for dwelling so long upon the present subjects was to prevent so very important a truth as that which relates to the good faith that ought to be maintained with regard to the coinage, from being placed on what I conceive to be an unsound foundation; and," he continues, quoting approvingly from Law, "money is not the value for which goods are exchanged, but the value by which they are exchanged." I

Now, if value be wholly abstracted from money, what harm can come of the arbitrary operations of princes in coinage? They never change the denominations of the coin they debase. If the sole use of money, as asserted by Stewart, be to assist in numeration and arithmetic, then the different denominations of coin have only the force of numerals; and a piece of leather upon which is imprinted the word "dollar" is in its proper essence the same thing as a piece of gold upon which the same word is impressed. Hume was more logical and consistent. Agreeing with Stewart that the only value of money, as such, was to assist in numeration and arithmetic, he took the ground that the currency should be debased, as the means of eliminating value from it; naïvely remarking, that such debasement should be effected in such a sly way that the people should not discover the swindle. Of the two, Hume is to be preferred. The admission that the debasement was a swindle had the merit, at least, of putting the people on their guard. It suggested reasons for inquiry and investigation; while Stewart, assuming similar grounds to Hume as to the nature of money, while expressing horror at the legitimate consequences of his doctrines, leaves the reader without even a thread to lead him out of the labyrinth in which he is involved.

Again :

"From the functions of the precious metals as media of exchange," says Stewart," they gradually and naturally came to form the common scale of valuation. For this end, indeed, they are naturally adapted, from the mathematical exactness with which metals, in consequence of their divisibility and fusibility, are fitted to express every conceivable variation of value, a quality, indeed, of so much importance in their use as money that it probably contributed more than any thing else to establish their employment among commercial nations. The existence, too, of such a standard would necessarily render the ideas of relative value much more

1 Lectures on Political Economy, Part. i. Book ii.

precise and definite than they otherwise would have been, by leading men to an arithmetical statement of relations which, in the infancy of commerce, would have been estimated in a very gross and inaccurate manner." 1

In the preceding paragraph, in place of "standard of value," Stewart has "scale of valuations." He certainly has the advantage of Smith and the Economists in the accuracy of his definitions. It would be a contradiction in terms to call that a standard of value which had no value. A thing may be a scale, without being a standard. A yardstick is a scale for measuring distance or extension, but not the standard of distance or extension.

:

If all value is to be abstracted from money, then of what advantage are the qualities of divisibility and fusibility, in the materials composing it? Why not have the denominations. which are fitted to express "every conceivable variation of value" all of the same size and fineness? A bank-note for a thousand dollars has precisely the same size and quality of material as a note for one dollar. The only difference is in their inscriptions. There could be no possible advantage in making the size of the notes correspond with their nominal values in making, say, the surface of a dollar note equal to one square inch, and the surface of a thousand dollar note equal to a thousand square inches. According to Stewart's theory, the qualities which fit gold and silver for money divisibility and fusibility—are of the least importance; for pieces of similar size may be made by their inscriptions to express" every conceivable variation of value." The existence of a scale of valuation like that proposed by him would, he says, render the ideas of value much more precise and definite than they otherwise would have been. But how can ideas of relative value be made more precise by comparing them with a scale from which all value is abstracted? How can nothing be made to be the measure of the value of something? A definite idea is conveyed in the statement that a gold dollar measures the value of a bushel of corn; but what idea can be formed of the value of the corn from a statement that its value is that expressed upon a worthless piece of leather or paper?

1 Lectures on Political Economy, Part i. Book ii.

12

Stewart was among the earliest writers to suggest that the quantity of money required by a community was in ratio to the rapidity of its circulation. This suggestion, which naturally resulted from the assumption that money is not capital, but a scale of valuation, or an aid in enumeration and arithmetic, has become an axiom among all modern Economists. Stewart undertakes to prove his assumption in the following

manner:

"In Mr. Pinto's Treatise on Circulation and Credit,' it has been shown, with much ingenuity, how a quick circulation makes money go far in exchanges. And the following anecdote is mentioned by this very well informed writer as an illustration: During the siege of Tournay, in 1745, and for some time before, all communication being cut off, it was a matter of some difficulty to pay the garrison, for want of money. It was thought advisable to borrow from the cantines [sutlers] the sum of 7,000 florins. It was all that they had. At the end of the week, the 7,000 florins had come back to the cantines, when the same sum was borrowed again. This was repeated for seven weeks, until the surrender; so that the same 7,000 florins did the work of 49,000 florins. It was, therefore, with very good reason that Bishop Berkeley long ago proposed the following query: Whether less money swiftly circulating be not in fact equivalent to more money slowly circulating?""1

Suppose the sutlers had had the whole 49,000 florins, and that these had been borrowed at once, Stewart's illustration would have had no meaning or significance whatever. What was this transaction? The garrison was in arrears of pay. No money could be obtained but of the sutlers, and they had but a small amount compared with what was wanted. They had, however, a plenty of camp supplies. The money they had was borrowed, and paid out to the soldiers. Such as received any went immediately to the sutlers, and supplied their wants as far as the money received would go. It was then reloaned, again paid out to the soldiers, and again paid out for supplies. It required seven different transactions to accomplish that which, had a sufficient amount of money been in hand, would have been accomplished by one. It was precisely like a process in mechanics, where the time required for lifting a given weight depends wholly upon the degree of power applied. The same amount is expended whether the

1 Lectures on Political Economy, Part i. Book ii.

weight be lifted in one minute or in one hour. The less the degree of power the greater the time. The result of these transactions was, that in the course of seven weeks the garrison had been paid 49,000 florins, the sutlers had sold supplies to the amount of 49,000 florins, and the commandant or government owed them 49,000 florins: so that in the end the latter had converted their supplies into money, and had in hand 7,000 florins, and a debt against the government or commandant for 49,000 florins. From all this Stewart deduces a law, that the amount of currency required is in ratio to its activity. Suppose the garrison had required a certain amount of forage lying twenty miles off; and that, having but one horse, ten days were required for its transportation. With ten horses, the same work might have been done in a single day. Would Stewart from this fact have attempted to prove that one horse could do the work of ten? We wonder he did not fortify his argument by the following syllogism: "ten horses can do so much work in one day; one horse can do the same work in ten days; therefore one horse can do the work of ten horses." It is really astonishing how great men, or those who have the reputation of being such, can repeat such puerile and unmeaning nonsense, and flatter themselves that they have proved some grand principle thereby.

"From these observations, it seems evident," says Stewart, "that the quantity of money and notes in circulation must bear but a small proportion to the value of the goods to be bought and sold, and that this proportion must vary according to the quickness with which the money circulates or shifts from one hand to another. According to Mr. Pinto, there is not in the whole world half the silver coin which would pay all the expenses of Paris for a single year, if the same piece were never to change its possessor but once." 1

If the proportion of money to the goods to be bought and sold be small, then the amount of goods bought and sold will be small. Stewart has only shown that, with a small amount of money, seven weeks were required to effect exchanges which might, with an adequate amount, have been made in one. There is no more escape from this law of proportion between money and transactions than there is from the law of gravity. The one is as deeply grounded in the nature of

1 Lectures on Political Economy, Book i. Part ii.

things as the other. Whether there were or were not a sufficient amount of silver in the world to pay the expenses of Paris for a single year has nothing more to do with the question of the activity of money, and the quantity dependent upon such activity, than if there had been silver enough in the world to pay the expenses of Paris for a thousand years.

"In order to illustrate this subject a little farther," says Stewart, "I shall suppose that a laboring man gains ten shillings a week, which he receives always on Saturday. This man may be said, on a medium, to be possessed of five shillings; and a hundred men in this situation may be said to be in possession of £25. This is all they have used, though they have each of them spent ten shillings a week.

"I make a second supposition, that each of these men lives on credit; that his ten shillings are spent by the time they are earned; and that every man pays his debt when he receives his weekly wages. In this case, the money may never have been a single hour in their hands; and it is a chance of a hundred to one if they are masters of twenty shillings amongst them; and yet each of them, as before, spends ten shillings a week.

"I have only another supposition to make: that each of these hundred laborers will live at the same rate as formerly; that they ask nó credit; and that they are paid their wages once a year. They will thus receive at once £26, which, having no other use for their money, they will gradually spend on their families, in the course of a year, at the rate of ten shillings a week. It is evident that these men will, at a medium, be possessed of £13 apiece, and that their whole money will be equal to £1,300; though their wage and consumption are the same as those of a hundred men who could not produce twenty shillings among them.

"The obvious inferences from these suppositions are: firstly, that £25 with a quick circulation will go as far as £1,300 with a slow circulation; secondly, that, even where the circulation is equally quick, £1 with credit will purchase as much as £25 without credit; and, thirdly, that, as both the circulation and quantity of money may vary in consequence of a variety of causes, both natural and moral, it is extremely improbable that the money in circulation should always bear a fixed and invariable proportion to the value of all the commodities used in commerce." 1

If money be capital, or the representative of capital, and if when it is exchanged it is exchanged for other kinds of capital, then there can be no greater activity in money than in other kinds of capital; and there can be no relation whatever between its activity and quantity. There would be just as much

1 Lectures on Political Economy, Part i. Book ii.