On the Origin of Money
Karl Menger
The Economic Journal, Vol. 2, No. 6. (Jun., 1892), pp. 239-255.
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ON THE ORIGIK OF MONEY. 

THEREis a phenomenon which has from of old and ill a
peculiar degree attracted the attention of social philosophers and
practical ecoiiomists, the fact of certain commodities (thesebeing
in advailced civilizations coined pieces of gold and silver, together
subsequently with doc~uineiitsrepresenting those coins) becoming
universally acceptable media of exchange. I t is obvious even to
the most ordinary intelligence, that a conlmodity should be given
up by its owner in exchange for another more useful to him.
But that every ecoiioiilic unit in a ilation should be ready to
exchange his goods for little metal disks apparently useless as
snch, or for documeilts representing the latter, is a procedure so
opposed to the ordinary course of things, that we cannot well
wonder if even a distinguished thinker like Savigily finds it
downright ' mysterious.'
I t must not be supposed that the f01-712of coin, or docuine~lt,
employed as current-money, constitutes the enigma in this phenomenon.
W e may looli away from these forms and go back to
earlier stages of economic developmelit, or indeed to what still
obtains in countries here and there, where we find the preciousmetals
in an uncoined state serving as the iliediuni of exchange,
and eve11 cerbaiil other conimodities, cattle, skins, cubes of tea,
slabs of salt, cowrie-shells, etc. ; still we are confronted by this
phenomenon, still we have to explain why it is that the econoiuic
illail is ready to accept a certain kind of commodity, even if Ae
does not need it, 07' i f 114s need qf i t is ctl~ectdyszq~plied,in exchange
for all the goods he has brought to market, while it is
iloile the less what he needs that he consults in the first instailce,
with respect to the goods he intends to acquire in the course of
his transactions.
And hence there runs, from the first essaj7sof reflecti3-e con-
240 THE ECONOMIC JOURNAL
tenlplation in social pheilonleila down to our own tiines, an
mlinterrupted chain of disqnisitions upon the nature and specific
qualities of money in its relation to all that constitutes traffic.
Philosophers, jurists, and historians, as well as economists, and
even naturalists a.nd nlatlienlaticians, h a ~ edea.lt with this iiotable
problein, and there is no civilized people that has not furnished
its quota to the abuildant literature thereon. What is the nature
of those little disks or doc~ullents,which in theniselves seen1 to
serve no useful purpose, and which nevertheless, ill contradiction
t o the rest of experience, pass froill one haid to another in exchange
for the nlost nsefnl coilmlodities, nay, for which every one
is so eagerly bent on surrendering his wares P I s nioney an
organic nlenlber in the world of commodities, or is it an econolnic
a,nomaly1 Are me to refer its comnlercial currency and its
value ill trade to the sanle causes co~~ditioningthose of other
goods, or are they t'21e distinct product of coiivelltiorl and
authority V
Thus far it can hardly be clainied for the results of investigation
into the problem above stated, that they are cornnlensurate
either with the great develop~i~entin historic research generally,
or with the outlay of time and intellect expended in efforts at
solution. The eiiignlatic phenonlenon of money is even at this
day without ail explanation that satisfies; nor is there yet agreenlent
011 the inost faiidalilental qnestiolis of its nature and
fuilctions. Even at this day we have no satisfactory theory of
money.
The idea which lay first to hand for an explanation of the
specific frulctioii of illoiley as a universal current tlledi~~iilof exchange,
was to refer it to a general convention, or a legal
dispensation. The problem, which science has here to solve,
corisists in givliig an explaiiatioil of a general, homogeiieons
course of action pursued by human beings when engaged ill
traffic, mhich, taken concretely, makes unquestionably for the
conlinon interest, and yet which seems to conflict with the ilearest
and iininediate interests of contracting individnals. Glider such
circumstances what could lie nlore contignons than the notioii of
referring the foregoing procedure to causes lying outside the
sphere of individual consideratioils '? To assnnle that certain
commodities, the precious metals in particular, had been exalted
ON THE ORIGIN O F MONEY 241
into the medium of exchange by general convention or law, in the
interest of the comnlonweal, solved the difficulty, and solved it
a~parentlythe more easily and naturally inasmuch as the shape
of the coins seemed to be a token of state regulation. Such in
fact is the opinion of Plato, Aristotle, and the Roman jurists,
closely followed by the medizval writers. Even the more modern
de~~elopmentsin the theory of illoneg have not in substance got
beyond this standp0int.l
Tested more closely, the assumption underlying this theory
gave room to grave doubts. An event of such high and universal
significance and of rlotoriety so inevitable, as the establishment
by law or cons-ention of a universal iilediuni of exchange, would
certainly have been retained in the inelllory of man, the more
certainly inasillucli as it svould have had to be performed in a
great llunlber of places. Tet no historical ilzonument gives us
trustworthy tidings of any transactions either conferring distinct
recognition on media of exchaiige already in use, or referring to
their adoptioil by peoples of conlparatively recent culture, much
less testifying to an initiation of the earliest ages of economic
civilization in the use of money.
And in fact the majority of theorists on this subject do not
stop at the explanation of money as stated above. The peculiar
adaptability of the precious metals for purposes of currency and
coiiliing was noticed by Aristotle, Xenophon, wild Pliny, and to a
far greater extent by John Law, Adam Smith and his disciples,
who all seek a further explanation of the choice made of them as
media of exchange, in their special qurtlificatione. Ne~rertheless
it is clear that the choice of the precious metals by law and convention,
even if made in coilsequence of their peculiar adaptability
for moiietary purposes, presupposes the pragmatic origin of
money, and selection of those metals, and that presupposition
is unhistorical. Nor do even the theorists above mentioned
hoilestly face the problei~lthat is to be solved, to wit, the
explaining how it has come to pass that certain commodities
(the precious metals at certain stages of culture) should be
promoted amongst the mass of all other commodities, and
accepted as the generally acknowledged media of exchange. It
is a question concerning not orlly the origin but also the nature
of money and its position in relation to all other commodities.
1 Cf. Roscher, Syste?iz de?- Volkszc;irthsclznft, I. 3 116 ; my Grundsiitse clec
~~olkszoi1~tsc7zaftslelz~e,1871, p. 255, et seq. ; &I. Block, I;es Progvds de la Sciclzce
@cono?iziq?aedepziis A. Svzitlz, 1890, II., p. 59, et seq.
THE ECONOMIC JOURNAL
I n primitive traffic the economic man is awaking but Yery
gradually to an understanding of the economic advantages to be
gained by exploitation of existing opportunities of exchange.
His aiiils are directed first and foremost, in accordance with the
simplicity of all priiilitive culture, only at what lies first to hand.
And only in that proportion does the value in use of the corniilodities
he seeks to acquire, coine into account in his bargaining.
Under such conditions each man is intent to get by way of
exchange just such goods as he directly needs, a ~ l dto reject
those of which he has no need at all, or with which he is already
sufficientlyprovided. I t is clear then, that in these circunlstances
the number of bargains actually concluded iilust lie within very
narrow limits. Consider how seldom it is the case, that a
commodity owned by sonlebody is of less value in use than
another commodity owned by soillebody else ! A ~ l dfor the latter
just the opposite relation is the case. But how much more
seldom does it happen that these two bodies meet ! Think,
indeed, of the peculiar difficulties obstructiilg the irniilediate
barter of goods in those cases, where supply and deniand do not
quantitatively coincide ; where, e.g., an indivisible coninlodity is to
be exchanged for a variety of goods in the possession of different
persons, or indeed for such coiiliilodities as are only in deniand at
different times and can be supplied only by different persons!
Even in the relatively siniple and so often recurring case, where
an econonlic unit, A, requires a conimodity possessed by B, and
B requires one possessed by C, while C wants one that is owned
by A-even here, under a rule of mere barter, the exchange of
the goods in question would as a rule be of necessity left undone.
These difficulties would have proved absolutely insurmountable
obstacles to the progress of traffic, and at the salve time to
the production of goods not conlmanding a regular sale, had
there not lain a renledy in the very nature of things, to wit, the
difle~.e~ztdegrees of saleable~zess(Absatxfllziglieit) of conznzodities.
The difference existing in this respect between articles of cornnlerce
is of the highest degree of significailce for the theory of
money, and of the market in general. And the failure to turn it
adequately to account in explaining the phenomena of trade,
canstitutes not only as such a lamentable breach in our science,
ON THE ORIGIN O F MONEY 243
bnt also one of the essential causes of the backward state of
nlonetary theory. T h e tkeory oj*money tzecessnrily presupposes
u theory of the saleuble?zess of goods. If we grasp this, we shall
be able to understand how the almost unlimited saleableness cf
nloney is only a special case,--presenting only a difference of
degree-of a generic phenomenon of economic life-namely, the
differencein the saleableness of comnlodities in general.
I t is an error in econonlics, as prevalent as it is patent, that
all commodities, at a definite point of time and in a given
market, inay be assumed to stand to each other in a definite
relation of exchange, in other words, may be mutually exchanged
in definite quantities at will. I t is not true that in anj7 given
market 10 csvt. of one article = 2 cwt. of another = 3 lbs. of a
third article, and so on. The most cursory observation of
market-phenon~enateaches us that it does not lie withill our
power, when we have bought an article for a certain price, to sell
it again forthwith at that same price. If we but try to dispose of
an article of clothing, a book, or a work of art, which n7ehave
just purchased, in the very same market, even thougl~it be at
once, before the same juncture of conditions has altered, u7eshall
ea,silg convince ourselves of the fallaciousness of such a,11 assumption.
The price at n-hich ally one call at pleasure bt~ya
commodity at a given market and a given point of time, and the
price at which he can dispose of the sarne at pleasure, are two
essentially different n~agnitudes.
This holds good of wholesale as well as retail prices. Even
such marketable goods as corn, cotton, pig-iron, cannot be voluntarily
disposed of for the price at which we hare purchased them.
Conlmerce and speculation would be the simplest things in the
world, if the theory of the ' objective equivalent in goods ' were
correct, if it were actualiy true, that in a given nlarkel and at a
given moment conlnlodities could be mutually converted at will
in definite quantitative relations-could, in short, at a certain
price be as easily disposed of as acquired. At any rate there
is no such thing as a general saleableness of wares in this
sense. The truth is, that even in the best organized markets,
while we inay be able to purchase when and what we like at
a definite price, viz. : the pz~rchnsi7zgprice, we can only dispose
I1 2
244 THE ECONOMIC JOURNAL
of it again when and as we like at a loss, viz. : at the selling
pr4ce.l
The loss experienced by any one who is compelled to dispose of
an article at a definite moment, as compared with the current
purchasing prices, is a highly variable quantity, as a glance at
trade and at markets of specific conlmodities will show. If corn
or cotton is to be disposed of at an organised market, the seller
will be in a position to do so in practically any quantity, at any
time he pleases, at the current price, or at most with a low of
only a few pence on the total sum. If it be a question of disposing,
in larger quantities, of cloth or silk-stuffs at will, the
seller will regularly have to content himself with a considerable
percentage of diminution in the price. Far worse is the case of
one who at a certain point of time has to get rid of astronomical
instruments, anatomical preparations, Sanskrit writings, and such
hardly marketable articles !
If we call any goods or wares ?nore or less saleable, according
to the greater or less facility with which they can be disposed of
at a market at any convenient time at current purchasing prices,
or with less or more diminution of the same, we can see by what
has been said, that an obvious difference exists in this conneetion
between commodities. Nevertheless, and in spite of its great
practical significance, it cannot be said that this phenomenon has
been much taken into account in economic science. The reason
of this is in part the circumstance, that iiivestigation into the
phenonlena of price has been directed almost exclusively to the
quantities of the commodities exchanged, and not as well to the
greater or less facility with which wares may be disposed of at
nornlal prices. I n part also the reason is the thorough-going
abstract method by which the saleableness of goods has been
treated, without due regard to all the circumstances of the case.
The nlan who goes to nlarket with his wares intends as a rule
to dispose of them, by no means at any price whatever, but at
such as corresponds to the general economic situation. If we are
going to inquire illto the different degrees of saleableness i11goods
so as to show its bearing upon practical life, we can only do so by
consulting the greater or less facility with which they may be
disposed of at prices corresponding to the general economic
1 We must make a distinction between the higher purchasing prices for which
the buyer is rendered liable through the wish to purchase at a definite point of
time, and the (lower)selling prices, which he, who is obliged to get rid of goods within
a definite period, must coutent himself withal. The sinaller the difference between
the buying and selling prices of an article, the inore saleable it usually proves to be
ON THE ORIGIN OF MONEY 245
situation, that is, at econowzicprices.l ,4 cominoditg is more or lesssaleable
according as we are able, with more or less prospect of
success, to dispose of it at prices corresponding to the general
economic situation, at eco?zo?nicprices.
The interval of time, moreover, within which the disposal of a
comnlodity at the economic price may be reckoned on, is of great
significance in an inquiry into its degree of saleableness. I t
matters not whether the denland for a conllnodity be slight, or
whether on other grounds its saleableness be small ; if its owner
can only bide his tirne, he will finally and in the long run be able
to dispose of it at economic prices. Since, however, this condition
is often absent in the actual course of business, there arises for
practical purposes an important difference between those commodities,
on the one hand, which we expect to dispose of at any
given time at economic, or at least approxiinately economic, prices,
and such goods, on the other hand, respecting which we have no
such prospect, or at least not in the same degree, and to dispose of
which at economic prices the owner foresees it will be necessary
to wait for a longer or shorter period, or else to put up with
a more or less sensible abatement in the price.
Again. account must be taken of the gua?ztitative factor in thesaleableness
of commodities. Some commodities, in consequence
of the development of markets and speculation, are able at any
time to find a sale in practically any quantity at economic, or
approximately economic, prices. Other commodities can only
find a sale at economic prices in smaller quantities, conln~ensurate
with the gradual growth of an effective demand, fetching a
relatively reduced price in the case of a greater supply.
The height of saleableness in a commodity is not revealed by the fact that it
may be disposed of at any price whatever, including such as result from distress or
accident. In this sense all commodities are pretty well equally saleable. A high
rate of saleableness in a commodity consists in the fact that it may at every moment
be easily and surely disposed of at a price corresponding to, or at least not discrepant
from, the general economic situation-at the economic, or approximately economic,
price.
The price of a commodity may be denoted as ?~neco~zomicon two grounds : (1)in
consequence of error, ignorance, caprice, and so forth; (2) in consequence of the
circumstance that only a part of the supply is available to the demand, the rest for
some reason or other being withheld, and the price in consequence not commensurate
with the actually existing economic situation.
'246 THE ECONOMIC JOURNAL
The degree to which a coinmodity is found by experience to
command a sale, at a given market, at ally time, at prices corresponding
to the econoinic situation (economic prices), depends
upon the following circumstances.
1. Upon the number of persons who are still in want of tlie
coniinodity in question, and upon the extent and inteiisity of that
want, which is unsupplied, or is constantly recurring.
2. Upon the purchasing power of those persons.
3. Upon the available quantity of the coiiiniodity in relation
to the get unsupplied (total) wailt of it.
4. Upon the divisibility of the con~modity,and any other ways
in which it may be adjusted to tlie needs of individual cnstoniers.
6. Upon the developmeiit of the market, and of speculation in
particular. And finally,
6. Gpon the nulnber and nature of the limitations iniposed
politically and socially upon exchange and consumption with
respect to the comniodity in question.
We inay proceed, in the same way in which we considered
the degree of the saleableness in con~moditiesat definite niarkets
and definite points of time, to set out the spatial cind tevzpo?.nl
limits of their saleableness. I n these respects also we observe in
our niarkets sonle comn~odities,the saleableness of which is
almost unlimited by place or time, and others the sale of which is
rnore or less limited.
The spaticcl: limits of the saleableiiess of conimodities are
niainly conditioned-
1. By the degree to which the want of the commodities is
distributed in space.
2. By the degree to wliich the goods lend tlieniselves to transport,
and the cost of transport incurred in proportioil to their value.
3. By the extent to which the means of transport and of
commerce generally are developed with respect to different classes
of commodities.
4. By the local extension of organised markets and their interconimunication
by ' arbitrage.'
6. By the differences in tlie restrictions iniposed upoil
comniercial iiitercollimunication with respect to different goods,
in interlocal and, in particular, in iizternational trade.
ON THE ORIGIN OF MONEY 247
The time-limits to the saleableness of commodities are mainly
conditioned-
1. By permanence in the need of t l ~ e m(their independence of
fluctuation in the same).
2. Their durability, i.e. their suitableness for preservation.
3. The cost of preserving and storing them.
4. The rate of interest.
5. The periodicity of a market for the same.
6. The development of speculation and in particnlar of timebargains
in connection with the same.
7. The restrictions imposed politically and socially on their
being transferred from one period of time to another.
All these circumstances, on which depend the different degrees
of, and the different local and temporal liilzits to, the saleableness
of commodities, explain why it is that certain conzmodities can be
disposed of with ease and certainty in definite markets, i.e. within
local and temporal linzits, at any tirne and in practically any
quantities, at prices corresponding to the general economic
situation, while the saleableness of other conzmodities is confined
within narrow spatial, and again, temporal, linzits ; and even
within these the disposal of the coillilzodities in question is
difficult, and, in so far as the demand cannot be waited for, is not
to be brought about without a more or less sensible diminution
in price.
VI. ON THE GENESISOF MEDIAOF EXCHANGE.]
It has long been the subject of universal renlarli in
centres of exchange, that for certain commodities there existed a
greater, more constant, and more effective demand than for other
cominodities less desirable in certain respects, the former being
such as correspond to a ~vaiiton the part of those able and willing
to traffic, which is at once universal and, by reason of the
relative scarcity of the goods in question, always imperfectly
satisfied. And further, that the person who wishes to acquire
certain definite goods in exchange for his own is in a more
favourable position, if he brings coilznlodities of this kind to
market, than if he visits the inarkets with goods which
cannot display such advantages, or at least not in the same degree.
Thus equipped he has the prospect of acquiring such goods as
1 Cf. my article on ' Money' in the Handwortcrbuch der Staats~uissenschafte?z
(Dictionary of Social Science),Jena, 1891, iii., p. 730 et seq.
248 THE ECONOMIC JOURNAL
he finally wishes to obtain, not only with greater ease and security,
but also, by reason of the steadier and more prevailing demand
for his own commodities, at prices corresponding to the general
economic situation-at econonlic prices. Under these circnnlstances,
when any one has brought goods not highly saleable to
market, the idea uppermost in his mind is to exchange them, not
only for such as he happens to be in need of, but, if this cannot be
effected directly, for other goods also, which, while he did not want
them himself, were nevertheless more saleable than his own. By
so doing he certainly does not attain at once the final object of
his trafficking, to wit, the acquisition of goods needful to hi?7zselJ'.
Yet he draws nearer to that object. By the devious way of a
mediate exchange, he gains the prospect of accomplishing his
purpose more surely and economically than if he had confined
himself to direct exchange. Now in point of fact this seems
everywhere to have been the case. Men have been led, with
increasing knowledge of their individual interests, each by his
own economic interests, without convention, without legal
compulsion, nay, even without any regard to the common interest,
to exchange goods destined for exchange (their "wares " ) for
other goods equally destined for exchange, but more saleable.
With the extension of traffic in space and with the expansion
over ever longer intervals of time of prevision for satisfying
material needs, each individual would learn, from his own
economic interests, to take good heed that he bartered his less
saleable goods for those special commodities which displayed,
beside the attraction of being highly saleable in the particular
locality, a wide range of saleableness both in time and place.
These wares would be qualified by their costliness, easy transportability,
and fitness for preservation (ill connection with the
circumstance of their corresponding to a steady and widely
distributed demand), to ensure to the possessor a power, not only
' here ' and ' now,' but as nearly as possible unlimited in space
and time generally, over all other market-goods at ecomomic prices.
And so it has come to pass, that as man became increasingly
conversant with these economic advantages, mainly by an insight
become traditional, and by the habit of econonlic action, those
commodities, which relatively to both space and time are most
saleable, have in every market become the wares, which it is not
only in the interest of every one to accept in exchange for his
own less saleable goods, but which also are those he actually does
readily accept. And their superior saleablenetis depends only
upon the relatively inferior saleableness of every other kind of
ON THE ORIGIN OF MONEY 249
commodity, by which alone they have been able to become
generally acceptable media of exchange.
I t is obvious how highly significant a factor is habit in the
genesis of such generally serviceable means of exchange. It lies
in the economic interests of each trafficking individual to exchange
less saleable for more saleable commodities. But the willing
acceptance of the medium of exchange presupposes already a
knowledge of these interests on the part of those ecorlomic
subjects who are expected to accept in exchange for their wares
a commodity which in and by itself is perhaps entirely useless to
them. It is certain that this knowledge never arises in every
part of a nation at the same time. I t is only in the first instance a
limited number of economic subjects who will recognise the advantage
in such procedure, an advantage which, in and by itself, is
independent of the general recognition of a commodity as a
medium of exchange, inasmuch as such an exchange, always
and under all circumstai~ces,brings the econonlic unit a good
deal nearer to his goal, to the acquisition of useful things of
which he really stands in need. But it is admitted, that there is
no better method of enlightening any one about his economic
interests than thlzt he perceive the economic success of those
who use the right means to secure their own. Hence it is also
clear that nothing may have been so favourable to the genesis of
a medium of exchange as the acceptance, on the part of the most
discerning and capable economic subjects, for their own econoinic
gain, and over a considerable period of time, of eminently saleable
goods in preference to all others. I n this way practice and habit
have certainly contributed not a little to cause goods, which were
most saleable at any time, to be accepted not only by many, but
finally by all, econonlic subjects in exchange for their less
saleable goods : and not only so, but to be accepted from the
first with the intention of exchanging them away again. Goods
which had thus become generally acceptable media of exchange
were called by the Germans Geld, from gelten, i.e. to pay, to
perform, while other nations derived their designation for money
mainly from the substance used,l the shape of the coin,2or even
from certain kinds of coin."
1 The Hebrew Keselll~,the Greek hpyhprov, the Latin argentzlnz, the French
argent, &c.
The English nzoney, the Spanish nzoneda, the Portuguese wzoeda, the French
wtonnaie, the Hebrew maotiz, the Arabic fi~lus,the Greek vdplapa, &c.
3 The Italian clanaro, the Russian dengi, the Polishpienondze, the Bohemian and
Slavonian penise, the Danish penge, the Swedish penningar, the Nagyar penz, &c.
(i.e. denare = Pfennige = penny).
250 THE ECONOMIC JOURXAL
I t is not impossible for media of exchange, serving as they do
the commonweal in the most emphatic sense of the word, to be
instituted also by way of legislation, like other social institutions.
But this is neither the oidy, nor the primary mode in
which money has taken its origin. This is much more to be
traced in the process depicted above, notwithstanding the nature
of that process would be but very incompletely explained if we
were to call it ' organic,' or denote moxey as something ' primordial,'
of 'primzval growth,' and so forth. Putting aside
assumptions which are historically unsound, we can only come
fully to understand the origin of money by learning to view the
establishment of the social procedure, with which we are dealing,
as the spontaneous outcome, the unpremeditated resultant, of
particular, individual efforts of the members of a society, who
have little by little worked their way to a discrimination of the
different degrees of saleableness in commoditie~.~
VII. THEPROCESS BETWEEN COMMODITIESOF DIFFERENTIATION 

WHICH HAVE BECOME MEDIAOF AND THE REST.
EXCHANGE
When the relatively most saleable commodities have become
' money,' the event has in the first place the effect of substantially
increasing their originally high saleableness. Every economic
subject bringing less saleable wares to market, to acquire goods of
another sort, has thenceforth a stronger interest in converting
what he has in the first instance into the wares which have
become money. For such persons, by the exchange of their less
saleable wares for those which as money are most saleable,
attain not merely, as heretofore, a higher probability, but the
certainty, of being able to acquire forthwith equivalent quantities
of every other kind of commodity to be had in the market. And
their control over these depends simply upon their pleasure and
their choice. Peculziunz Imbe~zs,lzubet om?ze??trenh quellz vult
Imbere.
On the other hand, he who brings other wares than money t o
market, finds himself at a disadvantage more or less. To gain
the same coininand over what the market affords, he must first
convert his exchangeable goods into money. The nature of his
economic disability is shown by the fact of his being compelled
to overcoine a difficulty before he can attain his purpose, which
difficulty does not exist for, i.e,has already been overcome by, the
man who owns a stock of money.
Cf.on this point 111y G ~ z ~ n d s a t z c I.hlicszo~~fschc~tsleh~e,d e ~ 1871,p. 250 et sep.
ON THE ORIGIN OF MONEY 251
This has all the greater significance for practical life, inasmuch
as to overcome this difficulty does not lie unconditionally within
reach of him who brings less saleable goods to market, but
depends in part upon circumstances over which the individual
bargainer has no control. The less saleable are his wares, the
more certainly will he have either to suffer the penalty in the
economic price, or to content himself with awaiting the moment,
when it will be possible for him to effect a conversion at economic
prices. H e who is desirous, in an era of monetary economy, to
exchange goods of any kind whatever, which are not money, for
other goods supplied in the market, cannot be certain of attaining
this result at once, or within any predetermined interval of time,
at economic prices. And the less saleable are the goods brought
by an economic subject to market, the more unfavourably, for his
own purposes, will his economic positioil compare with the
position of those who bring money to market. Consider, e.g.,
the owner of a stock of surgical instruments, who is obliged
through sudden distress, or through pressure from creditors, to
convert it into money. The prices which it will fetch will be
highly accidental, nay, the goods being of such limited saleableness,
they will be fairly incalculable. And this holds good of all
kinds of conversions which in respect of time are compulsory
sales.1 Other is his case who wants at a market to convert the
commodity, which has become vzopzey, forthwith into other goods
supplied at that market. H e will accomplish his purpose, not
only with certainty, but usually also at a price corresponding to
the general econoillic situation. Nay, the habit of economic
action has made us so sure of being able to procure in return for
nloney ally goods on the market, whenever we wish, at prices
corresponding to the economic situation, that we are for the most
part unconscious of how many purchases we daily propose to
make, which, with respect to our wants and the time of concluding
them, are conlpulsory purchases. Compulsory sales, on the other
hand, in consequerice of the economic disadvantage which they
comn~onlyinvolve, force themselves upon the attention of the
parties implicated in unmistakable fashion. What therefore
constitutes the peculiarity of a commodity which has become
inoney is, that the possession of it procures for us at any time, i.e.
1 Herein lies the explanation of the circulllstance why compulsory sales, and
cases of distraint in particular, involve as a rule the economic ruin of the person
upon whose estate they are carried out, and that in a greater degree the less the
goods in question are saleable. Correct discern~nentof the uneconomic character
of these processes will necessarily lead to a reforill in the available legal mechanism.
252 THE ECONOMIC JOURXAL
at any inomeilt we think fit, assured control over every commodity
to be had on the market, and this usually at prices adjusted to the
ecorlomic situation of the moment: the control, on the other
hand, conferred by other kinds of commodities over market goods
is, in respect of time, and in part of price as well, uncertain,
relatively if not absolutely.
Thus the effect produced by such goods as are relatively most
saleable becoiiliilg money is an increasing differeiltiatioil between
their degree of saleableiless and that of all other goods. And
this difference in saleableness ceases to be altogether gradual, and
must be regarded in a certain aspect as something absolute. The
practice of every-day life, as well as jurisprudeiice, which closely
adheres for the most part to the rlotions prevalent in every-day
life, distinguish two categories i11 the wheresvithal of traf3cgoods
which have become money and goods which have not.
And the ground of this distinction, we find, lies essentially in that
difference ill the saleableness of conlinodities set forth above-a
difference so sigilificailt for practical life and which comes to be
further emphasized by inte~ventionof the state. This distinction,
moreover, finds expression in language in the difference
of meailiilg attaching to ' money ' and ' wares,' to 'purchase '
and 'exchange.' But it also affords the chief explanation of
that superiority of the buyer over the seller, which has found
mailifold consideration, yet has hitherto been left irladequately
explained.
VIII. How THE PRECIOUS MONEY.METALSBECAME
The commodities, which under given local and time relations
are most saleable, have become money among the same ilatioils at
different times, and anioilg different natioils at the same time,
and they are diverse in kind. The reason why thep7.ecioz~smetals
have become the generally current medium of exchange amorig
here and there a nation prior to its appearance in history, and i11
the sequel among all peoples of advanced ecollonlic civilisation, is
because their saleableness is far and away superior to that of all
other commodities, and at the same time because they are found
to be specially qualified for the concomitant and subsidiary
fuilctioils of money.
There is no centre of population, which has not in the very
beginnings of civilizatioil come keenly to desire and eagerly to
covet the precious metals, in primitive times for their utility and
ON THE ORIGIN OF MONEY 253
peculiar beauty as in themselves ornamental, subsequently as the
choicest materials for plastic and architectural decoration, and
especially for ornaments and vessels of every kind. I n spite of
their natural scarcity, they are well distributed geographically,
and, in proportion to most other metals, are easy to extract and
elaborate. Further, the ratio of the available quantity of the
lwecious metals to the total requirement is so small, that the
number of those whose need of them is unsupplied, or at least insnficiently
supplied, together with the extent of this unsupplied
need, is always relatively large-larger more or less than in the
case of other more important, though more abundantly available,
conlmodities. Again, the class of persons who wish to acquire the
1wecious metals, is, by reason of the kind of wants which by these
are satisfied, such as quite specially to include those members of
the conlmunity who can most efticaciously barter ; and thus the
desire for the precious metals is as a rule more effective. Nevertheless
the limits of the effective desire for the precious metals
extend also to those strata of population who can less effectively
barter, by reason of the great divisibility of the precious metals,
and the enjoyment procured by the expenditure of even very small
quantities of them in individual economy. Besides this there are
the wide limits in time and space of the saleableness of the
precious metals ; a consequence, on the one hand, of the almost
unlinlited distribution in space of the need of them, together
with their low cost of transport as compared with their value,
and, on the other hand, of their unlimited durability and the
relatively slight cost of hoarding then]. I n no national economy
which has advanced beyond the first stages of development are
there any comnlodities, the saleableness of which is so little
restricted in such a number of respects-personally, quantitatively,
spatially, and temporally-as the precious metals. It
cannot be doubted that, long before they had become the
generally acknosvledged media of exchange, they were, amongst
very many peoples, meeting a positive and effective demand at all
times and places, and practically in any quantity that found its
way to market.
Hence arose a circumstance, which necessarily became of
special import for their becoming money. For any one under
those conditions, having any of the precious metals at his disposal,
there was not only the reasonable prospect of his being able to
coilvert them in all m r k e t s at any time and practically in all
quantities, but also-and this is after all the criterion of saleableness-the
prospect of converting them at prices col-respondingat
254 THE ECONOMIC JOU~ZNAL
ally time to the general ecoilomic situation, c ~ tecofzo~)~icpl-ices.
The proportionately strong, persistent, and omnipresei~tdesire on
the part of the most effective bargainers has gone farther to
exclude prices of the moment, of emergency, of accident, in the
case of the precious metals, than in the case of any other goods
whatever, especially since these, by reasoil of their costliness,
durability, and easy preservation, had becoine the rnost popular
vehicle for hoarding as well as the goods most highly favoured in
commerce.
Under such circumstances it becaine the leading idea in the
minds of the more iiltelligei~tbargainers, aid then, as the situation
came to be more generally understood, in the miid of
every one, that the stock of goods destined to be exchanged for
other goods must in the first instance be laid out in precious
metals, or must be converted into them, even if the agent in
question did not directly need them, or had already supplied his
wants in that direction. Bnt in and by this function, the
precious metals are already coastituted generally current media of
exchange. I11 other words, they hereby fuilction as coillmodities
for which every one seeks to exchange his market-goods, not, as a
rule, in order to coilsumption but entirely because of their
special saleableness, in the illtelltion of exchanging them subsequently
for other goods directly profitable to him. No accidei~t,
nor the consequence of state compulsion, nor voluntary coiiventioil
of traders effected this. It was the just apprehendiag of
their individual self-interest which brought it to pass, t,hat all the
inore economically advanced nations accepted the precious metals
as money as sooil as a sufficient supply of them had been collected
and introduced into commerce. The advance from less to more
costly money-stuffs depends upon analogous causes.
This developinent was inaterially helped forward by the ratio
of exchange between the precious metals and other comnlodities
urldergoiilg smaller fluctuations, more or less, than that existing
between most other goods,-a stability which is due to the
peculiar circumstances attending the productioa, consunlption,
and exchange of the precious metals, and is thus connected with
the so-called intrinsic grounds determiiliilg their exchange value.
It constitutes yet another reason why each man, in the first
instance (i.e. till he invests in goods directly useful to him), should
lay in his available exchange-stock in precious metals, or coiivert
it into the latter. Moreover the honzoge~zeityof the precious
metals, aild the consequeilt facility with which they can serve as
res fzu~gibilesin relatioils of obligation, have led to forms of con-
OX THE ORIGIN OF MOXEY 2.55
tract by which traffic has been rendered inore easy; this too has
materially promoted the saleableness of the precious metals, and
thereby their adoption as money. Finally the precious metals,
in consequence of the peculiarity of their colol~r,their ~.i~zg,and
partly also of their specijc grncitg, are with sonle practice not
difficult to recognise, and through their taking a durable stamp
can be easily controlled as to quality and weight; this too has
~nateriallycontributed to raise their saleableness and to forward
the adoption and diffusion of them as money.
IX. ISFLUENCEOF THE SOVEREIGSPOWER.
3lloney has not been generated by law. 111 its origin it is a
social, and not a state-institution. Sarictioil by the authority of
the state is a notion alien to it. On the other hand, howeyer, by
state recognition and state regulation, this social institution of
money has been perfected and adjusted to the illailifold aiid
varying needs of an e~olvingcommerce, just as cnstonlary rights
have been perfected and adjusted by statute law. Treated origiiially
by weight, like other commodities, the precious lnetals have by
degrees attained as coins a shape by which their intrillsically high
saleableiless has experienced a material increase. The fixing of a
coinage so as to include all grades of value (TVertstufell), aiid
the establishnle~ltand nlaiiltenance of coined pieces so as to win
public coilfidence and, as far as is possible, to forestall risk concerning
their genuineness, weight, and fineness, and above all the
ensuring their circulation in general, have beell everywhere
recognised as irllportant functions of state administration.
The difficulties experienced in the conlnlerce and modes of
payment of ally country from the conipetiilg actioii of the se~eral
corllnlodities s e r ~ i n gas currency, and further the circumstance,
that conc~mentstandards induce a manifold insecurity in trade,
and render necessary ~ariouscoriversions of the circulating
inedia, have led to the legal recognition of certain conlmodities
as money (to legal standards). Xiid where more than one coninlodity
has been acquiesced in, or admitted, as the legal forill of
payment, law or some systeill of appraiselnerit has fixed a defiiiite
ratio of value arnoilgst them.
A11 these measures ne~erthelessh a ~ enot first made nloiley of
the precious metals, but have oilly perfected them in their
function as money.
KARLMESGER.
Translated by CAROLINEA. FOLEY,M.A.