Money and the Mechanism of Exchange

William Stanley Jevons
Jevons, William Stanley
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New York: D. Appleton and Co.
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Chapter II



Money is the measure and standard of value and the medium of exchange, yet it is not necessary that I should enter upon more than a very brief discussion concerning the nature of value, and the advantage of exchange. Every one must allow that the exchange of commodities depends upon the obvious principle that each of our wants taken separately requires a limited quantity of some article to produce satisfaction. Hence as each want becomes fully satiated, our desire, as Senior so well remarked, is for variety, that is, for the satisfaction of some other want. The man who is supplied daily with three pounds of bread, will not desire more bread; but he will have a strong inclination for beef, and tea, and alcohol. If he happen to meet with a person who has plenty of beef but no bread, each will give that which is less desired for that which is more desired. Exchange has been called the barter of the superfluous for the necessary, and this definition will be correct if we state it as the barter of the comparatively superfluous for the comparatively necessary.


It is impossible, indeed, to decide exactly how much bread, or beef, or tea, or how many coats and hats a person needs. There is no precise limit to our desires, and we can only say, that as we have a larger supply of a substance, the urgency of our need for more is in some proportion weakened. A cup of water in the desert, or upon the field of battle, may save life, and become infinitely useful. Two or three pints per day for each person are needful for drinking and cooking purposes. A gallon or two per day are highly requisite for cleanliness; but we soon reach a point at which further supplies of water are of very minor importance. A modern town population is found to be satisfied with about twenty-five gallons per head per day for all purposes, and a further supply would possess little utility. Water, indeed, may be the reverse of useful, as in the case of a flood, or a damp house, or a wet mine.

Utility and Value are not intrinsic.


It is only, then, when supplied in moderate quantities, and at the right time, that a thing can be said to be useful. Utility is not a quality intrinsic in a substance, for, if it were, additional quantities of the same substance would always be desired, however much we previously possessed. We must not confuse the usefulness of a thing with the physical qualities upon which the usefulness depends. Utility and value are only accidents of a thing arising from the fact that some one wants it, and the degree of the utility and the amount of resulting value will depend upon the extent to which the desire for it has been previously gratified.


Regarding utility, then, as constantly varying in degree, and as variable even for each different portion of commodity, it is not difficult to see that we exchange those parts of our stock which have a low degree of utility to us, for articles which, being of low utility to others, are much desired by us. This exchange is continued up to the point at which the next portion given would be equally useful to us with that received, so that there is no gain of utility: there would be a loss in carrying the exchange further. Upon these considerations it is easy to construct a theory of the nature of exchange and value, which has been explained in my book*1 called "The Theory of Political Economy." It is there shown that the well-known laws of supply and demand follow from this view of utility, and thus yield a verification of the theory. Since the publication of the work named, M. Léon Walras, the ingenious professor of political economy at Lausanne, has independently arrived at the same theory of exchange,*2 a remarkable confirmation of its truth.

Value expresses Patio of Exchange.


We must now fix our attention upon the fact that, in every act of exchange, a definite quantity of one substance is exchanged for a definite quantity of another. The things bartered may be most various in character, and may be variously measured. We may give a weight of silver for a length of rope, or a superficial extent of carpet, or a number of gallons of wine, or a certain horsepower of force, or conveyance over a certain distance. The quantities to be measured may be expressed in terms of space, time, mass, force, energy, heat, or any other physical units. Yet each exchange will consist in giving so many units of one thing for so many units of another, each measured in its appropriate way.


Every act of exchange thus presents itself to us in the form of a ratio between two numbers. The word value is commonly used, and if, at current rates, one ton of copper exchanges for ten tons of bar iron, it is usual to say that the value of copper is ten times that of the iron, weight for weight. For our purpose, at least, this use of the word value is only an indirect mode of expressing a ratio. When we say that gold is more valuable than silver, we mean that, as commonly exchanged, the weight of silver exceeds that of the gold given for it. If the value of gold rises compared with that of silver, then still more silver is given for the same quantity of gold. But value like utility is no intrinsic quality of a thing; it is an extrinsic accident or relation. We should never speak of the value of a thing at all without having in our minds the other thing in regard to which it is valued. The very same substance may rise and fall in value at the same time. If, in exchange for a given weight of gold, I can get more silver, but less copper, than I used to do, the value of gold has risen with respect to silver, but fallen with respect to copper. It is evident that an intrinsic property of a thing cannot both increase and decrease at the same time; therefore value must be a mere relation or accident of a thing as regards other things and the persons needing them.

Notes for this chapter

"The Theory of Political Economy." 8vo. 1871 (Macmillan).
Walras, Éléments d'Économie politique pure." Lausanne, Paris (Guillaumin), 1874.

End of Notes

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