it is exchangeable for money. A bill of exchange on a solvent merchant has value, simply because at a certain time it will be exchanged for money. Hence it is clear that bank notes and bills of exchange have value for precisely the same reason that money has, and no other, viz., that they are exchangeable for something else. When money can be exchanged it has value; when it cannot be exchanged it has no value: when a bill, or note, can be exchanged it has value; when it cannot be exchanged it has no value.

Hence we see that the Value of Money and Credit of all kinds is essentially of the same nature, though there may be different degrees of it. A piece of credit is an article of merchandize and an exchangeable commodity just as much as money or any other goods.

The expression Intrinsic Value is so common that persons are apt to overlook its incongruity of idea; but if we use words of similar import whose use has not been so corrupted, the absurdity will be at once apparent. Thus who ever heard of an Intrinsic Distance, or an Intrinsic Ratio? The absurdity of these phrases is apparent at once; but they are not more absurd than Intrinsic Value. To say that money because it is material, and the produce of land and labour, has Intrinsic Value, and that a Bill or Note is only the Representative of value, is as absurd as to say that a wooden yard measure is intrinsic distance, and the space between two points one yard apart, is the representative of distance.

The extraordinary inconsistencies into which Smith and Ricardo have fallen are more fully exhibited in the next section but one, on a Standard of Value, but we will give here an example of the confusion of idea into which able writers are betrayed. Senior says "We have already stated that we use the word VALUE in its popular acceptation, as signifying that quality in anything which fits it to be given and received in exchange, or in other words to be lent or sold, hired or purchased.

"So defined, Value denotes a relation reciprocally existing between two objects!"

Now the quality of a melon which fits it to be sold is its agreeable flavour; its flavour is, according to Senior, its value;

1 Political Economy, p. 13,

and so defined, he says, it means it costs 5s.! That is, he defines the quality of a thing to be its price!

But Economics has nothing to do with the useful or agreeable qualities of things, but only with their external relations to other things. The sole quality of things which an Economist, quà Economist, is to investigate is their exchangeability; and it must always be remembered that Economics is a pure science of Ratios.

On the distinction between DEPRECIATION and DIMINUTION IN VALUE.

3. We must now observe the difference between two expressions, which, though often used indiscriminately, are essentially distinct, viz., Diminution in Value and Depreciation. alteration in value of any commodity means that the quantity of it which was considered as an equivalent for a certain amount of some other commodity with which it is compared, has undergone a change. Depreciation means that it is not really of the value it professes to be. Alteration in value of a commodity is always used in reference to some other commodity with which it is compared; Depreciation, in reference to itself. Thus, if at any given time an ounce of gold will exchange for fifteen ounces of silver, and owing to any great and sudden increase of the quantity of silver, while the quantity of gold remains the same, one ounce of gold becomes able to purchase twenty ounces of silver, then silver is said to have sustained a Diminution of Value with respect to gold; or if, while silver remained the same, gold became very scarce, so that one ounce of gold would purchase twenty ounces of silver, then gold would be said to have risen in value with respect to silver. But if a bank note, which professes to be of the value of five sovereigns, will only purchase four sovereigns, it is depreciated; or if a guinea, which professes to contain a certain amount of fixed weight of pure gold, does not contain that amount, it is depreciated. The expression Diminution in Value is applicable both to commodities and money; the word Depreciation is more properly restricted to currency; when an analogous change takes place in commodities, it is usually called deterioration.

These distinctions are very necessary to be observed in all discussions regarding the value of coins which retain the same names during a long series of ages. The pound of money in the days of William the Conqueror really meant a pound weight of silver bullion; and silver was the only money. Since then silver has greatly increased in quantity, and other things are used as money, which have tended very greatly to diminish its value. It is said, though of course all such statements are extremely difficult to verify, that silver has fallen to a twelfth of its value in those times. Not only has the value of the metal greatly diminished, but the coinage is greatly deteriorated. By various diminutions effected by successive sovereigns, the shilling now is only the 66th part of a pound weight, whereas it was formerly the 20th part. Hence it is said that a shilling will only command the 36th part of what it formerly would. Though, as great changes have taken place in everything else as well, it would be difficult to prove this.

These causes affecting the value of coins which retain their names through long periods, may act in the same, or opposite, directions. It is quite easy to imagine that a coin, though greatly deteriorated, or diminished from its original weight, may, in consequence of the increased value of the material of which it is composed, be able to purchase as much as it would have done originally. It is alleged sometimes that this happened at Rome. The first coinage of Rome was copper, and this metal was found in great abundance for some time after the foundation of the city. The first measure of value was the as which was a pound weight of copper. The as was subsequently reduced to the twelfth part of its weight, and some writers say, that in consequence of the great scarcity of the metal, it had increased so much in value, that the deteriorated coinage would purchase as much as the full pound would originally. This may be so, or not, but it in no way affects the argument. It might, very possibly have been so.

These considerations greatly affect the public in the matter of public debts. The State agrees at a particular time to pay a fixed quantity of bullion, either for ever, or for a long period, to the public creditors. Now, even supposing all other things to remain the same, the value of the money may vary very greatly during long periods, either from the increased scarcity, or the increased

abundance, of the metal; and either the State or the creditors may be grievously affected by these changes.

In recent times, many able Economists have expected that the value of gold would be violently affected by the great discoveries in California and Australia. Some countries have taken such alarm at this as to abolish gold as the legal measure of value, and some writers have proposed that the weight of the sovereign should be increased in consequence. Even if the consequences expected did follow, which is extremely doubtful, it is not very likely that this would be done. However, this is not the place to discuss this important question.

A STANDARD OF VALUE is IMPOSSIBLE.

4. The unfortunate confusion of ideas between the Value of a quantity being any other quantity a thing will exchange for, and the quantity of labour embodied in obtaining the quantity itself, has led not only to the mischievous expression, Intrinsic Value, the source of endless confusion, but also to the search for something which reflection would have shown to be impossible, viz., an Invariable Standard of Value.

The great difficulty in dealing with Economical writers and their opinions is, that to collect their opinions, it is often necessary to place before the reader long passages, and to examine closely the structure of nearly every sentence, to mark the changes and inconsistencies of thought which take place. This is insufferably wearisome to the reader, and therefore we must refer to the chapter in Smith on the subject, for a full considera tion of his views. It is B. i., c. v. But we must shortly state his doctrine.

The first doctrine he lays down is that the value of any commodity is equal to the quantity of labour which it enables him to command or purchase. Hence, if 7 denote labour,

He then says, in the next paragraph, that that is the same thing as saying that it is equal to the produce of labour it enables him to purchase; or, denoting produce by p,

A-p, 2p, 3p, 4p..

And then in the next paragraph he says that the value of any

1

thing is more frequently estimated in money than either in labour or commodities; or, denoting money by m,

A=m, 2m, 3m, 4m

Now, although it has justly been pointed out that these modes of estimating the value of a quantity are by no means identical, we observe that in this passage, Smith defines the value of a thing to be something external to itself-it is the thing which any thing can be exchanged for. Hence it is manifest that the value of A must vary directly, as l, p, or m. The more l, p, or m that can be got for A, the more valuable is A; the less of l, p, or m that can be got for A, the less valuable is A. It is also perfectly clear, that if any change whatever takes place in the exchangeable relations between A and these quantities, the value of A has changed.

Hence Smith admits that Value, like distance, requires two objects. If any change takes place in the position of either of these, the distance between them has changed, no matter in which the change takes place. So if the exchangeable relation between two quantities changes, their Value has changed, no matter in which the change takes place. Hence it is clear that there can be no such thing as Invariable Value. Nothing whatever can by any possibility have an invariable value, unless its exchangeable relation with everything else is fixed. Hence we can at once see that, by the very nature of things, there can be no such thing as an invariable standard of value, by which to measure the variations in value of other things, because, by the very nature of things, the very condition of anything being invariable in value is that nothing else shall vary in value and consequently the very condition of there being an invariable standard is, that there shall be no variations to

measure.

Nevertheless a very large body of Economists have set out upon this wild goose chase-this search for an invariable standard, which it is utterly contrary to the nature of things should exist at all. Directly after the passages we have referred to, Smith commences the search for that single thing which is to be the invariable standard of value. He says that gold and silver will not do because they vary in their value, -sometimes they can purchase more and sometimes less of labour and other commodities. Then he says: