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    Book I: Chapter 5

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    Chapter 6
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    CHAPTER V.

    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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