth,London,1824;Bray,Labour\'sWrongsandLabour\'sRemedy,Leeds,1839。13。
AlfredDarimon,Delaréformedesbanques,Paris,1856,canberegardedasacompendiumofthismelodramaticmonetarytheory。
TheoriesoftheMediumofCirculationandofMoneyKarlMarx\'sACONTRIBUTIONTOTHECRITIQUEOFPOLITICALECONOMY
C。TheoriesoftheMediumofCirculationandofMoneyJustasinthesixteenthandseventeenthcenturies,whenmodernbourgeoissocietywasinitsinfancy,nationsandprincesweredrivenbyageneraldesireformoneytoembarkoncrusadestodistantlandsinquestofthegoldengrail,sothefirstinterpretersofthemodernworld,theoriginatorsoftheMonetarySystem——theMercantileSystemismerelyavariantofit——declaredthatgoldandsilver,i。e。,money,aloneconstituteswealth。
Theyquitecorrectlystatedthatthevocationofbourgeoissocietywasthemakingofmoney,andhence,fromthestandpointofsimplecommodityproduction,theformationofpermanenthoardswhichneithermothsnorrustcoulddestroy。ItisnorefutationoftheMonetarySystemtopointoutthatatonofironwhosepriceis£3hasthesamevalueas£3
ingold。Thepointatissueisnotthemagnitudeoftheexchange—value,butitsadequateform。WithregardtothespecialattentionpaidbytheMonetaryandMercantilesystemstointernationaltradeandtoindividualbranchesofnationallabourthatleaddirectlytointernationaltrade,whichareregardedbythemastheonlyrealsourceofwealthorofmoney,onehastorememberthatinthosetimesnationalproductionwasforthemostpartstillcarriedonwithintheframeworkoffeudalformsandservedastheimmediatesourceofsubsistencefortheproducersthemselves。Mostproductsdidnotbecomecommodities;theywereaccordinglyneitherconvertedintomoneynorenteredatallintothegeneralprocessofthesocialmetabolism;
hencetheydidnotappearasmaterialisationofuniversalabstractlabouranddidnotindeedconstitutebourgeoiswealth。Moneyastheendandobjectofcirculationrepresentsexchange—valueorabstractwealth,notanyphysicalelementofwealth,asthedeterminingpurposeanddrivingmotiveofproduction。
Itwasconsistentwiththerudimentarystageofbourgeoisproductionthatthosemisunderstoodprophetsshouldhaveclungtothesolid,palpableandglitteringformofexchange—value,toexchange—valueintheformoftheuniversalcommodityasdistinctfromallparticularcommodities。Thesphereofcommoditycirculationwasthestrictlybourgeoiseconomicsphereatthattime。Theythereforeanalysedthewholecomplexprocessofbourgeoisproductionfromthestandpointofthatbasicsphereandconfusedmoneywithcapital。TheunceasingfightofmoderneconomistsagainsttheMonetaryandMercantilesystemsismainlyprovokedbythefactthatthesecretofbourgeoisproduction,i。e。,thatitisdominatedbyexchange—value,isdivulgedinanaivelybrutalwaybythesesystems。Althoughdrawingthewrongconclusionsfromit,Ricardoobservessomewherethat,evenduringafamine,cornisimportedbecausethecorn—merchanttherebymakesmoney,andnotbecausethenationisstarving。PoliticaleconomyerrsinitscritiqueoftheMonetaryandMercantilesystemswhenitassailsthemasmereillusions,asutterlywrongtheories,andfailstonoticethattheycontaininaprimitiveformitsownbasicpresuppositions。Thesesystems,moreover,remainnotonlyhistoricallyvalidbutretaintheirfullvaliditywithincertainspheresofthemoderneconomy。Ateverystageofthebourgeoisprocessofproductionwhenwealthassumestheelementaryformofcommodities,exchange—valueassumestheelementaryformofmoney,andinallphasesoftheproductiveprocesswealthforaninstantrevertsagaintotheuniversalelementaryformofcommodities。Thefunctionsofgoldandsilverasmoney,incontradistinctiontotheirfunctionsasmeansofcirculationandincontrastwithallothercommodities,arenotabolishedeveninthemostadvancedbourgeoiseconomy,butmerelyrestricted;theMonetaryandMercantilesystemsaccordinglyremainvalid。Thecatholicfactthatgoldandsilverasthedirectembodimentofsociallabour,andthereforeastheexpressionofabstractwealth,confrontotherprofanecommodities,hasofcourseviolatedtheprotestantcodeofhonourofbourgeoiseconomists,andfromfearoftheprejudicesoftheMonetarySystem,theylostforsometimeanysenseofdiscriminationtowardsthephenomenaofmoneycirculation,asthefollowingaccountwillshow。
Itwasquitenaturalthat,bycontrastwiththeMonetaryandMercantilesystems,whichknewmoneyonlyasacrystallineproductofcirculation,classicalpoliticaleconomyinthefirstinstanceshouldhaveunderstoodthefluidformofmoney,thatistheformofexchange—valuewhicharisesandvanisheswithinthemetamorphosisofcommodities。BecausecommoditycirculationislookedatexclusivelyintheformC——M——C,andthisinitsturnsolelyasthedynamicunityofsaleandpurchase,thespecificaspectofmoneyasmeansofcirculationisupheldagainstitsspecificaspectasmoney。Ifthefunctionofmeansofcirculationinservingascoinisisolated,then,aswehaveseen,itbecomesavalue—token。Butsinceclassicalpoliticaleconomywasatfirstconfrontedwithmetalliccurrencyasthepredominantformofcurrency,itregardedmetallicmoneyascoin,andcoinasameretokenofvalue。Inaccordancewiththelawrelatingtothecirculationofvalue—tokens,thepropositionisthenadvancedthatthepricesofcommoditiesdependonthevolumeofmoneyincirculation,andnotthatthevolumeofmoneyincirculationdependsonthepricesofcommodities。ThisviewismoreorlessclearlyoutlinedbyItalianeconomistsoftheseventeenthcentury;itissometimesaccepted,sometimesrepudiatedbyLocke,andfirmlysetforthintheSpectator（intheissueofOctober19,1711）aswellasintheworksofMontesquieuandHume。SinceHumeisbyfarthemostimportantexponentofthistheoryintheeighteenthcentury,weshallbeginoursurveywithhim。
Undercertainconditions,anincreaseordecreaseinthequantityofeitherspecieincirculation,ortokensofvalueincirculation,seemstohaveasimilareffectuponcommodity—prices。Ifthereisafallorriseinthevalueofgoldandsilver,inwhichtheexchange—valueofcommoditiesismeasuredasprice,thenpricesriseorfallbecauseachangehastakenplaceintheirstandardofvalue;andanincreasedordiminishedamountofgoldandsilverisincirculationascoinbecausethepriceshaverisenorfallen。Theobservablephenomenon,however,isthatwithanincreasingordiminishingvolumeofmeansofcirculation,priceschangewhiletheexchange—valueofcommoditiesremainsconstant。
If,ontheotherhand,theamountofvalue—tokensincirculationfallsbelowtherequisitelevel,orrisesaboveit,thenitisforciblyreducedtothatlevelbyafallorriseofcommodity—prices。Theeffectinbothcasesappearstobebroughtaboutbythesamecause,andHumeholdsfasttothisappearance。
Anyscholarlyinvestigationoftherelationbetweenthevolumeofmeansofcirculationandmovementsincommodity—pricesmustassumethatthevalueofthemonetarymaterialisgiven。Hume,however,considersexclusivelyperiodswhenrevolutionarychangesinthevalueofthepreciousmetalstakeplace,thatisrevolutionsinthestandardofvalue。Theriseincommodity—pricesthatoccurredsimultaneouslywiththeincreaseintheamountofspecieconsequentuponthediscoveryoftheAmericanminesformsthehistoricalbackgroundofhistheory,anditspracticalmotivewasthepolemicthathewagedagainsttheMonetaryandMercantilesystems。Itis,ofcourse,quitepossibletoincreasethesupplyofpreciousmetalswhiletheircostsofproductionremainunchanged。Ontheotherhand,adecreaseintheirvalue,thatisinthelabour—timerequiredtoproducethem,willinthefirstplacebeattestedonlybyanincreaseintheirsupply。Hume\'sdisciplesaccordinglystatedsubsequentlythatthediminishedvalueofthepreciousmetalswasreflectedinthegrowingvolumeofmeansofcirculation,andthegrowingvolumeofthemeansofcirculationwasreflectedinincreasedcommodity—prices。Butthereisinrealityanincreaseonlyinthepricesofexportedcommoditieswhichareexchangedforgoldandsilverascommoditiesandnotasmeansofcirculation。Thepriceofthosecommodities,whicharemeasureingoldandsilverofreducedvalue,thusrisesinrelationtoallothercommoditieswhoseexchange—valuecontinuestobemeasuredingoldandsilverinaccordancewiththescaleoftheirformercostsofproduction。Suchadualevaluationofexchange—valuesofcommoditiesinagivencountrycanofcourseoccuronlytemporarily;goldandsilverpricesmustbeadjustedtocorrespondwiththeexchange—valuesthemselves,sothatfinallytheexchange—valuesofallcommoditiesareassessedinaccordancewiththenewvalueofmonetarymaterial。Thisisnottheplaceforeitheradescriptionofthisprocessoranexaminationofthewaysinwhichtheexchange—valueofcommoditiesprevailswithinthefluctuationsofmarket—prices。Recentcriticalinvestigationsofthemovementofcommodity—pricesduringthesixteenthcenturyhaveconclusivelydemonstratedthatintheearlystagesoftheevolutionofthebourgeoismodeofproduction,suchadjustmentproceedsonlyverygradually,extendingoverlongperiods,anddoesnotbyanymeanskeepinstepwiththeincreaseofreadymoneyincirculation。[1]Quiteinappropriatearereferences——invogueamongHume\'sdisciples——
torisingpricesinancientRomebroughtaboutbytheconquestofMacedonia,EgyptandAsiaMinor。Thesuddenandforcibletransferofhoardedmoneyfromonecountrytoanotherisaspecificfeatureoftheancientworld;
butthetemporaryloweringoftheproductioncostsofpreciousmetalsachievedinaparticularcountrybythesimplemethodofplunderdoesnotaffecttheinherentlawsofmonetarycirculation,anymorethan,forinstance,thedistributionofEgyptianandSiciliancornfreeofchargeinRomeaffectsthegenerallawwhichregulatescornprices。Foradetailedanalysisofthecirculationofmoney,Hume,likeallothereighteenth—centurywriters,lackedthenecessarymaterial,i。e。,ontheonehandareliablehistoryofcommodity—prices,andontheotherhand,officialandcontinuousstatisticsregardingtheexpansionandcontractionofthemediumofcirculation,theinfluxorwithdrawalofpreciousmetals,etc。,inotherwordsmaterialwhichonthewholeonlybecomesaccessiblewhenbankingisfullydeveloped。
ThefollowingpropositionssummariseHume\'stheoryofcirculation。1。Commodity—pricesinagivencountryaredeterminedbytheamountofmoney（realortokenmoney）existingtherein。2。Themoneycirculatinginagivencountryrepresentsallcommoditieswhichareinthatcountry。Astheamountofmoneygrows,eachunitrepresentsacorrespondinglylargerorsmallerproportionofthethingsrepresented。3。Ifthevolumeofcommoditiesincreases,thentheirpricesfallorthevalueofmoneyrises。Iftheamountofmoneyincreases,then,onthecontrary,commodity—pricesriseandthevalueofmoneyfalls。