Update of Carl Menger Bio
A reader of The Concise Encyclopedia of Economics contacted me recently to point out the following:
In the 2008 copyright edition of “The Concise Encyclopedia of Economics,” I noticed that the Carl Menger bio, 565, gave a general explanation of how money was developed, and a brief history of some of its antecedents; this insight was attributed to Menger. However, in Smith’s “The Wealth of Nations,” this is stated nearly identically in substance in Book I, Ch, IV, “Of the Origin and Use of Money.” Adam Smith, The Wealth of Nations 34-5, (Edwin Cannan ed., Bantam Dell 2003) (1776). I then visited https://www.econlib.org/library/Enc/bios/Menger.html, and discovered the same error. I do not know if any predates Smith, but Smith clearly predates Menger on this issue.
I checked the section of The Wealth of Nations he references and he is right. (I don’t have permission to name the letter writer.)
But when the division of labour first began to take place, this power of exchanging must frequently have been very much clogged and embarrassed in its operations. One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less. The former consequently would be glad to dispose of, and the latter to purchase, a part of this superfluity. But if this latter should chance to have nothing that the former stands in need of, no exchange can be made between them. The butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase a part of it. But they have nothing to offer in exchange, except the different productions of their respective trades, and the butcher is already provided with all the bread and beer which he has immediate occasion for. No exchange can, in this case, be made between them. He cannot be their merchant, nor they his customers; and they are all of them thus mutually less serviceable to one another. In order to avoid the inconveniency of such situations, every prudent man in every period of society, after the first establishment of the division of labour, must naturally have endeavoured to manage his affairs in such a manner, as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry.
Many different commodities, it is probable, were successively both thought of and employed for this purpose. In the rude ages of society, cattle are said to have been the common instrument of commerce; and, though they must have been a most inconvenient one, yet in old times we find things were frequently valued according to the number of cattle which had been given in exchange for them. The armour of Diomede, says Homer, cost only nine oxen; but that of Glaucus cost an hundred oxen.
*61 Salt is said to be the common instrument of commerce and exchanges in Abyssinia;
*62 a species of shells in some parts of the coast of India; dried cod at Newfoundland; tobacco in Virginia;
*63 sugar in some of our West India colonies; hides or dressed leather in some other countries; and there is at this day a village in Scotland where it is not uncommon, I am told, for a workman to carry nails instead of money to the baker’s shop or the ale-house.
In all countries, however, men seem at last to have been determined by irresistible reasons to give the preference, for this employment, to metals above every other commodity.
*65 Metals can not only be kept with as little loss as any other commodity, scarce any thing being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be reunited again; a quality which no other equally durable commodities possess, and which more than any other quality renders them fit to be the instruments of commerce and circulation. The man who wanted to buy salt, for example, and had nothing but cattle to give in exchange for it, must have been obliged to buy salt to the value of a whole ox, or a whole sheep, at a time. He could seldom buy less than this, because what he was to give for it could seldom be divided without loss; and if he had a mind to buy more, he must, for the same reasons, have been obliged to buy double or triple the quantity, the value, to wit, of two or three oxen, or of two or three sheep. If, on the contrary, instead of sheep or oxen, he had metals to give in exchange for it, he could easily proportion the quantity of the metal to the precise quantity of the commodity which he had immediate occasion for.
Here is the updated bio of Carl Menger.