Of The Real And Nominal Price Of Commodities Or Of Their Price In Labour And Their Price In Money





Every man is rich or poor according to the degree in which he can afford

to enjoy the necessaries, conveniencies, and amusements of human life.

But after the division of labour has once thoroughly taken place, it is

but a very small part of these with which a man's own labour can supply

him. The far greater part of them he must derive from the labour of

other people, and he must be rich or poor according to the quantity of

that labour which he can command, or which he can afford to purchase.

The value of any commodity, therefore, to the person who possesses it,

and who means not to use or consume it himself, but to exchange it for

other commodities, is equal to the quantity of labour which it enables

him to purchase or command. Labour therefore, is the real measure of the

exchangeable value of all commodities.



The real price of every thing, what every thing really costs to the man

who wants to acquire it, is the toil and trouble of acquiring it. What

every thing is really worth to the man who has acquired it and who wants

to dispose of it, or exchange it for something else, is the toil and

trouble which it can save to himself, and which it can impose upon

other people. What is bought with money, or with goods, is purchased

by labour, as much as what we acquire by the toil of our own body. That

money, or those goods, indeed, save us this toil. They contain the value

of a certain quantity of labour, which we exchange for what is supposed

at the time to contain the value of an equal quantity. Labour was the

first price, the original purchase money that was paid for all things.

It was not by gold or by silver, but by labour, that all the wealth of

the world was originally purchased; and its value, to those who possess

it, and who want to exchange it for some new productions, is precisely

equal to the quantity of labour which it can enable them to purchase or

command.



Wealth, as Mr Hobbes says, is power. But the person who either acquires,

or succeeds to a great fortune, does not necessarily acquire or succeed

to any political power, either civil or military. His fortune may,

perhaps, afford him the means of acquiring both; but the mere possession

of that fortune does not necessarily convey to him either. The power

which that possession immediately and directly conveys to him, is the

power of purchasing a certain command over all the labour, or over

all the produce of labour which is then in the market. His fortune is

greater or less, precisely in proportion to the extent of this power,

or to the quantity either of other men's labour, or, what is the same

thing, of the produce of other men's labour, which it enables him to

purchase or command. The exchangeable value of every thing must always

be precisely equal to the extent of this power which it conveys to its

owner.



But though labour be the real measure of the exchangeable value of all

commodities, it is not that by which their value is commonly estimated.

It is often difficult to ascertain the proportion between two different

quantities of labour. The time spent in two different sorts of work will

not always alone determine this proportion. The different degrees of

hardship endured, and of ingenuity exercised, must likewise be taken

into account. There may be more labour in an hour's hard work, than in

two hours easy business; or in an hour's application to a trade which

it cost ten years labour to learn, than in a month's industry, at an

ordinary and obvious employment. But it is not easy to find any accurate

measure either of hardship or ingenuity. In exchanging, indeed, the

different productions of different sorts of labour for one another, some

allowance is commonly made for both. It is adjusted, however, not by

any accurate measure, but by the higgling and bargaining of the market,

according to that sort of rough equality which, though not exact, is

sufficient for carrying on the business of common life.



Every commodity, besides, is more frequently exchanged for, and thereby

compared with, other commodities, than with labour. It is more natural,

therefore, to estimate its exchangeable value by the quantity of some

other commodity, than by that of the labour which it can produce.

The greater part of people, too, understand better what is meant by a

quantity of a particular commodity, than by a quantity of labour. The

one is a plain palpable object; the other an abstract notion, which

though it can be made sufficiently intelligible, is not altogether so

natural and obvious.



But when barter ceases, and money has become the common instrument of

commerce, every particular commodity is more frequently exchanged for

money than for any other commodity. The butcher seldom carries his beef

or his mutton to the baker or the brewer, in order to exchange them for

bread or for beer; but he carries them to the market, where he exchanges

them for money, and afterwards exchanges that money for bread and for

beer. The quantity of money which he gets for them regulates, too, the

quantity of bread and beer which he can afterwards purchase. It is more

natural and obvious to him, therefore, to estimate their value by the

quantity of money, the commodity for which he immediately exchanges

them, than by that of bread and beer, the commodities for which he can

exchange them only by the intervention of another commodity; and

rather to say that his butcher's meat is worth three-pence or fourpence

a-pound, than that it is worth three or four pounds of bread, or

three or four quarts of small beer. Hence it comes to pass, that the

exchangeable value of every commodity is more frequently estimated by

the quantity of money, than by the quantity either of labour or of any

other commodity which can be had in exchange for it.



Gold and silver, however, like every other commodity, vary in their

value; are sometimes cheaper and sometimes dearer, sometimes of easier

and sometimes of more difficult purchase. The quantity of labour which

any particular quantity of them can purchase or command, or the quantity

of other goods which it will exchange for, depends always upon the

fertility or barrenness of the mines which happen to be known about the

time when such exchanges are made. The discovery of the abundant mines

of America, reduced, in the sixteenth century, the value of gold and

silver in Europe to about a third of what it had been before. As it cost

less labour to bring those metals from the mine to the market, so, when

they were brought thither, they could purchase or command less labour;

and this revolution in their value, though perhaps the greatest, is

by no means the only one of which history gives some account. But as a

measure of quantity, such as the natural foot, fathom, or handful, which

is continually varying in its own quantity, can never be an accurate

measure of the quantity of other things; so a commodity which is itself

continually varying in its own value, can never be an accurate measure

of the value of other commodities. Equal quantities of labour, at all

times and places, may be said to be of equal value to the labourer. In

his ordinary state of health, strength, and spirits; in the ordinary

degree of his skill and dexterity, he must always lay down the same

portion of his ease, his liberty, and his happiness. The price which

he pays must always be the same, whatever may be the quantity of goods

which he receives in return for it. Of these, indeed, it may sometimes

purchase a greater and sometimes a smaller quantity; but it is their

value which varies, not that of the labour which purchases them. At

all times and places, that is dear which it is difficult to come at, or

which it costs much labour to acquire; and that cheap which is to be

had easily, or with very little labour. Labour alone, therefore, never

varying in its own value, is alone the ultimate and real standard

by which the value of all commodities can at all times and places be

estimated and compared. It is their real price; money is their nominal

price only.



But though equal quantities of labour are always of equal value to the

labourer, yet to the person who employs him they appear sometimes to be

of greater, and sometimes of smaller value. He purchases them sometimes

with a greater, and sometimes with a smaller quantity of goods, and to

him the price of labour seems to vary like that of all other things. It

appears to him dear in the one case, and cheap in the other. In reality,

however, it is the goods which are cheap in the one case, and dear in

the other.



In this popular sense, therefore, labour, like commodities, may be

said to have a real and a nominal price. Its real price may be said to

consist in the quantity of the necessaries and conveniencies of life

which are given for it; its nominal price, in the quantity of money. The

labourer is rich or poor, is well or ill rewarded, in proportion to the

real, not to the nominal price of his labour.



The distinction between the real and the nominal price of commodities

and labour is not a matter of mere speculation, but may sometimes be of

considerable use in practice. The same real price is always of the same

value; but on account of the variations in the value of gold and silver,

the same nominal price is sometimes of very different values. When a

landed estate, therefore, is sold with a reservation of a perpetual

rent, if it is intended that this rent should always be of the same

value, it is of importance to the family in whose favour it is reserved,

that it should not consist in a particular sum of money. Its value would

in this case be liable to variations of two different kinds: first, to

those which arise from the different quantities of gold and silver which

are contained at different times in coin of the same denomination;

and, secondly, to those which arise from the different values of equal

quantities of gold and silver at different times.



Princes and sovereign states have frequently fancied that they had a

temporary interest to diminish the quantity of pure metal contained in

their coins; but they seldom have fancied that they had any to augment

it. The quantity of metal contained in the coins, I believe of all

nations, has accordingly been almost continually diminishing, and hardly

ever augmenting. Such variations, therefore, tend almost always to

diminish the value of a money rent.



The discovery of the mines of America diminished the value of gold and

silver in Europe. This diminution, it is commonly supposed, though I

apprehend without any certain proof, is still going on gradually, and

is likely to continue to do so for a long time. Upon this supposition,

therefore, such variations are more likely to diminish than to augment

the value of a money rent, even though it should be stipulated to be

paid, not in such a quantity of coined money of such a denomination (in

so many pounds sterling, for example), but in so many ounces, either of

pure silver, or of silver of a certain standard.



The rents which have been reserved in corn, have preserved their value

much better than those which have been reserved in money, even where the

denomination of the coin has not been altered. By the 18th of Elizabeth,

it was enacted, that a third of the rent of all college leases should be

reserved in corn, to be paid either in kind, or according to the current

prices at the nearest public market. The money arising from this corn

rent, though originally but a third of the whole, is, in the present

times, according to Dr. Blackstone, commonly near double of what

arises from the other two-thirds. The old money rents of colleges must,

according to this account, have sunk almost to a fourth part of their

ancient value, or are worth little more than a fourth part of the corn

which they were formerly worth. But since the reign of Philip and

Mary, the denomination of the English coin has undergone little or no

alteration, and the same number of pounds, shillings, and pence,

have contained very nearly the same quantity of pure silver. This

degradation, therefore, in the value of the money rents of colleges, has

arisen altogether from the degradation in the price of silver.



When the degradation in the value of silver is combined with the

diminution of the quantity of it contained in the coin of the same

denomination, the loss is frequently still greater. In Scotland, where

the denomination of the coin has undergone much greater alterations

than it ever did in England, and in France, where it has undergone still

greater than it ever did in Scotland, some ancient rents, originally

of considerable value, have, in this manner, been reduced almost to

nothing.



Equal quantities of labour will, at distant times, be purchased more

nearly with equal quantities of corn, the subsistence of the labourer,

than with equal quantities of gold and silver, or, perhaps, of any other

commodity. Equal quantities of corn, therefore, will, at distant times,

be more nearly of the same real value, or enable the possessor to

purchase or command more nearly the same quantity of the labour of other

people. They will do this, I say, more nearly than equal quantities of

almost any other commodity; for even equal quantities of corn will not

do it exactly. The subsistence of the labourer, or the real price of

labour, as I shall endeavour to shew hereafter, is very different upon

different occasions; more liberal in a society advancing to opulence,

than in one that is standing still, and in one that is standing still,

than in one that is going backwards. Every other commodity, however,

will, at any particular time, purchase a greater or smaller quantity

of labour, in proportion to the quantity of subsistence which it can

purchase at that time. A rent, therefore, reserved in corn, is liable

only to the variations in the quantity of labour which a certain

quantity of corn can purchase. But a rent reserved in any other

commodity is liable, not only to the variations in the quantity of

labour which any particular quantity of corn can purchase, but to

the variations in the quantity of corn which can be purchased by any

particular quantity of that commodity.



Though the real value of a corn rent, it is to be observed, however,

varies much less from century to century than that of a money rent,

it varies much more from year to year. The money price of labour, as I

shall endeavour to shew hereafter, does not fluctuate from year to year

with the money price of corn, but seems to be everywhere accommodated,

not to the temporary or occasional, but to the average or ordinary price

of that necessary of life. The average or ordinary price of corn, again

is regulated, as I shall likewise endeavour to shew hereafter, by the

value of silver, by the richness or barrenness of the mines which supply

the market with that metal, or by the quantity of labour which must be

employed, and consequently of corn which must be consumed, in order to

bring any particular quantity of silver from the mine to the market. But

the value of silver, though it sometimes varies greatly from century to

century, seldom varies much from year to year, but frequently continues

the same, or very nearly the same, for half a century or a century

together. The ordinary or average money price of corn, therefore, may,

during so long a period, continue the same, or very nearly the same,

too, and along with it the money price of labour, provided, at least,

the society continues, in other respects, in the same, or nearly in the

same, condition. In the mean time, the temporary and occasional price

of corn may frequently be double one year of what it had been the

year before, or fluctuate, for example, from five-and-twenty to fifty

shillings the quarter. But when corn is at the latter price, not only

the nominal, but the real value of a corn rent, will be double of what

it is when at the former, or will command double the quantity either of

labour, or of the greater part of other commodities; the money price of

labour, and along with it that of most other things, continuing the same

during all these fluctuations.



Labour, therefore, it appears evidently, is the only universal, as well

as the only accurate, measure of value, or the only standard by which

we can compare the values of different commodities, at all times, and

at all places. We cannot estimate, it is allowed, the real value of

different commodities from century to century by the quantities of

silver which were given for them. We cannot estimate it from year to

year by the quantities of corn. By the quantities of labour, we can,

with the greatest accuracy, estimate it, both from century to century,

and from year to year. From century to century, corn is a better measure

than silver, because, from century to century, equal quantities of

corn will command the same quantity of labour more nearly than equal

quantities of silver. From year to year, on the contrary, silver is

a better measure than corn, because equal quantities of it will more

nearly command the same quantity of labour.



But though, in establishing perpetual rents, or even in letting very

long leases, it may be of use to distinguish between real and nominal

price; it is of none in buying and selling, the more common and ordinary

transactions of human life.



At the same time and place, the real and the nominal price of all

commodities are exactly in proportion to one another. The more or less

money you get for any commodity, in the London market, for example,

the more or less labour it will at that time and place enable you to

purchase or command. At the same time and place, therefore, money is the

exact measure of the real exchangeable value of all commodities. It is

so, however, at the same time and place only.



Though at distant places there is no regular proportion between the real

and the money price of commodities, yet the merchant who carries goods

from the one to the other, has nothing to consider but the money price,

or the difference between the quantity of silver for which he buys them,

and that for which he is likely to sell them. Half an ounce of silver at

Canton in China may command a greater quantity both of labour and of

the necessaries and conveniencies of life, than an ounce at London. A

commodity, therefore, which sells for half an ounce of silver at Canton,

may there be really dearer, of more real importance to the man who

possesses it there, than a commodity which sells for an ounce at London

is to the man who possesses it at London. If a London merchant, however,

can buy at Canton, for half an ounce of silver, a commodity which he can

afterwards sell at London for an ounce, he gains a hundred per cent. by

the bargain, just as much as if an ounce of silver was at London exactly

of the same value as at Canton. It is of no importance to him that half

an ounce of silver at Canton would have given him the command of more

labour, and of a greater quantity of the necessaries and conveniencies

of life than an ounce can do at London. An ounce at London will always

give him the command of double the quantity of all these, which half an

ounce could have done there, and this is precisely what he wants.



As it is the nominal or money price of goods, therefore, which finally

determines the prudence or imprudence of all purchases and sales, and

thereby regulates almost the whole business of common life in which

price is concerned, we cannot wonder that it should have been so much

more attended to than the real price.



In such a work as this, however, it may sometimes be of use to compare

the different real values of a particular commodity at different times

and places, or the different degrees of power over the labour of other

people which it may, upon different occasions, have given to those who

possessed it. We must in this case compare, not so much the different

quantities of silver for which it was commonly sold, as the different

quantities or labour which those different quantities of silver could

have purchased. But the current prices of labour, at distant times and

places, can scarce ever be known with any degree of exactness. Those

of corn, though they have in few places been regularly recorded, are in

general better known, and have been more frequently taken notice of

by historians and other writers. We must generally, therefore, content

ourselves with them, not as being always exactly in the same proportion

as the current prices of labour, but as being the nearest approximation

which can commonly be had to that proportion. I shall hereafter have

occasion to make several comparisons of this kind.



In the progress of industry, commercial nations have found it convenient

to coin several different metals into money; gold for larger payments,

silver for purchases of moderate value, and copper, or some other coarse

metal, for those of still smaller consideration, They have always,

however, considered one of those metals as more peculiarly the measure

of value than any of the other two; and this preference seems generally

to have been given to the metal which they happen first to make use

of as the instrument of commerce. Having once begun to use it as their

standard, which they must have done when they had no other money, they

have generally continued to do so even when the necessity was not the

same.



The Romans are said to have had nothing but copper money till within

five years before the first Punic war (Pliny, lib. xxxiii. cap. 3),

when they first began to coin silver. Copper, therefore, appears to

have continued always the measure of value in that republic. At Rome all

accounts appear to have been kept, and the value of all estates to have

been computed, either in asses or in sestertii. The as was always the

denomination of a copper coin. The word sestertius signifies two asses

and a half. Though the sestertius, therefore, was originally a silver

coin, its value was estimated in copper. At Rome, one who owed a great

deal of money was said to have a great deal of other people's copper.



The northern nations who established themselves upon the ruins of the

Roman empire, seem to have had silver money from the first beginning of

their settlements, and not to have known either gold or copper coins for

several ages thereafter. There were silver coins in England in the time

of the Saxons; but there was little gold coined till the time of Edward

III nor any copper till that of James I. of Great Britain. In England,

therefore, and for the same reason, I believe, in all other modern

nations of Europe, all accounts are kept, and the value of all goods

and of all estates is generally computed, in silver: and when we mean to

express the amount of a person's fortune, we seldom mention the number

of guineas, but the number of pounds sterling which we suppose would be

given for it.



Originally, in all countries, I believe, a legal tender of payment could

be made only in the coin of that metal which was peculiarly considered

as the standard or measure of value. In England, gold was not considered

as a legal tender for a long time after it was coined into money. The

proportion between the values of gold and silver money was not fixed

by any public law or proclamation, but was left to be settled by the

market. If a debtor offered payment in gold, the creditor might either

reject such payment altogether, or accept of it at such a valuation of

the gold as he and his debtor could agree upon. Copper is not at present

a legal tender, except in the change of the smaller silver coins.



In this state of things, the distinction between the metal which was the

standard, and that which was not the standard, was something more than a

nominal distinction.



In process of time, and as people became gradually more familiar

with the use of the different metals in coin, and consequently better

acquainted with the proportion between their respective values, it has,

in most countries, I believe, been found convenient to ascertain this

proportion, and to declare by a public law, that a guinea, for example,

of such a weight and fineness, should exchange for one-and-twenty

shillings, or be a legal tender for a debt of that amount. In this state

of things, and during the continuance of any one regulated proportion of

this kind, the distinction between the metal, which is the standard,

and that which is not the standard, becomes little more than a nominal

distinction.



In consequence of any change, however, in this regulated proportion,

this distinction becomes, or at least seems to become, something more

than nominal again. If the regulated value of a guinea, for example,

was either reduced to twenty, or raised to two-and-twenty shillings,

all accounts being kept, and almost all obligations for debt being

expressed, in silver money, the greater part of payments could in either

case be made with the same quantity of silver money as before; but would

require very different quantities of gold money; a greater in the

one case, and a smaller in the other. Silver would appear to be more

invariable in its value than gold. Silver would appear to measure the

value of gold, and gold would not appear to measure the value of silver.

The value of gold would seem to depend upon the quantity of silver which

it would exchange for, and the value of silver would not seem to depend

upon the quantity of gold which it would exchange for. This difference,

however, would be altogether owing to the custom of keeping accounts,

and of expressing the amount of all great and small sums rather

in silver than in gold money. One of Mr Drummond's notes for

five-and-twenty or fifty guineas would, after an alteration of this

kind, be still payable with five-and-twenty or fifty guineas, in the

same manner as before. It would, after such an alteration, be payable

with the same quantity of gold as before, but with very different

quantities of silver. In the payment of such a note, gold would appear

to be more invariable in its value than silver. Gold would appear to

measure the value of silver, and silver would not appear to measure

the value of gold. If the custom of keeping accounts, and of expressing

promissory-notes and other obligations for money, in this manner should

ever become general, gold, and not silver, would be considered as the

metal which was peculiarly the standard or measure of value.



In reality, during the continuance of any one regulated proportion

between the respective values of the different metals in coin, the value

of the most precious metal regulates the value of the whole coin. Twelve

copper pence contain half a pound avoirdupois of copper, of not the

best quality, which, before it is coined, is seldom worth seven-pence

in silver. But as, by the regulation, twelve such pence are ordered to

exchange for a shilling, they are in the market considered as worth a

shilling, and a shilling can at any time be had for them. Even before

the late reformation of the gold coin of Great Britain, the gold, that

part of it at least which circulated in London and its neighbourhood,

was in general less degraded below its standard weight than the greater

part of the silver. One-and-twenty worn and defaced shillings, however,

were considered as equivalent to a guinea, which, perhaps, indeed, was

worn and defaced too, but seldom so much so. The late regulations have

brought the gold coin as near, perhaps, to its standard weight as it

is possible to bring the current coin of any nation; and the order

to receive no gold at the public offices but by weight, is likely to

preserve it so, as long as that order is enforced. The silver coin still

continues in the same worn and degraded state as before the reformation

of the cold coin. In the market, however, one-and-twenty shillings of

this degraded silver coin are still considered as worth a guinea of this

excellent gold coin.



The reformation of the gold coin has evidently raised the value of the

silver coin which can be exchanged for it.



In the English mint, a pound weight of gold is coined into forty-four

guineas and a half, which at one-and-twenty shillings the guinea, is

equal to forty-six pounds fourteen shillings and sixpence. An ounce of

such gold coin, therefore, is worth £ 3:17:10½ in silver. In England, no

duty or seignorage is paid upon the coinage, and he who carries a pound

weight or an ounce weight of standard gold bullion to the mint, gets

back a pound weight or an ounce weight of gold in coin, without any

deduction. Three pounds seventeen shillings and tenpence halfpenny an

ounce, therefore, is said to be the mint price of gold in England, or

the quantity of gold coin which the mint gives in return for standard

gold bullion.



Before the reformation of the gold coin, the price of standard gold

bullion in the market had, for many years, been upwards of £3:18s.

sometimes £ 3:19s, and very frequently £4 an ounce; that sum, it is

probable, in the worn and degraded gold coin, seldom containing more

than an ounce of standard gold. Since the reformation of the gold coin,

the market price of standard gold bullion seldom exceeds £ 3:17:7 an

ounce. Before the reformation of the gold coin, the market price was

always more or less above the mint price. Since that reformation, the

market price has been constantly below the mint price. But that market

price is the same whether it is paid in gold or in silver coin. The late

reformation of the gold coin, therefore, has raised not only the value

of the gold coin, but likewise that of the silver coin in proportion to

gold bullion, and probably, too, in proportion to all other commodities;

though the price of the greater part of other commodities being

influenced by so many other causes, the rise in the value of either

gold or silver coin in proportion to them may not be so distinct and

sensible.



In the English mint, a pound weight of standard silver bullion is coined

into sixty-two shillings, containing, in the same manner, a pound weight

of standard silver. Five shillings and twopence an ounce, therefore,

is said to be the mint price of silver in England, or the quantity of

silver coin which the mint gives in return for standard silver bullion.

Before the reformation of the gold coin, the market price of standard

silver bullion was, upon different occasions, five shillings and

fourpence, five shillings and fivepence, five shillings and sixpence,

five shillings and sevenpence, and very often five shillings and

eightpence an ounce. Five shillings and sevenpence, however, seems to

have been the most common price. Since the reformation of the gold coin,

the market price of standard silver bullion has fallen occasionally to

five shillings and threepence, five shillings and fourpence, and five

shillings and fivepence an ounce, which last price it has scarce

ever exceeded. Though the market price of silver bullion has fallen

considerably since the reformation of the gold coin, it has not fallen

so low as the mint price.



In the proportion between the different metals in the English coin,

as copper is rated very much above its real value, so silver is rated

somewhat below it. In the market of Europe, in the French coin and

in the Dutch coin, an ounce of fine gold exchanges for about fourteen

ounces of fine silver. In the English coin, it exchanges for about

fifteen ounces, that is, for more silver than it is worth, according to

the common estimation of Europe. But as the price of copper in bars

is not, even in England, raised by the high price of copper in English

coin, so the price of silver in bullion is not sunk by the low rate of

silver in English coin. Silver in bullion still preserves its proper

proportion to gold, for the same reason that copper in bars preserves

its proper proportion to silver.



Upon the reformation of the silver coin, in the reign of William III.,

the price of silver bullion still continued to be somewhat above the

mint price. Mr Locke imputed this high price to the permission of

exporting silver bullion, and to the prohibition of exporting silver

coin. This permission of exporting, he said, rendered the demand for

silver bullion greater than the demand for silver coin. But the number

of people who want silver coin for the common uses of buying and selling

at home, is surely much greater than that of those who want silver

bullion either for the use of exportation or for any other use. There

subsists at present a like permission of exporting gold bullion, and

a like prohibition of exporting gold coin; and yet the price of gold

bullion has fallen below the mint price. But in the English coin, silver

was then, in the same manner as now, under-rated in proportion to gold;

and the gold coin (which at that time, too, was not supposed to require

any reformation) regulated then, as well as now, the real value of the

whole coin. As the reformation of the silver coin did not then reduce

the price of silver bullion to the mint price, it is not very probable

that a like reformation will do so now.



Were the silver coin brought back as near to its standard weight as

the gold, a guinea, it is probable, would, according to the present

proportion, exchange for more silver in coin than it would purchase

in bullion. The silver coin containing its full standard weight, there

would in this case, be a profit in melting it down, in order, first to

sell the bullion for gold coin, and afterwards to exchange this gold

coin for silver coin, to be melted down in the same manner. Some

alteration in the present proportion seems to be the only method of

preventing this inconveniency.



The inconveniency, perhaps, would be less, if silver was rated in the

coin as much above its proper proportion to gold as it is at present

rated below it, provided it was at the same time enacted, that silver

should not be a legal tender for more than the change of a guinea, in

the same manner as copper is not a legal tender for more than the

change of a shilling. No creditor could, in this case, be cheated in

consequence of the high valuation of silver in coin; as no creditor can

at present be cheated in consequence of the high valuation of copper.

The bankers only would suffer by this regulation. When a run comes upon

them, they sometimes endeavour to gain time, by paying in sixpences,

and they would be precluded by this regulation from this discreditable

method of evading immediate payment. They would be obliged, in

consequence, to keep at all times in their coffers a greater quantity of

cash than at present; and though this might, no doubt, be a considerable

inconveniency to them, it would, at the same time, be a considerable

security to their creditors.



Three pounds seventeen shillings and tenpence halfpenny (the mint price

of gold) certainly does not contain, even in our present excellent

gold coin, more than an ounce of standard gold, and it may be thought,

therefore, should not purchase more standard bullion. But gold in coin

is more convenient than gold in bullion; and though, in England, the

coinage is free, yet the gold which is carried in bullion to the mint,

can seldom be returned in coin to the owner till after a delay of

several weeks. In the present hurry of the mint, it could not be

returned till after a delay of several months. This delay is equivalent

to a small duty, and renders gold in coin somewhat more valuable than an

equal quantity of gold in bullion. If, in the English coin, silver was

rated according to its proper proportion to gold, the price of silver

bullion would probably fall below the mint price, even without any

reformation of the silver coin; the value even of the present worn and

defaced silver coin being regulated by the value of the excellent gold

coin for which it can be changed.



A small seignorage or duty upon the coinage of both gold and silver,

would probably increase still more the superiority of those metals in

coin above an equal quantity of either of them in bullion. The

coinage would, in this case, increase the value of the metal coined in

proportion to the extent of this small duty, for the same reason that

the fashion increases the value of plate in proportion to the price of

that fashion. The superiority of coin above bullion would prevent the

melting down of the coin, and would discourage its exportation. If, upon

any public exigency, it should become necessary to export the coin, the

greater part of it would soon return again, of its own accord. Abroad,

it could sell only for its weight in bullion. At home, it would buy more

than that weight. There would be a profit, therefore, in bringing it

home again. In France, a seignorage of about eight per cent. is imposed

upon the coinage, and the French coin, when exported, is said to return

home again, of its own accord.



The occasional fluctuations in the market price of gold and silver

bullion arise from the same causes as the like fluctuations in that of

all other commodities. The frequent loss of those metals from various

accidents by sea and by land, the continual waste of them in gilding and

plating, in lace and embroidery, in the wear and tear of coin, and in

that of plate, require, in all countries which possess no mines of their

own, a continual importation, in order to repair this loss and this

waste. The merchant importers, like all other merchants, we may believe,

endeavour, as well as they can, to suit their occasional importations

to what they judge is likely to be the immediate demand. With all their

attention, however, they sometimes overdo the business, and sometimes

underdo it. When they import more bullion than is wanted, rather than

incur the risk and trouble of exporting it again, they are sometimes

willing to sell a part of it for something less than the ordinary or

average price. When, on the other hand, they import less than is wanted,

they get something more than this price. But when, under all those

occasional fluctuations, the market price either of gold or silver

bullion continues for several years together steadily and constantly,

either more or less above, or more or less below the mint price, we

may be assured that this steady and constant, either superiority or

inferiority of price, is the effect of something in the state of the

coin, which, at that time, renders a certain quantity of coin either of

more value or of less value than the precise quantity of bullion which

it ought to contain. The constancy and steadiness of the effect supposes

a proportionable constancy and steadiness in the cause.



The money of any particular country is, at any particular time and

place, more or less an accurate measure or value, according as the

current coin is more or less exactly agreeable to its standard, or

contains more or less exactly the precise quantity of pure gold or pure

silver which it ought to contain. If in England, for example, forty-four

guineas and a half contained exactly a pound weight of standard gold,

or eleven ounces of fine gold, and one ounce of alloy, the gold coin of

England would be as accurate a measure of the actual value of goods at

any particular time and place as the nature of the thing would admit.

But if, by rubbing and wearing, forty-four guineas and a half generally

contain less than a pound weight of standard gold, the diminution,

however, being greater in some pieces than in others, the measure of

value comes to be liable to the same sort of uncertainty to which all

other weights and measures are commonly exposed. As it rarely happens

that these are exactly agreeable to their standard, the merchant adjusts

the price of his goods as well as he can, not to what those weights

and measures ought to be, but to what, upon an average, he finds, by

experience, they actually are. In consequence of a like disorder in the

coin, the price of goods comes, in the same manner, to be adjusted, not

to the quantity of pure gold or silver which the coin ought to contain,

but to that which, upon an average, it is found, by experience, it

actually does contain.



By the money price of goods, it is to be observed, I understand always

the quantity of pure gold or silver for which they are sold, without any

regard to the denomination of the coin. Six shillings and eight pence,

for example, in the time of Edward I., I consider as the same money

price with a pound sterling in the present times, because it contained,

as nearly as we can judge, the same quantity of pure silver.





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