Money and the Mechanism of Exchange
By William Stanley Jevons
In preparing this volume, I have attempted to write a descriptive essay on the past and present monetary systems of the world, the materials employed to make money, the regulations under which the coins are struck and issued, the natural laws which govern their circulation, the several modes in which they may be replaced by the use of paper documents, and finally, the method in which the use of money is immensely economized by the cheque and clearing system now being extended and perfected.This is not a book upon the currency question, as that question is so often discussed in England. I have only a little to say about the Bank Charter Act, and upon that, and other mysteries of the money market, I refer my readers to the admirable essay of Mr. Bagehot on
“Lombard Street,” to which this book may perhaps serve as an introduction. [From the Preface]
First Pub. Date
New York: D. Appleton and Co.
Westminster (authorized) edition.
The text of this edition is in the public domain. Picture of William Stanley Jevons: Photogravure after a photograph of W. Stanley Jevons, taken by Maull & Co., London., courtesy Liberty Fund, Inc.
- Chapter I. Barter
- Chapter II. Exchange
- Chapter III. The Functions of Money
- Chapter IV. Early History of Money
- Chapter V. Qualities of the Material of Money
- Chapter VI. The Metals as Money
- Chapter VII. Coins
- Chapter VIII. The Principles of Circulation
- Chapter IX. Systems of Metallic Money
- Chapter X. The English System of Metallic Currency
- Chapter XI. Fractional Currency
- Chapter XII. The Battle of the Standards
- Chapter XIII. Technical Matters Relating to Coinage
- Chapter XIV. International Money
- Chapter XV. The Mechanism of Exchange
- Chapter XVI. Representative Money
- Chapter XVII. The Nature and Varieties of Promissory Notes
- Chapter XVIII. Methods of Regulating a Paper Currency
- Chapter XIX. Credit Documents
- Chapter XX. Book Credit and the Banking System
- Chapter XXI. The Clearing-House System
- Chapter XXII. The Cheque Bank
- Chapter XXIII. Foreign Bills of Exchange
- Chapter XXIV. The Bank of England and the Money Market
- Chapter XXV. A Tabular Standard of Value
- Chapter XXVI. The Quantity of Money Needed by a Nation
Early History of Money
Living in civilized communities, and accustomed to the use of coined metallic money, we learn to identify money with gold and silver; hence spring hurtful and insidious fallacies. It is always useful, therefore, to be reminded of the truth, so well stated by Turgot, that every kind of merchandise has the two properties of measuring value and transferring value. It is entirely a question of degree what commodities will in any given state of society form the most convenient currency, and this truth will be best impressed upon us by a brief consideration of the very numerous things which have at one time or other been employed as money. Though there are many numismatists and many political economists, the natural history of money is almost a virgin subject, upon which I should like to dilate; but the narrow limits of my space forbid me from attempting more than a brief sketch of the many interesting facts which may be collected.
Currency in the Hunting State.
Perhaps the most rudimentary state of industry is that in which subsistence is gained by hunting wild animals. The proceeds of the chase would, in such a state, be the property of most generally recognised value. The meat of the animals captured would, indeed, be too perishable in nature to be hoarded or often exchanged; but it is otherwise with the skins, which, being preserved and valued for clothing, became one of the earliest materials of currency. Accordingly, there is abundant evidence that furs or skins were employed as money in many ancient nations. They serve this purpose to the present day in some parts of the world.
In the book of Job (ii. 4) we read, “Skin for skin, yea, all that a man hath will he give for his life;” a statement clearly implying that skins were taken as the representative of value among the ancient Oriental nations. Etymological research shows that the same may be said of the northern nations from the earliest times. In the Esthonian language the word
râha generally signifies money, but its equivalent in the kindred Lappish tongue has not yet altogether lost the original meaning of skin or fur. Leather money is said to have circulated in Russia as late as the reign of Peter the Great, and it is worthy of notice, that classical writers have recorded traditions to the effect that the earliest currency used at Rome, Lacedæmon, and Carthage, was formed of leather.
We need not go back, however, to such early times to study the use of rude currencies. In the traffic of the Hudson’s Bay Company with the North American Indians, furs, in spite of their differences of quality and size, long formed the medium of exchange. It is very instructive, and corroborative of the previous evidence to find that, even after the use of coin had become common among the Indians the skin was still commonly used as the money of account. Thus Whymper says,
*3 “a gun, nominally worth about forty shillings, bought twenty ‘skins.’ This term is the old one employed by the company. One skin (beaver) is supposed to be worth two shillings, and it represents two marten, and so on. You heard a great deal about ‘skins’ at Fort Yukon, as the workmen were also charged for clothing, etc., in this way.”
Currency in the Pastoral State.
In the next higher stage of civilization, the pastoral state, sheep and cattle naturally form the most valuable and negotiable kind of property. They are easily transferable, convey themselves about, and can be kept for many years, so that they readily perform some of the functions of money.
We have abundance of evidence, traditional, written, and etymological, to show this. In the Homeric poems oxen are distinctly and repeatedly mentioned as the commodity in terms of which other objects are valued. The arms of Diomed are stated to be worth nine oxen, and are compared with those of Glaucos, worth one hundred. The tripod, the first prize for wrestlers in the 23rd Iliad, was valued at twelve oxen, and a woman captive, skilled in industry, at four.
*4 It is peculiarly interesting to find oxen thus used as the common measure of value, because from other passages it is probable, as already mentioned, that the precious metals, though as yet uncoined, were used as a store of value, and occasionally as a medium of exchange. The several functions of money were thus clearly performed by different commodities at this early period.
In several languages the name for money is identical with that of some kind of cattle or domesticated animal. It is generally allowed that
pecunia, the Latin word for money, is derived from
pecus, cattle. From the Agamemnon of Æschylus we learn that the figure of an ox was the sign first impressed upon coins, and the same is said to have been the case with the earliest issues of the Roman
As. Numismatic researches fail to bear out these traditions, which were probably invented to explain the connection between the name of the coin and the animal. A corresponding connection between these notions may be detected in much more modern languages. Our common expression for the payment of a sum of money is
fee, which is nothing but the Anglo-Saxon
feoh, meaning alike money and cattle, a word cognate with the German
vieh, which still bears only the original meaning of cattle. As I am informed by my friend, Professor Theodores, the same connection of ideas is manifested in the Greek word for property,
which means alike possession, flock, or cattle, and is referred by Grimm to an original verb
, to feed cattle. It is even supposed by Grimm that the same root reappears in the Teutonic and Scandinavian languages, in the Gothic,
skatts, the modern High German
schatz, the Anglo-Saxon,
sceat, the ancient Norsk
skat, all meaning wealth, property, treasure, tax, or tribute, especially in the shape of cattle. This theory is confirmed by the fact that the Frisian equivalent,
sket, has retained the original meaning of cattle to the present day. In the Norsk, Anglo-Saxon, and English,
scot has been specialized to denote tax or tribute.
In the ancient German codes of law, fines and penalties are actually defined in terms of live-stock. In the Zend Avesta, as Professor Theodores further informs me, the scale of rewards to be paid to physicians is carefully stated, and in every case the fee consists in some sort of cattle. The fifth and sixth lectures in Sir H. S. Maine’s most interesting work on “The Early History of Institutions,” which has just been published, are full of curious information showing the importance of live-stock in a primitive state of society. Being counted
by the head, the kine was called
capitale, whence the economical term
capital, the law term
chattel, and our common name
In countries where slaves form one of the most common and valuable possessions, it is quite natural that they should serve as the medium of exchange like cattle. Pausanias mentions their use in this way, and in Central Africa and some other places where slavery still flourishes, they are the medium of exchange along with cattle and ivory tusks. According to Earl’s account of New Guinea, there is in that island a large traffic in slaves, and a slave forms the unit of value. Even in England slaves are believed to have been exchanged at one time in the manner of money.
Articles of Ornament as Currency.
A passion for personal adornment is one of the most primitive and powerful instincts of the human race, and as articles used for such purposes would be durable, universally esteemed, and easily transferable, it is natural that they should be circulated as money. The wampumpeag of the North American Indians is a case in point, as it certainly served as jewellery. It consisted of beads made of the ends of black and white shells, rubbed down and polished, and then strung into belts or necklaces, which were valued according to their length, and also according to their colour and lustre, a foot of black peag being worth two feet of white peag. It was so well established as currency among the natives that the Court of Massachusetts ordered, in 1649, that it should be received in the payment of debts among settlers to the amount of forty shillings. It is curious to learn, too, that just as European misers hoard up gold and silver coins, the richer Indian chiefs secrete piles of wampum beads, having no better means of investing their superfluous wealth.
Exactly analogous to this North American currency, is that of the cowry shells, which, under one name or another—chamgos, zimbis, bouges, porcelanes, etc.—have long been used in the East Indies as small money. In British India, Siam, the West Coast of Africa, and elsewhere on the tropical coasts, they are still used as small change, being collected on the shores of the Maldive and Laccadive Islands, and exported for the purpose. Their value varies somewhat, according to the abundance of the yield, but in India the current rate used to be about 5000 shells for one rupee, at which rate each shell is worth about the two-hundredth part of a penny. Among our interesting fellow-subjects, the Fijians, whale’s teeth served in the place of cowries, and white teeth were exchanged for red teeth somewhat in the ratio of shillings to sovereigns.
Among other articles of ornament or of special value used as currency, may be mentioned yellow amber, engraved stones, such as the Egyptian scarabæi, and tusks of ivory.
Currency in the Agricultural State.
Many vegetable productions are at least as well suited for circulation as some of the articles which have been mentioned. It is not surprising to find, then, that among a people supporting themselves by agriculture, the more durable products were thus used. Corn has been the medium of exchange in remote parts of Europe from the time of the ancient Greeks to the present day. In Norway corn is even deposited in banks, and lent and borrowed. What wheat, barley, and oats are to Europe, such is maize in parts of Central America, especially Mexico, where it formerly circulated. In many of the countries surrounding the Mediterranean, olive oil is one of the commonest articles of produce and consumption; being, moreover, pretty uniform in quality, durable, and easily divisible, it has long served as currency in the Ionian Islands, Mytilene, some towns of Asia Minor, and elsewhere in the Levant.
Just as cowries circulate in the East Indies, so cacao nuts, in Central America and Yucatan, form a perfectly recognised and probably an ancient fractional money. Travellers have published many distinct statements as to their value, but it is impossible to reconcile these statements without supposing great changes of value either in the nuts or in the coins with which they are compared. In 1521, at Caracas, about thirty cacao nuts were worth one penny English, whereas recently ten beans would go to a penny, according to Squier’s statements. In the European countries, where almonds are commonly grown, they have circulated to some extent like the cacao nuts, but are variable in value, according to the success of the harvest.
It is not only, however, as a minor currency that vegetable products have been used in modern times. In the American settlements and the West India Islands, in former days, specie used to become inconveniently scarce, and the legislators fell back upon the device of obliging creditors to receive payment in produce at stated rates. In 1618, the Governor of the Plantations of Virginia ordered that tobacco should be received at the rate of three shillings for the pound weight, under the penalty of three years’ hard labour. We are told that, when the Virginia Company imported young women as wives for the settlers, the price per head was one hundred pounds of tobacco, subsequently raised to one hundred and fifty. As late as 1732, the legislature of Maryland made tobacco and Indian corn legal tenders; and in 1641 there were similar laws concerning corn in Massachussets. The governments of some of the West India Islands seem to have made attempts to imitate these peculiar currency laws, and it was provided that the successful plaintiff in a lawsuit should be obliged to accept various kinds of raw produce, such as sugar, rum, molasses, ginger, indigo, or tobacco.
*5 Such endeavours to establish a kind of multiple currency will be found to possess considerable interest for us in a later chapter.
The perishable nature of most kinds of animal food prevents them from being much used as money; but eggs are said to have circulated in the Alpine villages of Switzerland, and dried codfish have certainly acted as currency in the colony of Newfoundland.
Manufactured and Miscellaneous Articles as Currency.
The enumeration of articles which have served as money may already seem long enough for the purposes in view. I will, therefore, only add briefly that a great number of manufactured commodities have been used as a medium of exchange in various times and places. Such are the pieces of cotton cloth, called
Guinea pieces, used for traffic upon the banks of the Senegal, or the somewhat similar pieces circulated in Abyssinia, the Soulou Archipelago, Sumatra, Mexico, Peru, Siberia, and among the Veddahs. It is less easy to understand the origin of the curious straw money which circulated until 1694 in the Portuguese possessions in Angola, and which consisted of small mats, called libongos, woven out of rice straw, and worth about 1½
d. each. These mats must have had, at least originally, some purpose apart from their use as currency, and were perhaps analogous to the fine woven mats so much valued by the Samoans, and also treated by them as a medium of exchange.
Salt has been circulated not only in Abyssinia, but in Sumatra, Mexico, and elsewhere. Cubes of benzoin gum or beeswax in Sumatra, red feathers in the Islands of the Pacific Ocean, cubes of tea in Tartary, iron shovels or hoes among the Malagasy, are other peculiar forms of currency. The remarks of Adam Smith concerning the use of handmade nails as money in some Scotch villages will be remembered by many readers, and need not be repeated. M. Chevalier has adduced an exactly corresponding case from one of the French coalfields.
Were space available it would be interesting to discuss the not improbable suggestion of Boucher de Perthes, that, perhaps, after all, the finely worked stone implements now so frequently discovered were among the earliest mediums of exchange. Some of them are certainly made of jade, nephrite, or other hard stones, only found in distant countries, so that an active traffic in such implements must have existed in times of which we have no records whatever.
There are some obscure allusions in classical authors to a wooden money circulating among the Byzantines, and to a wooden talent used at Antioch and Alexandria, but in the absence of fuller information as to their nature, it is impossible to do more than mention them.