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Author: 
 
 Borden, John 
 
 Title: 
 
 An essay on value 
 
 Place: 
 
 Chicago 
 
 Date: 
 
 [1 897] 
 
^-^ao-^a-:;^ 
 
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 PRESERVATION DIVISION 
 
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 y- 
 
 H I HH . A 
 
 Borden, John, 1825-1919. 
 
 All essay on value, with a short account of American 
 currency, by John Borden. Chicago, Rand, McNallv & 
 CO. il897] 
 
 232 p. 19'". 
 
 L Value. 2. Money— U. S.— Hist. 
 
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 intlit€xtpiii^mfatk 
 
 LIBRARY 
 
 School of Business 
 
 III 
 
AN ESSAY 
 
 ON 
 
 VALUE 
 
 WITH 
 
 A Short Account 
 
 OF 
 
 AMERICAN CURRENCY 
 
 1 
 
 BY 
 
 JOHN BORDEN. 
 
 CHICAGO : 
 
 RAND, McNALLY & CO., 
 
 i66-i68 Adams Street. 
 
INTENTIONAL SECOND EXPOSURE 
 
 ERRATA. 
 Page 25, ninth line from bottom : 
 
 ^ should read ^^. 
 
 Page 56, ninth line from bottom : 
 
 -i+x+h<5^ should read i-|-x+h>^, 
 
 
 AN ESSAY 
 
 ON 
 
 VALUE 
 
 WITH 
 
 A Short Account 
 
 OF 
 
 AMERICAN CURRENCY 
 
 BY 
 
 JOIIX BORDEN. 
 
 CHICAGO : 
 
 RAND, McXALLV & CO., 
 166-168 Adams Street. 
 
 i 
 

 (4 
 
 l^AM 
 
 CONTENTS. 
 
 Copyright 1897, 
 
 By 
 John Borden. 
 
 iA// Rights Reserved.) 
 
 JIM 
 3C4 
 
 PAGE. 
 
 I. Utility, - 
 
 II. Use Value, g 
 
 III. Relative Value, 22 
 
 IV. Exchange Value, 23 
 
 V. Market Value, 32 
 
 VI. Natural Value, 52 
 
 VII. Money Value, j^q 
 
 VIII. American Currency, 148 
 
 A National Currency, i^g 
 
VALUE. 
 
 In economics a correct idea of value is said to 
 be of the utmost importance ; for from no source 
 do so many errors and so much difference of 
 opinion in that science proceed as from the vague 
 ideas which are attached to the word value. 
 (Ricardo, Chap, i.) The meaning of the word 
 utility seems to lack precision also, and because 
 of its relation to the word value will be first 
 noticed. 
 
 I. 
 
 UTILITY. 
 
 Utility has been defined as a capacity to satisfy 
 a desire, or serve a purpose ; and wealth has been 
 defined as utilities embodied in material objects. 
 As thus defined, the utility of a thing is supposed 
 to be inherent in it, and is a constant quantity ; for 
 the potential capacity of a thing to satisfy a want 
 or serve a purpose would exist and continue to be 
 the same whether the want or purpose existed or 
 not. A pound of iron, a bushel of grain, or a 
 yard of cloth would contain as much utility at 
 one time and place as at another ; as much in the 
 
 (6) 
 
 I 
 
6 
 
 VALUE. 
 
 i 
 
 hands of its producer as in those of a consumer, 
 and, in fact, the same amount, whether there was 
 a consumer at all or not ; the utility of coal would 
 be no more increased by carrying it from than to 
 Newcastle. A superfluity of anything would 
 contain as much utility, per unit of quantity, as a 
 scarcity. A gallon of water would contain a cer- 
 tain quantity of utility, and a deluge an infinite 
 quantity of it. The relative utility of any two 
 commodities per units of quantity would be the 
 same everywhere and to everybody ; the relative 
 utility of grain and cloth would be the same in 
 Dakota as in New England. In every exchange 
 there would be a transfer of equal or unequal 
 utilities ; in the first of which cases neither party 
 would gain anything, and in the second, one 
 party would gain and the other lose. 
 
 The same thing has a capacity to be injurious 
 as well as useful. A small quantity of water will 
 quench a man's thirst or suffocate him ; a small 
 fire will warm him or burn him seriously. 
 Where is the utility of water in floods, fire in a 
 conflagration, or air in a cyclone ? 
 
 A capacity to satisfy a desire or serve a purpose 
 implies the existence of the use or purpose and 
 has a relation thereto ; even a potential utility has 
 reference to a potential use or purpose. Since 
 the actual utility of an object depends upon the 
 existence of a demand for it, the degree of its 
 utility, per unit of quantity, depends upon how 
 much it is wanted ; therefore, actual utility is a 
 
 VALUE. 7 
 
 variable and not a constant quantity ; and the 
 relative utility of any two things, per units of 
 quantity, varies from time to time and place to 
 place, to the same person, and to different 
 persons. 
 
 Using the word utility in a loose, general, and 
 indefinite sense, it has been said that : '* The util- 
 ity of an object consists in its quality of being 
 useful for human purposes generally, and the 
 degree of its utility is to be measured by the 
 importance of such purposes," and, therefore, 
 " water, coal, or iron is more useful than alcohol, 
 gold, or diamonds." 
 
 While this may be useful information, it is more 
 important to everyone to determine from time to 
 time the relative utility to him, per units of 
 quantity, of any two commodities than to ascer- 
 tain that one of them is more useful than the 
 other for human purposes generally. In fact, 
 everyone, in dealing with commodities, consults 
 his own interest and acts on his own behalf; and 
 to that end he estimates their relative utility to 
 him for specific amounts of each at the time, and 
 from time to time, and does not govern his con- 
 duct by any loose notions which he or others 
 may entertain as to their general utility to man- 
 kind. If he had a hollow tooth, he would prob- 
 ably consider enough gold to fill it and preserve 
 the tooth to be more useful to him for that pur- 
 pose than a ton of water, coal, or iron ; or, if he 
 required a certain quantity of alcohol for some 
 
8 
 
 VALUE, 
 
 ii 
 
 I 
 
 purpose in the arts or in medicine, for which 
 alcohol was suitable and water unsuitable, that 
 alcohol was more useful to him for that purpose 
 than water. A coat would evidently be more 
 useful to a man who had none, especially in 
 winter, than to a dealer in coats who had more 
 than he could use or sell ; and a loaf of bread 
 would be more useful to a hungry man than to a 
 baker who had an overstock. So, also, a surplus 
 of grain and provisions would be less useful to 
 their producers than to others who lacked food 
 and needed such supplies ; also, a surplus of cloth 
 and hardware would be less useful to their 
 producers than food and other things which they 
 wanted. And if a person had more of those 
 things which are called necessaries than he could 
 use or consume before they would spoil or decay, 
 he might justly consider a useless, cumbersome* 
 and perishable superfluity of them to be of less 
 utility to him than a comparatively small quan. 
 tity of gold, or even an imperishable and brilliant 
 diamond. 
 
 II. 
 
 USE VALUE. 
 
 Anything which can satisfy a man's desire 
 need, use, or purpose-that is to say, his want or 
 wants—has value to him, or a use value ; which 
 phrase is here employed to signify the value of 
 a thing to one person only, or to each person 
 
 VALUE. 9 
 
 separately. Value is not inherent in a thing, 
 for the want is external to it. A want, as hunger 
 or thirst, can exist in the absence of any means 
 to satisfy it ; but in the absence of any want, use, 
 or purpose to which a thing can be applied, it 
 has no actual value, and any such quality which 
 may be imputed to it is merely potential or 
 imaginary. In fact, value exists only when there 
 is a want and a means available to satisfy it. 
 Treasure sunk in the ocean has no actual value ; 
 to a man in a desert, water in the clouds or else- 
 where has no actual value. The Garden of Eden 
 had an actual value to Adam while he was in it, 
 and only a potential value to him after he was 
 put out of it. 
 
 A thing may have a use value for the purpose 
 of satisfying an imaginary want; quack medi- 
 cines may cure imaginary ills, and furnish cheap 
 substitutes for the bones and relics of the saints, 
 holy shrines, pretended relics of the true cross, 
 and the holy coat of Treves. Formerly the cata- 
 combs of Rome had nearly as great a value to 
 the Church as her treasury of good works. If 
 the owner of a gem finds that it is bogus, or of a 
 picture that it is a copy, its value to him declines. 
 When the turquoise ceases to be a talisman 
 against the " evil eye," the stone will lose in use 
 value to the Persian ; so, also, as to all fetiches, 
 charms, and amulets. 
 
 The value of a thing to anyone includes all the 
 uses and purposes to which it can be applied by 
 
10 
 
 VALUE. 
 
 him; e . g., grain has a use value for seed, food, 
 manufacture, and also for the purpose of exchange 
 for other things. Also, the same thing may have 
 a value to different persons for different purposes. 
 The value of a commodity to a merchant lies in 
 the profit which he can obtain by dealing in it, 
 while the value of opium, tobacco, coffins, or any 
 other thing to its consumer is quite different. 
 The product of one person may be the tools or 
 raw material of another. A thing may have a 
 present value for the purpose of satisfying a 
 future want. A prudent man provides before- 
 hand for his future wants, especially those which 
 ire recurrent and involuntary ; and, therefore, he 
 stores away corn in his granary, food in his 
 larder, and riches in his treasury, because of their 
 value to him for consumption and exchange, 
 present and prospective. 
 
 Use value is a variable quantity : The supply 
 and the demand are both variable. 
 The supply varies: 
 
 In quality — A good timepiece is more useful 
 than a poor one ; cloth may be all wool or partly 
 waste or shoddy. Nearly all commodities vary 
 in quality. There are more than loo grades of 
 wool; the same fleece sorts into seven or more 
 qualities. In the Chicago market there is red 
 and white wheat, winter and spring, divided into 
 about twenty grades ; of Indian corn there are ten 
 grades; oats, six grades; barley, five grades; butter, 
 six or more grades ; cattle of numerous grades. 
 
 VALUE. 
 
 11 
 
 In quantity — The supply may vary from noth- 
 ing to a superabundance. There may be too 
 much of such a useful thing as water. A person 
 may have no food, or barely enough to sustain 
 life, or more than he can consume before it 
 will spoil. In some parts of the country, when 
 newly settled, Indian com has been used for 
 fuel, and fruit so abundant as to be left to rot 
 on the ground; the potato crop of 1895 was so 
 abundant as not to be worth digging in places 
 remote from market, being worth at Chicago, in 
 the early spring of 1896, about 16 cents per 
 bushel by the car load. Formerly, in Australia, 
 the surplus carcasses of sheep were used for fuel 
 and the ashes sold as a fertilizer ; and surplus 
 cattle in South America had no value except for 
 their hides and tallow. An excess of anything 
 beyond what its owner can use or consume him- 
 self before it will spoil or decay, has no value to 
 him except to exchange for something else which 
 he wants or desires. 
 
 The demand varies : 
 
 A person may be more hungry or thirsty at 
 one time than at another, or want clothing more 
 when it is cold than when it is warm. He usually 
 wants any necessary, useful, or agreeable thing 
 more when he has none of it than when he is 
 partially supplied. Beyond the point of neces- 
 sity, the intensity of his desire usually decreases 
 as the supply increases up to the limit of extreme 
 abundance. 
 
12 
 
 VALUE. 
 
 Use Value, Its Existence and Degree, 
 
 Its existence depends solely upon a demand 
 and an available supply, and not upon the source 
 of the supply or its cost of production. 
 
 Cost is the sacrifice made to procure a thing ; 
 value is the benefit which can be derived from it, 
 which is the same whether the thing costs much, 
 little, or nothing. Water derived from the 
 clouds or a living spring has the same value to 
 quench thirst, or for any other purpose, as if the 
 same water had been filtered or distilled out of 
 some solution. A lump of gold has the same 
 value to its finder as if he had obtained it after 
 great labor. A coat will keep a man as warm if 
 it be a gift as if it were acquired at great cost. 
 Cloth woven on a hand-loom has no greater value 
 than if the same cloth had been woven on a 
 loom propelled by wind, water, or steam. No 
 sensible person would consider the same thing 
 to be of greater value to him merely because it 
 was produced at great cost. If a thing is not 
 wanted it has no actual value, whether its cost 
 was much or little. 
 
 But a demand converts a potential into an 
 actual supply. "The paving of the streets of 
 London enabled the owners of some barren rocks 
 on the coast of Scotland to draw a rent from 
 what never afforded a rent before ; also, the for- 
 ests of Norway found a market in Great Britain 
 which they could not find at home ; also, the sur- 
 
 VALUE. 
 
 13 
 
 plus wool of England found a market in Flan- 
 ders, and, after the Union, the Highland cattle 
 found a market in England ; those bred on the 
 most uncultivated moors, in proportion to their 
 weight and goodness, brought the same price as 
 those raised upon the most improved land." 
 (Wealth of Nations.) 
 
 The degree of the use value of a supply, per unit 
 of quantity, depends solely upon its quality, and 
 its quantity relative to the demand for it, increas- 
 ing with its quality and decreasing as its quantity 
 increases. 
 
 Quality may be due to soil and climate, as in 
 fruits, cotton, coffee, etc.; or to lapse of time, 
 which improves coffee, wine, and distilled liquors, 
 and injures fruit, meat, and other things ; or to 
 the care, skill, and honesty exercised in the pro- 
 duction of a thing. 
 
 Scarcity and abundance have the same effect 
 upon the degree of use value, whether the cause 
 is natural or artificial, as a siege, blockade, or a 
 comer in the article. In Egypt, during the 
 years of plenty, food was of little worth ; but 
 during the years of scarcity Pharaoh acquired all 
 the property of the Egyptians and reduced them 
 to slavery, although there was grain enough in 
 Eg^pt to feed its people, and also to supply others. 
 
 Wants. Adam Smith said : "A man is rich 
 or poor according to the degree in which he can 
 afford the necessaries, conveniences, and amuse- 
 ments of human life." 
 
14 
 
 VALUE. 
 
 A savage and a civilized man differ in their 
 notions about wealth. To each of them food and 
 dnnk of some kind are clearly necessaries ; cloth- 
 ing and shelter may not be, for a part of mankind 
 go naked and lie on the ground. As a man 
 acquires knowledge his views alter and his wants 
 multiply. Knowledge discovers needs and wants 
 and also the means to satisfy them. The first hut 
 was a luxury ; the first clothing, the first fire the 
 first salt, etc. 
 
 During - the ages of faith " those who aspired 
 to be saints believed in mortifying the flesh. 
 Some never washed themselves, nor disturbed 
 the vermin with which they were infested ; so 
 far as they caused pain they were increasing the 
 stock of the aspirant s merits ; that treasure which 
 he was laying up in heaven. Greater knowledge 
 has caused piety to assume a more rational form. 
 It IS not now deemed essential to a saint that he 
 should be dirty and lousy, or a nest of microbes 
 and bacteria, nor that the temple of God should 
 be a chamel house. Now the wise man prefers 
 a good house well aired to a cave or a hole in the 
 ground ; food in wholesome variety, well cooked, 
 to raw fish or flesh ; suitable and clean clothes to 
 dirty rags and skins ; and is glad if he can justly 
 acquire the means to satisfy his voluntary and 
 involuntary, natural and acquired, present and 
 prospective, real and imaginary wants. 
 
 Cost and Use Value, If nature had supplied 
 everything which is wanted, as a free gift, every 
 
 VALUE. 
 
 15 
 
 want would find full satisfaction in a gratuitous 
 supply. But when the acquisition of a thing 
 involves cost, the demand for it becomes stinted 
 towards the point where it would be as easy to 
 endure the want, or so much of it as remained 
 unsatisfied, as to gratify it. If a person feels a 
 want, as hunger or thirst, it causes pain ; and if 
 he has not the means at hand to satisfy it, the 
 want impels him to undergo the sacrifice neces- 
 sary to obtain the requisite supply. This sacrifice 
 also causes pain. By labor a man is said to lay 
 down a part of his ease, liberty, and happiness ; 
 by outlay he parts with what cost him something to 
 acquire, and deprives himself of the benefit which 
 he might otherwise obtain from it. Every sen- 
 sible person usually considers how great a sacrifice 
 he must make in order to gratify his various 
 wants, and as the price which he must pay seems 
 to him to be greater or less than its reward he acts 
 accordingly. 
 
 The sensations produced by a want, by its 
 gratification, and by the cost of appeasing it, are 
 not the same to every person, for men differ in 
 their mental and physical powers, natural and 
 acquired ; they differ not only in ability, but in 
 their feelings, tastes, and inclinations. Even a 
 future want renders an industrious and frugal 
 man nervous and unhappy until he has made 
 provision for it. He anticipates his future wants, 
 and will not wait until the spur of necessity is 
 actually applied ; for experience teaches him that 
 
m 
 
 VALUE. 
 
 VALUE, 
 
 ir 
 
 it requires time as well as effort and sacrifice to 
 obtain the requisite supply ; and he is unwilling 
 to rely on chance, charity, or theft to supply his 
 wants as they occur. Other persons can not 
 restrain their desires, have no frugality, and live 
 in poverty because of their wasteful extravagance. 
 Others regard labor as a dreadful sacrifice, and 
 will suffer for want of food, clothing, and shelter 
 rather than undergo the great pain which they 
 would suffer in order to satisfy their wants by 
 their own industry. The Pilgrims landed among 
 the rocks of New England in December, 1620; 
 they were assisted to migrate, but by 1637, if not 
 earlier, they were taxing themselves to support 
 the poor, and afterwards indulged in expensive 
 litigation as to which town ought to support some 
 particular pauper. Now he travels not only from 
 one town to another, but from Maine to Oregon, 
 having no use for a tract of wild land, unless for 
 the scenery, although offered as a gift. In 1894 
 crowds of tramps seized railroad trains and 
 marched on Washington, feeding on the industry 
 of the country by the way. At Chicago, during 
 the winter of 1 893-4, with bricklayers* wages at 
 50 cents an hour; carpenters', 35 cents an hour; 
 common labor at $1.50 to $1.75 for an eight-hour 
 day; patent flour at $4.50 per barrel; ** bakers'" 
 ditto at half that price, and thousands of dram 
 shops, each paying a license of $500 per annum, the 
 Relief and Aid Society called upon the charitable 
 for about $2,300 per day to support the needy. 
 
 Formerly a very rich man said, the drunkard and 
 the glutton come to poverty, and sloth clothes a 
 man in rags and his family also. 
 
 It is asserted that wealth would yield the 
 greatest amount of happiness if it were equally 
 divided; how often a redivision would be nec- 
 essary in order to maintain the equality is not 
 stated. But one might surmise that, if those 
 who love industry and frugality the most were 
 required to acquire the wealth, and those who 
 derive the greatest enjoyment from its consump- 
 tion and who love labor and frugality the least, 
 were employed as consumers, a much greater 
 sum of happiness might be realized. Heavy tax- 
 ation of everybody who has anything renders this 
 scheme quite feasible. 
 
 It is said that "the real price of everything, 
 what everything costs to the man who wants to 
 acquire it, is the toil and trouble of acquiring it." 
 But neither this price nor the value of the thing 
 when acquired is the same to everybody. One 
 person may want a thing more than another, 
 acquire it for less, and obtain a greater satisfac- 
 tion from it. The same person does not always 
 obtain the same thing at the same cost. A hunter 
 or fisherman would undergo the same amount of 
 toil and trouble whether he killed or caught any- 
 thing or not ; so also with a miner whether he dug 
 in rich or barren ground ; or a farmer whether 
 his crop was good or poor. A person engaged 
 in any occupation after a certain period of time 
 
18 
 
 VALUE. 
 
 would form his opinion whether his total reward 
 compensated him for the total sacrifice; and what- 
 ever was the result he would adopt an easier or 
 more lucrative occupation if he could find it. In 
 some way satisfactory to himself he might strike 
 an average, and thereupon say that in the ordinary 
 state of his health, strength, and spirits, in the 
 ordinary exercise of his skill and dexterity, and 
 in the usual degree of hardship caused by the 
 elements, the nature of the business and other- 
 wise, he obtained an average reward for an 
 average sacrifice. But the standard by which 
 he measured and compared the two would not 
 measure the same amount of cost or reward to 
 others who were unlike him, each of whom would 
 have an equal right to compare his sacrifices with 
 his enjoyments and to act accordingly. 
 
 In the science of political economy it is assumed 
 that all men are exactly alike, or so near alike 
 that any differences between them may be ig- 
 nored. This fallacy makes the science unsound ; 
 the subject may be thereby simplified and made 
 easy for new beginners, but the reasoning founded 
 upon this false assumption fails to apply to the 
 facts as they exist. 
 
 Adam Smith said that the difference of natural 
 talents in different men is in reality much less 
 than we are aware of ; that the difference between 
 a philosopher and a street porter, for example, 
 seems to arise, not so much from nature as from 
 habit, custom, and education ; that the two from 
 
 VALUE. 
 
 19 
 
 nature are not half so different as a mastiff is 
 from a greyhound, or it from a spaniel, or this 
 last from a shepherd's dog. But since there is a 
 material difference between an idiot and a Sir 
 Isaac Newton, and between a Samson and one 
 who has the rickets, with gradations between 
 the two extremes, and a great difference between 
 races or breeds of men, it is immaterial whether 
 the difference from nature between men is less 
 than It is between dogs. The difference between 
 Napoleon and the generals he defeated was not 
 due to custom, habit, and education ; the differ- 
 ence between General Grant and other generals 
 who were total failures was a material and natural 
 aifference. 
 
 A pereon of equal authority with Adam Smith, 
 to wit the Pope, in his encyclical letter on the 
 Condition of Labor, says it is impossible to reduce 
 human society to a level, because there naturally 
 exist among mankind innumerable differences of 
 the most important kind; that people differ in 
 capability,in diligence. in health.and in strength 
 This being manifestly true, the Pope, by his letter 
 knocked the " hypothetical economic man " in the 
 
 o^v ^? r "''f'^ ^^^^ ^y^*^" o* political econ- 
 omy which IS founded on the tacit or express 
 
 ^bhufr '""^'f '"^•^ ^'^ exactly alike, to merl 
 rubbish fit only for the dunghill. 
 
 Among mankind there naturally exist all sorts 
 
 Tu<^ tL'n i- °^ '""'' ^ ^^^°' E«^"' Canaan, 
 Judas, the prodigal son. the wicked husbandmen 
 
20 
 
 VALUE. 
 
 VALUE. 
 
 21 
 
 and the idle servant who hid in the earth the 
 talent entrusted to him. Eternal happiness is 
 offered to all, but many are unwilling to pay the 
 price for it. 
 
 Much ingenuity has been expended in devis- 
 ing schemes whereby everyone will suffer an 
 equal amount of sacrifice for an equal amount of 
 satisfaction. Instead of allowing everyone to 
 measure and compare the two for himself, it is to 
 be done for him ; he must perform an allotted task 
 for an allotted reward, whether he is willing or 
 not. Socialism proposes to establish equality 
 among unequal men by reducing them to the 
 dead level of slavery. Society is to be recon- 
 structed ; personal liberty abolished ; all land and 
 capital put in the hands of the managers of the 
 scheme, who will determine what things are 
 ** socially necessary," and by their subalterns com- 
 pel everybody to perform the task assigned to 
 him. The confiscation of all private property is 
 the attractive bait held out by those who in the 
 grand social upheaval expect to be on top. 
 Robespierre, Marat, and the Jacobin Club pro- 
 fessed to be great philanthropists. The central 
 aim of socialism is said to be justice. Ignoring 
 the difference which exists among men, sacrifice 
 is to be measured by a unit of labor time, for 
 which everyone is to receive the same wages. 
 But if an hour's labor in one occupation ought to 
 count for more than in another, the managers of 
 the scheme will measure the difference, and not 
 
 every person for himself. The things deemed 
 "socially necessary" having been determined by 
 them, the laborers must do the work whether 
 they are willing or not, for otherwise society 
 would suffer. In a state of freedom, self interest 
 is the goad, and every person can prick himself 
 much or little ; in a state of slavery, the master 
 and overseer apply the goad. Another method of 
 accomplishing justice is to compel the production 
 of those things deemed "socially necessary," and 
 to divide the net proceeds among consumers in 
 proportion to their reasonable needs, or in pro- 
 portion to consumptive instead of productive 
 power, the managers of the scheme, however, to 
 determine what are reasonable needs. By some 
 people freedom is highly esteemed; but the 
 Israelites, although fed from heaven, wept when 
 they remembered the fish, cucumbers, melons, 
 leeks, onions, and garlic on which they were fed 
 by their masters in Egypt. 
 
 If society is to be regimented, and everybody 
 compelled to work under overseers, it would seem 
 to be good economy to vest the management of 
 the scheme in the priesthood ; for then every per- 
 son's eternal and temporal welfare would be 
 secured by the same piece of machinery. Then 
 ever>^one might find a subsistence somewhere 
 about the soup kitchen of the national workhouse 
 and at the same time feel assured of beinj 
 at least a small angel in the world to come. 
 
 Although it may be true, since the Pope says 
 
 ^^ 
 
ill 
 
 22 
 
 VALUE. 
 
 VALUE. 
 
 23 
 
 so in his letter, that in a state of innocence every- 
 body would practice industry as their free choice 
 and delight, yet in the present state of depravity 
 labor among the thorns and thistles is unequally 
 arduous. When labor became a cause of sorrow 
 it fell heaviest on ignorance and stupidity. Those 
 who could do mental labor soon employed beasts 
 to perform physical toil, and thereafter harnessed 
 the forces of inanimate nature. These are now 
 doing labor more and more ; mental labor causes 
 the senseless machine to become automatic. The 
 chief source of wealth is mental, not manual 
 labor. A social organism would be a strange sort 
 of an octopus, all legs and arms, and no head. 
 
 III. 
 
 RELATIVE VALUE. 
 
 The essence of value being satisfaction, the 
 use values of different things are of the same 
 nature, and may be compared with each other as 
 to quantity. Such comparison brings into view 
 their relative use value. Commodities of a uni- 
 form grade or quality are usually measured as to 
 their quantity by units of number, length, area, 
 bulk, weight, etc. If at any time and place a cer- 
 tain number of units of one commodity had an 
 equal value to a person with a certain other num- 
 ber of units of some other commodity the ratio 
 of the relative value of the two quantities to him 
 
 at such time and place would be unity; if he 
 considered the two quantities to be of equal value 
 to him, no reason would exist why he would pre- 
 fer the one to other. 
 
 Relative value is variable. The use value of 
 every commodity per unit of quantity being vari- 
 able, their relative value is also variable, varying 
 from time to time and from place to place. 
 
 To the same person; for if he had more food 
 than he could consume and no clothes, their rela- 
 tive value to him would be different from what 
 it would be if he had a superfluity of clothes and 
 no food. 
 
 As between different persons; for if one were 
 hungry and the other thirsty, the relative value 
 of food and drink would not be the same to each 
 of them ; at some other time their condition as to 
 the two things might be reversed. 
 
 IV. 
 
 EXCHANGE VALUE. 
 
 When different things are exchanged between 
 their respective owners such things are said to 
 have exchange value. 
 
 The existence of this quality depends upon a 
 difference in the relative value of the things 
 exchanged to the respective parties and their 
 right to make the transfer. Every person esti- 
 mates for himself the relative pressure of his 
 
24 
 
 VALUE. 
 
 VALUE. 
 
 25 
 
 wants and the relative value to him of the means 
 necessary for their satisfaction. Market value 
 is the combined result of the individual opinions 
 of the buyers and sellers. 
 
 In every exchange each party gives what he 
 considers to be the comparatively superfluous for 
 the comparatively necessary, and expects to gain 
 in value to him by the exchange ; for otherwise 
 he would act without a motive. If a person has 
 more of anything than he requires for his own 
 use, and is in want of something else, some of 
 the former may well be of less value to him than 
 some of the latter. By an exchange the owner 
 of a thing, although it may be a useless superflu- 
 ity to him, can make it worth to him as much as 
 what he can obtain in exchange for it ; how much 
 this will be depends on his trading capacity and 
 value sense. Fraud, deceit, a lack or mistake of 
 judgment may cause a loss where a gain was 
 expected. A person may pay too much for his 
 whistle, too much for green spectacles, or even 
 sell his birthright for a mess of pottage. But 
 everyone who is at all competent to take care of 
 himself usually gains more or less by an ex- 
 change. If he thinks a surplus m bushels of 
 grain are of less value to him than n yards of 
 cloth, he is usually correct in his opinion. 
 
 Neither party is satisfied with a mere balance 
 of relative value to him, but strives to g^ve the 
 least and get the most possible. Hence, an 
 exchange is usually preceded by a negotiation, 
 
 during which each party has the benefit of the 
 other's opinion as to the quality of the articles 
 and their value ; when each party believes that 
 he has reached the best terms he can make for 
 himself, and that he can do no better by dealing 
 with some other person, a bargain is struck upon 
 a basis finally agreed upon. It is naught, it is 
 naught, saith the buyer ; but when he is gone his 
 way then he boasteth. 
 
 Ratio of exchange is the basis upon which an 
 exchange is made ; as if m units of one com- 
 modity are exchanged for n units of another, their 
 ratio of exchange in that transaction is ^ or ™ ; or, 
 a unit of the former buys ^ units of the latter, and 
 a unit of the latter buys ^ units of the former. 
 Such is the degree of exchange value, or relative 
 purchasing power of each of the commodities in 
 the case supposed. In other exchanges of the 
 same commodities between other persons, or 
 between the same persons at another time or 
 place, their ratio of exchange in large or small 
 quantities would probably be ^ Even if the 
 same commodities of any certrin ^rade or qual- 
 ity always exchanged, at wholesale or retail, at a 
 certain ratio, e. g. ^, the exchanges would not be 
 made on the basis of equivalents. If neither 
 party gamed anything, both parties would act 
 ^^'ithout a motive. But the fact is, ratio of 
 exchange varies with the parties concerned, and 
 irom time to time and from place to place 
 
26 
 
 VALUE. 
 
 If an exchange were made between A, the 
 owner of a horse, and B, the owner of sheep, on 
 the basis of the horse for twenty sheep, such basis 
 would not fix a ratio of exchange between all 
 horses and sheep as to other persons, nor as to A 
 and B even as to the same horse and sheep at 
 some other time and place ; for then A might 
 need or want the horse more than the sheep, and 
 B the sheep more than the horse. At one time, 
 according to Shakespeare, King Richard was in 
 great need of a horse. 
 
 At an exchange as above supposed, the 
 bystanders would probably differ in their opin- 
 ions as to the relative value of the animals ; one 
 might say that eighteen of the sheep were worth 
 as much as the horse, and another that the horse 
 was worth two dozen of such sheep. The trans- 
 action, however, would prove that A then con- 
 sidered the twenty sheep to be of greater value to 
 him at that time than the horse ; and that B 
 considered the horse to be of greater value to him 
 at that time than the sheep ; both of them might 
 be correct in their opinions. If A would have 
 preferred nineteen of the sheep to the horse, and 
 B the horse to twenty-one sheep, each of them 
 would consider that he had gained by the 
 
 transaction. 
 
 Title is the other element which is essential to 
 the existence of exchange value. An exchange 
 between two persons, neither of whom had any 
 right to the respective articles proposed to be 
 
 VALUE. 
 
 %7 
 
 exchanged, nor power to confer any, can not be 
 made, unless possibly between two thieves, who 
 might thereby transfer to each other their respec 
 tive possessory rights. Therefore, if a thing is 
 not property, it can not have exchange value ; 
 and any such value which might be imputed to it 
 would be merely potential or imaginary; and any 
 reasonmg about such value would be mere idle 
 speculation. 
 
 But if a thing has an owner, and it is not 
 obtamed from him by robbery, theft, or as a gift 
 It becomes necessary, in order to induce him to 
 part with it, to offer him something which he will 
 consider to be more valuable to him in exchange 
 for It. Its acquisition by this method would be 
 impossible to a person who possessed nothing 
 which the owner of the coveted object would 
 accept in lieu of it. A demand for anything 
 belonging to another, in order to be effectual 
 must be backed up by a supply of something 
 which such other person wants more than the 
 thing demanded. 
 
 Property is defined to be : That which belongs 
 exclusively to a person, that to which he has a 
 legal nght, a thing owned ; also, as the exclusive 
 right of possessing, enjoying, and disposing of a 
 thing ; ownership. The essence of property con- 
 sists of rights, although the word is applied both 
 to the thing and to the right to it. Value is 
 impaired or fades away if a person is not secured 
 and protected in his personal and property rights 
 
28 
 
 VALUE. 
 
 VALUE, 
 
 29 
 
 In fact, rights are essential to value ; for a thing 
 can not have an actual use value to a person 
 unless he has a right or power to appropriate it 
 in satisfaction of his wants. Food can not satisfy 
 hunger unless there is a right or power to eat it ; 
 nor clothing satisfy the need for it unless there is 
 a right to wear it. An actual supply implies the 
 right or power to make the demand effectual. 
 
 An owner has the exclusive right to possess, 
 enjoy, and dispose of ^n object of desire to the 
 extent of his right to it. If all such objects 
 belonged to nobody, none of them would have any 
 exchange value, nor any actual use value until 
 they were appropriated by some one. A science 
 of wealth requires some assumed basis of personal 
 and property rights. Any system of socialism, 
 communism, or anarchism must have as its basis 
 a system of personal and property rights to cor- 
 respond therewith. What a man shall have a 
 right to do ; what shall be his acquisitions, if any; 
 and to what extent he shall be protected in his 
 life, liberty, and property, are matters of essential 
 importance in any inquiry into the nature and 
 causes of wealth. The word wealth is often used 
 as synonymous with possessions and property. A 
 thing, however, may be property and not wealth ; 
 for if a thing has lost its value by use and wear, 
 or decay, it would continue to be property until 
 its owner saw fit to abandon it. 
 
 The fact that ownership is essential to the 
 existence of exchange value affords an explana- 
 
 tion of what has been called a paradox. Adam 
 Smith said : " The things which have the greatest 
 value in use have frequently little or no value in 
 exchange ; and, on the contrary, those which have 
 the greatest value in exchange have little or no 
 value in use. Nothing is more useful than water ; 
 but it will purchase scarce anything ; scared any- 
 thing can be had in exchange for it. A diamond, 
 on the contrary, has scarce any value in use ; but 
 a very great quantity of other goods may fre- 
 quently be had in exchange for it." 
 
 Water running loose and open to everybody 
 
 can not have any exchange value, nor any use 
 
 value, until it is appropriated by some one. When 
 
 water is property, as a flow available for irrigation, 
 
 a water power, or a city supply, it has exchange 
 
 value just the same as other property, the degree 
 
 of its exchange value being dependent upon the 
 
 amount of its supply relative to the demand for 
 
 it. In Chicago, with a vast body of fresh water 
 
 in front of it, spring water from Wisconsin is sold 
 
 like other goods, it being asserted and believed 
 
 by some that the Wisconsin water is purer than 
 
 the lake water. Various kinds of water in barrels 
 
 and bottles are sold everywhere. Water, in the 
 
 form of ice, is regularly sold at wholesale and 
 
 retail. Ice formed on the surface of a pond or a 
 
 running stream is often sold by the owner of the 
 
 soil like any other crop. The wicked men 
 
 drowned in the deluge, and who went to a place 
 
 of torment, had reason to say nothing is more 
 
f 
 
 30 
 
 VALUE. 
 
 VALUE. 
 
 31 
 
 11 
 
 injurious than water, except fire. If diamonds 
 and water are property, their relative value, per 
 units of quantity, depends upon the same consid- 
 erations as those which apply to any other kinds 
 of property. 
 
 Measure of Wealth. Everyone estimates his 
 
 property by its value to him ; i. e., by the benefit 
 
 and satisfaction which he can derive from it, or 
 
 obtain by means of it. If he uses or consumes a 
 
 thing himself, its benefit is direct ; if he exchanges 
 
 it for something else, its benefit is indirect. The 
 
 value of any superfluity which he may possess, or 
 
 of anything having a less value to him than other 
 
 things which he may need or desire, by means 
 
 of an exchange is made equal to the value to him 
 
 of those things which he obtains in lieu of it, less 
 
 the cost of making the exchange. Commodities 
 
 are produced partly, and often entirely, for the 
 
 purpose of sale, it being only a part of those 
 
 things which one needs or desires that he can, or 
 
 at least does, produce himself. Therefore, where 
 
 markets exist and sales are constantly made, it is 
 
 usual for everyone to measure his wealth by its 
 
 purchasing power, such being the best practical 
 
 approximation to a correct measure of its use value. 
 
 But it has been said that wealth is properly 
 measured by quantity of commodity, and not by 
 its exchange value ; that, " a man is rich or poor 
 according to the abundance of necessaries and 
 luxuries which he can command, and whether the 
 exchange value of these for money, com, or labor 
 
 be high or low, they will equally contribute to the 
 enjoyment of their possessor." As to this it may 
 be said that if a man had at all times a crisp and 
 fresh stock of the best quality of everything in 
 quantity sufficient to fully satisfy all his wants, it 
 would be immaterial to him whether his riches 
 had any exchange value at all or not. But not 
 having an abundance of that kind, he would be 
 rich or poor according to the abundance of neces- 
 saries and luxuries which he could command, and 
 the quantity of them which he could command 
 would depend upon the purchasing power of his 
 riches. If he possessed at any time an abundance 
 of necessaries and luxuries, such of them as he 
 could not use or consume before they spoiled or 
 decayed would have no value whatever to him 
 except to the extent of their purchasing power. 
 
 If wealth were measured solely by quantity 
 of commodity, and not at all by its exchange 
 value, every such quantity would measure the 
 same when and where it was a superfluity as 
 when and where it was scarce and in demand. A 
 superabundance would be proportionately greater 
 wealth than any less amount. Ever>' product 
 would measure as much wealth in the hands of its 
 producer as in those of the consumer. Wheat in 
 Dakota, beef and pork in Kansas, cotton in Ala- 
 bama, cloth in New England, would measure as 
 much wealth there as elsewhere. Wealth would 
 not be increased by transporting goods from where 
 they are not wanted to where they are wanted. 
 
32 
 
 VAL UE. 
 
 V. 
 
 II 
 
 MARKET VALUE. 
 
 rJTf ^''^'^' ^'^ ''"''^^^y ^^^^^^ ^^^ sold, their 
 ratio of exchange, or, as it is sometimes called 
 
 their relative value, at any time and place is 
 
 ascertainable only as a deduction from the prices 
 
 at which they are bought and sold at such^'me 
 
 whnl/r' T^ P"^"^' ^^^^^ ^^^ ^^ount at 
 wholesale and another at retail. 
 
 The makers of goods, or their first owners do 
 not usually deal directly with each othrbut sell 
 their surplus products to dealers in them, and 
 
 retailer. A tailor, shoemaker, or other person 
 may do custom work or directly supply a local 
 or limited demand. But those commodities 
 which enter into general consumption, and wS 
 are continuously produced for sale, are usually 
 supplied to consumers after they have passed 
 through the hands of one or mLTeaferHn 
 them A dealer in a commodity produces it at 
 
 l.^n.!!r?i, P^^'^ ^^^'^ '' '^ ^^^ted, and 
 
 wanted the most, or assists in the procesL If 
 
 American farmers are ready to sell one or two 
 
 millions of bushels of grain per day, over eight 
 
 millions of bales of cotton within one hundred 
 
 days, as m 1894, millions of livestock, vast 
 
 amounts of tobacco, wool, and other products 
 
 VALUE. 
 
 33 
 
 there must be buyers of the stuff to hold, trans- 
 port, and sell it to consumers at home and 
 abroad. The world's supply of commodities is 
 taken off the hands of its producers by the 
 traders and finally handed over to the consumer 
 from time to time as he may want it, and in 
 quantity proportioned to his effectual demand. 
 
 The consumer gains by buying whatever he 
 requires when he wants it from those who make 
 it their business to supply the consumptive de- 
 mand. He lays in no large stock of anything; 
 most commodities are bulky, expensive to keep, 
 and more or less perishable ; e. g., the daily news- 
 paper soon loses its value. A producer of any- 
 thing intended to meet a general demand, as cloth 
 or hardware, can not afford to retail his product 
 to consumers far or near ; to do so would inter- 
 fere with his business, involve cost, and loss from 
 remnants, rejected and deteriorated goods. Their 
 wants are so varied and capricious that the expe- 
 rienced dealer can hardly satisfy them. He deals 
 with as large a number of customers as possible, 
 sets a high price, at retail often double the 
 wholesale price, on the newest, best, and most 
 desirable things, and as his stock grows old, dete- 
 riorates or fails to be in demand, he finally 
 endeavors to dispose of it at or below cost to 
 those who are anxious for bargains. The cus- 
 tomer who wants the best, e. g., eggs new laid, 
 fresh butter, fish just caught, the choice qualities 
 and cuts of meat, selected fruit, the best quality 
 
u 
 
 VALUE. 
 
 VALUE. 
 
 \\\ 
 
 I 
 
 and newest style of goods, must pay a price to 
 correspond. Any one who is willing to eat stale 
 fish, fruit, vegetables, inferior qualities of meat, 
 the tough pieces and shanks of a carcass, use old 
 stock and poor qualities of anything, needs no 
 public warehouse provided by socialism to sup- 
 ply him, for the retailer is always anxious to sell 
 his old, decayed, and rejected goods at less than 
 cost. What a consumer wants is satisfaction, of 
 which he elects to be the judge at the price asked 
 for it, and the dealer endeavors to gratify him. 
 A woman wants what is in fashion, and what 
 will suit her in style, make, color, and price. A 
 man also wants what will suit him, e. g., his 
 tobacco must be of the right sort. Some one 
 might say that tobacco-smoke drawn through a 
 cob pipe ought to answer the same purpose as if 
 it were drawn through a meerschaum or a Ha- 
 vana cigar ; but tobacco, like other things, varies 
 in quality, and tastes differ. Prison fare, a striped 
 suit of warm clothing, and eight hours of labor 
 or less per day may suffice to sustain life and 
 health. But happiness resides outside of prison 
 walls and any straight jacket invented by some 
 schemer to promote the general felicity. In a 
 state of slavery or coercion a consumer must 
 take whatever his masters and overseers see fit 
 to give him ; in a state of freedom the supply 
 must conform to the demand. Producers and 
 dealers endeavor to supply consumers with what 
 they want when it is wanted, and free competi- 
 
 35 
 
 tion reduces the reward for doing so to a mini- 
 mum. It is not sufficient for producers to go on 
 mechanically " embodying (so-called) utilities in 
 material objects"; for if anything is produced 
 which is not wanted, or in excess of the demand 
 for it, there is no way at present to compel 
 people to consume it at or below its cost. 
 
 A market is a place where commodities (one or 
 more) are continuously, or at stated times, offered 
 for sale and sold. Those who buy and sell at any 
 place constitute the market there. A city or 
 other locality is a sufficient designation of the 
 place to which a market price refers; e. g., the 
 prices of various commodities at London, Liver- 
 pool, Havre, Hamburg, New York, etc., are pub- 
 lished daily in the newspapers, and otherwise. 
 
 If those who deal in one or more things as- 
 semble together at one spot, as on some board of 
 trade or stock exchange, and there publicly buy 
 and sell, any one present and conversant with 
 the mode of doing business there can reasonably 
 ascertain the prices at which articles are sold 
 there; in other cases market prices are ascer- 
 tained by inquiry of buyers and sellers, or from 
 the reports of sales published daily or oftener, and 
 which are more or less correct, depending upon 
 the ability and honesty of the reporter. There 
 is no such a thing as a perfect market, where 
 every commodity is durable, uniform in quality, 
 and brings the same price at the same time. The 
 relative value of gold and silver continually varies, 
 
36 
 
 VALUE. 
 
 their relative value everywhere being fixed daily 
 by the London quotations, which are said to be 
 made up in the afternoon as an average of the 
 dealings for that day among the bullion dealers. 
 If a thing IS sold at auction, and for any cause is 
 again put up and resold, it rarely brings the same 
 price ; or if a similar thing is offered, it will prob- 
 ably sell for less or more than its duplicate. 
 
 The price of a commodity varies with its qual- 
 ity ; if the grade is not uniform and the article 
 durable, it is usually inspected by the buyer, or is 
 bought by sample, it being agreed that the quan. 
 tity bought shall conform to the sample. A per- 
 son must be familiar with the various kinds and 
 grades of a commodity and with the mode of 
 dealing in it, in order to act intelligently concern- 
 mg It, or even to understand the quotations of its 
 market price. 
 
 As specimens of grades and quotations of mar- 
 ket price are the following : In the Chicago live- 
 stock market there are numerous grades of cattle, 
 the poorest selling for about one-third of the best' 
 the price of each grade varying with the average 
 merits of the particular lot of cattle sold. In wool 
 of the sort called " pulled," there are about fifty 
 grades, the poorest bringing about one-fifth of 
 the best. In the New York and New Orleans 
 markets there are twenty-two grades of cotton. 
 Coffee may be, or claimed to be. Mocha, Java, Rio,' 
 Santos, etc., with various grades of each! At 
 London, October 7, 1891, Rio was quiet at 12%q, 
 
 VALUE. 
 
 37 
 
 for No. 7, the reported visible supply of coffee 
 in Europe and America on October i, 1891, in- 
 cluding the amount afloat from Brazil, Java, and 
 the East, being 2,576,456 bags, as against 2,214,544 
 bags ''in sight" on October i, 1890. 
 
 At New York, March 26, 1895, sugars were 
 quoted : Raws, quiet but firm ; Cuba, Muscovado, 
 89 test, 2^.; molasses sugars, 89 test, 2^^.\ cen- 
 trifugals, 96 test, 3c.; refined, quiet but firm on the 
 basis of 3-ff04i^c. for granulated : at Liverpool 
 same date, American wheat. No. 2 red winter, 
 4s. 8d.; No. 2 spring, 5s. 2j^d.; No. i California, 
 5s., with a difference between "spot" and 
 "futures"; beef, extra India mess, 70s.; prime 
 mess, 60s.; pork, prime mess, 57s. 6d.; medium, 
 52s. 6d.; butter, finest United States, 55s.; good, 50s. 
 
 At London, during the season of 1889-90, the 
 bank rate for money varied between the extreme 
 limits of 3 and 6 per cent; English wheat 
 (farmers' deliveries), between 29s. id. and 36s. 6d. 
 per quarter ; cotton (mid. Or.), between 5^J^6fJd. 
 per lb. During the season of 1890-91 the bank 
 rate varied between 2>^@6 per cent; wheat 
 (farmers* deliveries), between 31s. and 41s. 4d.; 
 cotton (mid. Or.), between 4^ and 54^. Cargoes 
 "off the coast" of California wheat, between 
 38s. 6d. and 47s.; ditto " shipping and shipped," 
 between 37s. and 46s. 6d.; Calcutta No. 2 club, 
 between 34s. and 41s. 9d. At Liverpool, during 
 1 89 1, bacon (long, short, and clear) varied between 
 the extreme limits of 25s. 6d. and 45s. per 112 lbs.; 
 
38 
 
 VALUE. 
 
 VALUE. 
 
 39 
 
 Cumberland cut, between 24s. 6d. and 53s.; cured 
 salt hams, between 35s. and 56s.; lard, per 100 lbs 
 between 29s. 6d. and 36s. 6d. At Chicago No. 2 
 spring wheat varied, during 1888, between the 
 extreme limits of $1.16^ and 72%q. per bushel • 
 durmg 1889, between $1.07 and 7514c.; during 1890' 
 between $1.10 and 70c. Early in the summer of 
 1 89 1, on report of short crops abroad, the price of 
 No. 2 spring wheat at Chicago was advanced from 
 about 85c. to about $1.1 6 per bushel. But soon after 
 harvest the farmers sold wheat at the rate of one 
 and one-half millions of bushels per day, and later 
 at the rate of about two millions of bushels per 
 day, whereupon the price sagged down to about 
 95c. m October and 80c. in April, 1892 ; the price 
 of wheat abroad failed to respond to the higher 
 prices. In 1888, owing to a short crop of wheat 
 m this country, the price of No. 2 red winter at 
 New York was advanced from about 84c. to $1 01 
 per bushel, but there were good crops elsewhere 
 and prices abroad failed to respond. The wheat 
 crop of 1894 in this country was much below an 
 average, but for want of a foreign demand the 
 pnce of No. 2 spring at Chicago went below 50c 
 per bushel. The world s harvest of wheat is peri 
 petual, being always at hand somewhere in the 
 Northern or Southern Hemisphere, the annual 
 crop within the reach of statistics being estimated 
 at about twenty.five hundred millions of bushels 
 as an average, but its price varies as above. On 
 September 25, 1891, at Chicago (weather unsea- 
 
 sonably hot), the market report was : " Nearly 
 20,000 fresh and 12,000 stale cattle proved too 
 much for yesterday's market, which was flat. 
 The number was entirely too great, considering 
 the glutted condition of the meat channels. 
 There were cattle here for which owners refused 
 $4 (per 100 lbs.) a week ago, which could not be 
 sold for over $3." 
 
 The price of a commodity varies not only with 
 its grade or quality and as between different 
 buyers and sellers scattered about a market — a 
 sharp seller selling for more and a sharp buyer 
 buying for less than others— but also when the 
 supply is in excess of the demand, or the con- 
 trary. If the quantity offered for sale at any 
 price exceeds the demand for it at such price, the 
 excess of supply must remain unsold unless it is 
 crowded upon the market; e. g., a perishable 
 article, as fruit ; whereupon competition among 
 sellers reduces the price. Or, if the quantity 
 demanded at any price exceeds the quantity 
 offered at that price, a part of the demand must 
 remain unsatisfied, else competition among 
 buyers raises the price, a rise in price tending 
 to increase the supply and to stint the demand, 
 and a fall in price tending to increase the demand 
 and to stint the supply. 
 
 There is a present and also a prospective sup- 
 ply. There is an amount in the market or on its 
 way there, i. e., " in sight," and there is another 
 and more uncertain amount still in producers* 
 
40 
 
 VALUE, 
 
 hands, or available in the future. More or less of 
 a present supply may be withheld by its owners, 
 depending upon their several views as to its pres^ 
 ent as compared with its future or market value. 
 So, also, the demand varies according to the several 
 views of buyers as to the present as compared 
 with the future price of a commodity. Com- 
 modities are not hurried forward as fast as they 
 are produced and crowded on the market, unless 
 they are perishable or their market price is very 
 attractive ; nor do buyers rush in greedily unless 
 their wants are very pressing or the price is 
 abnormally low. Every producer or owner of a 
 commodity consults his own interest and con- 
 venience as to when and where he will dispose of 
 It, and every buyer acts in like manner on his 
 own behalf. Every seller endeavors to sell at the 
 highest price, and every buyer to buy at the 
 lowest. The greater part of a year's surplus 
 product IS usually marketed during the year. A 
 great variety of causes affect market price — the 
 durability of an article, the cost of its keep the 
 amount -in sight," the amount not in sight' but 
 available in the future, comers, strikes, war, a tight 
 or easy money market, changes in taxes, tariffs, etc. 
 The variation of market price is a source of 
 profit and loss. Any one who can foretell the 
 price of stocks, grain, cotton, etc., has no need of 
 the ring and lamp of Aladdin. Every buyer or 
 seller who waits is a speculator, and there are 
 also dealers who seek their fortunes in a practical 
 
 VALUE. 
 
 41 
 
 study of what is called the law of supply and 
 demand, but who, in spite of all the light which 
 has been shed upon that subject, continually differ 
 in their opinions. The " bull" thinks the price of 
 an article is too low, and is a buyer. The honest 
 farmer or other producer wants the market well 
 stocked with bulls. The " bear " has a contrary 
 opinion and is a seller. Consumers regard bears 
 with favor. The bulls and bears buy and sell for 
 cash and also for future delivery. Sometimes 
 one side corners the other, but such events are 
 usually local and short-lived. Their operations 
 give precision and publicity to market price. By 
 their assistance everyone can reasonably ascer- 
 tain from the market reports published daily or 
 oftener the current price of any staple commodity 
 for present or future delivery, and can sell or buy 
 "spot" or "futures" at or about the price then 
 current. Formerly the farmer wagoned his grain 
 to Chicago, finding on arrival the price quite 
 indefinite, buyers indifferent, and liable finally to 
 be compelled to exchange his product for gro- 
 ceries or store goods on some basis fixed by the 
 other party, who might perhaps sweeten the bar- 
 ter by paying some small sum in cash. Now a 
 producer or owner can sell grain ahead by the 
 thousand or hundred thousand bushels and de- 
 liver it afterward for cash on delivery. 
 
 The price of anything is no exact sum in a 
 market unless fixed by law, or the article is a 
 monopoly so that its price can be fixed by the 
 
I 
 
 42 
 
 VALUE. 
 
 VAL UE. 
 
 43 
 
 seller, or is sold at auction, in which case each 
 parcel sold has a price of its own. The one-price 
 store always has a bargain counter, and the one 
 price is not immutable. As above cited, on March 
 5, 1895, at New York, ''refined sugar was quiet 
 but firm on the basis of sfjc. to 4i^c. for granu- 
 lated." The difference between these two prices 
 on 100 tons would be $1,125. Tables of market 
 prices which purport to give the prices per day, 
 month, or year, of commodities, more or less vari- 
 able in quality, are evidently made up on some 
 system of averages. But in the market nobody 
 buys or sells at any average price. Where trans- 
 actions are large there is a material gain or loss 
 at some of the prices from which the average is 
 made up. A miller who makes 10,000 barrels of 
 flour per day, may buy i ,000,000 bushels of wheat 
 at one time; the difference of a cent a bushel 
 makes a difference of $10,000 in the price paid. 
 A cent a bushel makes a difference in the price 
 of an average crop of wheat in this country of 
 about $5,000,000. Its price often varies from i to 
 5 cents a bushel in a day, and during a year may 
 vary 30 or 40 cents a bushel as between the 
 highest and lowest price. 
 
 Cost and Market Value, Since the price of a 
 commodity varies with the supply relative to the 
 demand for it, and the cost of its production 
 affects the former and the cost of its acquisition 
 the latter, these two causes constantly tend to 
 keep its price within certain extreme limits. 
 
 There is a minimum below which the market 
 price of anything can not continue without finally 
 cutting off its supply. Those who produce it at a 
 loss must quit when they have exhausted their 
 capital and credit, and those who can do better at 
 something else will quit voluntarily, for in such 
 case the market price of the article is below its 
 cost of production to each of them. But before its 
 production finally ceases, unless the article is 
 superseded by something better or more desira- 
 ble, goes out of fashion, or for some cause is not 
 wanted, its supply finally becomes inadequate to 
 the demand, and its price rises. As its price rises 
 the reward for its production increases, which 
 stimulates its producers to increased activity, and 
 induces others who can do so to aid in increasing 
 its supply, unless there is a general rise in prices 
 consequent upon an inflation of the currency, or 
 other cause. But there is also a limit to the price 
 of any product as compared with other things; 
 for as its price increases, its consumption cost also 
 increases, which stints the demand more and more 
 until such demand must finally become nominal. 
 But before reaching that point the supply becomes 
 in excess of the demand for it, and its price 
 declines until finally the supply again becomes 
 inadequate from a decrease in its amount and an 
 increase in the demand for it. 
 
 An effectual demand consists of a want coupled 
 with a disposition and ability to gratify it. There 
 is a limit to the quantity wanted of anything. 
 
44 
 
 VALUE. 
 
 VALUE. 
 
 45 
 
 
 although it can be had for nothing. A person 
 drinks water until his thirst is quenched and then 
 stops ; he wants no deluge for any purpose. If a 
 thing must be bought, the cost of its acquisition 
 narrows up the extent of the demand for it. Such 
 cost to everyone is the production cost to him of 
 what he gives in exchange for the thing bought. 
 No one can continue to buy more than his revenue 
 will purchase, and however he may distribute it in 
 gratifying his various wants, there is a limit to his 
 eflfectual demand for every commodity, the aggre- 
 gate of which several demands constitute the total 
 demand for it. As the price of anything rises, 
 the ordinary consumer uses the article less freely; 
 he economizes, or buys other relatively less costly 
 and more desirable things. If pressed he will use 
 inferior qualities of the same commodity; one 
 kind of food, drink, or clothing instead of another. 
 During the Irish famine, Indian corn was used as 
 a substitute for potatoes ; other textiles were used 
 abroad in lieu of cotton during the late Civil War. 
 Great loss was suffered at Chicago in a corner on 
 pork because the consumptive demand refused to 
 respond to the high price set on the article by 
 those who engrossed the whole supply until it 
 became too heavy for them to carry. Such also 
 was the result of an attempt made a few years 
 ago to engross the entire world's supply of copper. 
 Commodities are produced in such variety that no 
 one is ordinarily compelled to buy any one of 
 them. There is other meat besides pork, and 
 
 other metals besides copper. A person can wear 
 woolen, linen, or cotton goods ; drink beer instead 
 of whisky ; tea, cocoa, or chicory instead of coffee ; 
 eat Indian corn, rye, oats, etc., instead of wheat,' 
 and wheat instead of com or potatoes when 
 bakers' flour is $2 and patent flour $3.20 per bar- 
 rel, wheat (No. 2 spring) 54 cents, corn 57 cents, 
 and potatoes 70 cents per bushel, as they were at 
 Chicago in September, 1894. 
 
 While the extent of the demand for a thing is 
 affected by its cost to the consumer, and also by 
 the cost of its substitutes, yet the demand for it 
 is greatly aided by an established taste for it. 
 Many will continue to -consume corn or potatoes, 
 although wheat is cheaper. A preference abroad 
 for other grain, in fact less nutritious, materially 
 limits the foreign demand for Indian corn. When 
 the tax on distilled spirits raised the price of 
 whisky from 15 cents a gallon to $1.15 or more, 
 the quantity wanted was not reduced propor- 
 tionally ; so also as to beer and tobacco. On the 
 other hand the stress of a want, as compared 
 with other wants, varies from a desire for vari- 
 ety, or a change of fashion, custom, and habits. 
 Boots and stovepipe hats are little worn ; snuff 
 has almost gone out of use ; broad-toed shoes are 
 not wanted. 
 
 Free competition in the production and sale of 
 commodities is the only method of fixing their 
 price in which all parties can concur. Either the 
 producer or consumer will object to any price 
 
46 
 
 VALUE. 
 
 fixed by law, and to all combinations entered into 
 in order to raise or lower the price of anything 
 or to monopolize its production. It is proper by 
 law to punish and prevent the sale of unwhole- 
 some commodities, adulteration, fraud, deceit, and 
 all boycotts and other combinations to oppress 
 anyone m the exercise of his just and lawful 
 rights, leaving him free to decide what, if any- 
 thing, he will produce for sale, when, where, and 
 at what price he will sell his product — those 
 covered by patent, copyright, trademark, or other 
 legitimate monopoly excepted — and also free to 
 buy anything which may be lawfully offered for 
 sale, when, where, and at any price which he 
 may see fit to give for it. Every person engaged 
 m an occupation might desire to have his product 
 or business a monopoly, but if the price of every- 
 thing could be doubled their relative value would 
 remain the same. Therefore, every trade union 
 trust, pool, syndicate, etc., ought to insist that in 
 every business, except their own, there should 
 be no monopoly whatever. 
 
 Under ancient class legislation a baker in Lon- 
 don was convicted by a jury of consumers and 
 pilloried because he bought two quarters (i6 bu ) 
 of wheat, then exposed for sale in the common 
 market on the pavement within Newgate, at 1 5 >^d 
 per bushel, being 2>^d. over the common selling 
 price at that time in that market, "to the great 
 loss and deceit of the common people and to the 
 increase of the dearness of corn." Now the wheat 
 
 VAL UE. 
 
 47 
 
 might have been of superior quality, or of a dry sort 
 which would absorb more water in the dough, or 
 take less alum in order to make the regulation 
 loaf. Formerly famines were frequent in Eng- 
 land, there being fifty-seven in that country dur- 
 ing the eleventh century, according to Mulhall. 
 
 It being reported, during the winter of 1894-5, 
 that two pounds of bread were sold in New York 
 for 5 cents, it was proposed to compel the Chi- 
 cago bakers to do the same. The city having no 
 authority to fix prices, some Solon introduced 
 a bill m the Legislature for the desired purpose. 
 At that time everyone could, if he chose to do so 
 bake his own bread, and perhaps also bake bread 
 for sale, and sell two pounds or more for 5 cents 
 unless he feared injury as a "scab" from some 
 bakers' union. 
 
 In 1670 a bill was passed by one branch of the 
 General Court of Massachusetts, but not con- 
 curred in by the other, reciting : " This court 
 considering the great difficulty and discourage- 
 ment that at present lies pressing upon many 
 inhabitants of this jurisdiction, especially upon 
 such whose callings are in husbandry, not only 
 by reason of the afflicting hand of God upon them 
 several years in blasting their principal grain, and 
 abating their increase in other corn, and slowness 
 of market, and exceeding low price for what the 
 husbandman can raise — unto whose afflicting 
 hand all ought to submit and humble themselves 
 and yet with the prophet confess, * Thou, Lord' 
 
48 
 
 VALUE, 
 
 t 
 
 hath afflicted us less than we deserve,'— but also 
 difficulty and discouragement are yet heaped and 
 increasing upon them and others by reason of the 
 excessive dearness of labor by artificers, laborers, 
 and servants, contrary to reason and equity, to 
 the great prejudice of many householders and 
 their families, and tending to their utter ruin and 
 undoing — and the' produce thereof is by many 
 spent to maintain such bravery in apparel which 
 is altogether unbecoming their place and rank, 
 and in idleness of life, and a great part spent 
 viciously in taverns and alehouses, and other 
 sinful practices, much to the dishonor of God, 
 scandal of religion, and great offense and grief to 
 sober and godly people amongst us, all of which 
 timely to prevent, etc.," thereupon proceeding to 
 fix wages, payable in corn at the price from year 
 to year set by the General Court, and providing 
 penalties for the breach of its provisions. The 
 modem Pecksniff entertains quite opposite views, 
 and favors an '* afflicting hand " manifested in 
 the form of boycott, intimidation, force, and 
 violence done to scabs, employers, and their 
 property. 
 
 Every person, who is free to do so, in order to 
 obtain a livelihood or a profit, selects from those 
 occupations which are open to his choice, the one 
 which appears to him to offer the best reward for 
 the same cost to him. All employments are kept 
 filled by each one of the rising generation and 
 others in search of a livelihood or profit, amount- 
 
 VALUE. 
 
 49 
 
 mg m this country to a million or more annually 
 exercismg his power of choice, and adopting with 
 or without the assistance of friends, the occupa- 
 tion which appears to be best suited to his means 
 capacity, inclination, and previous training' 
 What reward will be deemed adequate in any occu- 
 pation which is or seems to be arduous, hazardous 
 unwholesome, discreditable, dirty, or otherwise 
 unattractive, or the contrary, every person 
 decides for himself. Cost and its reward no one 
 can measure and compare except the person who 
 undergoes the one and enjoys the other. For 
 example, no one can estimate the sacrifice made 
 by a smith in shoeing a horse except himself It 
 probably costs one smith more than another to 
 shoe the same horse equally well, and the price 
 paid for the job may afford him less satisfaction 
 But if both smiths continued to shoe horses, the 
 fair inference would be that each of them con- 
 sidered his reward to be worth its cost to him 
 and to be at least equal to any reward which he 
 could otherwise obtain at the same cost to him 
 Some fail to find any industrial pursuit which 
 offers to them a sufficiently attractive reward 
 Darwin, during his vojrage round the world, asked 
 two beggars in Chili why they did not work? 
 One gravely answered that the days were too 
 long, and the other said he was too poor. 
 
 Among the great variety of employments 
 there are places suited to every degree of 
 capacity ; and everyone is rewarded according to 
 
50 
 
 VALUE, 
 
 his ability and good fortune. Every common 
 sailor is not competent to command the ship, 
 nor every common soldier to command the army, 
 nor every railroad employe to be its manager, 
 nor every wage laborer to take the place of his 
 employer. With equal opportunities unequal 
 men achieve unequal success. Some fail from ill 
 health or other misfortune, but more fail from 
 incapacity, ignorance, indolence, extravagance, 
 drunkenness, dishonesty, and bad habits. In the 
 same employment one person is much sought 
 after by customers, employers, and clients, while 
 another gains only a meager subsistence or fails 
 entirely. The diligent, skillful, able, and honest 
 man is always busy, while others are out of a job 
 and apply for work to him, for which they 
 demand high wages, whether they are indolent, 
 unskillful, dishonest, drunk, or sober. In one 
 case a journeyman tailor employed to make up a 
 coat, in order to finish his job easier and sooner, 
 cut off part of the pattern and spoilt the coat. Such 
 a tailor fails even as a journeyman. Employers 
 are not an hereditary race ; the most successful 
 men usually start poor and rise to position and 
 affluence by their own merits and against all 
 obstacles. The rich Carnegie says his father was 
 a poor Scotch weaver, and his wealth was not due 
 solely either to good luck or oatmeal. The 
 master workman of the Knights of Labor 
 was paid $5,000 per annum for his services, 
 while the Sir Knights, who voluntarily footed 
 
 VALUE. 
 
 51 
 
 all the bills, received for their labor $2, more 
 or less, per day. 
 
 The office of President was held successively 
 by a rail-splitter and a tailor, while the Union 
 hosts were led to victory by the son of a tanner. 
 Others led their armies to defeat. 
 
 Under free competition every competitor 
 endeavors to adopt the occupation, lying within 
 his power of choice, which will afford him, on a 
 reasonable average and according to his standards 
 and opinion in the matter, the best reward at the 
 same cost to him. And supposing every compet- 
 itor to have accomplished his purpose, then no one 
 would have any motive to change his occupation, 
 and the relative value of commodities would be in 
 equilibrium. But even if nobody died and there 
 was no rising generation or other newcomers, 
 yet if the production or consumption of commod- 
 ities varied relatively, the equilibrium would be at 
 an end ; the supply of some things would be in 
 excess and of others deficient, and a redistribu- 
 tion of industry would be required. But one gen- 
 eration is continually dying out and another suc- 
 ceeding having different capacities, tastes, and 
 desires, too many of whom adopt some pursuits 
 and too few others, while many of those who 
 have already made their choice fail of success in 
 it or become dissatisfied with their lot and 
 endeavor to better themselves by a change. Very 
 few people consider themselves adequately 
 rewarded for their merits and sacrifices. Also 
 
 I 
 
52 
 
 VALUE. 
 
 new industries arise — e. g., electric appliances — 
 new wants and new means to satisfy them ; new 
 uses are found for things, e. g., cotton seed, rock 
 oil, coal tar, gas, animal fat, etc.; and new modes 
 of conducting old industries by improved methods 
 and machinery. 
 
 VI. 
 
 NATURAL VALUE. 
 
 Free competition implies the right of every 
 competitor to estimate and compare cost and its 
 reward for himself; and, therefore, if everyone 
 of them were, in his opinion, as well rewarded in 
 his occupation as he would be in any other within 
 his power of choice, competition would have spent 
 its force, and the relative value of commodities 
 would be in equilibrium, although the cost of each 
 of them to each of its producers was not the same. 
 But the relative value of commodities has been 
 called natural, or normal, when they exchange for 
 each other on the basis of equivalents in cost, 
 i. e., when the cost of their acquisition is equal to 
 the cost of their production. In order to present 
 natural value in a definite form, suppose — 
 
 c=a unit of cost, 
 
 x.c=cost per unit of commodity *' a," 
 
 y.c: 
 
 t( 
 
 n 
 
 n 
 
 <« 
 
 "b," 
 
 and that m units of "a" cost each of its producers 
 the same to produce them as n units of " b " cost 
 
 VALUE. 
 
 53 
 
 each of its producers, then, at their so-called 
 natural or normal value. 
 
 m.x.c=n.y.c, or ^=^, (i) 
 
 it being asserted that under free competition - 
 regulates and determines ^ ; it being also assumed, 
 contrary to the facts, that every commodity is 
 uniform in quality, and that all men are exactly 
 alike. 
 
 If m units of " a " and n units of " b " have the 
 same market value, what is c or a unit of cost 
 whereby it may be known whether or not their 
 cost is the same ? According to great authority, 
 a unit of cost consists of *' a quantity of labor," it 
 being said (Ricardo, Chap, i, Sec. i) "that this is 
 really the foundation of the exchangeable value 
 of all things excepting those which can not be 
 increased by human industry is a doctrine of the 
 utmost importance in political economy." The 
 doctrine of natural value being of that importance, 
 whatever c may represent, in Eq. (i), the subject 
 deserves careful examination, beginning with 
 Adam Smith. 
 
 I. THE DEER AND BEAVER CASE. 
 
 Adam Smith said (B. i, Chap, 6): "In that 
 early and rude state of society, which precedes 
 the accumulation of stock and the appropriation of 
 land, the quantities of labor necessary for acquir- 
 ing different objects seems to be the only circum- 
 stance which can afford any rule for exchanging 
 
54 
 
 VALUE. 
 
 them for one another. If among a nation of hunt- 
 ers, for example, it usually cost twice the labor to 
 kill a beaver which it cost to kill a deer, one beaver 
 would naturally exchange for or be worth two 
 deer. It is natural that what is the produce of 
 two days' or two hours' labor should be worth 
 double of what is usually the produce of one 
 day's or one hour's labor." 
 
 Here cost consists of labor, and is measured by 
 a unit of labor time, viz. , a day's or an hour's labor, 
 which is supposed to be the same sacrifice to 
 every hunter, and to procure the same amount of 
 deer or beaver, whether one hunter undergoes 
 the labor or another. 
 
 But if it cost a hunter twice the labor to kill a 
 beaver as it cost him to kill a deer, what motive 
 would induce him to kill deer for the purpose of 
 exchanging them for beaver? He would not 
 undergo the cost of killing two deer and the 
 additional cost of making the exchange, and take 
 the chances of doing so, when he could kill a 
 beaver at the same cost as to kill two deer. No 
 person, savage or civilized, will produce, or con- 
 tinue to produce, anything for sale or exchange 
 unless he can save in cost by the exchange. 
 Adam Smith says (B. i, Chap. 2): " In a tribe of 
 hunters or shepherds a particular person makes 
 bows and arrows, for example, with more readi- 
 ness and dexterity than any other. He fre- 
 quently exchanges them for cattle or for venison 
 with his companions, and finds at last that he can 
 
 VALUE. 
 
 55 
 
 in this manner get more cattle and venison than 
 if he went to the field to catch them." To this it 
 may be added that his companions gave cattle 
 and venison for bows and arrows because they 
 thereby obtained the latter at a less cost to 
 them than if they made them for themselves. 
 Everybody could not, nor can, make an arrow or 
 spearhead out of a piece of brittle flint, nor other 
 stone implements, many of which, and wampun, 
 also, were made with such art that they excite 
 wonder how the work was done with wooden or 
 stone implements. It may be safely asserted, 
 therefore, under color of great authority, that 
 cattle and venison were exchanged for bows and 
 arrows, and deer for beaver, because each party 
 saved in cost to him by the exchange, to which 
 may be added that he also gained in value; 
 for if the bows and arrows were of greater 
 value to their maker than the cattle or ven- 
 ison offered for them, he would refuse to make 
 the exchange. 
 
 Suppose it cost A as much to produce a unit of 
 commodity **c" as m units of commodity "d," and 
 B as much as n units of commodity *'d"; it is 
 required to know the conditions on which each 
 may save cost by an exchange. 
 
 If B gave A n units of "d" for (i+x) units of 
 "c," B would save the cost to him of producing 
 the X units; and the (i+x) units of "c" would 
 cost A the same as m (i+x) units of "d." There- 
 fore each would save in cost as follows : 
 
56 
 
 VALUE. 
 
 (2) 
 
 A, the cost to him of producing n— m 
 (i+x) units of "d," or ^ - (i+x) units of "c." 
 
 B, the cost to him of producing n.x units 
 of "d" or X units of **c." 
 
 And the conditions are : 
 
 x>o 
 
 H>i+x (3) 
 
 which hold good, positively, if n>m, or if the 
 relative cost of producing *»d" as compared with 
 "c" is less to B than to A, although "c" costs A 
 more to produce it per unit than it does B. For ex- 
 ample, suppose m=2 : n=4 : x= >^, then each party 
 would save the cost to him of producing one-half 
 a unit of "c." 
 
 Suppose there is competition in the production 
 of the two commodities. If A gave B (i+x) units 
 of "c" for n units of "d," then one unit of "c" 
 ^^ys TTi ^nits of "d." But if E offered ( i -f-x+h) 
 units of "c" for the n units of "d," B would deal 
 with him unless A would do the same. If E, 
 or some other competitor of A, made i+x+hJt^ 
 the exchange value of **c" would be below its cost 
 of production to A, for he would save cost by pro- 
 ducing "d." Suppose now that F, competing with 
 B, offered (n+k) units of "d" for (i+x-f h) units 
 of "c," then B must do the same or be undersold. 
 ^ !f ^.^^^ accept of a very small saving per unit of 
 "d" in order to make a large saving by selling a 
 large quantity of -d." Finally, if F, or some 
 
 V 
 
 VALUE. 
 
 67 
 
 other competitor of B, made k large enough, 
 the result of the competition might be 
 
 i + x + h I + X* (4) 
 
 In which case both A and B would save 
 as much by an exchange of their products as 
 they did at first, which would justify the old 
 saying that it is well for the cobbler to stick to 
 his last. 
 
 If a person wants n, which exchanges in the 
 market for m, and he produces m and exchanges 
 it for n, it costs him the same as m, with the cost 
 of making the exchange added. He may not be 
 able to produce n at all, or only at great cost, 
 while another or others can do so at a small cost 
 to them. Every one usually acquires any home or 
 foreign product by way of exchange at much less 
 than it would cost him to produce it. If this were 
 not so, there would be no motive to induce a per- 
 son to procure m for the purpose of exchanging 
 it for n, or of procuring n for the purpose of 
 exchanging it for m. 
 
 Cost of Production, among a nation of hunters, 
 would not be the only circumstance affecting the 
 exchange value of their products. If it cost twice 
 as much to kill a beaver as to kill a deer, the 
 question would still remain, how much of each 
 was wanted? If beaver were produced in excess 
 of the demand, one of them would not exchange 
 for two deer. This would reduce the supply of 
 beaver. Hence, relative demand is a regulator of 
 relative value. 
 
58 
 
 VALUE, 
 
 I ^ 
 
 Although it may be true that in the same occu- 
 pation and to the same person, usually or on an 
 average, two days' or two hours' labor would be 
 double the cost or sacrifice of one, yet, since men 
 are not exact duplicates of each other, labor in 
 the same occupation for the same period of time 
 will not usually, or on an average, amount to the 
 same sacrifice, or produce the same amount in 
 quantity or value. It is quite obvious that an 
 alert, active hunter, swift of foot, with keen sight 
 and hearing, would usually kill more deer or 
 beaver in the same time than a dull, sluggish 
 hunter, slow of foot, dim or short-sighted and 
 hard of hearing ; also, the former would probably 
 enjoy the hunt and thereby lay down a less quan- 
 tity of ease, liberty, and happiness than the other. 
 Also, men being unlike, some of the hunters 
 would prefer to kill or trap beaver than to scour 
 the country after deer. Whereupon, if one hunter 
 could kill (2+p) deer at the same cost to him as 
 to kill one beaver, and another hunter could cap- 
 ture (i+q) beaver at the same cost to him as to 
 kill two deer, each of them would save cost by an 
 exchange of two deer for one beaver. At that 
 ratio of exchange, every hunter who could, or 
 thought he could, kill two deer at less cost to him 
 than one beaver, would kill deer, and every hunter 
 who could, or thought he could, kill a beaver at 
 less cost to him than to kill two deer, would kill 
 beaver. In a state of freedom, every person will 
 adopt the occupation lying within his power of 
 
 VALUE. 
 
 59 
 
 choice which will, in his opinion, afford him the 
 best reward at the same cost to him, and will 
 measure cost and its reward for himself. There- 
 fore, if among a nation of hunters deer and beaver 
 were killed for the purpose of exchange, their 
 relative value would tend to become such that 
 every hunter of deer would acquire beaver, and 
 every hunter of beaver would acquire deer, at less 
 cost to him by way of exchange than to procure 
 them directly for himself ; for otherwise, a hunter 
 would alter his vocation, which he would have 
 reason to do if too many hunted deer or beaver, 
 or either of the animals became more or less dif- 
 ficult to capture, or varied in quality, or the rel- 
 ative demand for them varied. 
 
 The quantities p and q would be different to 
 the hunters because of their inequality, natural 
 and acquired. Whatever the ratio of exchange 
 might be, the best or most efficient hunters would 
 have more product to consume and exchange than 
 their inferiors. No one of them would receive 
 or be entitled to an average reward unless he 
 were an average hunter ; for, according to the 
 author cited, in the original state of things exist- 
 ing before the advent of the landlord and cap- 
 italist, the whole produce of labor belongs to the 
 laborer as the natural recompense or wages of his 
 labor. But these natural wages, being contingent 
 on the result of the labor, may be very small. 
 For Adam Smith says : '' Among the savage 
 nations of hunters and fishers, every individual, 
 
60 
 
 VALUE. 
 
 who is able to work, is more or less employed in 
 useful labor, and endeavors to provide, as well as 
 he can, the necessaries and conveniences of life 
 for himself or for such of his family or tribe as 
 are either too old or too young or too infirm to 
 go a hunting or fishing. Such nations, however, 
 are so miserably poor that, from mere want! 
 they are frequently reduced, or at least think 
 themselves reduced, to the necessity, sometimes, 
 of directly destroying, and sometimes of abandon' 
 ing, their infants, their old people, and those 
 afflicted with lingering diseases, to perish with 
 hunger, or to be devoured by wild beasts." If, 
 as it is asserted, manual or physical labor pro^ 
 duces all the wealth, it seems strange that a 
 laborer who works for hire should make a better 
 living now, when the landlord and capitalist are 
 said to share with him, than he did when he 
 directed his own labor and shared with nobody. In 
 fact, the socialist strives to convince him that he 
 will always live in the midst of abundance, with 
 very little labor, when the State is his landlord and 
 a swarm of officials and overseers are his masters. 
 In the deer and beaver case, cost of production 
 consists of labor and is measured by a unit of 
 labor time, e. g. an hour's or a day's labor, which 
 is there supposed to cost everyone the same 
 amount of his ease, liberty, and happiness, and to 
 produce in every case the same amount in quan- 
 tity or value, all the deer and also the beaver 
 bemg assumed to be of a uniform size and quality. 
 
 VALUE. 
 
 61 
 
 But after stating that case, Adam Smith adds : 
 "If the one species of labor should be more 
 severe than the other, some allowance will 
 naturally be made for this superior hardship, and 
 the produce of one hour's labor in one way may 
 frequently exchange for that of two hours* 
 labor in the other. Or, if one species of labor 
 requires an uncommon degree of dexterity 
 or ingenuity, the esteem which other men 
 have for such talents will naturally give a value 
 to their produce superior to what would be due to 
 the time employed about it. Such talents can 
 seldom be acquired, but in consequence of long 
 application, and the superior value of their pro- 
 duce, may frequently be no more than a reasonable 
 compensation for the time and labor which must 
 be spent in acquiring them. In the advanced state 
 of society, allowances of this kind for superior 
 hardship and superior skill are commonly made 
 in the wages of labor ; and something of the same 
 kind must probably have taken place in its ear- 
 liest and rudest period." 
 
 In this statement it is assumed that the same 
 species of labor is of equal hardship to everybody. 
 But this is not true. Among a nation of hunters, 
 one would enjoy the chase, and consider the cap- 
 ture of beaver as very dull and irksome ; another 
 would be of a contrary opinion. In the later 
 stages of society some prefer to be a soldier or a 
 sailor than to follow some other occupation for the 
 same reward, while others do not. 
 
62 
 
 VALUE. 
 
 Nor is it true that every person will acquire the 
 same skill in an occupation by the same experi- 
 ence ; for example, in weaving, one operator will 
 attend on more looms than another who has had 
 the same practice, and do it better than the other. 
 In " The Effects of Machinery on Wages," by J. S. 
 Nicholson, Chap. 3, it is stated on the authority 
 of one who knew the facts : " I have known lads 
 to learn the use of the stocking frame and to be 
 able to compete with men in six or eight weeks, 
 and I have known men who have worked at the 
 trade for years and can scarcely make a living. I 
 know a^ this time a case of four men working in 
 one room, and one of the four does as much work 
 as the other three, and earns and receives as much 
 money as the other three." 
 
 The esteem which hunters would have for 
 superior skill, dexterity, and ingenuity would be 
 indicated by giving more for two deer or beaver 
 than for one, or more for a well-made bow or 
 arrow than for an inferior one. Labor of itself 
 has no value, except to keep the body and mind 
 employed and in a healthy condition. As a means 
 of production its value is derived from its product. 
 If that is worthless so is the labor expended upon 
 it. Labor, like a tree, and some other things, is 
 known and estimated by its fruits. 
 
 2. QUANTITY OF LABOR. 
 
 It is obvious from Eq. (i) that the relative cost 
 of commodities "a" and "b,"per unit, depends 
 
 VAL UE. 
 
 63 
 
 on the absolute cost of each of them. Therefore, 
 supposing " c " or a unit of cost to be a unit quan- 
 tity of labor, such unit must be a definite amount, 
 or the theory of natural value based on "quan- 
 tities of labor" becomes weak in the knees. But 
 its chief exponent says (Ricardo, Chap, i. Sec. 2): 
 " In speaking, however, of labor as the foundation 
 of all value, and the relative quantity of labor as 
 almost exclusively determining the relative value 
 of commodities, I must not be supposed to be 
 inattentive to the different qualities of labor, and 
 the dijfficulty of comparing one hour's or one day's 
 labor in one employment with the same duration 
 of labor in another. The estimation in which 
 different qualities of labor are held comes soon 
 to be adjusted in the market with sufficient pre- 
 cision for all practical purposes, and depends 
 much upon the comparative skill of the laborer 
 and intensity of the labor performed. The scale, 
 when once formed, is liable to little variation. If 
 a day's labor by a working jeweler be more valu- 
 able than a day's labor by a common laborer, it 
 has long ago become adjusted, and placed in its 
 proper position in the scale of value." 
 
 According to this statement, the position of 
 labor in the scale of "quantity" is fixed by its 
 position in the scale of " value," i. e. ^, or relative 
 value, measures ^, or relative cost, instead of the 
 contrary. If a day's labor by a working jeweler, 
 or its product, is esteemed in the market to be 
 more valuable than a day's labor by a common 
 
64 
 
 VAL UE, 
 
 laborer, then the quantity of labor done and 
 suffered by the former, per unit of labor time, is 
 proportionally greater than the labor done and 
 suffered by the latter. The wages of a diamond 
 cutter in Amsterdam being $5 per day, and of 
 a common laborer there 25 cents, then, as ad- 
 justed in that market, the comparative quan- 
 tity of their labor, per day, is as 20 to i. 
 And in the same occupation, e. g. jewelry, with the 
 same materials and implements, one jeweler will 
 produce more in quantity or quality than another 
 in the same period of labor time. So also in 
 other occupations, including that of common labor. 
 Nor is the difference immaterial either for prac- 
 tical purposes, or to the theory of natural value. 
 As a matter of fact, two farmers will make butter 
 from the same quality of milk, and the product of 
 one of them will be esteemed in the market at 
 twice the value of the product of the other ; there- 
 fore, as thus adjusted, the quantity of labor done 
 and suffered by the former is double that of the 
 latter. In the opinion of consumers, the sweat 
 and sacrifice of the former, as embodied in his 
 product, exhales a perfume and has an agreeable 
 and wholesome taste, while the sweat and sacrifice 
 of the latter taints his product with soap-grease 
 qualities. 
 
 According to Howell (" Conflicts of Labor and 
 Capital," Chap. 4), in 1877 the weekly wages of 
 engineers in England varied from 25s. to 45s.; of 
 iron founders, in the same locality, from 24s. to 
 
 VALUE. 
 
 65 
 
 45s. He also says (lb.) that a trade or labor union 
 only endeavors to fix a minimum wage, below 
 which none in that employment shall work, or at 
 least those who are members of the union. Any 
 uniformity in wages arises from the effort of 
 employers to make this minimum wage the max- 
 imum in all cases, and also by sifting out the 
 drones. Also a labor union may endeavor to pre- 
 vent the careful, diligent, and efficient workman 
 from " besting " his inferiors, but not with entire 
 success. 
 
 According to Carroll D. Wright (Evolution of 
 Wage Statistics — Quar. Jour, of Economics for 
 January, 1892), in iron works, a crew of nine men 
 all receive different wages, by voluntary agree- 
 ment ; the weekly wages of women in jewelry at 
 Attleboro, Mass., in 1872, varied from $4.50 to $13 ; 
 wages of workingmen in Massachusetts, in 1875, 
 varied from $300 to $1,800 per annum; in 1884, 
 the weekly wages of working girls in Boston, 
 Mass., varied from $1 to $35 ; in 1885, the weekly 
 wages of operatives in cotton goods varied from 
 $5 to $20 and over. 
 
 A person, instead of working for hire or wages, 
 may work for himself or profits. But there is no 
 uniformity in profits, even in the same pursuit ; 
 for otherwise all would succeed and nobody fail 
 in business, except from some natural and inevi- 
 table accident. There are about ten thousand 
 insolvencies per annum in the United States, in 
 prosperous times, with a still greater number of 
 
66 
 
 VALUE. 
 
 VALUE. 
 
 67 
 
 cases where persons retire from business after the 
 loss of the whole or a large part of their capital, 
 before becoming insolvent. Young men and 
 others, with capital or credit, are continually 
 engaging in some business without having the 
 personal elements necessary to success in it, and 
 are continually failing because consumers will 
 not reimburse them the cost to them of their 
 contribution to the supply of their commodity. 
 It is notorious that in the same locality and in the 
 same occupation, one company, firm, or person 
 does better than another, the difference being due 
 to him or those who conduct the business. Mrs. 
 Micawber said that the coal business on the Trent 
 required talent and capital, and that Mr. Micawber 
 was excluded from the business for want of the 
 latter. Nobody would furnish it. If the govern- 
 ment had done so, without interest, and prohibited 
 anybody from underselling him, he might have 
 succeeded. The Barings failed for want of talent. 
 One popular scheme of social reform proposes to 
 put all the young men at common labor for five 
 years ; all the voting, ruling, and managing to be 
 done by the graybeards, who have cut their eye- 
 teeth and retired from all labor, except headwork, 
 on a pension. The young women to be employed 
 as assistant teachers of political economy, and to 
 entertain ** sleepers " by taking them shopping, and 
 with music and sermons furnished by telephone. 
 Adam Smith said (Chap. 5) that labor is the 
 real measure of the exchange value of all com- 
 
 modities, i. e., that | determines ^, Eq. (i). But 
 he says it is difficult to ascertain the proportion 
 between the different qualities of labor. The 
 time spent in two different sorts of work will not 
 always determine this proportion. The different 
 degrees of hardship endured and of ingenuity 
 exercised must likewise be taken into account, 
 and it is not easy to find any accurate measure 
 of either. It is adjusted, however, he says, not 
 by any accurate measure, but by the higgling and 
 bargaining of the market. Therefore, according 
 to him also, ^, as fixed in the market, measures 
 -. But the ratio ^ continually varies ; the quality 
 
 y m 
 
 of the goods varies ; and for the same quality ^ 
 is not the same, even at the same time, to all buy- 
 ers and sellers. If they are equal in all other 
 respects one proves to be a better higgler than 
 another ; but, as a matter of fact, some of them, 
 with equal facilities, produce n or m at less cost 
 than the others. 
 
 He also says (lb.), in substance, that wealth 
 consists of means of satisfaction; that a man's 
 labor will not directly supply him with all of 
 these ; that in order to obtain them in kind, quan- 
 tity, and quality suited to his wants, his wealth 
 must have purchasing power ; having this power 
 it gives its owner a certain command over all the 
 labor and all the produce of labor which is in the 
 market ; and a man's fortune is, therefore, in pro- 
 portion to the extent of this power, or to the 
 
68 
 
 VALUE. 
 
 quantity of other men's labor, or, what is the same 
 thing, of the produce of other men's labor^ 
 which it enables him to purchase or command. 
 Thus he makes the quantity of "other men's 
 labor" to be in proportion to its purchasing 
 power, or to that of its product; e. g., if a week's 
 labor by two engineers in England, in 1877, ^ad, 
 respectively, the purchasing power of 25s. and 
 45s., then the quantities of their labor, per unit 
 of labor time, was in the proportion of 25 to 45. 
 
 3. THE DEER AND FISH CASE. 
 
 Ricardo considered that the doctrine illustrated 
 by the deer and beaver case applied in the later 
 as well as in the early stages of society, and said 
 that the quantity of labor bestowed on commodi- 
 ties, whose production is open to competition, 
 regulates their relative or exchangeable value. 
 In order to harmonize this doctrine with the use 
 of capital as an aid to labor, he said (Chap, i , Sec. 
 3): "Even in that early state to which Adam 
 Smith refers, some capital, though possibly made 
 and accumulated by the hunter himself, would be 
 necessary to enable him to kill his game. With- 
 out some weapon, neither the deer nor the beaver 
 could be destroyed, and, therefore, the value of 
 the animals would be regulated, not solely by the 
 time and labor necessary to their destruction, but 
 also by the time and labor necessary for provid- 
 ing the hunter's capital, the weapon, by the aid 
 of which their destruction was eflFected." 
 
 VALUE. 
 
 69 
 
 Since the hunter could not kill deer and beaver 
 without a weapon, he must, theretofore, have ac- 
 quired a surplus ; for in order to make the weapon 
 its maker must have materials, tools, and subsist- 
 ence during the time of its manufacture. This 
 surplus would not be due merely to the exercise 
 of greater industry than was necessary to support 
 him, but also to the exercise of frugality or absti- 
 nence from consuming or squandering what this 
 greater industry produced. Frugality or abstinence 
 being essential to the existence of capital, is an ele- 
 ment to be considered. Having capital the hunter 
 became enabled to procure a weapon and kill 
 deer and beaver, a thing which was impossible 
 for him to do without it. Competition in killing 
 them would be limited to those who possessed 
 the necessary capital ; those who failed to acquire 
 it would be compelled to subsist as they did 
 theretofore. 
 
 Also a right of property must have then 
 existed. And the hunter, being the owner of his 
 weapon, would be entitled to all the benefit he 
 could derive from it, either by using it himself or 
 by demanding a profit for its use by others. 
 
 But assuming all men to be exactly alike, each 
 of them would acquire an equal capital in an 
 equal period of labor time ; whereupon the author 
 cited says (lb.) : " Suppose that in the early 
 stages of society the bows and arrows of the 
 hunter were of equal value and of equal durability 
 with the canoes and implements of the fisher- 
 
ii|i 
 
 70 
 
 VALUE. 
 
 VALUE. 
 
 71 
 
 man, both being the produce of the same quantity 
 of labor. Under such circumstances, the value of 
 the deer, the produce of the hunter's day's labor, 
 would be exactly equal to the value of the fish, 
 the produce of the fisherman's day's labor. The 
 comparative value of fish and game would be 
 entirely regulated by the quantity of labor real- 
 ized in each." 
 
 It is not said that the relative value of the two 
 products would be adjusted in the market with 
 sufiicient precision for all practical purposes, nor 
 that their relative value would be adjusted, not by 
 any accurate measure, but by the higgling and bar- 
 gaining of the market ; but it is asserted that the 
 value of the two products would be "exactly 
 equal." It was necessary to be exact, for a small 
 difference in cost or value per unit of product 
 during a lifetime, or for a shorter period in produc- 
 tion on a large scale, would make a great difference 
 in the total result. A difference of a fraction of 
 a cent per yard in the cost of making cotton cloth, 
 or in the price obtained for it, makes the dif- 
 ference between success and failure in the busi- 
 ness, and this difference might be solely due to 
 one of its producers being a better higgler than 
 the other. Each of them is a buyer of materials, 
 etc., and a seller of products on a large scale. 
 
 The statement that the relative value of the 
 two products would be entirely regulated by the 
 quantity of labor realized in them is not true. 
 Suppose it cost the same to kill a deer as to catch 
 
 f 
 
 x fish ; this would not determine how many of 
 each was wanted at that ratio. The deer might 
 be large and fat, the fish small and poor, or vice 
 versa. The quantity required of each at that 
 ratio would depend upon their relative use value. 
 If the relative demand for them at that ratio was 
 for n times as many fish as deer, evidently n is 
 unknown. If there were too many fishermen, 
 the supply of fish would be in excess of the 
 demand for them. Some fishermen therefore must 
 become hunters ; but to do so, a fisherman must 
 abandon his skill and implements, and acquire 
 those of a hunter. Bows and arrows being in 
 demand, and canoes, etc., not, the implements of 
 the hunter and fisherman would not then be of 
 equal value. Relative demand is a regulator of 
 relative value. 
 
 This may be shown by a formula : 
 
 If the product of each hunter's day's labor was 
 p deer, then x.p fish would be the product of 
 each fisherman's day's labor. Assume p= i. 
 a = total number of producers, 
 y= total number of hunters, 
 
 ^= total number of fishermen, 
 y + ^=a.\ ^=number of hunters, (5) 
 
 a.n . 
 n + x' 
 
 number of fishermen. 
 
 All of the hunters and fishermen being exactly 
 alike, all of them would want the same ration. 
 
 Suppose x=2, obviously n still remains un- 
 known, and may be set at any figure. For n=3 : 40 
 
73 
 
 VALUE. 
 
 VALUE. 
 
 73 
 
 per cent would be hunters and 60 per cent fisher- 
 man. Total relative demand, 40 deer to 120 fish. 
 Each ration would be 0.4 deer to 1.2 fish. There 
 would be 24 surplus deer to be exchanged for 48 
 surplus fish, per hundred of producers. 
 
 For n=>i : 80 per cent would be hunters, and 
 20 per cent fisherman ; total relative demand, 80 
 deer to 40 fish. Each ration would be 0.8 deer to 
 0.4 fish, leaving 16 surplus deer to be exchanged 
 for 32 surplus fish. 
 
 But men are not all exactly alike ; therefore, 
 with the same implements the best hunter would 
 usually kill more game per day than the poorest 
 hunter, and the product of each of them would 
 not be " exactly equal " to that of the same fisher- 
 man. But, for the same reason, the bows and 
 arrows of the hunters would not all be exactly 
 alike merely because they were the product of 
 the same number of day's labor by each of them. 
 There is a difference in bows and arrows and in 
 the men who use them. Everybody could not 
 bend the bow of Ulysses, or shoot like William 
 Tell or Robin Hood; nor could every Israelite 
 kill Goliath with a sling, nor with David's sling. 
 In every stage of society men differ, physically 
 and mentally ; fish, game, and other things vary 
 in quality and quantity ; one generation continu- 
 ally dies out and another succeeds,* having dif- 
 ferent capacities, tastes, and desires from their 
 fathers ; n, or relative demand (Eq. 5), and x, or 
 relative cost, both vary. It is, therefore, hardly 
 
 ,1 
 
 worth while to assert or assume that all men are 
 exactly alike, as if they were cut out by some 
 machine, and thereupon to assert that under free 
 competition and with equal facilities, all hunters, 
 fishermen, or other competitors will produce the 
 same amount in quantity or value in the same 
 period of labor time or at the same cost. In fact, 
 some men will produce more than others having 
 the same facilities, from the same land, mine, 
 factory, workshop, business, or occupation. If 
 there is anything whose cost is uniform, i. e., the 
 same to everybody, it ought to be pointed out, so 
 that those who make a poor living, or fail in busi- 
 ness, might engage in its production and succeed 
 as well as anybody. 
 
 4. THE SUPPLY REQUIRED. 
 
 The author cited also says (Ricardo, Chap. 2): 
 "The exchangeable value of all commodities, 
 whether they be manufactured, or the produce of 
 mines, or the produce of land, is always regulated, 
 not by the less quantity of labor which will sufiice 
 for their production by those who have peculiar 
 facilities of production, but by the greater quan- 
 tity of labor necessarily bestowed on their pro- 
 duction by those who have no such facilities ; by 
 those who continue to produce them under the 
 most unfavorable circumstances, meaning by the 
 most unfavorable circumstances the most unfavor- 
 able under which the quantity of produce required 
 renders it necessary to carry on the production." 
 
74 
 
 VALUE. 
 
 VALUE, 
 
 75 
 
 From this it follows that since one person, 
 with the same facilities, will produce more than 
 another in the same period of labor time, from 
 the same land, mine, factory, or workshop than 
 another, he does it by a less ''quantity of labor." 
 Also, it is the quantity of labor "necessarily 
 bestowed " on the most costly portion of "the sup. 
 ply required " of it, which is the foundation, cause, 
 or measure of the exchange value of the whole 
 supply, per unit of quantity. When the cost of a 
 product is not uniform or the same to everybody, 
 " the quantity of produce required " determines 
 the quantity of labor which must be necessarily 
 bestowed on the most costly portion of such sup- 
 ply. Wherefore, it would seem to be the fact 
 that relative demand is the regulator of the 
 exchange value of commodities, by determining 
 how much cost shall be expended on the most 
 costly portion of the supply required of each. 
 
 When the cost of a product is not uniform, 
 x.c or y.c (Eq. i) represents the cost per unit of 
 the most costly portion of its supply. 
 
 Every two commodities, the cost of both of 
 which is not uniform, have an indefinite number 
 of natural values. 
 
 First. Suppose that the supply required of a 
 product whose cost was not uniform remained 
 constant ; if the production of the less costly por- 
 tions of such supply increased or decreased, the 
 cost of the most costly portions of such supply 
 would vary. Some of the more efficient pro- 
 
 ducers might die, or change their product for one 
 which produced a greater profit, or by increasing 
 their production save in cost per unit of product 
 and make a greater total profit by taking a smaller 
 profit per unit of product. 
 
 Secondly. Suppose the cost of commodity " a " is 
 uniform at 40c. per unit, while the cost of " b " is 
 not uniform, the cost of the most costly portion of 
 its supply being 15 c. per unit, then their relative 
 value is " natural " when three units of " a " have 
 the same market value as eight units of " b." If 
 the supply required of " b " increased, the cost of 
 the most costly portion of such supply would 
 increase or decrease, depending upon whether 
 such increased or decreased supply required an 
 increased or decreased cost per unit for its pro- 
 duction, e. g. 15 ± 5. For the plus sign, the rela- 
 tive value of " a " and " b " would be called natural 
 when one unit of "a " had the same market value 
 as two units of " b." For the minus sign, their rela- 
 tive value would be natural when one unit of " a " 
 had the same market value as four units of "b." 
 
 If the cost of both " a *' and " b " was not uni- 
 form, then ^ (Eq. i) might become ^. 
 
 5, GOLD AND SILVER. 
 
 In treating of money, the author cited says 
 (Ricardo, Chap. 27) : " Gold and silver, like other 
 commodities, are valuable only in proportion to 
 the quantity of labor necessary to produce them 
 and bring them to market. Gold is about fifteen 
 
70 
 
 VAL UE. 
 
 times dearer than silver, not because there is a 
 greater demand for it, nor because the supply of 
 silver is fifteen times greater than that of gold, 
 but solely because fifteen times the quantity of 
 labor is necessary to procure a given quantity of it." 
 According to this statement, if silver cost 
 fifteen times as much as gold, to procure an equal 
 quantity of it, silver would be fifteen times dearer 
 than gold ; and if they could be procured at the 
 same cost, their value would be the same for equal 
 weights of each. But if everybody preferred 
 gold to silver in dentistry ; a gold watch to a silver 
 one ; money, plate, jewelry, and ornamentation of 
 gold ; and if gold, in addition to being more beau- 
 tiful and durable than silver, were more suitable 
 for all purposes, then no silver would be wanted 
 at an equal cost. Who would pay the same price 
 for an inferior article ? But if silver has a greater 
 use value than gold for some purposes, as being 
 more sonorous, the best conductor of heat and 
 electricity, of great use in photography, and for 
 various purposes in chemistry and the arts, a 
 supply of silver might be required to answer some 
 or all of these purposes, although its cost equaled 
 or even exceeded that of gold. Gold was " about " 
 fifteen times dearer than silver, because it was 
 wanted at its price, and not merely because it cost 
 fifteen times more to produce it than silver. 
 Neither metal could be procured unless its 
 exchange value were sufl&cient to induce its 
 production. 
 
 VALUE. 
 
 77 
 
 Since about 1873 silver has been largely disused 
 for money. Germany adopted a gold standard, 
 and other countries have done and are doing the 
 same ; also, electroplate, German silver, and other 
 alloys have largely supplanted silver for various 
 other purposes. Although the production of both 
 metals has very greatly increased since 1873, yet 
 in 1896 gold was over thirty times dearer than 
 silver. 
 
 The cost of procuring either metal is not uni- 
 form. Therefore, the author might have said 
 that gold was about fifteen times dearer than sil- 
 ver solely because the cost of the most costly 
 part of the supply required of gold was fifteen 
 times greater than the most costly part of the 
 supply required of silver, for equal weights of 
 each. And unless he ascertained in units of labor 
 what was the quantity of it "necessarily bestowed " 
 on the most costly portion of the supply of each 
 metal, per ounce, or other unit of quantity, he 
 probably measured the relative cost of their pro- 
 duction by their relative market value for equal 
 weights of each, and which then made gold 
 ** about" fifteen times dearer than silver. 
 
 Gold occurs in an almost pure state in the beds 
 of streams, in alluvial deposits, in certain rocks, 
 and also combined with other metals and sub- 
 stances in veins or lodes. Silver rarely occurs 
 native, but is found in deposits and veins of its 
 ores combined with other metals and substances, 
 sometimes with gold. The deposits and veins of 
 
78 
 
 VALUE. 
 
 VALUE. 
 
 79 
 
 both metals vary greatly in richness and facility 
 in mining and extracting the precious metal. 
 The same mine varies continually in this respect, 
 rarely producing for any length of time a uniform 
 kind and quantity of ore. In some cases the prec- 
 ious metals, or one of them, is the chief product, 
 and the baser metals, or some one or more of them, 
 are a by-product. In other cases the precious metal 
 is the by-product. There are mines of lead and of 
 copper containing precious metal, and especially 
 silver, in the ore, which would be extracted 
 although its value was quite nominal. Twenty 
 ounces or less of silver in a ton of pig lead greatly 
 injures its value. In some countries mining is 
 done mainly by manual labor, and the ore reduced 
 by crude and primitive methods ; in others, mining 
 and reduction of the ore is done by and with the 
 latest improved methods and machinery. 
 
 Some countries produce gold only, as Africa, 
 Brazil, also formerly the United States and Aus- 
 tralia; others, silver, as Peru; others produce 
 both. Great Britain produces neither, except to 
 a very small amount and as a by-product ; yet the 
 London quotations fix daily the relative value of 
 gold and silver throughout the commercial world. 
 
 Those who produce the most costly portion of 
 the supply of either metal, wherever they may be, 
 do so for a reward, actual or expected, which they 
 deem adequate, each of them measuring cost and 
 its reward for himself. A Chinaman will work over 
 a placer which has been abandoned by an Ameri- 
 
 can and find gold enough to reward his sacrifices. 
 According to Jacobs (" Precious Metals," Chap. 
 25): " In Columbia, river washing is extensively 
 practiced. The sand at the bottom of the rivers 
 abounds in particles of gold and platinum, but the 
 labor is attended with little profit. It is carried 
 on by an indolent race of independent peasants, 
 who have few wants, and who, by some exertion 
 and occasional success, gain sufficient to subsist 
 on scanty resources." 
 
 The cost of foreign products, e. g., gold and 
 silver in England, is the cost of their acquisition 
 (Ricardo, Chap. 7). If an English trader ex- 
 changed or exchanges glass beads, colored cloth, 
 rum, etc., for gold on the coast of Guinea, in this 
 exchange of equivalents (?) the trader might say 
 that the negro's reward outweighed its cost, or 
 else he would not have worked for it, and might 
 also say the same as to an exchange of English 
 wares for gold with an Asiatic or a South Ameri- 
 can Indian, or for silver with a Peruvian or Mex- 
 Neither metal would be acquired always, 
 
 lean. 
 
 everywhere, and by every trader, or any one of 
 them, at the same cost. 
 
 It is the exchange value, or general purchasing 
 power, of either metal which justifies its pro- 
 duction or acquisition, and not merely its value 
 relative to the other ; therefore, if the exchange 
 value of either be increased by any means affect- 
 ing the demand for it, that will extend the margin 
 of its production and increase its supply, while a 
 
80 
 
 VALUE, 
 
 VALUE. 
 
 81 
 
 decrease in its exchange value, caused as above, 
 will discourage its production and tend to decrease 
 its supply. Also, a decrease in the cost of pro- 
 duction of either, caused, e. g., by improvements 
 in mining and metallurgy, stimulates its produc- 
 tion and tends to increase its supply. 
 
 According to the report of the Director of the 
 Mint for 1896, p. 221, the average commercial 
 ratio of silver to gold during 1894 was 32.56 ; dur- 
 ing 1895 was 31.60; during 1896, 30.66, or an 
 average for the three years of 31.27 to i. 
 
 The same report, p. 46, gives the approximate 
 stock of money in the principal countries of the 
 world in dollars (counting gold per fine ounce = 
 $20.671834, and silver per fine ounce =$1.292929, 
 p. 230). Gold, $4,143700,000 ; silver, full tender! 
 $3,616,700,000; limited tender, $620,200,000; un- 
 covered paper, $2,558,000,000. 
 
 The product of both metals has been increas- 
 ing for many years, very great improvements 
 having been made in mining and in metallurgy. 
 As to the effect of the cyanide process, see p. 132 
 of the report. The production during 1895 was : 
 Gold, fine ounces, 9^694,640= $200,400,000 ; silver, 
 fine ounces, 168,308,3 5 3 =$2 17,610,800 (p. 232 of 
 the report). At this rate of production the 
 amount produced in about twenty years would 
 equal the world s present stock of gold and silver 
 coins. 
 
 Although the most costly portion of the 
 increased and increasing supply of silver has been, 
 
 and continues to be, produced at a profit sufficient 
 to induce its production, the producers of silver 
 and others, who constitute a numerous and 
 powerful party, insist that the relative value of 
 the two metals shall be fixed arbitrarily and by 
 force of law at a ratio more favorable to silver 
 than the existing commercial ratio, by means of 
 what is called bimetallism, or the free and 
 gratuitous coinage of the two metals at such fixed 
 legal ratio. Since everything is bought and sold 
 for money the world over, it is insisted that inter- 
 national bimetallism at a fixed ratio as above will 
 cause the commercial ratio to agree with it, 
 although free coinage by one nation only would 
 not have that effect, but merely cause its money 
 to consist of the cheaper metal. 
 
 If bimetallism as above were universally 
 adopted, unless there were a uniform system of 
 coinage, foreign trade would be carried on as now, 
 by estimating metal, whether coined or not, as 
 so much bullion. A people accustomed to 
 pounds, shillings, and pence, or other system of 
 money, would hardly consent to use strange coins 
 and systems of money, or precious metal in the 
 form of bullion, as it was used in the time of 
 Abraham. Also, although both metals were 
 freely coined everywhere, a whole people, or a 
 whole community, or individuals separately, 
 might, and probably would, stipulate for payment 
 in the kind of coin which they preferred, and 
 which would probably be the one with which they 
 
 6 
 
82 
 
 VALUE. 
 
 had become familiar, and by means of which they 
 had been accustomed to estimate values. Also, 
 some nations prefer to have a large part of their 
 currency in paper money, and some from choice 
 or necessity have no other kind. Heretofore 
 every nation has adopted a kind and system of 
 money which suited its people and their condition. 
 International bimetallism would be indefinitely 
 postponed if it were necessary to wait until it was 
 universally agreed to. If the countries which now 
 refuse free coinage to silver, or the principal part 
 of them, as, for example, the United States, Great 
 Britain, Canada, Egypt, Australia, France, Ger- 
 many, Belgium, Austria- Hungary, Netherlands, 
 Denmark, Sweden, and Norway, would agree to 
 adopt bimetallism at the ratio of, e. g., 15^ to i, it 
 would be quite as much as can be expected. Those 
 using a paper or silver currency may be omitted. 
 The money of the countries above named, ex- 
 pressed in United States dollars coined at the 
 ratio of 15.988+ to i, consists of $3,255,000,000 in 
 gold; $1,214,800,000 in full tender silver; and 
 $1,113,200,000 in uncovered paper (Report of the 
 Director of the Mint for 1 896, p. 46). According to 
 the above report, p. 232, the world's production of 
 gold and silver during 1895, expressed in United 
 States dollars, was $418,016,800. Deducting one- 
 fifth of this for the new bullion used in the indus- 
 trial arts, and assuming that all old material derived 
 therefrom is again used solely for that purpose, 
 then at the rate of production of the precious 
 
 VALUE. 
 
 83 
 
 metals during 1895 there could be added to the 
 currencies of the gold-standard countries above 
 named, coin to the amount, as expressed in 
 United States dollars, of $335,000,000 per annum, 
 which, in less than fourteen years, would double 
 the full legal-tender coins of those countries, and 
 enable them also to double their present stock of 
 uncovered paper. All of the new bullion would 
 be coined in gold standard countries. For silver, 
 when coined there, would have its purchasing 
 power doubled and a debt-paying power at the 
 fixed ratio equal to gold. For example, every 
 debt payable in England would become at once 
 payable in silver pounds sterling coined at the 
 ratio, e. g., of 151^ to i. No gold or silver bullion 
 would be coined in silver standard countries, e. g., 
 into rupees ; for the silver in those countries' must 
 rise to its value as bullion, which would probably 
 be caused by its exportation for coinage in the 
 gold standard countries. 
 
 International bimetallism as above, if adopted 
 and enforced, would double the gold price of silver, 
 enrich its present producers, extend the margin 
 of its production, greatly increase its supply, 
 decrease prices and increase debts in silver stand- 
 ard countries, raise prices, lessen debts, encourage 
 speculation, and (it is said) thereby give a fillip 
 to business in gold standard countries. 
 
 An advocate of bimetallism (F. A. Walker), 
 who favors cheap money and the ** fillip" idea] 
 declines to base his argument on any specific 
 
 n 
 
84 
 
 VAL UE. 
 
 ratio, with good reason, for the question is, bi- 
 metallism being agreed to, how cheap shall money 
 be made ? Since the coinage ratio to be adopted 
 is purely arbitrary, suppose it were fixed at i to i. 
 The total output of silver during the two years 
 1894-5 was 332,918,747 fine ounces (above report, 
 p. 232), which at $20.67 per ounce would coin into, 
 in United States dollars, over $6,769,000,000 ; three 
 years of product would coin into more than the 
 world's present stock of coins. This hardly seems 
 desirable, unless a confiscation of all debts and 
 the adoption of a Chinese currency is considered 
 to be so. How much ought debts to be confis- 
 cated and prices be raised in order to give the 
 proper '* fillip" to business? 
 
 Another advocate of international bimetallism 
 (" Popular Fallacies Regarding Bimetallism," by 
 Sir R. P. Edgcombe, p. 143) says that the Argentine 
 paper dollar, worth one-quarter its nominal value 
 in gold, enabled that country to undersell India in 
 wheat, whose silver rupee had only depreciated 
 one-half. Sundry American advocates of bimet- 
 allism insist that the depreciated India rupee has 
 enabled that country to undersell the United 
 States in the same article. From this it would 
 seem that if the United States would adopt 
 a paper currency more depreciated than 
 that of Argentine, this country could under- 
 sell all the world in all products. The proper 
 way to enrich this country is to make the 
 dollar smaller. 
 
 VALUE. 
 
 85 
 
 If a cheap money is desirable, why not have an 
 exclusively paper currency? It is workable al- 
 though made very abundant. After it has given 
 one "fillip" to business, make the money more 
 abundant and give business another ''fillip." 
 Why not adopt an international paper money, so 
 that no nation will be enabled to enrich itself and 
 undersell others by cheapening its money, and 
 the whole world thereby enjoy " the endless bene- 
 fits of a common currency" at a nominal cost? 
 
 It is asserted by the advocates of the free coin- 
 age of silver that gold has appreciated since 1873, 
 relative to other things, because their gold price 
 has fallen ; not because of the decreased cost of 
 their production, but because of the appreciation 
 in the value of gold. Wages have greatly in- 
 creased since 1873, as estimated in gold coin. 
 Hence, gold has not appreciated, but in fact de- 
 preciated relative to wages ; gold wages have in- 
 creased greatly, and real wages, or the purchasing 
 power of money wages, still more. This point is 
 attempted to be evaded by saying that the laborer 
 gets a larger share of the product than he did 
 before. But his labor, aided by improved meth- 
 ods and machinery, has become more productive 
 than it was in 1873, so that although he gets more 
 product, it does not follow that he gets a larger 
 share of the total product than before. Whether 
 he does or not, in this country money wages are 
 paid in gold or its equivalent, and since the 
 laborer gets more gold for his labor than he did 
 
86 
 
 VALUE. 
 
 in 1873, therefore, in this country at least, gold 
 has depreciated relative to labor. According to 
 very high authority, labor is the real measure of 
 the exchange value of all commodities. In the 
 Presidential canvass of 1896, the laborers gener- 
 ally failed to see that wages paid in cheap dollars 
 would benefit them. If it were desirable to pay 
 them in such dollars, it could be more readily 
 effected by a paper inflation of the currency than 
 by its inflation with silver dollars coined at 15^^ 
 to I. 
 
 The effect of international free coinage would 
 seem to be to discourage the production of gold 
 and encourage the production of silver ; to narrow 
 up the margin of production of the former, and 
 extend that of the latter. 
 
 6. AN AGGREGATE SUM OF LABOR. 
 
 In another illustration of the theory that the 
 exchange value of products is in proportion to 
 the quantity of labor, direct and indirect, be- 
 stowed on their production, it was said (Ricardo, 
 Chap. I, Sec. 3): "In estimating the exchange- 
 able value of stockings, for example, we shall 
 find their value, comparatively with other things, 
 depends upon the total quantity of labor neces^ 
 sary to manufacture them and bring them to 
 market. First, there is the labor necessary to 
 cultivate the land on which the raw cotton is 
 grown ; secondly, the labor of conveying the cot- 
 ton to the country where the stockings are to be 
 
 
 VALUE. 
 
 87 
 
 manufactured, which includes a portion of the 
 labor bestowed in building the ship in which it 
 is conveyed, and which is charged in the freight 
 of the goods; thirdly, the labor of the spinner 
 and weaver ; fourthly, a portion of the labor of 
 the engineer, smith, and carpenter who erected the 
 buildings and machinery, by the help of which 
 they were made; fifthly, the labor of the retail 
 dealer and many others whom it is unnecessary 
 to particularize. The aggregate sum of these 
 various kinds of labor determines the quantity of 
 other things for which these stockings will ex- 
 change, while the same consideration of the vari- 
 ous quantities of labor which have been bestowed 
 on those other things will equally govern the por- 
 tion of them which will be given for the stock- 
 ings." 
 
 Although not mentioned in the statement 
 above quoted, yet the fact is that no one would 
 prepare land for cultivation, build ships, make 
 stockings and other things for the purpose of 
 exchange unless a right of property existed and 
 its owner was protected in its enjoyment ; there- 
 fore, a portion of the various kinds of labor ex- 
 pended to protect persons and property on land 
 and water against robbers, pirates, and others 
 who claim an equal right to the earth, would fig- 
 ure in the above mentioned *' aggregate sum " 
 unless such protection was furnished gratis. 
 
 Also the cost of a foreign product, e. g. cot- 
 ton in England, is the cost of its acquisition, and 
 
88 
 
 VALUE. 
 
 VALUE, 
 
 89 
 
 not of its production (Ricardo, Chap. 7). In order 
 to state "an aggregate sum" correctly there must 
 be not only a proper unit, but also the proper 
 items. Therefore, it seems quite proper to inquire 
 what the stockings cost their maker. The pro- 
 ducers of cotton, machinery, etc., sell their 
 products, either directly or indirectly, to him, so 
 that it is the cost of the stockings to him relative 
 to their exchange value which induces their pro- 
 duction by him. The cost of the cotton, mill, 
 machinery, etc., to him would be the then value 
 of what he gave for them, whatever may have 
 been theretofore the cost to him of acquiring the 
 means necessary to make the purchase. Whether 
 he obtained such means by the very painful 
 exercise of industry and frugality during a long 
 period of time, or from profits realized by him in 
 the production of the less costly portion of the 
 supply required of some commodity, or from 
 speculations in buying and selling, or by gift or 
 inheritance, his capital would equally enable him 
 to engage in the manufacture of stockings. 
 
 Laborers, although properly instructed and 
 directed, can not build a ship, make machinery, 
 etc., unless they are provided with subsistence,' 
 implements, and materials. No one can produce 
 anything for sale unless he possesses means suffi- 
 cient to procure the necessary materials and im- 
 plements, and to support him until his product 
 by its sale will replace his outlays ; thereafter his 
 further outlays are made from the replacement of 
 
 >;. 
 
 his capital by the sale of his product, if sufficient 
 for the purpose. 
 
 The theory of natural value is based on free 
 competition, which is limited to those who have 
 the necessary capital and are induced by a suffi- 
 cient motive to take part in it. They determine, 
 in view of the present and prospective market 
 value of commodities, what things shall be pro- 
 duced for sale, each of them deciding for himself 
 what his product shall be. If every competitor 
 thought he could obtain a better reward for his 
 labor and capital in some other way, no cotton 
 stockings would be produced for sale ; for in such 
 case their exchange value, in the opinion of each 
 competitor, would be below their cost of produc- 
 tion to him. The relative cost of products, which 
 is said to regulate their relative value, is their 
 relative cost to those who own and produce them 
 in the market for sale. 
 
 Those who work for hire do not determine the 
 nature of the product nor the method of its pro- 
 duction. If any of them do, they are not ordinary 
 hired men, but as managers or foremen are paid, 
 often large sums, for their mental labor and busi- 
 ness ability. Hired laborers do what they are 
 directed to do by their employer for a reward to 
 be paid to them whether their labor produces any- 
 thing of value or is profitable to their employer 
 or not; that is a matter for him to consider. 
 When there is a loss his hired men set up no claim 
 to a share in it. The cost of hired labor to him is 
 
90 
 
 VALUE. 
 
 I 
 
 the value of what he pays for it. Wages is one 
 of his outlays, which he pays out of his capital 
 when he begins business, and thereafter from its 
 replacement by the sale of his product, if suffi- 
 cient for the purpose, and if not, then from his 
 other resources. 
 
 According to the author cited, the cost of the 
 stockings consists of the labor bestowed on the 
 cotton and a portion of the labor bestowed on the 
 ship, mill, machinery, etc. The stocking-maker, 
 by the purchase of them, steps into the shoes of 
 their producers, who, without capital, could not 
 have produced them ; for even the hunter could 
 not kill game without a weapon. If no more 
 stockings could be produced by the same •* quan- 
 tity of labor" intelligently directed, or "neces- 
 sarily bestowed," when a part of it is indirectly 
 expended upon a knitting mill than if all the 
 labor were directly expended in knitting the 
 stockings by hand, there would be no motive for 
 building it ; nor would there be any such motive 
 unless the stocking-maker could gain something 
 by its use, instead of employing laborers to spin 
 the yam on spinning wheels and knit the stock- 
 ings with knitting needles. How they could 
 make the stockings without implements of some 
 kind would seem to be more difficult than to kill 
 game without a weapon. 
 
 But it is said that while implements are pro- 
 ductive of quantity, they are not productive of 
 value. For (Ricardo, Chap. 20): "If an improved 
 
 VALUE. 
 
 91 
 
 piece of machinery should enable us to make two 
 pair of stockings instead of one, without addi- 
 tional labor, double the quantity will be given 
 for a yard of cloth. If a similar improvement be 
 made in the manufacture of cloth, stockings and 
 cloth will exchange in the same proportion as 
 before, but they will both have fallen in value ; 
 for in exchanging them for hats, for gold, or 
 other commodities in general, twice the former 
 quantity must be given. Extend the improve- 
 ment to the production of gold and every other 
 commodity, and they will regain their former 
 proportions. There will be double the quantity of 
 goods annually produced in the country and there- 
 fore the wealth of the country will be doubled, 
 but this wealth will not have increased in value." 
 But, in such case, every commodity, per unit 
 of quantity, would have the same purchasing 
 power as before the increase ; and the number of 
 units being doubled, their value expressed in 
 terms of a unit of any one of them, as an ounce 
 of gold, would be doubled, although their ratio 
 of exchange per units of quantity remained the 
 same. Also, in such case, if a hired laborer, oper- 
 ating the improved machinery, received for the 
 same " quantity of labor " the same number of 
 units of commodity as before, they would have 
 the same purchasing power and the same value 
 to him as before ; the increase in quantity being 
 due, as above supposed, solely to the improved 
 machinery, would justly belong to its owners. 
 
92 
 
 VALUE. 
 
 VALUE. 
 
 93 
 
 If the original quantity were doubled, not by 
 improved machinery, but by the laborers working 
 longer hours and with greater diligence, or by 
 doubling the number of laborers, commodities 
 would, according to the author cited, exchange in 
 the same proportions as before. In this case, 
 also, there would be double the quantity of com- 
 modities produced in the country, and therefore 
 the wealth of the country would be doubled, but 
 this wealth would not have increased in value 
 any more than if the quantity were doubled by 
 using improved machinery, as above supposed. 
 
 The author cited also says (Chap. 20): "If ten 
 men turned a corn mill, and it was discovered 
 that by the assistance of wind or water, the labor 
 of these ten men may be spared, the flour which 
 is the product partly of the work performed by 
 the mill would immediately fall in value in pro- 
 portion to the labor saved." If so, the owner of 
 the old mill would gain nothing by discarding it 
 for the new one, even if he could have it for noth- 
 ing. It is also said (Ricardo, Chap. 30) : " If the 
 natural value of bread fell 50 per cent, the demand 
 for it would not greatly increase, for no one would 
 desire more than would satisfy his wants, and, as 
 the demand would not increase, neither would the 
 supply, for a commodity is not supplied because 
 it can be produced, but because there is a demand 
 for it." In such case consumers would obtain 
 their supply of bread for one-half as much of their 
 products as before, thus leaving the other half 
 
 unsold, while those whose labor was saved would 
 be compelled to compete with them in order to 
 obtain their supply of flour and other necessaries. 
 If double the original quantity of bread was 
 produced, the supply would be nearly 100 per cent 
 in excess of the demand. And since the supply 
 must conform to the demand in order to exchange 
 or sell at its natural value, it follows that mis- 
 directed labor confers no value, or at least no 
 value in proportion to its quantity. Somebody 
 must determine beforehand whether there is a 
 demand for a product, and if so take the risk that 
 the supply is not in excess of the demand. Hired 
 laborers merely perform the task assigned to 
 them ; whether the result of their labor will be 
 worth much, little, or nothing is not for them to 
 determine. Their claim to a reward rests upon 
 the ground of monopoly ; an employer can have 
 their labor by paying for it, otherwise not. The 
 least they can permanently accept is a subsist- 
 ence for themselves and their families ; the most 
 an employer can afford to give is an amount 
 which will leave his capital intact and also a sup- 
 port for him and his family. Between these 
 limits the amount of reward to be paid for hired 
 labor is a matter of negotiation between the 
 parties. When the employer can gain by adopt- 
 ing improved methods and machinery, he adopts 
 them instead of using hired labor. 
 
 A blind horse hitched to a lever, with his 
 halter fastened to a pole in front of him, will lead 
 
 ■^ 
 
^4 
 
 VALUE. 
 
 himself round and do the work of several men, or 
 the propelling force maybe wind or water. 
 
 Adam Smith says that, in the first steam 
 engines, a boy was constantly employed to open 
 and shut alternately the communication between 
 the boiler and the cylinder, according as the piston 
 ascended and descended. A boy thus employed 
 observed that by tying a string from the handle 
 of the valve which opened the communication 
 to another part of the machine, the valve would 
 open and shut without his assistance. Thereupon 
 the string dispensed with the labor of the boy. 
 
 He also says: **A broad- wheeled wagon, 
 attended by two men and drawn by eight horses, 
 in about six weeks' time, carries and brings back 
 between London and Edinburgh, near four ton 
 weight of goods. In about the same time a ship 
 navigated by six or eight men, and sailing 
 between the ports of London and Leith, fre- 
 quently carries and brings back 200 ton weight of 
 goods. Six or eight men, therefore, by the help 
 of water carriage, can carry and bring back in the 
 same time the same quantity of goods between 
 London and Edinburgh as fifty broad-wheeled 
 wagons attended by 100 men and drawn by 400 
 horses. A train of cars, attended by six or eight 
 men or less, will now carry between the same 
 points a much greater quantity of goods in less than 
 one-tenth of the time. An ocean steamer, carry- 
 ing thousands of tons of freight and hundreds 
 of passengers, will cross the Atlantic in a week. 
 
 VALUE. 
 
 95 
 
 In the time of Adam Smith, ten men, by exert- 
 ing themselves, could make 48,000 pins in a day. 
 In 1888 a machine made 180 pins of a greatly 
 superior quality in a minute. The coil of wire 
 was put in its proper place, the end fastened, and 
 the almost human piece of mechanism with its 
 iron fingers did the work. Seventy machines 
 were tended by three men, while a machinist 
 with a boy helper kept them in order. After 
 allowing for stoppages, the machines produced 
 per day over 20,000 papers of pins of 300 pins 
 each. ('* Recent Economic Changes," by Wells, 
 p. 60.) In Adam Smith's time an expert nailer 
 could make several hundred nails per day; now a 
 machine makes them by the kegful. 
 
 The cotton gin superseded a great part of the 
 labor previously required to separate the cotton 
 from the seed ; and machinery now, almost auto- 
 matic, converts the cotton into a great variety of 
 fabrics. The age of handcraft ended and the age 
 of machinery began about 1 770-80. According to 
 Mulhall, spinning machinery attended by one 
 operative produced as much yarn in 1 8 1 5 as 200 
 could a few years before; in 1855 the ratio had 
 more than tripled. The crane at the Cologne 
 Cathedral, in 1870, with two men did the same 
 work, in lifting stone, in one hour as required 
 sixty men working twelve hours in the middle 
 ages. A California harvester cuts, threshes, and 
 bags sixty acres of grain in a day, and a roller mill 
 will make 10,000 barrels of flour in the same time. 
 
 : 
 
 i 
 
 
 1 
 
 !: 
 
96 
 
 VALUE. 
 
 I 
 
 Implements and machines do better work than 
 can be done without them, and work which would 
 be otherwise impossible. Watt thought that he 
 had done well when he made a piston and cylinder 
 agree to within three-eighths of an inch; now they 
 can be made so accurately that the piston feels 
 quite loose in the cylinder when their diameter 
 differs only one-five-thousandth part of an inch. 
 Instruments measure distance, area, volume, 
 weight, time, force, light, heat, velocity, electricity, 
 gild, carve, set type, talk, play music, make pic- 
 tures, discover microbes, nebula, and the elements 
 composing the stars, send a message around the 
 world in a few seconds and the human voice a 
 thousand miles. There is also the machine to 
 make a machine. 
 
 In the early stages of society, laborers make 
 their own implements and therewith kill deer, 
 beaver, and catch fish. Population is sparse and 
 their living poor enough. In the later stages of 
 society, the producer, with his own capital or bor- 
 rowed, buys his materials and instruments, hires 
 laborers to work for him, and if the exchange 
 value of his product exceeds his outlays, he makes 
 a profit, otherwise not. Whereupon, taking linen 
 instead of cotton stockings, it is said (J. S. Mill, 
 B. 3, Chap. 4) : " The flax spinner, part of whose 
 expenses consists of the purchase of flax and of 
 machinery, has had to pay in their price, not only 
 the wages of the labor by which the flax was 
 grown and the machinery made, but the profits of 
 
 VALUE. 
 
 97 
 
 the grower, the flax dresser, and the machine 
 maker. All of these profits, together with those 
 of the spinner himself, were again advanced by 
 the weaver, in the price of his material, linen 
 yam ; and, along with them, the profits of a fresh 
 set of machine-makers and of the miners and iron 
 workers who supplied them with their metallic 
 material. All of these advances form part of the 
 cost of the production of the linen. Profits, 
 therefore, as wel as wages, enter into the cost of 
 production, which determines the value of the 
 produce." 
 
 To this he might have added, that all these 
 wages and profits make linen cost less per yard than 
 if the grower of the flax had made the linen him- 
 self. Every additional person who participates 
 in the production of linen does so only by being 
 able to reduce its cost. And although every capi- 
 talist, directly or remotely concerned in its pro- 
 duction, and so also of other things, is above 
 supposed to get a profit, the hired laborer obtains 
 for his labor, necessaries, comforts, and luxuries 
 beyond anything conceived of the savage laborer, 
 who, '* in that original state of things which pre- 
 cedes both the appropriation of land and the 
 accumulation of stock," gets the whole product. 
 
 According to Mulhall, the population of Eng- 
 land in 1780 was about nine and one-half millions ; 
 in 1880, over thirty-five millions, during which 
 time the ratio of paupers to population greatly 
 
 decreased ; the wages of common labor increased 
 7 
 
I 
 
 98 
 
 VALUE. 
 
 two and one-half times; real wages more. The 
 increase in population is sufficient evidence of an 
 increase in the well-being of the people. The 
 hired laborer who competes with and is super- 
 seded by some machine finds new demands for 
 his labor and obtains more for it than before. 
 Those laborers who can attend on machinery 
 claim and get higher wages for their intelligence, 
 skill, and mental labor. Mere physical force can 
 be exerted by a machine or a beast. Both the 
 hired laborer and his employer get a less reward 
 per unit of product than in the days of hand- 
 craft, but receive a much greater total reward. 
 The greatly increased quantity of products fur- 
 nishes more to consume and more to exchange at 
 home and abroad. 
 
 7. COST OF PRODUCTION. 
 
 The cost of a product to its producer consists 
 of his outlay expended on it, with a profit suffi- 
 cient to induce him to produce it. This is the 
 debit side of the account, for which the realized 
 value of the product must compensate him or else 
 there is a loss. What reward will induce a per- 
 son to engage in or to continue to produce a thing 
 is estimated by himself. If, however, he invests 
 his capital and labor in any business, it may be 
 thence inferred that the expected reward ex- 
 ceeded its expected cost, and, if he continues in 
 the business, not merely to retrieve his capital, it 
 may be thence inferred that he obtains a reward 
 
 VALUE. 
 
 99 
 
 which is by him deemed adequate and, in his 
 opinion, is at least as great as he could otherwise 
 obtain at the same cost to him. 
 
 A producer makes outlays for plant (fixed cap- 
 ital), for materials, hired labor, etc. (circulating 
 capital). The plant deteriorates as time elapses, 
 wears out, and may become old lumber by being 
 superseded by something better. The materials 
 are used up, the amount paid for hired labor, etc., 
 is gone. His wealth exists "in supposition.'* 
 Its investment lies open to loss from the elements; 
 his own incapacity ; the inefficiency, negligence, 
 ill-will, and dishonesty of his employes; the 
 wrongful acts of evil-doers, and the fluctuation 
 in the value of what he buys and what he sells. 
 Present goods are certain and have a present 
 value; future goods are uncertain as to their 
 existence, amount, and value. Money, or money's 
 worth, embarked in business does not always 
 return to its owner, with or without a profit. 
 Unless the value of the fixed capital as it oozes 
 out of the plant is absorbed by the product it 
 evaporates; unless the value of the circulating 
 capital reappears in the product it ceases to cir- 
 culate; and unless, on a proper balance struck 
 between receipts and outlays, there is a balance in 
 favor of the former he has lost among other 
 things his labor. 
 
 In August, 1894, the operatives in the cotton 
 mills at Fall River and New Bedford struck, at 
 which time, as stated in the newspapers, plain 
 
 ^1 
 
100 
 
 VALUE, 
 
 cotton cloth sold at 25^ cents per yard; wages 
 being a cent a yard, besides which, there were 
 repairs, depreciation of plant, materials, motive 
 power, waste, cost of marketing goods, bad debts, 
 taxes, and insurance. 
 
 Outlays are made in money, the product is sold 
 for money, and the profit or loss stated in money. 
 Since everything is bought and sold for money, 
 every person, in order to compare his reward with 
 the sacrifice which he makes to obtain it, takes 
 the money unit as the unit of cost and value to 
 him, the cost of which to him is the cost of its 
 acquisition by him, and its value to him is the 
 benefit which he can derive from it or by means 
 of it, and which must exceed or outweigh its cost 
 to him in order to furnish a motive for its acquisi- 
 tion. The money unit furnishes a measure of 
 both, although it does not represent the same 
 amount of either to everybody nor always to the 
 same person, even if no alterations are made in 
 the money. The wages of labor consist of money 
 or money's worth, and money wages better enable 
 a laborer to compare his reward with his sacrifice 
 than payment in kind or out of a truck store. 
 
 In socialism, labor for a certain period of time, 
 e. g. an hour, is taken as the unit of cost and value, 
 it being falsely assumed that labor for the same 
 period of time causes the same amount of sacrifice 
 to every person who undergoes it ; that in such 
 time each of them will produce the same amount 
 in product or value, and that the same amount of 
 
 VALUE. 
 
 101 
 
 product will aflford everyone the same amount of 
 satisfaction. If any difference is supposed to exist 
 between one kind of labor and another, such dif- 
 ference will be determined not by the laborer but 
 by his overseers. Everything will be considered 
 worth, in certificates of labor time, the quantity of 
 labor time bestowed on its production, regardless 
 of its quality ; e. g., a horse will be worth the same, 
 if blind, unsound, and vicious, as if he was sound 
 and kind. But it seems reasonable to suppose that 
 any one who was compelled "to do time " under 
 ground, in the mines, or on the surface at any 
 work which was disagreeable to him, and who 
 received for his certificates of labor time stale 
 eggs, butter, meat, vegetables, and other things of 
 an inferior quality, would consider a fluctuating 
 paper currency in a state of freedom a better 
 measure of cost and value than certificates of labor 
 time in a state of slavery. 
 
 Profit is said to consist of interest on capital, 
 insurance against risk, and wages of superintend- 
 ence (J. S. Mill, B. 2, Chap. 15). It being said 
 that the return for abstinence from consuming the 
 capital is interest at the current rate on the best 
 security; such security as precludes any appre- 
 ciable chance of losing the principal ; that the rate 
 of profit greatly exceeds this, a part of which is 
 compensation for risk, called insurance ; for capi- 
 tal embarked in business is always exposed to 
 some and in many cases to very great danger of 
 partial or total loss, for which there must be com- 
 
102 
 
 VALUE, 
 
 pensation, or the risk will not be incurred ; that to 
 control the operations of industry with efficiency 
 requires great assiduity and often no ordinary 
 skill, which must be remunerated ; the rest of the 
 profit goes for this purpose, called, as above, wages 
 of superintendence. 
 
 The wealth of this country is said to have 
 increased about 50 per cent in the decade 1880-90, 
 a period of peace and great prosperity, being an 
 increase of a little over 4 per cent per annum. 
 During the same time the population increased 
 over 30 per cent. A large part of this increase in 
 wealth consisted of savings from wages and sal- 
 aries; the deposits in the savings banks alone 
 amounted in dull times, after the panic in 1893, to 
 wit, in 1894, to over $1,800,000,000. The current 
 rate of interest during the above period was not 
 less than 4 per cent per annum. Deducting the 
 savings of hired labor, either risk was great or 
 the abstinence, assiduity, and skill were small. 
 According to Giffen, the increase in the wealth of 
 Great Britain in the decade 1875-85 was less than 
 25 per cent. The money sunk in the Panama 
 Canal was largely derived from the savings of 
 French laborers. 
 
 Misdirected and mismanaged capital produce 
 loss instead of profit. In time past many States 
 of the Union spent large sums on canals and 
 roads, few of which proved to be of any value, 
 the result being high taxes, general poverty, and 
 in some cases State insolvency. Prior to 1589 Sir 
 
 VALUE. 
 
 103 
 
 Walter Raleigh sunk ;^40,ooo in his efforts to 
 colonize Virginia. One-fourth of this sum at 5 
 per cent per annum, compounded half-yearly, 
 would now greatly exceed the present wealth of 
 Great Britain. So also would a penny at the time 
 of the Norman Conquest. 
 
 Because the owner of capital can demand inter- 
 est, capital is said to beget a profit, and therefore 
 to be capable of perpetual growth and increase. 
 But capital can also beget a loss. Many discover 
 that capital has wings ; that its essence, value, is 
 volatile. Debts are not always paid in full with 
 interest ; even banks and governments sometimes 
 make default in payment, and some who hide 
 their treasure fail to find it again. Besides loss 
 from the elements, war, civil commotion, and the 
 acts of evil-doers, there is great risk that the per- 
 son who embarks his capital in business does not 
 possess the personal qualities necessary to control 
 his operations with efficiency. No underwriter 
 will insure against this risk. Whether capital 
 will beget a loss or a profit depends on its mana- 
 ger, inevitable accidents excepted. 
 
 In the same locality and in the same business 
 one person or company will do better than an- 
 other, the difference being due to the manage- 
 ment. In 1 891, of the no mills at Oldham, 
 England, the stock of sixty-seven of them was at a 
 discount (** Methods of Industrial Remuneration,'* 
 Schloss, p. 148, note). Of sixty-seven manufact- 
 uring companies in Massachusetts, engaged in 
 
104 
 
 VALUE. 
 
 various kinds of business, including cotton and 
 woolen manufactures, bleaching, belting and 
 machiner>% being all or which figures are given 
 for ten years, to wit, 1882^2, a period of great 
 prosperity, ?iVQ stopped, seven had their capital 
 impaired and renewed, and twelve increased their 
 capital. These twenty-four companies taken to- 
 gether paid less than one-half of i per cent per 
 annum on their capital stock, and the whole sixty- 
 seven taken together paid 2.06 per cent per 
 annum on the average value of their capital stock. 
 {Social Economist for September, 1892.) 
 
 Of two similar mills making plain cotton cloth, 
 one better managed than the other will make a 
 greater profit, or make a profit while the other 
 makes a loss, by saving in outlay and gain in the 
 value of the product, as, by saving in repairs, de- 
 preciation, waste, employing more efficient, care- 
 ful, and honest employes, buying suitable material 
 and selling product at the right time and to solvent 
 parties. Cotton is not of uniform quality in the 
 fiber, nor equally free from moisture, sand, dirt, 
 and leaves. Both materials and product vary 
 continually in price. 
 
 Profit varies with the person according to his 
 abilities and good fortune. Every owner of loan 
 capital does not obtain the same rate of interest 
 on the same security. Even the public funds 
 vary in price. If a farmer with a capital equal 
 to 1,000 quarters of corn produces i ,200 quarters 
 one year, his product will probably be more or 
 
 II 
 
 (6 
 
 ( 
 
 VALUE. 
 
 105 
 
 less the next; and his profit would not be 20 
 per cent in corn unless the product was of the 
 same quality as his capital, nor in value, unless 
 the product per quarter was worth the same as 
 the outlay. Also if one farmer, on an average, 
 made a profit of 20 per cent in corn or in 
 value, all farmers with an equal capital will not 
 do the same, nor will others in other occupations 
 all make that profit by becoming farmers. 
 
 Those who make the greatest profit on their 
 capital often do so by making a low rate of profit 
 per unit of product and by quick sales turn over 
 their circulating capital often during the period 
 for which profit is computed. And it is the total 
 profit which a person can make in his occupation 
 that determines the direction of his competition, 
 while it is the cost per unit of product that is said 
 to determine its natural value. 
 
 It is said (J. S. Mill, B. 2, Chap. 15): " Profit 
 varies greatly with the person, and can scarcely 
 be the same in any two cases. It depends on the 
 knowledge, talents, economy, and energy of the 
 capitalist or of the agents he employs, on the 
 accidents of personal connection, and even on 
 chance. Hardly any two dealers in the same 
 trade, even if their commodities are equally good 
 and equally cheap, carry on their business at the 
 same expense or turn over their capital in the 
 same time. That equal capitals make equal prof- 
 its as a general maxim of trade would be as false 
 as that equal age or size gives equal bodily 
 
106 
 
 VALUE. 
 
 Strength, or that equal reading or experience 
 gives equal knowledge." 
 
 But it is said that profit is no part of the cost 
 of production, but is only a deduction from the 
 product of the hired labor ; a tribute levied on it 
 by the owner of capital by means of his monopoly. 
 Adam Smith said that a master would have no 
 interest to employ a workman unless his stock was 
 replaced with a profit, which is a share in the 
 produce of his workmen or in the value which 
 their labor adds to the materials on which it is 
 bestowed; that perhaps it may be thought that 
 profit is only a different name for the wages of a 
 particular sort of labor, the labor of inspection 
 and direction ; that profit bears no proportion to 
 the quantity, hardship, or ingenuity of this sup- 
 posed labor; that in many great works almost the 
 whole labor of this kind is committed to some 
 principal clerk, whose wages express the value of 
 this labor of inspection and direction. 
 
 When capital is invested in great works or 
 small ones, it must be replaced or the master 
 would suffer loss, and if the workmen are paid 
 wages, that must also be deducted, wherefore the 
 profit can not be greater than what is left. 
 
 But works, great or small, do not necessarily 
 make a profit, large or small, so that there is an 
 element affecting the result which is not consid- 
 ered when it is said that profit is a share in the 
 product of the hired labor. It being evident that 
 great works would grow small and small ones. 
 
 VALUE. 
 
 107 
 
 g^ow smaller without a manager, it is obvious 
 there must be some "supposed labor" of inspec- 
 tion and direction ; and if only a part of it is done 
 by a principal clerk, his wages fail- to express the 
 value of the whole of it. 
 
 Suppose there is a loss or no profit, the work- 
 men can say, we obeyed the orders and direc- 
 tions g^ven to us ; we are not responsible for the 
 result ; we are entitled to our wages wholly irre- 
 spective of the result. The principal clerk can 
 also say, I executed in detail the general orders 
 g^ven to me, therefore I am entitled to my wages 
 like the other hired men. I did not determine 
 the general or specific nature of the product, sell 
 it, or buy the materials. Or, suppose he does all 
 the "supposed labor" of inspection and direc- 
 tion, and there is a loss. He could say : I was 
 employed to run the works and produce the com- 
 modity which constitutes its product, e. g. cotton 
 stockings, thread, cloth, bicycles, or some other 
 article. There was no adequate demand for the 
 product, the business was already overdone, or 
 the price of materials and labor was too high, etc. 
 And even if his employer could say : Mr. A. ran * 
 his works and made a profit while you made a 
 loss, the principal clerk might reply, I performed 
 my duty to the best of my ability and that is all I 
 agreed to do ; therefore pay me my wages. 
 
 An owner of a ship and cargo employs a cap- 
 tain and crew to make a certain vo3'^age. The 
 crew set and furl the sails, raise and drop the 
 
108 
 
 VALUE. 
 
 \t~ 
 
 anchor as directed. The ship arrives at the des- 
 tined port, the cargo is landed and disposed of as 
 directed. The captain and crew earn their wages 
 irrespective of the result, and are entitled to no 
 more or less, whether there is a profit or a loss. 
 
 Another author (Rodbertus) asserts that goods 
 are the product solely of the labor, direct and 
 indirect, which performs the material operations 
 necessary to their production. For example, a 
 newspaper is the product solely of those who per- 
 form the material operations necessary to make 
 the paper, ink, type, printing press, and to print 
 the newspaper. Obviously some "head-work" 
 was necessary to effect this final result. But 
 waiving this, the value of the newspaper, except 
 for base uses, and for which clean paper would be 
 preferable, depends upon its contents. If these 
 are worthless, so also is the newspaper, no matter 
 how much labor may be expended on the mate- 
 rial operations necessary to produce it. Obviously 
 the asserter of this doctrine would be more pro- 
 ductively employed in making printer's ink or 
 setting type than in racking his brains to invent 
 or maintain some theory intended to vest the 
 hired laborer with an exclusive right to the whole 
 product ; for, by his own theory, he produces no 
 goods nor anything of value. 
 
 It is said by J. S. Mill (B. 2, Chap. 15): - The 
 reason why capital yields a profit is because food, 
 clothing, materials, and tools last longer than the 
 time required to produce them ; so that if a cap- 
 
 VALUE. 
 
 10» 
 
 italist supplies a party of laborers with these 
 things on condition of receiving all they produce, 
 they will, in addition to reproducing their own 
 necessaries and instruments, have a portion of 
 their time remaining to work for the capitalist. 
 Thus we see that profit arises, not from the inci- 
 dent of exchange, but from the productive power 
 of labor, and the general profit of the country 
 is what the productive power of labor makes it, 
 whether any exchange takes place or not." 
 
 This seems to be an artful statement of the 
 doctrine more fully elaborated by the socialist 
 (Marx), to wit, the laborers work a portion of 
 their time to make a profit for the capitalist. 
 Profit is a deduction from or a share in the prod- 
 uct of their labor. From which it follows that 
 if any party of laborers fail to produce a profit, it 
 is solely because they do not work long enough ; 
 their labor day is too short. Neither profit or loss 
 is at all due to the " inspection and direction " 
 of the capitalist, for he is supposed to do nothing 
 except to furnish the capital. Production is not 
 carried on in that way. The capitalist supplies 
 himself with the necessary means and instru- 
 ments, and hires laborers to do as he and his fore- 
 man direct. For their work he pays them wages, 
 and if the exchange value of his product exceeds 
 his outlays he makes a profit, otherwise not. If 
 he makes a profit, he is said by the socialist " to 
 exploit " his laborers. If he makes a loss, he may 
 be said to " exploit" himself. 
 
 \ 
 
110 
 
 VALUE. 
 
 VALUE. 
 
 Ill 
 
 A party of laborers without a manager would 
 be like an army without a general, a mere mob, 
 fit only to tread on each other's heels. Until 
 laborers can make voluntary cooperation a suc- 
 cess, their proper course is to deposit their sav- 
 ings in banks, to be loaned out at interest to their 
 employers, or used as a fighting fund to maintain 
 strikes for higher wages. When coercive coop- 
 eration or socialism is adopted, the managers of 
 the scheme must determine beforehand what 
 things shall be produced, how much of each, in 
 what manner, by whom, and by the proper sub- 
 alterns see that every man performs his allotted 
 task, for otherwise the molecules of the social 
 organism would suffer from inanition. The labor- 
 ers will allow something as a deduction from 
 the product of their labor to their managers and 
 overseers on the score of equality and fraternity, 
 for they do no labor, properly so called. The 
 brain of this social octopus will be a parasite 
 feeding upon what is gathered by its legs and 
 arms. 
 
 Also exchange value has something to do with 
 the existence and amount of profit. For if any- 
 thing is produced for which there is no adequate 
 demand, because there is already an overstock, or 
 because it is not wanted, there is little hope of 
 profit, however productive of quantity the labor 
 bestowed upon it may be. Laborers operating a 
 knitting mill would produce stockings of some 
 sort. Their product, however great, could not 
 
 reproduce their necessaries and instruments 
 with or without a profit, except by way of 
 exchange, and not then unless the exchange 
 value of the product was sufficient for the 
 purpose. If the product remained unsold, or 
 was unsalable, the laborers could not repro- 
 duce even their victuals, although they worked 
 night and day. 
 
 The quantity of products is not increased by 
 exchanging them, nor by transporting them from 
 where they are not to where they are wanted, but 
 their value is. If either party to an exchange 
 gained nothing by it, there would be no motive 
 on his part for making it. If wheat had no 
 greater exchange value abroad than at home 
 there would be no motive for its exportation. A 
 product in excess of what its producer can use or 
 consume himself is worthless to him except for 
 the purpose of exchange, and its value to him is 
 in proportion to its purchasing power. If surplus 
 products remained in the hands of their pro- 
 ducers, manufacturers would starve, while farmers 
 would go naked. Without exchanges, surplus 
 products might be called potential wealth — until 
 they rotted. But as actual wealth they are meas- 
 ured by their value, which is greatest when they 
 have reached the hands of those who want them 
 the most, to wit, their consumers, although after 
 their consumption nothing is left of them except 
 the benefit they have conferred in the satisfaction 
 of wants. 
 

 
 112 
 
 8. CAPITAL AND INTEREST. 
 
 Since more goods can be produced by the aid 
 of capital than without it, even if their ratio of 
 exchange remain the same when produced in 
 such vast quantities by machinery, more or less 
 automatic, as when everything was hand-made, 
 there are more things to consume and exchange 
 than before, and therefore the aggregate exchange 
 value of each of them has manifestly increased. 
 The intelligent socialist loves capital so much 
 that he wants to acquire it, not by the exercise 
 of industry and frugality, but by confiscation. 
 He wants to stand in the shoes of the capitalist, 
 and enjoy the use and benefitof his capital. Not 
 that he really thinks that a party of laborers, 
 without a competent manager, if supplied with 
 food, clothing, materials, and tools, will reproduce 
 their necessaries and instruments and still have a 
 portion of their time left to work for the capitalist, 
 but because the managers who will do the head- 
 work and will possess and control everything, will 
 have him among their number, perhaps as their 
 chief. To furnish a pretext for the confiscation 
 of capital, it is asserted that hired laborers, after 
 reproducing their necessaries and instruments, 
 work an additional period of time to make a profit 
 for the capitalist, which profit is surplus labor 
 value extracted by him out of them, and which 
 continually adds to and causes the growth of 
 capital. But since no one could or can hire 
 
 VALUE. 
 
 113 
 
 laborers unless he had or has acquired capital, it 
 is necessary to attack its original acquisition. It 
 was said by the socialist (Marx) : "At the dawn 
 of capitalist roduction— and every capitalist up- 
 start must go through the historical stage- 
 avarice and the desire to be rich were the ruling 
 passions." The socialist wants to confiscate 
 capital in order to punish greed; the frugality 
 and abstinence necessary to maintain it after- 
 wards to be endured and suffered as a national 
 calamity by the body politic as a social organism. 
 In this country the origin of capital is not lost in 
 the mists of antiquity. Poverty migrated and 
 migrates here, not wealth. In a wide continent, 
 where all had equal opportunities, those who were 
 diligent and frugal acquired wealth, more or less, 
 depending upon their abilities and good fortune. 
 And such is still the case ; a large part of the con- 
 tinent still remains unsettled, while land in many 
 of the oldest States can be acquired at a nominal 
 price. In fact the industrious and frugal man 
 makes savings everywhere, although in some 
 countries he must conceal his treasure to prevent 
 its confiscation by the public or private robber. 
 Doctor Franklin saved money while working for 
 wages as a printer in London ; he drank water 
 while his co-workers drank beer. Poor Richard 
 said : ''Without economy no revenue is sufficient." 
 Savings enable a laborer to acquire implements, a 
 stock in trade, or land and cattle. After he has 
 acquired sufficient to be his own employer, he is a 
 
 8 
 
114 
 
 VALUE. 
 
 capitalist. The hired laborer who is diligent, tem- 
 perate, frugal, and honest, is an incipient capital- 
 ist ; he belongs to the class of men which furnishes 
 the millionaires. Those who regard industry 
 and frugality as great sacrifices and spend all 
 they might save on drink and other extravagance 
 belong to the class which furnishes the paupers. 
 
 The capitalist upstart usually begins by work- 
 ing for hire; he is diligent, frugal, able, and 
 honest ; he makes himself more and more useful 
 to his employer, gets higher and higher wages, 
 until he is taken in as a partner or starts in busi- 
 ness for himself. Numerous instances might be 
 cited from the most eminent concerns in 
 Chicago, whose members began as hired men. 
 When a successful house ceases to be composed of 
 upstarts, it becomes infected by dry rot and pros- 
 perity forsakes it. 
 
 When the upstart has proved himself to be 
 trustworthy he can command loan capital or the 
 savings of others. Having ability, honesty, fru- 
 gality, industry, and fortitude, others are ready 
 to bet that he will pay his debts ; although calam- 
 ity may possibly overtake him, they believe he 
 will do to trust. About his premises there is 
 vigilance and efficiency; his methods, imple- 
 ments, materials, and employes are of the best ; 
 he is a good buyer and a good seller, or employs 
 those who are ; his outlays are a minimum, his 
 product a maximum and suited to the market. 
 Loiterers, incapables, and high livers can not with- 
 
 VALUE. 
 
 115 
 
 Stand his competition ; it is ruinous to them ; he 
 supplies consumers with what they want at too 
 cheap a rate. 
 
 When the upstart has achieved great success 
 everybody wants to share profits with him, and 
 think that he ought to pay the taxes, support the 
 poor, and cry over the prodigal, the loafer, and 
 the tramp. Social agitators denounce him, urge 
 his employes to strike for higher wages, and are 
 ready to confiscate his property or to destroy it, 
 and to do him personal violence. He has bought 
 and sold at the market price and become rich, 
 while others who did the same have consumed or 
 lost their capital and become poor, or never 
 acquired any and remained poor. He has prac- 
 ticed legerdemain ; he possesses the art of extract- 
 ing surplus value out of the labor of his hired 
 men, while others, who paid the same wages, 
 possess the art of having surplus value extracted 
 out of them ; others, the art of not extracting 
 any surplus value out of their own labor, or of 
 spending it if they do ; and still others of doing 
 no more labor than necessity compels them to do. 
 
 The rich Rockefeller, in 1864, was working for 
 hire as a clerk ; his partner, Andrews, was, or had 
 been, a hired laborer in an oil refinery, when by 
 some mental labor he devised a method whereby 
 more kerosene could be obtained from petroleum 
 than by any method then known. With the aid 
 of borrowed capital his process was tried and 
 proved to be a success. At that time the residue 
 
116 
 
 VALUE. 
 
 'II 
 
 was waste or used for fuel, but afterward was con- 
 verted into paraf&ne, lubricating oil, aniline dyes, 
 etc. Tanks were constructed to save the petro- 
 leum from running to waste ; also pipe lines to 
 convey it from the well to the seaboard, the lakes, 
 and elsewhere ; also numerous other economies 
 were used in the production, transportation, and 
 sale of the crude oil and its products, whereby 
 the quantity of labor per unit of product has been 
 reduced to a minimum, with the result that kero- 
 sene is sold at retail for a few cents a gallon. If 
 the members of the Standard Oil Company have 
 extracted their vast wealth out of their hired 
 men, each of them must have been a spouting 
 well of richness. 
 
 But in Texas, where none of the members of 
 the company reside or carry on business, it is 
 thought that this great wealth has been extracted 
 out of the consumer, and they have been indicted 
 there for feloniously conspiring to keep up the 
 price of kerosene above what it might be sold for. 
 The Texas consumer considers himself defrauded, 
 although he prefers kerosene at its price to cot- 
 ton-seed oil, lard oil, whale oil, tallow, or any 
 other illuminant, and can buy petroleum at its 
 market price and make his own kerosene, naphtha, 
 benzine, gasoline, paraffine, lubricating oil, ani- 
 line dyes, etc., if he chooses to do so. Texas 
 being an agricultural State, the provisions of its 
 anti-trust law do not apply to the producers of 
 agricultural products and live stock. Any com- 
 
 VALUE. 
 
 117 
 
 bination or conspiracy among them and other 
 like producers elsewhere which would raise the 
 price of cotton, cotton seed, or steers would be 
 hailed there with delight. 
 
 The possession of property implies that its 
 owner has practiced frugality, for those who con- 
 sume or squander all they acquire can not remain 
 or become a capitalist. Any one who makes 
 savings and hides them away gets no profit out of 
 them ; the reward for his abstinence is the pro- 
 vision which he has made against sickness, old 
 age, or any future need. Capital, which in fact 
 is money, or money's worth, has the same pur- 
 chasing power and will draw the same rate of 
 interest, whether its acquisition caused or the 
 abstinence from consuming it causes pleasure or 
 pain. Hired labor gets the same wages whether 
 the laborer who performs it loves labor or hates 
 it. If any one is so constituted that industry and 
 frugality, or either of them, cause him great pain, 
 perhaps those who practice those virtues as their 
 free choice and delight ought to share with him. 
 
 An owner of capital can demand a profit for its 
 use. As an excuse for doing so, he might say 
 that a loan involves trouble in the lending and 
 securing its return ; if it be of a specific article, 
 there is also its injury from wear, misuse, and 
 accident ; if the thing is consumable, there is also 
 the trouble of identifying the thing returned as 
 an equivalent to the thing lent ; if money is lent, 
 that offered in payment may consist of light. 
 
118 
 
 VALUE. 
 
 debased, or counterfeit coin or depreciated 
 paper money ; a loan without interest is a mere 
 gratuity. 
 
 Although the lender demands interest, why 
 does the borrower agree to pay it ? Some who 
 borrow can not repay the loan without interest • 
 their proper vocation is to work for wages, or at 
 least not to borrow. Many farmers mortgage 
 their farms and with the assistance of their fam- 
 ilies spend and fool away the money, and thus 
 often lose their farms. But those who possess 
 the requisite abilities make a profit out of bor. 
 rowed money in excess of interest, some of them 
 great sums. Profit is made in trade, by buying 
 at one price and selling for more, or by selling 
 short and afterward buying back at a lower 
 pnce. The market price of commodities, includ- 
 ing all kinds of negotiable securities, continually 
 vary. A producer is a buyer of materials, instru- 
 ments, etc., and a seller of products. The price of 
 cotton varies much during a year ; its price was a 
 third higher, on an average, in 1895 than in 1894. 
 Profit IS made by paying interest for money on 
 call ; banks do so continually. Present purchas- 
 ing power is of greater value than the same 
 amount certain to accrue in the future to any one 
 who can make a profit by means of it in the mean- 
 time ; also, to any one who is without the means 
 to satisfy his present needs. A nation engaged or 
 about to engage in war, or has suffered defeat 
 may be included in this category. 
 
 VALUE. 
 
 119 
 
 Money tied up in a bag will not beget money ; 
 neither will wheat in a granary beget wheat, 
 although it may become wormy, grow musty, 
 or sprout. Locomotives, cars, wagons, ships, and 
 other useful instruments will beget nothing except 
 loss if allowed to stand idle. Money is a pro- 
 ductive instrument; if employed it can beget 
 either a profit or a loss ; it can enable its owner 
 or borrower to carry coals to Newcastle, to sow 
 seed in barren ground, or to produce something 
 which is not wanted or not in demand at an 
 adequate price. No useful instrument is pro- 
 ductive of profit unless it is intelligently employed. 
 Ships, etc., can convey goods from where they are 
 a superfluity to a place where they are wanted. 
 At Venice, when Antonio's argosies ** richly laden 
 came to harbor suddenly," there were more ducats 
 in the cargoes than he had expended on them. 
 The three thousand ducats enabled Bassanio to 
 win the rich heiress, and were more productive 
 to him than ewes and rams. 
 
 A hired man said that he could not see why 
 anybody should make a profit out of the product 
 of his labor. In the first place, such product was 
 not of his designing but of his employer, and was 
 worthless if not wanted, and if wanted had the 
 greatest value where it was wanted the most, 
 which might be at Venice, the East Indies, or 
 elsewhere. Who was to find the best customer 
 and sell it to him ? It was good sense for the 
 workman to stick to his job, take his reward in 
 
120 
 
 VALUE. 
 
 VALUE. 
 
 121 
 
 money, and leave to his employer the risk of 
 profit or loss and of finding the best customer for 
 the product, the nature of which was determined 
 not by the workman, but by his employer. 
 
 Great efforts have been made to befog the sub- 
 ject of interest. For example, this language is 
 quoted : It is often said that capital is productive, 
 and so calls for interest. Obviously capital is 
 productive in the sense that production is greater 
 with than without capital ; but does that explain 
 interest ^ Why should any one care for a plow, 
 which one can not eat, wear, or play with ? The 
 reason is clear : because it produces things which 
 we can eat, etc. Their value gives value to the 
 plow. Thus we have the principle that the value 
 of capital is a reflected value ; that is, the value of 
 the means of production is derived from the prod- 
 uct. But how much value will the plow have? 
 Suppose it lasts ten years and with it are produced 
 crops worth $i,ooo. Paying all the rent, wages, 
 etc.. $50 is left at the end of ten years. Now 
 men learn to foretell these results very closely, 
 and from their estimate of what a machine will 
 produce they determine its value. If it will pro- 
 duce a great deal they value it highly ; if only a 
 little, they will only give a little for it, no matter 
 how much or little it cost to produce it. So it 
 does not do to say that capital draws interest 
 because it produces more than its own value, for, 
 as we have seen, it is valued according to what it 
 produces. ("Outlines of Economics," Ely, p. 212.) 
 
 The market value of the plow is no more than 
 sufficient to induce its maker, competing with other 
 plowmakers, to produce it for sale. Any more 
 plows than he can use himself are worthless to 
 him except for the purpose of sale. A plow would 
 have no other than its market value to a person 
 who had no use for it except to sell, nor to 
 any one who had no other means to satisfy his 
 immediate and pressing needs. The value of the 
 plow is fixed by its cost of production as above. 
 Although a farmer had means sufficient to satisfy 
 his wants until the productive power of the plow 
 became available, he ought not to borrow its price, 
 with or without interest, unless its product 
 in ten years, or during the life of the plow, 
 would more than repay the debt. No one ought 
 to buy the plow at any price unless he could 
 
 gain by it. 
 
 An argument against interest might be made 
 as follows : Obviously a capitalist has a surplus 
 in excess of his current needs ; therefore the same 
 amount in the future is worth more to him than 
 his present surplus. A loan of it on good secur- 
 ity, without interest, would secure him from loss 
 by accident, theft, robbery, and deterioration from 
 lapse of time, and relieve him from all expense, 
 care, and trouble of keeping it. In fact he would 
 gain or save so much by lending his surplus in 
 that way until it was needed to satisfy his wants, 
 that he ought to pay the borrower for his trouble. 
 Money is often deposited in bank without 
 
 y 
 
122 
 
 VAL UE. 
 
 interest; also put with other valuables in a 
 safety deposit vault and money paid for their 
 safe keeping. 
 
 9. NECESSARY VALUE. 
 
 It is said (J. S. Mill, B. 3, Chap. 3): When the 
 production of a commodity is the effect of labor 
 and expenditure there is a minimum value which 
 is the essential condition of its being permanently 
 produced, i. e., its market value must be sufficient 
 to repay the cost of production, and to afford 
 besides the ordinary expectations of profit. The 
 cost of production, together with the ordinary 
 profit, may therefore be called the necessary price, 
 or value, of all things made by labor and capital ; 
 that when the commodity can be made by labor 
 and capital in indefinite quantity, this necessary 
 value is also the maximum which its producers 
 can expect, if competition is free and active, for a 
 higher rate of profit would stimulate its produc- 
 tion, capital would rush in to share in this extra 
 gain, and by increasing the supply of the article 
 reduce its value ; that as a general rule things tend 
 to exchange for one another at such values as 
 will enable each producer to be repaid the cost 
 of production with the ordinary profit ; in other 
 words, such as will give to all producers the same 
 rate of profit on their outlay. But in order that 
 the profit maybe equal where the outlay— that is, 
 the cost of production— is equal, things must on 
 the average exchange for each other in the ratio 
 
 VALUE. 
 
 123 
 
 of the cost of their production ; things of which 
 the cost of production is the same must be of the 
 same value. For only thus will an equal outlay 
 yield an equal return. 
 
 According to this statement, in Eq. (i), c=a 
 unit of outlay; x.c=total outlay per unit of com- 
 modity "a"; y.c=total outlay per unit of com- 
 modity "b." Also, 
 
 r=the ordinary rate of profit on outlay, 
 
 r.x.c=profit per unit of '* a," 
 
 r.y.c= " " "b," 
 
 x.c (i4-r)=necessary value of **a*' per unit, 
 
 y.c(i+r)= " '• "b" - " 
 
 If m units of "a" have the same market value 
 as n units of **b," then, at their " natural " value, 
 
 m.x.c (i+r)=n.y.c (i+r). (6) 
 
 Things of which the cost of production is the 
 same must be of the same value, and all producers 
 make the same rate of profit on their outlay, to 
 wit, the ordinary profit. 
 
 But the author cited also says (J. S. Mill, B. 3, 
 Chap. 6): " Every commodity of which the sup- 
 ply can be indefinitely increased by labor and 
 capital, exchanges for other things proportionally 
 to the cost necessary for producing and bringing 
 to market the most costly portion of the supply 
 required. The natural value is synonymous with 
 the cost value, and the cost value of a thing means 
 the cost value of the most costly portion of it." 
 
 Therefore the producers of the less costly por- 
 tions of the supply required make a greater rate 
 
124 
 
 VALUE. 
 
 of profit on their outlay than^ those who produce 
 the most costly portion, and hence, ♦* as a general 
 rule things do not even tend to exchange for each 
 other at such values as will give to all producers 
 the same rate of profit on their outlay." And in 
 order that the producers of the most costly por- 
 tions of the supply required of various commod- 
 ities may be satisfied with the same rate of profit 
 on their outlay, the production of them must be 
 equally attractive; it being said by the author 
 cited that the production of gunpowder would 
 require a greater rate of profit than things which 
 were not explosive. 
 
 The producers of the most costly portions of 
 the supply required, and who stand at or just 
 within the margin of production, are not in a very 
 good condition to rush into some other business, 
 " and by increasing its supply reduce its value." 
 
 The proportionality of value to cost above 
 mentioned results in Eq. (6). For if m units of 
 commodity "a" exchange for n units of commod- 
 ity "b," then one unit of "a" buys ^ units of '*b," 
 and ^ expresses the value of "a" relative to **b," 
 the value of which relative to itself is unity. 
 Hence, if the market value of "a" and '^b" is 
 natural as between them, then, according to the 
 author cited, 
 
 5: I ::x.c(i+r):y.c(i+r) (7) 
 
 r being the rate of profit made by all their 
 
 producers, according to one of his statements, or 
 
 VALUE. 
 
 125 
 
 the rate of profit made by the producers of the 
 most costly portion of the supply required of 
 each, according to his other statement. 
 
 A treatise on economics, not purely specula- 
 tive, ought to furnish a list or table of the neces- 
 sary value (or price) of each commodity. The 
 rising generation, having learned (J. S. Mill, B. 2, 
 Chap. 1 5) that after making good the outlay there 
 commonly remains a surplus or profit, the net 
 income from the capital invested, would all be 
 anxious to know the amount of the "ordinary 
 profit " which he could spend on necessaries or 
 pleasures, or by saving add to his wealth. Public 
 officers and others who let contracts ought to 
 know what is the necessary value of the thing or 
 things contracted for ; so, also, those who bid for 
 the job, or propose to produce anything for sale 
 or exchange. Unless the " ordinary profit " is 
 generally known, capital and competitors might 
 rush in for an extra profit, when they ought to 
 stay out and avoid a loss. 
 
 The list would, however, be limited to those 
 things which are uniform in kind and quantity, 
 and which are continuously produced for the pur- 
 pose of sale or exchange, for only such would have 
 a quotable market value. 
 
 All products of a joint cost would be excluded 
 (J. S. Mill, B. 3, Chap. 16), for the cost of each 
 would be unknown; as, for example, coke, coal 
 gas, coal tar ; chickens and eggs ; calves and dairy 
 produce ; beef, hides, tallow, horns, hair, bones ; 
 
126 
 
 VALUE. 
 
 VALUE. 
 
 127 
 
 mutton, mutton tallow, wool, sheepskins ; cotton, 
 cotton seed ; g^rain and straw— all joint products 
 of the same process of reduction, distillation, man- 
 ufacture, the same course of husbandry, or of any 
 occupation or industry whose reward is derived 
 from more than one specific commodity. A 
 maker of cotton stockings does not make them all 
 of the same quality of cotton, nor all equally fine, 
 nor all of the same size and pattern. He endeav- 
 ors to conform his product to the current demand 
 for it ; and if some kinds and styles prove to be in 
 such demand as to more than compensate for the 
 loss on those which are not in adequate demand, 
 he feels encouraged to continue the business. A 
 farmer produces various things, as grain, hay, 
 roots, live stock, etc.; he will sow grain partly for 
 the straw, and partly in order to seed down the 
 land to grass ; rotation of crops is good husbandry. 
 A shoemaker uses various kinds and qualities of 
 leather and other materials, and makes shoes of 
 various sizes, kinds, and qualities. A producer 
 follows an occupation, very few of which are such 
 that the product is some one thing of a uniform 
 kind and quality. And it is the total result* of his 
 operations during a period of time sufficient, in 
 his opinion, to determine the question which 
 induces him to continue or to abandon his occu- 
 pation. It is the total profit, actual or expected, 
 \yhich determines for each competitor the direc- 
 tion of his competition. Large profits are often 
 made by taking a very small rate of profit per 
 
 unit of outlay, as by turning over capital often 
 during the period for which profit is computed, 
 or, as it is said, by quick returns and small 
 profits. 
 
 The author cited also says (J. S. Mill, B. 3, 
 Chap. 3): **Adam Smith and Ricardo have called 
 that value of a thing which is proportional to the 
 cost of its production its natural value (or natural 
 price). They meant by this the point about 
 which the value oscillates, and to which it always 
 tends to return ; the center value toward which, 
 as Adam Smith expressed it, the market value of 
 a thing is constantly gravitating ; and any devi- 
 ation from which is but a temporary irregularity, 
 which, the moment it exists, sets forces in motion 
 tending to correct it. On an average of years, 
 sufficient to enable the oscillations on one side of 
 the central line to be compensated by those on 
 the other, the market value agrees with the 
 natural value. The sea everywhere tends to a 
 level, but it never is at an exact level ; its surface 
 is always ruffled by waves, and often agitated by 
 storms. It is enough that no point, at least in the 
 open sea, is permanently higher than another. 
 Each place is alternately elevated and depressed, 
 but the ocean preserves its level." 
 
 Instead of preserving its level the ocean con- 
 tinues to oscillate. The earth's gravity tends one 
 way ; its centrifugal force and the attraction of 
 the sun and moon another. Heat and cold cause 
 vast currents to flow to and from the poles, which 
 
128 
 
 VALUE. 
 
 r 
 
 are turned aside by obstructions and the forces 
 which operate upon the water; the pressure of 
 the air does not remain uniform everywhere, and 
 the shifting winds not only ruffle the surface of 
 the water, but disturb its level. It would have 
 been more accurate to say that the oscillations of 
 the water occur within certain variable limits at 
 which the various forces counteract each other. 
 In order that the ocean may be level, no part 
 or parts of it must be higher than others ; so also 
 as to natural value, which, in order to be natural, 
 must be so as to all commodities at the same 
 time. 
 
 Although the oscillations in market value may 
 compensate for one another on an average of 
 years, as above stated, that fact does not help 
 those who are engaged in or who begin business 
 when the oscillation is going the wrong way for 
 them. The '* ordinary profit " on the most costly 
 portion of the supply required of the various 
 commodities is not so great as to enable them to 
 keep their heads above water until it sets the 
 other way. During the lapse of years many pro- 
 ducers of the most and of the less costly parts of 
 the several supplies will die, alter their business, 
 or step out of the competition, and newcomers 
 will take part in it ; the relative demand will vary, 
 and also the conditions of production. A compen' 
 sation which occurs only in an average of years 
 can help those only who are long-lived and long- 
 winded. In relative value, while one or more 
 
 VALUE. 
 
 129 
 
 things are going down, another or others are 
 going up ; hence it would add greatly to the prac- 
 tical value of this central line if it were located 
 so that everyone, and especially every new begin- 
 ner, might enter into the swim at the right place 
 or at the right time. 
 
 The theory of natural value, above considered, 
 ignores human inequality and assumes that all 
 products are uniform in quality. All the hunters, 
 fishermen, and other producers are all exactly 
 alike ; so also are all the deer, beaver, fish, and other 
 products. With equal facilities all producers can 
 produce the same thing at the same cost and make 
 the same profit. The theory does not apply to a 
 state of industrial freedom and of free competi- 
 tion among unequals. 
 
 It is only in socialism that every person will 
 produce and procure the same thing at the same 
 cost. In that Utopia all men will be considered 
 to be exactly alike ; no kind of labor will be con- 
 sidered more arduous or disagreeable to one per- 
 son than to another. Every unit of labor time 
 will draw from the common stock the same quan- 
 tity of commodity, which will be uniform in 
 quality, or so considered, and none of it be stale, 
 musty, mildewed, worm-eaten, inferior, or unequal 
 in any respect. All the beef will be from cattle 
 that are all equally young, healthy, and fat, and be 
 all tenderloin and fine cuts ; all the honey in the 
 hive will be of new white comb, and none of it 
 will be old, webbed over by the moth, or partly 
 
 9 
 
130 
 
 VALUE, 
 
 II 
 
 ii 
 
 % 
 
 
 occupied by young bees. Everjlhing will be de- 
 livered over to consumers at the same price per 
 unit of quantity, and none of it offered to the 
 highest bidder and sold according to its quality. 
 
 It has been said (Caimes) that the normal or 
 natural value of a commodity is that which will 
 suffice, and no more than suffice, to yield its pro- 
 ducers what is considered to be the average or 
 usual remuneration for such sacrifices as they 
 undergo. But, under free competition, every 
 competitor does the considering for himself ; and 
 the value of his product for a period by him 
 deemed sufficient for the purpose must yield him 
 at least as good a reward as, in his opinion, he can 
 otherwise obtain, or else he will change his occu- 
 pation, whether his remuneration is above or be- 
 low the average. 
 
 When ever}' competitor has no cause to change 
 his occupation, it may be said that competition 
 has, at least theoretically, ceased to operate and 
 the relative value of commodities are in equi-' 
 librium, although all producers were making a 
 different rate of profit on their outlay. 
 
 VII. 
 
 MONEY VALUE. 
 
 The money vaitie of a thing is its relative value 
 as compared with money, and in amount is 
 expressed by the number of units contained in 
 
 VALUE. 
 
 131 
 
 the sum of money which it is deemed worth or 
 for which it is sold. The exchange value of the 
 money unit is the unit of money value. All of 
 the units being alike, are of the same value ; for 
 if not alike they can not be added together into 
 an aggregate ; but being so, there are as many 
 units of money value in a sum of money as there 
 are money units. Thereupon, sums of money 
 and amounts of money value can be stated in 
 figures and become amenable to the rules of arith- 
 metic. Accounts can be kept in terms of the 
 money unit ; all taxes, dues, debts, damages, cost, 
 and value can be so stated. Market prices of all 
 commodities, being of the same nature, can be 
 compared with each other, and the relative value 
 of commodities thereby ascertained ; in fact, their 
 relative market value is not otherwise ascer- 
 tainable. 
 
 Barter is the direct exchange of commodities 
 between their respective owners. In barter each 
 party must have something which the other wants 
 more than what he then has, and the commodities 
 must be divisible so as to form a basis of 
 exchange which will be satisfactory to both par- 
 ties. But ordinary commodities are bulky, more 
 or less perishable, and usually suitable only for 
 some particular purpose, are consumed by their 
 use, and have no general purchasing power. The 
 number of ratios arising from the direct exchange 
 of loo commodities is 4,950 ; of 200 commodities 
 is 19,900, supposing each of them to be exchanged 
 
i 
 
 132 
 
 VALUR 
 
 for each of the others and always at the same 
 ratio. But they would not always exchange at 
 the same ratio, and many of them would rarely, 
 if ever, directly exchange for each other, as 
 feathers for railroad iron, or axle grease for mil- 
 linery. Value would not be easy to state in 
 accounts ; also debts and credits, if they existed. 
 A theory of exchange value founded on barter, 
 which assumes that every commodity is uniform 
 in quality, durable, and has a general purchasing 
 power, is based on a fiction. Where division of 
 labor exists, and every producer relies upon his 
 product as a means to acquire from others many 
 of those things which he needs, no one could 
 obtain them by barter, in kind, quantity, when 
 wanted, and on terms which would enable him to 
 pursue his occupation successfully; too much 
 of his time would be occupied in truck and trade ; 
 those who want his product are seldom those who 
 can supply him with what he requires. A baker 
 needs from time to time a certain quantity of 
 flour of a suitable quality ; those who want some 
 bread at stated intervals can not supply him with 
 flour. A miller wants grain, but the farmer wants 
 other things besides bread or flour for his surplus 
 crop. What everyone wants in exchange for his 
 superfluities is general purchasing power in a 
 concrete, durable, portable, and divisible form, 
 which he can from time to time, and at any time, 
 use to acquire by purchase what ever he may need 
 or desire ; he also wants to sell at the highest 
 
 I 
 
 VALUE. 
 
 133 
 
 price obtainable and buy at the lowest ; as a seller 
 he wants competition among buyers ; and, as a 
 buyer, competition among sellers. In fact, the 
 relative value of commodities is properly fixed by 
 competition in their sale as well as in their 
 production. 
 
 Money enables everyone to sell his superflui- 
 ties to those who want them the most, and to 
 acquire his necessaries from those who want them 
 the least ; to do this, he sells to one person or set 
 of persons, and buys of another. 
 
 During the fiscal year ending June 30, 1 889, 
 about one-half, in money value, of the exports 
 from this country went to Great Britain, while 
 only about one-quarter of the imports came from 
 there. The exports to and imports from the fol- 
 lowing countries were, in money value, as fol- 
 lows: 
 
 Brazil 
 
 Cuba 
 
 China 
 
 Philippine Islands 
 
 Exports. 
 
 $ 9.35i»o8i 
 
 11,691,311 
 
 2,791,128 
 
 179.647 
 
 Imports. 
 
 $60,403,804 
 52,130,623 
 17,028,412 
 10,593.172 
 
 The exports were sold where they would bring 
 the best price, and the imports were bought 
 where they could be obtained at the lowest price. 
 How this could be done by way of barter, and how 
 international balances could be stated and paid by 
 the use of that method of exchange, is hardly 
 worth while to consider. Even if the money of a 
 
134 
 
 VALUE. 
 
 country consists of an irredeemable and fluctuat- 
 ing paper currency, trade is not carried on with it 
 by way of barter. 
 
 An exporter is one person and an importer is 
 usually another ; the former may sell on one side 
 of the globe, and the latter buy on the opposite 
 side; each of them buys and sells for money, 
 unless in dealing with savages. A merchant con- 
 tinually buys of one set of persons and sells to 
 another. A producer buys his materials and 
 implements from sundry persons and sells his 
 product to others. A farmer sells his surplus 
 grain, live stock, and other produce to various 
 persons, buys his dry goods, groceries, and other 
 necessaries of others, pays his taxes, his doctor, 
 lawyer, clerg)anan, the schoolmaster, etc., and, if 
 thrifty, has some money left, which he may not 
 use or spend for years. He would be no wiser 
 if he were informed that his transactions really 
 amounted to barter. A person can sell more 
 goods, in value, than he buys ; but he can not 
 continue to buy more than his means will pur- 
 chase. The people of Great Britain, having large 
 investments in their colonies, India, and else- 
 where, are enabled to buy continually more than 
 they sell. The annual income from British capi- 
 tal invested abroad is said to exceed eighty-five 
 millions of pounds sterling ('*The Growth of Capi- 
 tal," Giffen). 
 
 In that rude state of society to which barter 
 properly belongs, some commodity was usually 
 
 :' I 
 
 VALUE, 
 
 135 
 
 found to have a more general purchasing power 
 than any other, whereupon it came to be used as 
 a crude and imperfect money. Many things have 
 been so used at different times and places, among 
 others, cattle, sheep, grain, skins, and furs. But 
 cattle and sheep may be large or small, young or 
 old, fat or lean, sound or unsound ; grain, skins, 
 and furs also vary in quality. Money ought not 
 to require to be fed, watered, and perhaps doctored, 
 or be liable to die, decay, become musty, or in- 
 fected with weevil, moth, and vermin. No com- 
 modity is suitable for the purpose unless it is 
 uniform in quality, durable, portable, divisible 
 into parts without injury, limited in quantity and 
 always in general demand. 
 
 When the metals became known, they were used 
 for the purpose, and finally the precious metals 
 were preferred to anything else. After they be- 
 came known and available for the purpose, the 
 owners of superfluous commodities, which are 
 usually bulky, perishable, expensive to keep and 
 carry, preferred to sell hem for precious metal, 
 feeling sure that it would remain sound and in 
 general demand until they severally saw fit to dis- 
 pose of it from time to time as their needs might 
 require. By so doing they acquired and still 
 acquire a store of wealth in a concentrated, dura- 
 ble, and divisible form, with a great saving in 
 value and in cost to them. Such money has a 
 general purchasing power, present and prospec- 
 tive. The money of international trade is prec- 
 
136 
 
 VALUE, 
 
 iotis metal treated as bullion, estimated according 
 to its weight and fineness. 
 
 Coinage fits the metal for use as money, and is 
 done by the State according to a money system 
 with which its people are familiar. The metal is 
 reduced to a uniform fineness called standard, as, 
 for example, nine-tenths pure metal and one-tenth 
 of a prescribed alloy. This obviates all questions 
 as to its fineness, and makes equal quantities of it 
 by weight of equal value. A fixed quantity of it 
 by weight is taken as the money unit, to which a 
 name is given, as a dollar, a sovereign, a mark, a 
 franc, etc. Thereupon the standard bullion is 
 coined into multiples and submultiples of the 
 money unit, each of a weight proportionate to its 
 nominal value in the money system to which it 
 belongs. This being done, any sum of money 
 stated in terms of such unit contains a quantity 
 of the metal in proportion to the number of 
 money units contained in such sum, and with the 
 requisite number of pieces, or coins, any such 
 sum can be counted out in them without any divi 
 sion of metal or further ascertainment of its 
 weight and fineness, assuming them to be gen- 
 uine, undebased, and unimpaired by use or fraud. 
 If coinage is free and gratuiotus, the coins, exe- 
 cuted as above, and therefore called standard 
 coins, are merely the standard metal put into a 
 form most suitable and convenient for use as 
 money, and their exchange value conforms to that 
 of the same weight of standard bullion. 
 
 VALUE. 
 
 137 
 
 Each of the precious metals is uniform in qual- 
 ity and makes a homogeneous currency ; each of 
 its units are alike and of the same value, and 
 therefore a sum of money can be stated in terms 
 of the money unit. But bimetallism, or the free 
 and gratuitous coinage of both metals at a fixed 
 ratio between them, to wit, that the silver coins, per 
 money unit, shall be in pure silver a specific num- 
 ber of times heavier than the gold coins are in pure 
 gold, fails to make a homogeneous currency ; for 
 the relative market value of the two metals will 
 not remain the same as their coinage ratio, and 
 the difference in bulk and weight of the two kinds 
 of coin prevent them from being equally desirable 
 in all sums. 
 
 If a money coined out of either metal remains 
 unaltered in fineness and its unit unaltered in 
 weight, every person who buys or sells, borrows 
 or lends, in terms of such unit, knows what is to 
 be paid or received just the same as in a contract 
 to deliver or receive a specific amount of any 
 other commodity of a uniform quality. A super- 
 structure of credit can be erected upon such a 
 solid foundation, for everyone knows what is 
 meant by a sum of money stated in money units. 
 What the exchange value, or, in other words, the 
 general purchasing power, of a sum of money, or 
 of a certain quantity of any other commodity, 
 may be in the future, no one can foretell ; as to 
 that, everyone must take the risk. Prices and the 
 relative value of commodities can not be fixed by 
 

 138 
 
 VALUE. 
 
 law so as to suit both the buyer and the seller, 
 the producer and the consumer. The demand rela- 
 tive to the supply of anything does not remain 
 constant, nor does its cost of production or acqui- 
 sition. But with a metallic currency as above 
 supposed, the money and relative value of com- 
 modities would conform to the varying relative 
 demand for them at the varying relative cost of 
 their production. 
 
 The relative value of the two metals has varied 
 one-half since 1873, to wit : An ounce of fine gold 
 had the same exchange value as 15.92 ounces of 
 fine silver in 1873, and of about double that quan- 
 tity in 1 897. 
 
 The annual supply of both metals has been 
 large and increasing for a number of years (Re- 
 port of the Director of the Mint for 1896, p. 232)^ 
 which proves that each of them is produced at a 
 profit sufficient to induce and encourage its pro- 
 duction. 
 
 The change in their relative value has been 
 quite gradual since 1873, and affords no sufficient 
 reason why a country which then had, and still 
 has, either a gold or a silver standard should now 
 alter it; for the relative value of commodities 
 under either standard conforms to the variation 
 in their relative cost of production or acquisition. 
 Gold is greatly superior to silver as a metal, and 
 has been preferred more and more for use as 
 money ever since 1873. Silver has also been 
 greatly supplanted in the industrial arts by elec- 
 
 VALUE, 
 
 \m 
 
 troplate, German silver, and other alloys of the 
 baser metals. 
 
 If bimetallism were beneficial its adoption at 
 the existing commercial ratio would cause the 
 least disturbance to prices and values. The adop- 
 tion of the free coinage of gold at the ratio of 1 5 J^ 
 or 16 to I by a silver standard country would be 
 nugatory ; its adoption by a gold standard coun- 
 try would debase its unit of cost and value to the 
 bullion value of the silver contained in its money 
 unit. But its general adoption by all or the princi- 
 pal gold standard countries, if made effectual, it is 
 insisted, would cause the relative value of the two 
 metals to conform to their coinage ratio by mak- 
 ing the relative demand for them conform to that 
 ratio. The scheme has for its object to raise the 
 exchange value of silver and depress that of gold ; 
 to stimulate the production of the former and dis- 
 courage the production of the latter. The silver 
 producers are its chief advocates, aided and 
 assisted by debtors and speculators in gold stand- 
 ard countries who expect to gain by an upheaval 
 and alteration in values, caused by making money 
 more abundant and of less value per unit. Some 
 countries which hold a large stock of silver, coined 
 formerly at the ratio of 155^ or 16 to i, being 
 somewhat in the condition of the fox in the fable 
 who had lost his tail, are inclined to regard the 
 above scheme with an eye of favor. 
 
 Metallic Tokens. Some of the coins, as for the 
 fractional parts of the money unit, if made of the 
 
i 
 
 u 
 
 140 
 
 VALUE. 
 
 Standard metal, would be too small for convenient 
 use, and are usually made of baser metal, with a 
 nominal or money value assigned to them greater 
 than their metallic value. Such coins are neces- 
 sary in retail trade and to pay the fractional parts 
 of the money unit. A newspaper could not be 
 bought for a cent if there were no cents. These 
 coins are called tokens. Their coinage is limited 
 to the amount required, is done on Government 
 account, and their legal tender power is limited 
 to a small sum in any one payment. Such coins 
 are necessary for change, but they become a 
 nuisance when they are in excess of the amount 
 required, wherefore they are made redeemable 
 at the Treasury, and when wanted are obtainable 
 there for other money. 
 
 Paper Tokens, Paper money is token or repre- 
 sentative money, and properly consists of prom- 
 ises to pay money to the bearer on demand, 
 executed on paper in such form and in such 
 amounts as to be suitable for general circulation 
 as a substitute or token for the money thereby 
 promised to be paid. This token takes the 
 place of the coin which it represents, and thereby 
 reduces to the extent of its nominal value the 
 amount of coin which would otherwise be current. 
 
 The legitimate demand for paper money is not 
 a demand for more money, but for that kind 
 because of its superiority over coin for common 
 use in active circulation. Standard coin is sub- 
 ject to the objections of bulk, weight, and wear. 
 
 VALUE. 
 
 141 
 
 Paper money is light, easy to count, carry and 
 conceal about the person, and always requires for 
 its redemption coin of full weight. 
 
 The power to coin money, to alter, debase, and 
 dilute it, is an attribute of sovereignty, to be exer- 
 cised solely for the public good, and not for pri- 
 vate gain. Hence the State ought to furnish all 
 the money. Any gain, saving, or profit arising 
 from the manufacture and issue of metallic and 
 paper tokens belongs exclusively to the people as 
 represented by the State. No person or corpo- 
 ration should be authorized or permitted to make 
 and put in circulation any kind of money. Banks of 
 issue and bogus mints ought to be alike prohibited. 
 
 The fineness of the standard metal, the weight 
 of the standard coins, and even of the metallic 
 tokens, are fixed with great precision, and abun- 
 dant provision is made for the execution of the 
 coinage conformable thereto ; also, the coinage of 
 the standard metal is made free and gratuitous in 
 order that the standard coins shall have the same 
 exchange value, per unit of weight, as the 
 uncoined metal. Thereupon the money and its 
 value are as stable and as elastic as the metal and 
 its value, and all attempts to make the former 
 more so violate the theory of free coinage and 
 
 nullify its object. 
 
 Metallic and paper tokens issued solely for the 
 purpose of obviating the practical objections to 
 the exclusive use of the standard metal, and made 
 always redeemable at the National Treasury and 
 
142 
 
 VALUE. 
 
 I' 
 
 I! 
 1 ( 
 
 1 
 
 its offices, would not alter the nature of the cur- 
 rency, and would leave its value per unit, the 
 same as if it were exclusively of standard coin. 
 
 The Currency Volume, The amount of money 
 needed for active circulation depends upon the 
 quantity of business to be transacted and the 
 manner of doing it. A commercial community 
 would require more money for this purpose, per 
 unit of population, than if it were agricultural. 
 Also, when transactions of any magnitude are 
 chiefly effected by checks and other ordinary 
 instruments of credit, the quantity of money 
 required is much less than if it were counted out, 
 examined, and paid over in every transaction. 
 
 But money is not wanted merely for immediate 
 but also for future use, more or less remote. The 
 money held in reserve for future use is as much 
 a part of the currency as that which is paid away 
 as soon as it is received. For savings, reserves 
 and future use, gold coin is preferred. Such 
 money encourages frugality and promotes the 
 growth of capital; war, civil commotion, or finan 
 cial panic does not destroy its value. The finan- 
 cial condition of a country is strong when it is 
 saturated with specie. Then the exportation of a 
 few millions would excite no fear about the stability 
 of the currency, such as continually arises when it 
 consists chiefly of paper money and other tokens. 
 The people of France paid a thousand millions of 
 dollars to Germany, when overrun by its armies, 
 without a financial collapse. 
 
 VALUE. 
 
 143 
 
 The nominal amount of a metallic currency 
 also depends on the kind of metal used and the 
 weight of the money unit. For example, if the 
 weight of the money unit were reduced one-half, 
 the nominal amount of the currency would be 
 doubled. 
 
 A metallic currency whose standard coin and 
 money unit remain unaltered in weight and fine- 
 ness, is automatic in its volume. As prices rise 
 the exchange value of money falls, and exporta- 
 tion of it occurs when it can be done at a profit. 
 As prices fall, the exchange value of money rises, 
 and coin previously exported is imported, or bul- 
 lion is procured and coined when it can be done 
 at a profit. Precious metal, in coin or bullion, 
 like any other commodity, is exported when in 
 superfluity and procured in the opposite case. 
 
 If, instead of allowing a metallic currency to 
 correct itself automatically, money is kept too 
 abundant by issues of paper money , the final result 
 is the total expulsion of the standard coin ; after 
 which the paper money, being non-exportable and 
 irredeemable, declines in value as its quantity 
 increases, until its value becomes nominal, as 
 Continental money, assignats. Confederate money. 
 
 A gold currency may also be debased by the 
 free and gratuitous coinage of silver at a nominal 
 or legal-tender value in excess of its bullion 
 value, or gold price. In such case, silver bullion 
 can be coined at a profit until the abundance of 
 money and the consequen rise in prices cause 
 
144 
 
 VAL UE. 
 
 the silver coins to fall to their bullion value 
 Pnor to which time the gold coins, being worth 
 more as bullion than their nominal or money 
 value, are exported or otherwise disappear from 
 circulation. After the silver coins fall to their 
 value for export as bullion, the currency could not 
 be further inflated except by debasing them, or by 
 issues of paper money as above stated. 
 
 According to the report of the Director of the 
 Mint for 1896, p. 226, the gold produced in the 
 'United States previous to 1896 amounted, in coin- 
 ing value, to $2,059,946,769 ; to which add his esti- 
 mate for 1896, to wit, $51,500,000, and the total 
 product up to 1897 was $2,111,446,769. Also, p. 
 281, the total gold coinage at the mints of the 
 United States up to July i, 1896, was $1,814,692,. 
 253, which is greater than the total currency of 
 the United States at that date, which, as given by 
 the Treasury Department, was $1,776,817,488 of 
 which only $567,931,823 was in gold coin, the 
 residue consisting of various kinds of paper 
 money and of silver tokens. The difference 
 between the product and the coinage may be 
 taken as equal to the quantity of gold used in 
 the industrial arts, supposing all old material to 
 be reemployed for that purpose. It is obvious, 
 therefore, that the entire currency might have 
 been in gold coin, without importing any of that 
 metal. In such case, the preference for paper 
 money over coin for use in active circulation 
 could have been satisfied by the issue from the 
 
 VALUE. 
 
 145 
 
 Treasury of gold certificates for a like amount in 
 gold coin deposited and there held for their 
 redemption. Thereupon the currency and its 
 proportionate parts, as between coin and paper, 
 would have been automatic. The annual domes- 
 tic product, which is large and increasing, 
 to wit, $46,610,000 in 1895, and $51,500,000 in 
 1896, after deducting the quantity of new gold 
 required for use in the industrial arts, would 
 have supplied any future increase in the cur- 
 rency demanded by an increase in the population 
 or other cause. 
 
 But the currency of the United States consists 
 of about one-third in standard gold coin and two- 
 thirds in paper and other tokens. In addition to 
 all the foreign gold imported, there was exported 
 previous to July i, 1896, about $1,200,000,000 of 
 the domestic product. The net export of the 
 United States gold coin from January i, 1870, to 
 November i, 1896, was $576,494,360 (Mint report 
 for 1896, p. 32). To this add the net export of 
 foreign gold coin and of domestic and foreign 
 bullion. The net export of gold for the fiscal 
 year ending June 30, 1896, was $78,904,612; for 
 the fiscal year ending June 30, 1895, was $30,117,- 
 376 (lb.). Gold is exported persistently as above, 
 because the volume of the currency has been in 
 time past, and still is, kept stuffed with paper and 
 other tokens. " When, during a period of appre- 
 hension, caused by a large efflux of gold from 
 
 England to America, views were expressed in 
 10 
 
146 
 
 VALUE. 
 
 'i* 
 
 
 Manchester and Liverpool that a much larger 
 issue of bank notes ought to be permitted, this 
 opinion tended manifestly to the depreciation of 
 our currency." (Goshen's " Foreign Exchanges," 
 p. 74-) 
 
 If the free coinage of silver were adopted at 
 the ratio of i6 to i, which is about twice its com- 
 mercial value, all of the gold coin, and gold not 
 used in the industrial arts, would be exported, 
 except what might be hoarded. And thereupon 
 the currency would become one consisting of sil- 
 ver dollars and paper tokens redeemable in silver 
 dollars. Only about $60,000,000 of silver dollars 
 is all that can be kept in circulation in specie ; 
 any excess over this amount is returned to the 
 Treasury' and silver certificates taken out for it. 
 After such a currency was inflated to the export- 
 ing point for the silver coin, and prices had 
 become adjusted to the silver dollar as the money 
 unit, and debts had been incurred on that basis, 
 the chronic complaint about the scarcity of money 
 would be heard, unless the exchange value of sil- 
 ver continued to decline, prices to rise, and debts 
 to dwindle. 
 
 The State has power to alter the money and 
 its unit, so that a sum of money payable, e. g., in 
 dollars is payable in any kind of dollars which is 
 a legal tender at the time of payment. In addi- 
 tion to the natural and unavoidable causes of 
 variation in money value, everyone must take 
 the additional risk of variation caused by an alter- 
 
 VALUE. 
 
 147 
 
 ation in the money. Such alterations may be 
 justified by necessity or other reasons of State 
 almost equally cogent. 
 
 Many people, who would be startled by legal- 
 ized alterations in other commodities and their 
 units of measure, think that alterations in money 
 so as to make it more abundant and less valuable, 
 is quite the correct thing to do; it helps the debtor 
 and speculator and is said to give "a fillip "to 
 business; it is always practicable, for creditors 
 can be compelled to accept the inferior article and 
 are then in no condition to cry stinking fish. To 
 refuse the free and gratuitous coinage of silver 
 dollars out of metal worth half their nominal and 
 legal-tender value was said by the cheap-money 
 candidate for the Presidency in 1 896, to shut the 
 gates of mercy on mankind. The gates could 
 have been kept open quite as easily by debasing 
 the gold coin one-half, and more easily by liberal 
 issues of paper money, as desired by the Populists. 
 But neither of these methods would have suited 
 the silver producers or been supported by the 
 votes of the silver States. To alter money and 
 its value by debasing the coin, or by substituting 
 a cheaper metal, is an antiquated method involv- 
 ing time and expense. The French livre was 
 originally a pound of silver, but finally contained 
 only about seventy grains troy, but it took a long 
 time to do this. To inflate and depreciate a cur- 
 rency with paper money is more adroit, and can 
 be done quickly and cheaply ; paper money can 
 
148 
 
 VALUE, 
 
 be produced at once to an unlimited amount at a 
 merely nominal cost. 
 
 Alterations in money cause the standard of 
 cost and value to become fallacious. The differ- 
 ence is not readily perceived by everybody; 
 prices alter, but the cause is not referred to the 
 alteration made in the money. During the war of 
 secession, accounts were kept and prices stated in 
 dollars as before, but they were paper dollars. 
 During July, 1864, the value in paper dollars of a 
 dollar in gold varied between the extreme limits 
 of $2.85 and $2.22. After the war ended, as the 
 quantity of paper money was reduced, it was said 
 gold fell in price. The prices and relative value 
 of commodities did not at once and uniformly 
 respond to the change. Some things rose faster 
 or sooner than others during the expansion, and 
 some things fell sooner or faster than others dur- 
 ing the contraction of the currency. 
 
 VIII. 
 
 AMERICAN CURRENCY. 
 
 A brief history of the money of this country 
 furnishes a practical illustration of the subject of 
 money and money value. 
 
 Colonial money was expressed in £, s. d., or 
 pounds, shillings, and pence. But this is money 
 in the abstract, ideal money, or, as it is called, 
 
 VALUE, 
 
 149 
 
 money of account. What, then, was this money 
 in the concrete ? v 
 
 From the time of Queen Elizabeth until 18 16, 
 a pound troy of sterling silver (.925 fine) was 
 coined into 62 shillings. Spain and her colonies 
 being^the chief source of_silver, the Spanish dol- 
 larTound^ts wayTnto'England and this country. 
 This dollar, called the old Seville piece of eight, 
 contained the same amount of pure silver as 4s. 6d. 
 sterling. But in this country, as finally settled, 
 this dollar in Colonial currency was 8s. in New 
 York and North Carolina ; 6s. in New England 
 and Virginia ; 7s. 6d. in New Jersey, Pennsyl- 
 vania, Maryland, and Delaware; 5s. in Georgia. 
 The colonists in their foreign trade acquired Eng- 
 lish, French, Spanish, Portuguese, and other gold 
 and silver coins, which, taking their contents in 
 pure metal and allowing the market ratio 
 between gold and silver, could be valued in terms 
 of Colonial money. Any colonist who sold Colo- 
 nial produce abroad, bought foreign products, 
 received or paid coin in his accounts, could state 
 his transactions and his profit or loss in Colonial 
 £, s. d. By making Colonial shillings smaller 
 than English shillings the colonists gained noth- 
 ing, for the prices of goods were raised to cor- 
 respond. Nearly all the colonies issued paper ~ 
 money and made it a legal tender, with penalties 
 for asking a higher price in paper than in hard 
 money, with the result that £100 specie was the 
 equivalent of ;f 525 Massachusetts paper money in 
 
150 
 
 VALUE. 
 
 \ 
 
 1740, and of ;f 1, 1 00 in 1748. Adam Smith said in 
 commentmg on Colonial money (*' Wealth of 
 Nations," B. 2, Chap. 2) : - A positive law may 
 render a shilling a legal tender for a guinea 
 because it may direct the courts of justice to dis^ 
 charge the debtor who made the tender. But no 
 positive law can oblige a person to sell goods and 
 who IS at liberty to sell or not to sell as he 
 pleases, to accept of a shilling as an equivalent to 
 a guinea in the price of them." 
 
 Continental Money. The colonies, afterward 
 States, fought the mother country jointly and sev- 
 erally on credit ; the people were opposed to taxa- 
 tion. The Continental Congress had no power and 
 the several States had no disposition, to tax. Con- 
 gress and the States severally issued bills of credit 
 to very large amounts. Continental money was 
 expressed in Spanish dollars and ninetieths a 
 Pennsylvania penny being one-ninetieth of a dol- 
 lar. 
 
 An account of this money is given in a report, 
 April 18, 1781, by a committee appointed to esti- 
 mate and state the amount of the debts of the 
 United States, with the necessary estimates for the 
 current year as near as could be done, the debts 
 being stated in Continental money at $230,000,000 • 
 also in specie, on the basis of 75 to i , at $3,066,666% ' 
 One Item of the total is $160,000,000 of Continental 
 money then supposed to be outstanding. They 
 say : - It can not be forgotten that these United 
 States were plunged into a war and that an army 
 
 VALUE. 
 
 151 
 
 was drawn together before any money was pro- 
 vided or funds established for defraying the 
 expense thereof. In this situation of affairs Con- 
 grress met in May, 1775. They had no resource 
 from whence to derive present supplies but that 
 of emitting bills of credit redeemable at a f uture^ *^ 
 day. On JuneT2ri775, Congress agreed"^© ~ emit 
 two millions, which, on July 25th, was increased to 
 three millions, for the redemption of which they 
 pledged the confederated colonies ; on November, 
 29, 177s, three millions more were authorized on 
 the same security; on February 17, 1776, four 
 millions more ; on May 9, 1 776, five millions more ; 
 on July 22, 1776, five millions more. But as it 
 was foreseen that such repeated issues of bills of 
 credit would increase the quantity to too great a 
 degree, and consequently occasion their deprecia- 
 tion, it was resolved in October to borrow five 
 millions, and in November a lottery was^set on 
 foot. As neither loans nor the lottery were suffi- 
 ciently productive, necessity compelled further 
 emissions of biljs_ of credit. By this means the 
 paper currency being multiplied began to depre- 
 ciate. It was therefore resolved, September 10, 
 I 'j'j'j, to prepare an earnest recommendation to the 
 States to proceed to taxation ; also to borrow^larger 
 sums. Unfortunately the tax failed, and the sums 
 obtained from loans were greatly inadequate to 
 the expenditure ; consequently more money* was 
 emitted, and, notwithstanding the favorable turn 
 in our affairs in 1778, depreciation increased with 
 
i 
 
 15:;^ 
 
 VALUE. 
 
 I 
 
 
 amazing rapidity. At the close of the year 1778 
 the sums emitted and borrowed amounted to about 
 one hundred and eight millions. Congress, anx- 
 ious to put a stop to any further emissions and to 
 provide a fund for redeeming whrt'was issued 
 called upon the States to pay, etc. But the public 
 treasury, receiving no recruit from taxes, was from 
 time to time replenished with ne^emissions ; 
 depreciation, instead of receiving a check,~^o^ 
 , -^cee^d with redoubled vigor. On September i, 
 ^ 1 779' the sum emittea and in circulation amounted 
 \ ^to $159,948,880; and as there was a great outcry 
 i\j^ on account of the depreciation and the floods of 
 ^ a money emitted. Congress resolved that they would 
 ^ on no account whatever emit more bills than to 
 make the whole two hundred millions. Congress 
 was compelled by necessity to issue this remain- 
 der, etc. 
 
 The rate of exchange for hard money at Phil- 
 adelphia was, at the end of 1776,1 1^ to i; of 1777, 
 4 to l; of 1778, 9 to i; of 1779, 45 to l; of 1780, lOO 
 to i; m May, 1781, from 200 to 500 to i, when it 
 ceased to circulate there, and, soon afterward, 
 elsewhere. 
 
 ^^ The quantity of the paper money destroyed its 
 value, although it was sustained by legal-tender 
 laws, limitation of prices, penal laws, vigilance 
 committees, and military force. 
 
 Thos. Paine, in a letter to Danton, dated May, 
 1793, said: "The assignats are not of the same 
 value they were a year ago, and as the quantity 
 
 f 
 
 VALUE. 
 
 153 
 
 increases the value of them will diminish. This 
 gives the appearance of things being dear when 
 they are not so in fact, for in the same proportion 
 that any kind of money falls in value, articles rise 
 in price. If it were not'^or this the quantity of 
 assignats would be too great to be circulated. 
 Paper money in America fell so much in value 
 from the excessive quantity of it thaf in the year 
 1 78 1 I gave $300 for one pair of worsted stock- 
 ings. What I write to you on this subject is 
 experience and not merely opinion." 
 
 While Continental money remained a legal 
 tender, debtors, executors^ trustees, and guardians 
 could easily discharge their liabilities. But after 
 the collapse and the repeal of the legal-tender 
 acts, debts theretofore incurred were in a differ- 
 ent category. Debts were scaled down, stay laws 
 passed, about all kinds of property made a legal 
 tender at a valuation, and in some States new 
 bills of credit wer^ issued. There was financial 
 anarchy and almost civil war. 
 
 A Coinage and a Money Unit, 
 
 The States having achieved their independence 
 and survived their difficulties, adopted the pres- 
 ent Federal Constitution and therein provided that 
 Congress shall have power to coin money, rege- 
 late the value thereof and of foreign coin, and fix 
 the standard of w eight s and measures. Also that : 
 gp^ State shall coin money, emit bills of credit, 
 make anything but gold and silver coin a tender 
 
154 
 
 VALUE. 
 
 \ 
 
 in payment of debts, or pass any law impairing 
 the obligation of contracts. 
 
 The Secretary of the Treasury (Mr. Hamilton), 
 in his report relative to the establishment of a 
 mint, etc., January 28, 1791, said: ''The pound, 
 though of various values, is the unit of account in 
 all the States. But it is not equally easy to pro- 
 nounce what is to be considered as the unit in the 
 coins. The manner of adjusting the foreign 
 exchanges would seem to indicate the dollar as 
 best entitled to that character. In these the old 
 piaster of Spain, or old Seville piece of eight rials, 
 of the value of 4s. 6d. (sterling), is evidently con' 
 templated. But this circumstance in favor of the 
 4oll§r loses much of its weight from^wo consid- 
 erations. That species of coin has never had any 
 settled or standard value according to weigh*t or. 
 fineness, but has been permitted to circulate by 
 tale, without regard to either, very much as a 
 matter of convenience, while gold has had a fixed 
 price by weight and with an eye to its fineness. 
 This greater stabiH^tyJn the value of gold is an 
 argument of force for regarding the money unit 
 as having been hitherto virtually attached to gold • 
 24 Ji grains of fine gold have corresponded ~^^I!h 
 the nominal value of the dollar in the several 
 States, without regard to the several denomina- 
 tions of its intrinsic worth. But if the dollar 
 should, notwithstanding, be supposed to have the 
 best title to being considered as the present unit, 
 it would remain to determine what kind of a dol' 
 
 VALUE. 
 
 155 
 
 lar ought to be understood, or in other words 
 what quantity of silver." 
 
 "The old piaster of Spain, which appears to 
 have regulated our exchanges, weighed 17 dwt. 
 12 grains, and contained 3863^ grains of fine silver. 
 But this piece has been long since out of circu- 
 lation. The dollars now in common currency are 
 of recent date and much inferior to that, both in 
 weight and fineness. The average weight of 
 these, upon different trials in large masses, has 
 been found to be 17 dwt. 8 grains. Their fine- 
 ness is less precisely ascertained ; the result of 
 various assays made by different persons under 
 the direction of the late Superintendent of the 
 Finances, and of the Secretary, being as various 
 as the assays themselves. The experiment which 
 appears to have the best pretensions to exactness 
 would make the new dollar to contain 370.933 
 grains of pure silver. And the Secretary finally 
 reached the conclUvSion that the sum of money 
 of account of each State, corresponding with the 
 nominal value of the dollar in each State, corre- 
 sponds also with 24^ grains of fine gold and with 
 something between 368 and 374 grains of fine 
 silver." (The average of these is 371.) 
 
 By an act of Congress, April 2, 1792, establish- 
 ing a mint, etc., it was enacted that the money of 
 account of the United States shall be expressed 
 in dollars_or units, dimes or tenths, cents or, 
 hundredths, and mills or thousandths, and th^t 
 all accounts in the public offices and all proceed- 
 
156 
 
 VALUE. 
 
 ings in the courts of the United States shall be 
 kept and had in conformity to this regulation; 
 also, that there shall be from time to time struck 
 and coined at the mint, coins of gold, silver, and 
 copper, having thereon the devices and legends 
 in the act specified, to wit : In gold, eagles ($io), 
 half and quarter eagles ; in silver, dollars, halves! 
 quarters, dimes, and half-dimes ; in copper, cents! 
 and half^ents. The dollars each to be of the\ 
 value of the Spanish milled dollar as the same is 
 now current, and to contain 371.25 grains (troy) of 
 pure silver or 416 grains of standard silver; the 
 other silver coins to be of standard silver and of 
 proportionate weight and value ; the eagle to con- 
 tain 247.50 grains of pure or 270 grains of stan- 
 dard gold ; the half and quarter eagles to be of 
 standard gold and of proportionate weight and 
 value. 
 
 Also, that the gold and silver coins issued from 
 the mint shall be a lawful tender in all payments 
 those of full weight at their nominal value and 
 those of less weight at values proportional thereto. 
 
 Also, that the proportional value of gold to 
 silver in all coins which shall by law be current 
 within the United States shall be as fifteen to 
 one, according to quantity in weight of^pH?i^ld~" 
 or pure silver; that is to say, every fifteen pounds 
 weight of pure silver shall be of equal value in 
 all payments with one pound weight of pure gold, 
 and so in proportion as to any greater or less 
 quantities of the respective metals. 
 
 VALUE. 
 
 157 
 
 In estimating coins the alloy is not valued. 
 
 The coinage of gold and silver was made free /? 
 and gratuitous. 
 
 Foreign Coins. By the act of February 9, 1793, 
 regulating foreign coins, etc., sundry foreign 
 gold and silver coins therein named were to pass 
 current as money within the United States and 
 be a legal tender at the rates therein specified. 
 But all such coins received in payment of moneys 
 due the United States (Spanish milled dollars and 
 parts thereof excepted), after coinage should begin 
 at the mint, were to be coined anew. Other acts 
 of a similar nature were passed from time to time 
 until, by the act of February 21, 1857, all former 
 acts authorizing the currency of foreign coin and 
 declaring the same a legal tender in payment of 
 debts were repealed. 
 
 Ever since the act of 1 792 the money unit of 
 the United States has been called a dollar; all 
 accounts and sums of money are stated in terms 
 of it and its decimal parts. And by that act a 
 dollar signified 24^ grains of pure gold, or 371 J^ 
 grains of pure silver, in United States coin, or in 
 foreign coin made current by law. 
 
 But the relative market value of the two metals 
 having varied from the ratio of 1 5 to i by the act 
 of June 28, 1834, "concerning the gold coins, 
 etc.," the weight of the eagle was reduced to 232 
 grains of pure and 258 grains of standard gold. 
 
 This altered the coinage ratio to ^=16+ to i ; 
 the commercial ratio then was 15.73 to ^- Silver 
 
 Hl 
 
 itr 
 
158 
 
 VALUE. 
 
 '^' 
 
 was intentionally undervalued in order by its ex 
 portation, to bring about a single gold standard" 
 The gold coins previously minted were given the 
 value of $0.94.8 per pennyweight ; those remain- 
 ing in the country were recoined 
 
 Afterward, by the act of January ,8, ,837 
 supplementary to the act establishing a mint 
 etc the standard of nine-tenths fine for both 
 gold and silver coins was adopted. The standard 
 weight of the gold coins was left the same as 
 under the act of ,834 ; the alloy was reduced and 
 a little more gold added. The weight of the sil- 
 ver dollar was reduced to4.2>^ grains by reduc- 
 ing the alloy, the other silver coins to be in pro- 
 portion. The coinage ratio thereby became 
 aj.M- '5-988+ to I, the commercial ratio then 
 
 ^.V"^/!,^"^^/" ''^°^ '"''^'' ^""tinned to be worth 
 more than its coinage ratio until 1874 
 
 In order to prevent the exportation of the frac- 
 tional silver coins, by the act of February 21, 18?^ 
 amendatory of existing laws relative to the half- 
 
 nf r rfJ!f ';, ^'"^^^ ^°*^ half^iime," the weight 
 of the h^f-dollar was reduced to .92 grains, and 
 of the others in proportion. Their legal-tender 
 power was limited to $5 in any one payment, and 
 their coinage to be done solely on Government 
 account. They were reduced from standard to 
 token coins. — — — — 
 
 The coinage of gold dollars and of double 
 eagles was authorized by the act of March x 
 
 1 849. •^* 
 
 VALUE. 
 
 159 
 
 This suffices to show the alterations made in 
 the coinage prior to the year 1873. 
 
 Bank Notes. Althoug it was generally con- 
 ceded that Congress could establish a money sys- 
 tem, give its unit a name, and manufacture coins 
 pursuant thereto, yet its power to issue directly or 
 indirectly paper tokens in any form suitable for 
 circulation as money was denied by the advocates Jj 
 of State rights, although it was adjudged by the 
 Supreme Court of the United States that Congress 
 could create a bank with power to issue bank 
 notes ; and it was also held by that court that such 
 notes issued by a corporation created by a State 
 were not ** bills of credit," prohibited by the Fed- 
 eral Constitution. The result was that with the 
 exception of a first and second bank of the 
 United States, hereafter mentioned, Congress 
 created no banks until 1 863 ; and until then the 
 several States competed with each other in stuff- 
 ing the currency with bank notes issued by cor- 
 porations created under State authority. The 
 doctrine generally received and acted on was, that 
 Congress could coin money and the States could 
 expel it from circulation and from the country by / 
 issues of bank notes. 
 
 But it finally became obvious that Congress 
 could not regulate the value of money unless it 
 had the power to regulate its kind and quantity. 
 Whereupon, about 1883, it was finally adjudged 
 that " Congress has power to provide a National // 
 currency and secure the benefit of it to the peo- 
 
160 
 
 , 
 
 f 
 
 \ 
 
 VALUE. 
 
 \ 
 
 pie To this end Congress has denied the quality 
 of legal tender to foreign coin, and has provided 
 by law against the imposition of counterfeit and 
 base com on the community. To the same end 
 
 ciSr "^""l '^'■""■""' ''y ^"'table enactments the 
 circulation of any notes not issued under its 
 authonty. Without such power its attempts to 
 secure a sound and uniform currency to the coun 
 try must be futile. Also, that Congrel can 
 authorize the direct issue of bills of credit and 
 make them a legal tender in all payments " 
 
 r J5\^^'* ^*°^ ""^ '^^ U'^'t^^ States was estab- 
 lished by an act of Congress, approved February 
 
 M;rr'' Z Vh*'°'°°°'°°°' t° continue untJ 
 March 4. i8i I. This act was passed more than a 
 year prior to the act establishing a coinage and a 
 money unit to be called a dollar - 
 
 At first the States created banks of issue under 
 special charters, a few prior to .790. By "g'l 
 they had become numerous, with a nominal cap. 
 ital exceeding $75,ooo.a>o, which usually con- 
 
 the stoct "^ °' '"' '^''^^ °' ^''^ subscribe to 
 
 The Banking Principle. According to this orin 
 c:ple, a bank of issue needs no more money to 3 
 It in operation than enough to furnish an olBce 
 and to pnnt its bank notes. Having fiLd itJ 
 coffers with them it is ready to exchange them 
 for commercial paper, discounted at the current 
 rate ; ,t exchanges its notes not bearing interest 
 for the notes and bills of others bearing interest 
 
 1 
 
 VALUE. 
 
 161 
 
 When the paper discounted matures and is paid, 
 it has redeemed its notes or acquired the means 
 to do so. Thereupon it can, at least theoretically, 
 continue to discount commercial paper ' and 
 redeem its notes in that manner for all time, 
 although bank notes became so abundant that a 
 pair of worsted stockings would sell for $300, and 
 other things in proportion. But a demand for 
 specie knocks the wind out of the banking prin- 
 ciple, and that occurs when specie is wanted for 
 ex portation_ or other purpose. The notes get into 
 circulation under the faith that they will be 
 redeemed on demand^ and if payment is refused 
 the solvency~6r^e bank is distrusted and its 
 notes become uncurrent. But the banking prin- 
 ciple was aided by circulating the notes as far 
 away from home as possible and scattering them 
 broadcast so that they might slowly return in 
 single file. This was effected by exchanging 
 notes with distant banks under a mutual under- 
 standing to scatter the notes as much as possible, 
 or by lending them, e. g., at Chicago to solvent 
 buyers of live stock, grain, etc., from people 
 residing west of the Mississippi. 
 
 After a bank has put its notes in circulation 
 and thereby assisted in providing the people with 
 a currency, it can refuse to redeem the notes and 
 still continue to do business, provided its debtors 
 will pay or can be forced to pay their debts. 
 Having borrowed its capital from the people it 
 
 would lose it by redeeming its notes. Therefore, 
 11 
 
H,:i 
 
 I 
 
 162 
 
 VAL UE. 
 
 I 
 
 V 
 
 It was customary, when the notes became dis- 
 trusted so that it would be difficult or impossible 
 to reissue them, to suspend payment. The Bank 
 of England suspended specie payment in 1707 ^ 
 and did not resume for twenty years or more! 
 Why should not American banks imitate so illus- 
 trious an example ? 
 
 In "Gouge on Banking" (Part II, p. 143) is 
 quoted a report of the directors of the State 
 Bank of South Carolina, dated October i 18 19 in 
 which the effects produced by the resumption of 
 specie payments are deplored as unnecessary 
 evils. - It becomes necessary (say the directors) 
 to inquire whether, in the present sUte of the 
 world, a metallic currency sufficient for the wants 
 of our country is attainable, and whether, if it be 
 obtained, it will be worth the necessary cost • 
 whether, in fact, a currency equally good, per' 
 haps better, may not be established without any 
 of those sacrifices which our country has been 
 already obliged to make, and which it must for a 
 long time make, to secure this fugitive and 
 evanescent object. In Great Britain, where alone 
 m modern days, gold and silver have for a short 
 time been left freely to find their value in an un- 
 shackled market, they have been known to 
 fluctuate m value nearly 50 per cent in the 
 course of a few months, a fluctuation which no 
 paper currency has undergone, except such as has 
 been issued by the mandates of arbitrary and 
 necessitous governments, where no value is re- 
 
 VALUE. 
 
 163 
 
 ceived for their emission, no pledge given for 
 their redemption." 
 
 No doubt the notes of this bank never fluc- 
 tuated in value relative to each other ; two notes 
 for the same amount were always of equal value. 
 
 But in "Gouge on Banking "(Part II, p. 166) is 
 griven a table showing the discount on the notes of 
 the Pennsylvania country banks, not in specie but 
 in Philadelphia bank paper, from which it appears 
 that November i, 18 19, the discount was, of the 
 notes of one bank, 60 per cent ; of eight banks, 
 50 per cent ; others from 15 to 45 per cent, and 
 the notes of seven out of a total of thirty-three 
 were at par. On the following page of the same 
 book is given a table of the prices of bank notes 
 at Baltimore, August 7, 1819, the discount on them 
 being as follows: New England notes, i to 6; 
 Pennsylvania, i to 60; Delaware, i to 50; Mary- 
 land, I to 40; District of Columbia, i to 60; Vir- 
 ginia, 1% to 25; North Carolina, 20 to 25; South 
 Carolina, 8 to 10; Georgia, 7 to 8; Kentucky, 15 
 to 25 ; Ohio, 10 to 50; Indiana, Illinois, and Mis- 
 souri, 15 to 60. 
 
 To which is added the statement that the 
 prices of bank notes varied several per cent in the 
 course of a week. The notes which were at par 
 in one part of the country were in other parts 
 at a heavy discount. A bank's paying specie did 
 not prevent its notes from depreciating, for no- 
 body knew how long any distant bank would con- 
 tinue to pay specie. All banks whose notes were 
 
 I 
 
164 
 
 VALUE. 
 
 at a discount at New York of less than 5 per cent, 
 and some of the others, were understood to pay 
 specie on demand. 
 
 When the banks suspended specie payment, as 
 they often did, the people, and the government 
 also, had the benefit of Hobson's choice — they 
 could use the dishonored bank notes as a currency 
 or go without any kind of money. The notes be- 
 ing of various and variable values, everybody 
 could estimate daily, by the aid of bank-note 
 detectors and reporters, the specie value of his 
 money. For others assisted in furnishing the 
 people with a currency, to wit, ordinary counter- 
 feits ; genuine notes altered from lower denomi- 
 nations to higher ones; genuine notes of failed 
 banks altered to the names of solvent banks; 
 notes of banks having no existence ; notes pur- 
 porting to be issued by a bank which never issued 
 any of that denomination. 
 
 According to " Gouge on Banking," Part II, p. 
 160, Governor Wolcott, in an address to the Legis- 
 lature of Connecticut in May, 1826, said: "The 
 currency which is required by the daily exchange 
 between all the people, and by which the trans- 
 actions between farmers, mechanics, laborers, 
 manufacturers, and traders is regulated, is almost 
 exclusively in bank notes, which are issued by a 
 great number of independent corporations which 
 possess an exclusive privilege of creating notes 
 for their own benefit." 
 
 '*This monopoly is here so exercised that neither 
 
 VALUE. 
 
 165 
 
 the amount of currency which is issued, nor the 
 amount of that which is suddenly suspended, 
 withdrawn, or annihilated, is subject to any prac- 
 tical limitation other than what must arise from 
 the state of foreign and domestic exchanges, the 
 speculations of individuals, political events, and 
 the necessities or caprices of the numerous monop- 
 olizing incorporations who entirely control the 
 circulation of the country. These last observa- 
 tions require no other confirmation than a refer- 
 ence to the notorious fact that no coins circulate 
 among the people, except small sums of copper 
 and the fractional parts of a dollar in silver, which 
 is our silver unit. Our unit of gold in a coin of 
 $10, which, with its fractional parts in coins of $5 
 and $2.50, have wholly vanished from circulation. 
 The effects produced on the people are that no 
 man can travel fifty miles in any direction with- 
 out receiving paper notes of which he possesses 
 no means of ascertaining the value, or even the 
 authenticity, and this difficulty increases in pro- 
 portion to the distance of an individual from some 
 one of these banks. From these causes the whole 
 country is subject to complex evils, arising from 
 either a redundant or too restricted circulation of 
 the only currency which can be obtained, and 
 hence sudden variations in the prices of exchange- 
 able commodities far exceeding the customary 
 profits of regular industry and commerce, thereby 
 converting all transactions of business, especially 
 at a distance from the seats of foreign commerce, 
 
 
166 
 
 VALUE, 
 
 * 
 
 I 
 
 into mere lotteries. It is amidst explosions of 
 credit, principally occasioned by the conduct of 
 banks, that every class of industrious citizens and 
 all our enterprising young men are exposed to 
 repeated losses, against which no vigilance can 
 guard and no prudence exempt them." 
 
 War was declared against Great Britain in June, 
 1 812, and terminated in 181 5. Washington was 
 taken by a small invading force and the public 
 buildings burned. Insolvency compelled peace 
 without honor, except on the water, and finally at 
 New Orleans. 
 
 There was no National currency, no money or 
 its equivalent, which represented the same value 
 in all places. The first National bank ceased to 
 exist in 181 1. Local banks overspread the land, 
 and upon these the Government was thrown for 
 currency and for loans. They, unequal to the 
 task, and having removed their own foundations 
 by banishing specie by profuse issues, sank under 
 the double load of National and local wants, and 
 stopped specie payments, except New England, 
 which section was unfavorable to the war. Treas^ 
 ury notes were then the resort of the Government. 
 They were issued in great quantities, and not 
 being convertible into coin at the will of the 
 holder, soon began to depreciate. In the second 
 year of the war, depreciation had become enor- 
 mous. An officer setting out from Washington 
 with a supply of these notes found them sunk 
 one-third by the time he reached the northern 
 
 VALUE. 
 
 107 
 
 frontier. They could not be used as a currency, 
 but only to obtain local bank paper, itself greatly 
 depreciated. All Government securities were 
 under par, even for depreciated bank notes. Loans 
 were obtained with great difficulty at large dis- 
 count, on the lender's own terms, and still attain- 
 able only in depreciated bank notes. (Benton's 
 *' Thirty Years' View," Vol. I, p. i.) 
 
 The form of these Treasury notes was, in sub- 
 stance, that the United States would receive this 
 
 note for dollars, with interest from the date 
 
 thereof, in all payments to them, or issue on de- 
 mand therefor to A B or order 6 per cent stock, 
 agreeably to the act of Congress. Total amount 
 issued, $36,680,794. Of the eighty millions of 
 loans negotiated by the Government the avails 
 were only thirty millions, after deducting dis- 
 counts and depreciations. (" United States Notes," 
 by Knox, Chap. 5.) 
 
 The population had trebled since the days of 
 Continental money, and a Federal Government 
 existed with adequate powers, but its adminis- 
 tration was in the hands of the advocates of State ] 
 rights, who shuddered at the idea of a Treasury ; 
 note drawn payable to the bearer, or made a legal 
 tender in any form. The United States then 
 existed in the plural number only. 
 
 But the President (Mr. Madison) having been 
 chased out of Washington by the enemy, a cur- 
 rency consisting of State bank notes sickened on 
 the Democratic stomach, and that party, with the 
 
 1 
 
168 
 
 VALUE. 
 
 ^ 
 
 \ 
 
 President at its head, discovered sufficient author- 
 ity to establish the Second Bank of the United 
 States, capital $35,000,000, created by an act of 
 Congress approved April 10, 18 16, to continue 
 until March 3, 1836. The United States owned 
 one-fifth of the stock and lost it all. 
 
 In support of this measure Mr. Calhoun said 
 in the House : " There has been an extraordinary 
 revolution in the currency of the country. By a 
 sort of undercurrent the power of Congress to 
 regulate the money of the country has caved in, 
 and upon its ruin has sprung up these institu- 
 tions which now exercise the right of making ! 
 money in and for the United States. For gold 
 and silver are not the only money, but whatever 
 is the medium of exchange and sale, in which 
 ^5?i^ paper alone was now employed and had 
 become the money of the country. A change, 
 great and wonderful, has taken place, which 
 divests you of your rights and turns you back to 
 the Revolutionary War, in which every State " 
 issued bills of credit, which were made a legal 
 tender and were of various values. We have in 
 lieu of gold and silver a paper medium, une- 
 qually and generally depreciated, which aflFects 
 the trade and industry of the nation, which para- / 
 lyzes the National arm, and which sullies the ■ 
 faith, both public and private, of the United 
 States." ' 
 
 And he further stated that the banks had one 
 hundred and seventy millions in circulation, and 
 
 VALUE. 
 
 169 
 
 not over fifteen millions in specie for its redemp- 
 tion. 
 
 A currency composed of State bank notes 
 having proved to be disastrous, by a resolution, 
 relative to the more effectual collection of the 
 public revenue, approved April 30, 18 16, the Sec- 
 retary of the Treasury was directed to adopt 
 such measures as he may deem necessary to 
 cause, as soon as may be, all duties, taxes, debts, 
 and sums of money, accruing or becoming pay- 
 able to the United States, to be collected and paid 
 in the legal currency of the United States, or 
 Treasury notes, or notes of the Bank of the 
 United States, as by law provided, or in notes of 
 banks which are payable and paid on demand in 
 the said legal currency, and that from and after 
 February 20th next, no such duties, taxes, debts, 
 or sums of money accruing to the United States 
 ought to be collected or received otherwise than 
 in the said legal currency. Treasury notes, notes 
 of the Bank of the United States, or notes of 
 banks payable and paid on demand in said legal 
 currency. 
 
 The money of the country must have been bad 
 enough when Congress saw fit to declare that, 
 after the expiration of nearly a year, only specie, 
 its own notes, and the notes of specie-paying 
 banks " ought " to be received at the Treasury. 
 
 By the charter of the Second Bank of the 
 United States, its bills and notes payable on 
 demand were made receivable in all payments to 
 
 1! 
 
 r 
 
 •1 
 
170 
 
 VALUE, 
 
 the United States unless otherwise directed by an 
 act of Congress ; also, the deposits of the money 
 of the United States in places in which the bank 
 and branches thereof were established were to be 
 made in said bank or branches thereof, unless the 
 Secretary of the Treasury shall at any time other- 
 wise direct ; in which case the Secretary of Treas- 
 ury shall immediately lay before Congress, if in 
 session, and if not, immediately after the com- 
 mencement of the next session, the reasons of 
 such order or direction. 
 
 According to Mr. Benton (''Thirty Years' View," 
 Vol. I, p. 242), there was a part of the Revolu- 
 tionary debt amounting to thirteen and a quarter 
 millions which bore interest at 3 per cent. The 
 price of this stock in 1817 was 64 per centum ; the 
 money was in the Bank of the United States to 
 pay it, a gratuitous deposit bearing no interest. I 
 had submitted a resolve early in my term of ser- 
 vice to have this stock purchased at its market 
 value, which was resisted and defeated by the 
 friends of the bank. I then moved a resolve that 
 the bank pay interest on the deposits, which was 
 opposed and defeated in like manner. 
 
 In March, 1832, the bank was notified that the 
 Government desired to pay off the outstanding 
 3 per cents, to wit, nine millions, the public 
 deposits then being $12,000,000. Instead of assist- 
 ing, the bank secretly took steps to prevent their 
 redemption. The money was worth 7 per cent to 
 the bank. But its conduct became known, where- 
 
 VALUE, 
 
 171 
 
 upon its president said the arrangement was made 
 for the public good. To disburse the money 
 would tighten the money market. Every bank 
 made a depository of public funds objects to their 
 withdrawal for the same ostensible reason, but in 
 fact because the profits of the bank would be 
 thereby curtailed. 
 
 General Jackson, then President, became hos- 
 tile to the bank, and the Secretary of the Treasury, 
 as directed by the President, removed the public 
 deposits from it. 
 
 The entire National debt was paid by January 
 I, 1835, leaving a large and increasing surplus of 
 revenue, and by an act of Congress, approved 
 June 23, 1836, the public deposits were to be made 
 in specie-paying State banks as in the act speci- 
 fied, by which it was also provided that the money 
 in the Treasury on January i, 1837, reserving 
 $5,000,000, should be deposited with the several 
 States upon the terms and in the proportions as 
 in the act specified; the same to be made, one 
 quarter on January i, 1837; one quarter on April 
 I, one quarter on July i, and one quarter on 
 October i, 1837. 
 
 The surplus revenue January i, 1837, after 
 reserving the five millions, amounted to $37,468,- 
 859.97. The first installment was paid in specie or 
 its equivalent, the second in valid money, the third 
 in depreciated paper, and the fourth was never 
 made. The revenues were from six to ten 
 millions short of the expenditures, and it be- 
 
172 
 
 yAL UE. 
 
 \\\ 
 
 m 
 
 \ 
 
 <iaine necessary to issue Treasury notes to meet 
 the expenditures to very large amounts, as to 
 which, see "United States Notes," by Knox, 
 Chap. 6. 
 
 The banks suspended specie payments in May, 
 1837. Mr. Benton claimed that he foresaw it. '' I 
 recalled the recollection of the times of 18 18-19 
 when the Treasury reports of one year showed a 
 superfluity of revenue for which there was no 
 want, and of the next a deficit which required to 
 be relieved by a loan, and argued that we must 
 now have the same result from the bloat in the 
 paper-money system which we then had. Of the 
 act which rescinded the specie circular (of General 
 Jackson) and made the notes of the local banks 
 receivable in payment for all federal dues, I said, 
 * I oppose it.' I did not join in putting down the 
 Bank of the United States to put up a wilderness 
 of local banks. I did not join in putting down 
 the paper currency of a National bank to put up a 
 National paper currency of a thousand local 
 banks." (" Thirty Years' View," Vol. II, Chap. 2.) 
 Mr. Benton also says (lb.. Chap. 7) : "A great 
 disturbance took place in the business of the 
 country from the stoppage of the banks. Their 
 agreement to receive each other's notes made 
 them the sole currency of the country. It was a 
 miserable substitute for gold and silver, falling 
 far below these metals when measured against 
 them, and very unequal to each other in different 
 parts of the country. Those of the interior and 
 
 VALUE. 
 
 173 
 
 of the West being unfit for payments in the great 
 commercial Atlantic cities, were far below the 
 standard of the notes of those cities, and suffered 
 a heavy loss in all remittances to those cities, to 
 which points the great payments tended. Specie 
 disappeared as a currency, and became an article 
 of merchandise. Even metallic change disap- 
 peared down to the lowest subdivision of the 
 dollar. Its place was supplied by every conceiv- 
 able variety of individual and corporation tickets. 
 Taken by surprise in the deprivation of its 
 revenues, the Federal Government could only do 
 as others did— receive and pay out depreciated 
 
 paper." 
 
 The collapse of the State banks in May, 1837, 
 caused the Democratic party, with Mr. Van Buren 
 at its head, to fayor an independent Treasury and 
 hard money for Government dues, and an act for 
 that purpose was passed July 4, 1840. 
 
 In support of the measure Mr. Benton said : " I 
 do not pretend to estimate the moneyed losses, 
 direct and indirect, to the Government alone from 
 the use of local bank notes in the last twenty-five 
 years, including the war and covering three gen- 
 eral suspensions. Leaving the people out of view, 
 as a field of losses beyond calculation, I confine 
 myself to the Federal Government and say its 
 losses have been enormous. We have had three 
 general stoppages of the local banks in the short 
 space of twenty-two years," etc. (" Thirty Years' 
 View," Vol. II, Chap. 15.) 
 
174 
 
 VALUE. 
 
 To show the condition of the people after the 
 collapse of 1837, Governor Ford, in his " History 
 of Illinois," said : " The treasury of the State 
 was indebted (1842) for the ordinary expenses of 
 government to about $313,000. Auditor's war- 
 rants were selling at 50 per cent discount, and 
 there was no money in the treasury whatever, 
 not even to pay postage on letters. The treas^ 
 ury was bankrupt. A debt of fourteen millions 
 had been contracted for canal, railroad, and other 
 purposes. The currency of the State had been 
 annihilated ; there was not over two or three hun- 
 dred thousand dollars of good money in the pock- 
 ets of the whole people. They were indebted to 
 the merchants, nearly all of whom were indebted 
 to the banks or foreign merchants, and the banks 
 owed everybody, and none were able to pay." 
 
 During this period the several States resorted 
 to stay valuation and appraisement laws. A large 
 part of the insolvency was settled under the 
 bankrupt act of 1 84 1 . 
 
 In 1 840 Mr. Benton moved for leave to bring 
 in a bill to tax the circulation of banks, bankers, 
 and all corporations, companies, or individuals 
 which issued paper currency. He said nothing 
 was more reasonable than to require the moneyed 
 interest which was employed in banking, and 
 especially in that branch of banking which was 
 dedicated to the profitable business of converting 
 lampblack and rags into money, to contribute to 
 the support of the Government. While the pro- 
 
 VALUE. 
 
 175 
 
 ducing and laboring classes were all taxed in their 
 salt, iron, sugar, etc., the banking interest, which 
 manufactured and monopolized money, which put 
 up and put down prices, and held the whole coun- 
 try tributary to its wealth, paid nothing. In other 
 countries the banking interest was subject to 
 taxation. The tax on circulation and bills of 
 exchange was a handsome item in the budget of 
 British taxation. In this country, during the war 
 with Great Britain, the banking interest had been 
 taxed in its circulation, discounts, and bills of 
 exchange. At the end of the war this tax was 
 abolished, while most of the war taxes were con- 
 tinued in force, among them the tax on salt and 
 other necessaries of life. It is time to make the 
 banks pay and to let salt go free. But his motion 
 came to nothing. (Benton's " Thirty Years," etc. 
 
 Vol. II, p. 179.) 
 
 The hard times ensuing after 1836-7 defeated 
 the Democratic party in the Presidential canvass 
 of 1840, and the independent Treasury act was 
 repealed August 13, 1841. But this party having 
 regained power in 1845, reCwStablished their meas- 
 ure by an act for that purpose, approved August 
 6, 1846, by which it was provided that on and 
 after January i, 1847, all sums due the United 
 States should be paid in coin, and after April i, 
 1847, ^ payments made on account of the United 
 States should be made in coin or Treasury notes 
 if the creditor agree to receive them. Thereafter 
 until the war of secession the Federal Government 
 
 t, 
 
 
176 
 
 VALUE. 
 
 kept its own funds and did business on a specie 
 basis. 
 
 About 1840 the notion began to prevail that 
 banking ought to be free ; that everybody ought 
 to be allowed to issue bank notes who could com- 
 ply with the conditions prescribed. But these 
 banks failed also. In 1854 a free banking system 
 adopted in Indiana went to pieces and the hold- 
 ers of the notes suffered great loss. 
 
 In 1857 there was another bank suspension, 
 the effects of which continued when the Civil War 
 began. In the fall of i860 Mr. Lincoln was 
 elected President, and thereupon the Southern 
 States attempted to secede, and to that end com- 
 bined as the Confederate States, in February, 
 1 861. The State of Illinois then had a free bank- 
 ing system. The banks were numerous, small, 
 and generally located in out-of-the-way places, 
 with a view to avoid the redemption of their 
 notes. They were so many petty paper-money 
 factories, having about $12,000,000 in notes in cir- 
 culation and only $302,905 in specie for their 
 redemption. The bonds held in the State treas- 
 ury to secure payment of the notes were chiefly 
 bonds of the Southern States. As they seceded 
 their bonds fell in value; even bonds of the 
 United States fell to a heavy discount. The peo- 
 ple lost a large per cent of the face value of this 
 " stumptail " money, and were left without a cur- 
 rency. The prostration was complete. The 
 paper money issued out of the National Treasury' 
 
 VALUE. 
 
 177 
 
 was about the first good money which the people 
 of Illinois ever had, and enabled them to show 
 their hand and make their mark in the war 
 
 la 
 
A NATIONAL CURRENCY. 
 
 The war of secession caused its adoption and 
 the suppression of paper money issued under 
 State authority. 
 
 Mr. Lincoln was elected President in the fall 
 of i860, and thereupon the Southern States 
 attempted to secede from the Union, and to that 
 end combined as the Confederate States. On 
 April 14, 1 86 1, Fort Sumter surrendered to the 
 rebels, and thereupon the President issued a call 
 for 75,000 men ; also for a special session of Con- 
 gress, to meet July 4, 1861. In May, 1861, he 
 called for thirty-nine volunteer regiments of 
 infantry and one of cavalry ; also directed an 
 increase of the regular army by eight regiments 
 of infantry, one of artillery, one of cavalry, and 
 the enlistment of 13,000 seamen. 
 
 Congress met July 4, 1861. The Union army 
 was defeated at Bull Run July 21, 1861, and there- 
 upon Congress authorized the enlistment of 500,- 
 000 volunteers. In August, 1861, the Confederate 
 Congress authorized the Confederate President 
 to accept the services of 400,000 volunteers, to 
 serve not less than one nor more than three years. 
 
 (178) 
 
 A NATIONAL CURRENCY. 
 
 179 
 
 The rebels then had in the field not less than 
 210,000 men. (McPherson's "History of the 
 Rebellion," p. 117.) 
 
 Lee surrendered to Grant April 9, 1865, and 
 the war ended soon thereafter, at which time 
 the Union had in the field an army of 1,000,016 
 men and a navy of 530 vessels of all kinds, 
 armed with 3,000 guns and manned by 51,000 
 men. The public debt, which, on June 20, i860, 
 was $64,769,703.08, on August 31, 1865, was 
 $2,845,907,626.56 ("United States Notes," Knox, 
 pp. 72 and 85), a condition of things quite differ- 
 ent from that existing in March, 1861, when 
 treason and rebellion beleagured Washington, 
 and Mr. Lincoln was forced to reach it in dis- 
 guise. 
 
 Pursuant to an act of Congress of July 17, 186 1, 
 authorizing a loan of $250,000,000, and an act of 
 August 5, 1 86 1, supplementary thereto, the Secre- 
 tary of the Treasury (Mr. Chase), on August 15, 
 1 86 1, effected an arrangement with the associated 
 banks of Boston, New York, and Philadelphia, by 
 which they agreed to take fifty millions of the 
 loan in three-year Treasury notes, bearing 7.3 per 
 cent interest, payable semi-annually, with the priv- 
 ilege to take a like amount on October 15th, then 
 next, and another like amount on December 1 5th 
 following. In aid of the loan as agreed, the Sec- 
 retary caused books of subscription to be opened 
 throughout the country and the people subscribed 
 liberally, so that the banks took the second fifty 
 
 n 
 
180 
 
 A NATIONAL CURRENCY. 
 
 millions in similar notes, and on November i6, 
 
 1 86 1, took the third fifty millions in twenty-year 
 6 per cent bonds, at a rate equivalent to bonds 
 bearing 7 per cent, payable semi-annually. 
 
 Demand Notes. Also, the above acts authorized 
 the Secretary, as a part of the loan, to issue in 
 exchange for coin, or in payment of salaries and 
 other dues from the United States, Treasury 
 notes of denominations not less than $5, not bear- 
 ing interest but payable on demand and receiv- 
 able for all public dues, to an amount not exceed- 
 ing $50,000,000, and reissuable until December 31, 
 
 1862. In form these notes were: "On demand 
 the United States promise to pay the bearer 
 
 dollars." They were the first paper money 
 
 issued directly out of the Treasury. The ordinary 
 Treasury notes were in large denominations, pay- 
 able after a time specified, to the order of 
 
 and bearing interest. 
 
 Congress met in regular session December 2, 
 
 1 86 1, and the Secretary, in his report thereto, esti- 
 mated that, if the war continued, the public debt, 
 which was $90,867,828 on July i, 1861, would be 
 five hundred and seventeen millions on July i, 
 
 1862, and eight hundred and ninety-seven millions 
 on July I, 1863, and also said: ** To enable the 
 Government to obtain the necessary means for 
 prosecuting the war to a successful issue, without 
 unnecessary cost, is a problem which must engage 
 the most careful attention of the Legislature. 
 The Secretary has given to this problem the best 
 
 A NATIONAL CURRENCY. 
 
 181 
 
 consideration in his power, and now begs leave to 
 submit to Congress the result of his reflections." 
 "The circulation of the banks of the United 
 States on January i, 1861, was computed to be 
 $202,000,767, of which $150,000,000, in round num- 
 bers, was in the States now loyal. The whole of 
 this circulation constitutes a loan without interest 
 from the people to the banks, costing them noth- 
 ing except the expense of issue and redemption 
 and the interest on the specie kept on hand for 
 the latter purpose; and it deserves consideration 
 whether sound policy does not require that the 
 advantages of this loan be transferred, in part at 
 least, from the banks, representing only the inter- 
 ests of the stockholders, to the Government, rep- 
 resenting the aggregate interests of the whole 
 people. It has been well questioned by the most 
 eminent statesmen whether a currency of bank 
 notes issued by local institutions under State laws 
 is not in fact prohibited by the National Consti- 
 tution. Such emissions certainly fall within the 
 spirit, if not within the letter, of the constitutional 
 prohibition of the emission of " bills of credit " by 
 the States and of the making by them of any- 
 thing except gold and silver coin a legal tender 
 in payment of debts." 
 
 " However this maybe, it is too clear to be reas- 
 onably disputed that Congress, under its powers 
 to lay taxes, to regulate commerce, and to regu- 
 late the value of coin, possesses ample authority 
 to control the credit circulation which enters so 
 
:t 
 
 182 
 
 A NATIONAL CURRENCY. 
 
 A NATIONAL CURRENCY. 
 
 183 
 
 largely into the transactions of commerce, and 
 affects in so many ways the value of coin. In the 
 judgment of the Secretary, the time has arrived 
 when Congress should exercise this authority. 
 The value of the existing bank-note circulation 
 depends on the laws of thirty-four States and the 
 character of some sixteen hundred private cor- 
 porations. It is usually furnished in greatest 
 proportions by institutions of least actual capital ; 
 circulation, commonly, is in the inverse ratio of 
 solvency. Under such a system, or lack of sys- 
 tem, great fluctuations and heavy losses in dis- 
 counts and exchanges are inevitable, and not 
 infrequently, through failure of the issuing insti- 
 tutions, considerable portions of the circulation 
 become suddenly worthless in the hands of the 
 people. The recent experience of several States 
 m the valley of the Mississippi painfully illus- 
 trates the justice of these observations, and en- 
 forces, by the most cogent, practical arguments, 
 the duty of protecting commerce and industry 
 against the recurrence of such disasters. The 
 Secretary thinks it is possible to combine with 
 this protection a provision for circulation, safe to 
 the community and convenient for the Govern- 
 ment." 
 
 " Two plans for effecting this object are sug. 
 gested. The first contemplates the gradual with- 
 drawal from circulation of the notes of private 
 corporations, and for the issue in their stead of 
 United States notes payable in coin on demand, 
 
 in amounts sufficient for the useful ends of a rep- 
 resentative currency. The second contemplates 
 the preparation and delivery to institutions and 
 associations, of notes prepared for circulation 
 under national direction, and to be secured as to 
 prompt convertibility into coin by the pledge of 
 United States bonds and other needful regula- 
 tions." 
 
 " The first of these plans was partially adopted 
 at the last session of Congress, in the provision 
 authorizing the Secretary to issue United States 
 notes payable in coin. This provision may be so 
 extended as to reach the average circulation of 
 the country, while a moderate tax, gradually 
 augmented, on bank notes, will relieve the 
 national from the competition of local circula- 
 tion. It has already been suggested that the sub- 
 stitution of a national for a State currency upon 
 this plan would be equivalent to a loan to the 
 Government without interest, except on the fund 
 to be kept in coin, and without expense except 
 the cost of preparation, issue, and redemption ; 
 while the people would gain the additional 
 advantage of a uniform currency, and relief from 
 a considerable burden in the form of interest on 
 debt." But he saw the specter of continental 
 money, and for that and other reasons preferred 
 his second plan, i. e.. National bank notes. 
 
 On or just prior to December 31, 1 86 1, all the 
 banks then doing business suspended specie pay- 
 ments, and notes of any kind " payable in coin on 
 
184 
 
 A NATIONAL Cl/RKENCY. 
 
 A NATIONAL CURRENCY. 
 
 185 
 
 lii 
 
 
 demand" were postponed into the indefinite 
 tuture. The war was to be prosecuted, if at all 
 with an irredeemable paper currency. 
 
 At that time the outstanding bank circulation 
 was $183,000,000 and their specie reserve $102 000 - 
 000 ("Money in Politics," by J. K.Upton, late Assist- 
 ant Secretary of the Treasury, p. 74). The banks 
 of New York alone, according to the president of 
 one of them then held over $40,oo«,ooo in specie 
 ( Money, Its Laws and History," by H V Poor o 
 56.). Mr. Blaine ("Twenty Years in Congrei/' 
 Vol. I, Chap. 19) said: " At the opening of the 
 year 1862 the Government finances were in a crit 
 ical condition. Confederate bonds were more 
 popular in England than the bonds of the United 
 ^\T' '^l^^.^^^'^ers of Europe, with the Roths- 
 childs at their head, would not touch our securi- 
 ties We were thrown on our own resources. 
 With one hundred millions of coin in the banks 
 and one hundred and fifty millions hoarded 
 among the people, it was obviously impossible to 
 conduct the business of the country and to carrv 
 on the war in cash payments." 
 
 The coinage of gold at the mint prior to 1862 
 jas $545,150,625.50, or about $540,000,000 after 
 deducting recoinages ; in silver there was onlv 
 that coined during the period 1853-61, to wit 
 $49,642,031 in fractional silver tokens. About 
 $340,000,000 in gold coin had been expelled from 
 the country previous to 1862, by stuffing the 
 currency with State bank notes. The eagles on 
 
 
 this amount of gold coin had flown away to the 
 same roost abroad to which the ** dollars of the 
 daddies" had previously resorted. Had all the 
 gold and silver coined previous to 1862 remained 
 in the country, and there had been no bank notes, 
 it would not have been so obviously impossible to 
 maintain specie payments during the war. During 
 the period 1862-5 there was coined at the mint, in 
 gold, $91,698,032, and in silver $3,362,706, being 
 of the domestic product during that time. 
 
 The panic of 1857 had thinned out the bank- 
 note currency. But if the banks doing business 
 on December 31, 1861, had a circulation of $183,- 
 ocx),ooo and a specie reserve of $100,000,000, it was 
 manifestly dishonest for them to suspend specie 
 payments and hold the coin for sale thereafter at 
 a premium. They never resumed payment in coin. 
 They locked up their specie as a " precautionary 
 measure ! ** 
 
 When the demand notes were first issued in 
 August, 1 86 1, the associated banks refused to 
 receive them except on special deposit. And in 
 January, 1862, after specie payments were sus- 
 pended, the associated banks resolved that before 
 we receive the demand notes on deposit we must 
 require that such legal provision be made by 
 Congress as shall insure their speedy redemption 
 (" United States Notes," Knox, Chap. 9.) These 
 notes competed with their bank notes as a circu- 
 lating medium, were receivable for duties on 
 imports and all public dues, while their suspended 
 
186 
 
 A NATIONAL CURRENCY. 
 
 bank notes were not legally receivable for any- 
 thing. 
 
 In February, 1862, 6 per cent United States 
 bonds were selling in the market at 88, and 5 per 
 cents at y^yi (" United States Notes," Knox, p. 97), 
 and these prices were in depreciated bank notes! 
 Greenbacks. By the act of February 25, 1862, 
 the Secretary of the Treasury was authorized 
 to issue $150,000,000 of United States notes 
 (greenbacks), not bearing interest, paj^able to 
 the bearer at the Treasury of the United 
 States, of such denominations, not less than 
 $5, as he might deem expedient, which notes 
 were made receivable in payment for all dues 
 to the United States except duties on imports, 
 and of all claims and demands against the 
 United States except for interest on the public 
 debt, which shall be paid in coin, and which notes 
 were made lawful money and a legal tender in 
 payment of all debts, public and private, within 
 the United States, except duties on imports and 
 interest as aforesaid ; the notes to be fundable into 
 6 per cent bonds ; to be received at their par value 
 in payment for any loans thereafter negotiated ; 
 and to be reissued from time to time as the exi- 
 gencies of the public interest may require. 
 
 And to enable the Secretary to fund the Treas- 
 ury notes and floating debt he was authorized to 
 issue and sell not exceeding five hundred millions 
 of 6 per cent five-twenty bonds. 
 
 And the act further provided that duties on 
 
 A NATIONAL CURRENCY. 
 
 187 
 
 imported goods should be paid in coin or in the 
 demand notes theretofore authorized, which coin 
 should be a special fund to be applied first to the 
 payment in coin of interest on the public debt^ 
 and secondly as a sinking fund, etc., as in the act 
 specified. 
 
 In pursuance of this financial policy all interest 
 on the funded debt was regularly paid in coin. 
 
 In January, 1862, after the bill was introduced 
 in Congress which resulted in the act above re- 
 ferred to, the associated banks of Boston, New 
 York, and Philadelphia sent a powerful lobby to 
 Washington to oppose it and the schemes of the 
 Secretary. In his report he had proposed to na- 
 tionalize the currency. The whole State bank 
 system was opposed to it, and were violently op- 
 posed to all irredeemable paper money except 
 their own. The offer of the National bank system 
 under National control failed to placate banks 
 whose issues were under less control. They pro- 
 posed a plan, to wit : No legal-tender notes and 
 no more demand notes ; the Government to be- 
 come one of their customers and keep its deposits 
 with them, checking out the money as occasion 
 might require ; bonds to be issued and sold for 
 whatever they might bring, with power in the 
 Secretary to hypothecate bonds as security for 
 loans, which, if not paid at maturity, the bonds 
 might be sold to the highest bidder. All the 
 banks in the States of Massachusetts, New York, 
 and Pennsylvania then had a circulation of about 
 
188 
 
 A NATIONAL CURRENCY, 
 
 m. 
 
 I 
 
 $66,ooo,cxx), and this they either could not or 
 would not redeem. The expenses of the war 
 were then running on an average of $2,000,000 
 per day. (" History of the Legal Tender Paper 
 Money," etc., by E. G. Spaulding, chairman of 
 the Sub-committee of Ways and Means at that 
 time.) The plan of these confederate banks 
 failed and their officers went home, not to pay 
 their suspended paper money, but to inflate it. 
 State bank notes in the war of 181 2 had "para- 
 lyzed the National arm and sullied the faith, both 
 public and private, of the United States.'' In 
 the crisis of 1861-65, the men at the helm did not 
 intend to allow the National cause to be swamped 
 by State bank money. 
 
 The Secretary of the Treasury (Mr. Chaser, in a 
 
 letter addressed to Mr. Stevens, chairman of the 
 
 Committee of Ways and Means, after expressing 
 
 his great aversion to making anything but coin a 
 
 legal tender in payment of debts, said: "It is, 
 
 however, at present impossible, in consequence of 
 
 the large expenditures entailed by the war, and the 
 
 suspension of the banks, to procure sufficient coin 
 
 for disbursements ; and it has, therefore, become 
 
 indispensably necessary that we should resort to 
 
 the issue of United States notes. The making 
 
 them a legal tender might still be avoided, * * 
 
 but unfortunately some persons and institutions 
 
 refuse to receive and pay them," etc. And in a 
 
 letter to Mr. Spaulding, dated February 3, 1862, 
 
 the Secretary said : " It is true that I came with 
 
 A NATIONAL CURRENCY. 
 
 189 
 
 reluctance to the conclusion that the legal-tender 
 clause is a necessity, but I came to it decidedly 
 and I support it earnestly. * * The Treasury 
 is nearly empty. I have been obliged to draw for 
 the last installment of the November loan ; so 
 soon as it is paid, I fear the banks generally will 
 refuse to receive the United States notes. You 
 will see the necessity of urging the bill through 
 
 without more delay-" 
 
 In the debate on the bill, Mr. Hooper, one of 
 the committee of Ways and Means, said in the 
 House : " The levying of the contemplated tax, 
 the proper inauguration of the new banking 
 system, and the successful negotiation of a new 
 loan are matters that will require time. In the 
 meantime the treasury is comparatively empty, 
 and the demands of the Government are numer- 
 ous and pressing. * * * There is a necessity 
 for money, and the object of the authority to issue 
 $150,000,000 of United States notes is to pay 
 the creditors of the United States and enable 
 them to discharge their debts. The propositions 
 of committees from boards of trade and banks, 
 which recently visited Washington, differed from 
 the theory of this bill so far as to require that 
 instead of the issue of the United States notes 
 the banks should be relied upon to furnish the 
 amount needed. The effect of this would be 
 that the Government bonds must first be disposed 
 of, without restriction as to the rate or terms, 
 taking the notes of suspended banks in payment 
 
190 
 
 A NATIONAL CURRENCY. 
 
 of these bonds, and with these bank notes pay off 
 the contractors. The obvious effect of such an 
 arrangement would be to put the reins of our 
 National Government in the hands of the banks 
 Exactly upon what terms the Government bonds 
 could now be disposed of, no one can say but 
 last summer, when the banks made their negotia- 
 tion with the Secretary of the Treasury, they at 
 first refused to do anything because the Secretary 
 was restricted by law to taking par for 7 per cent 
 bonds, payable in twenty years, and for 7.3 Treas- 
 ury notes payable in three years. They finally 
 decided, with great reluctance, to take $100,000,000 
 of the latter, though at the time money was not 
 worth for commercial purposes more than 5 per 
 cent. In the war of 1812 the Government paid 
 for Its supplies with funds obtained from the 
 banks in the manner as proposed in the plan 
 recently submitted to the Secretary by those com- 
 mittees. The bonds of the United States were 
 then negotiated in some instances at 20 per cent 
 less than their par value, and paid in bank cur- 
 rency of different degrees of depreciation, accord- 
 mg to locality, but averaging from 20 to 25 per 
 cent discount as compared with coin. * * * We 
 shall probably be told that England, in her great 
 struggle while specie payments were suspended, 
 never made paper money a legal tender, * ♦ 
 but instead of doing this she did worse by sus- 
 pending the laws to enforce payment of debts in 
 cases where the paper money had been refused 
 
 A NATIONAL CURRENCY. 
 
 191 
 
 as a tender." C' History of Legal Tender Notes," 
 by E. G. Spaulding, p. 54.) 
 
 Trustworthy reports from eighteen different 
 States show that in i860, out of 1,230 banks, 140 
 were broken, 234 closed, and 131 worthless. There 
 were in existence at that time 3,000 kinds of 
 altered notes, 1,700 varieties of spurious notes, 460 
 varieties of imitation, and over 700 of other kinds 
 more or less fraudulent. The various kinds of 
 genuine bills in circulation were about 7,000. 
 The use of bank-note detectors was necessary in 
 order to ascertain the genuineness of notes, and 
 the solvency, or the existence even, of the banks 
 of which they purported to be the issue. (" Money 
 and Politics," Upton, p. 112.) 
 
 In 1 862 all the banks were in a state of suspen- 
 sion. Without a reliable bank-note detector of 
 the latest issue, no one, although an expert, could 
 have discovered whether the "rags and lamp- 
 black" offered to him were worth anything at all 
 or not. Dishonored, depreciated, and doubtful 
 bank notes would have been poor stuff to offer the 
 Union soldier for his blood. 
 
 The demand notes were made a legal tender 
 by the act of March 17, 1862. When first issued, 
 although they were receivable for all public dues 
 and were paid in coin on demand, the State banks 
 refused to receive them as current money, because 
 these notes competed with their issues and 
 impaired their monopoly of the paper currency. 
 But they were compelled to accept legal tenders 
 
192 
 
 A NATIONAL CURRENCY. 
 
 in payment of debts due them and were thereby 
 forced to treat them as current money. But bank- 
 ers have never ceased to rail at the greenbacks, 
 because the people get the benefit of this paper 
 circulation, and not them. If they could issue 
 paper money, and greenbacks were not a legal 
 tender, they would soon cease to be bankable, and 
 be thereby crowded out of circulation. 
 
 A greenback is a promise to pay dollars without 
 saying when. At first, it meant payment in coin 
 when the Government was able ; and the people 
 made it able. Since January i, 1879, the United 
 States note has meant payment in gold on de- 
 mand. To the people it was always acceptable, 
 at home or in the field— also to the rebels. Its 
 only enemies were, and are, the friends and 
 issuers of bank notes. 
 
 An additional amount of $150,000,000 in legal 
 tender United States notes was authorized July 
 II, 1862, of such denominations as the Secretary 
 of the Treasury might deem expedient; but none 
 to be issued for the fractional part of a dollar, 
 and not more than $35,000,000 of lower denomi- 
 nations than $5. Not less than $50,000,000 to be 
 reserved and held to secure prompt payment of 
 the temporary deposits mentioned in the act, and 
 to be issued and used only when needed for that 
 purpose. 
 
 By a joint resolution approved January 17, 
 1863, to provide for the immediate payment of 
 the army and navy, the Secretary of the Treasury 
 
 A NATIONAL CURRENCY. 
 
 193 
 
 was authorized, if required by the exigencies of 
 the public service, to issue an additional $100,- 
 000,000 of legal tender United States notes, of 
 such denominations not less than $1 as he may 
 prescribe. This amount was increased to $150,- 
 000,000 by the act of March 3, 1863. 
 
 Mr. Lincoln, as President, in giving his 
 approval to this joint resolution, said: "While 
 giving this approval, however, I think it my duty 
 to express my sincere regret that it has been 
 found necessary to authorize so large an addi- 
 tional issue of United States notes when this cir- 
 culation and that of the suspended banks together 
 have become already so redundant as to increase 
 prices beyond real values, thereby augmenting 
 the cost of living, to the injury of labor, and the 
 cost of supplies, to the injury of the whole coun- 
 try. It seems very plain that the continued issue 
 of United States notes, without any check to the 
 issues of suspended banks, and without adequate 
 provision for the raising of money by loans, and 
 for funding the issues so as to keep them within 
 due limits, must soon produce disastrous conse- 
 quences. That Congress has' power to regulate 
 the currency of the country can hardly admit of 
 a doubt ; and that a judicious measure to prevent 
 the deterioration of this currency, by a reasonable 
 taxation of bank circulation or otherwise, is 
 needed, seems equally clear. Independently of 
 this general consideration, it would be unjust to 
 
 the people at large to exempt banks enjoying the 
 la 
 
194 
 
 A NATIONAL CURRENCY. 
 
 m% 
 
 
 'HI; 
 
 special privilege of circulation from their just 
 proportion of the public burdens.** 
 
 Mr. Blaine (** Twenty Years in Congress,'* Vol. 
 I, Chap. 22) said : " The Secretary of the Treasury 
 had not failed to see that a constant conflict and 
 damaging competition must ensue between the 
 currency of the nation and the currency of State 
 banks. It was the course of the banks more than 
 any other agency that had discredited the demand 
 notes, and demonstrated the absolute necessity of 
 imparting the quality of legal tender to the paper 
 issued by the Government. As this paper took 
 the place of gold and silver in all payments 
 except duties on imports and interest on the pub- 
 lic debt, it was easy for the State banks to extend 
 their circulation, which they did to a dangerous 
 extent. The enactment of the legal-tender bill 
 had not, therefore, given the control of the cur- 
 rency to the Government. It had only increased 
 the dangers of inflation by the stimulus it 
 imparted and the protection it afforded to the 
 circulation of State bank notes." 
 
 But the war declared by Secretary Chase 
 against this kind of Confederate money was very 
 feebly conducted by him. The National bank 
 act of 1863 imposed a tax of 2 per cent annu- 
 ally on the circulation of National and none 
 on that of State banks ; but a similar and lighter 
 tax was imposed on the latter by the act of 
 March 3, 1863. The National bank act of June 
 3, 1864, taxed both kinds of bank notes alike. 
 
 A NATIONAL CURRENCY. 
 
 195 
 
 And it was not until the act of March 3, 1865, 
 amendatory to prior internal revenue acts, that a 
 tax of 10 per cent was imposed on the amount 
 of State bank notes paid out after July i, 1866. 
 Lee surrendered to Grant April 9, 1865, and the 
 war ended soon thereafter. 
 
 National Bank Notes. Although a dollar in 
 coin was worth from $1.28^ to $1.34 in paper 
 money in December, 1862, Secretary Chase 
 urged his National bank scheme upon Con- 
 gress, and the bank act of February, 25, 1863, 
 was passed by a small majority. The scheme 
 failed to furnish a market for bonds. Up to 
 December 10, 1863, 134 banks had been organ- 
 ized under the act, chiefly in the West, with 
 an aggregate capital of $16,000,000. The people 
 took the first five hundred million loan of 6 per 
 cent bonds at par, in paper money, in the summer 
 of 1863. More recently, Mr. Cleveland found that 
 the people could be relied upon to take a loan 
 when directly offered to them. 
 
 At the instance of Secretary ChavSe, the bank 
 act of 1 863 was revised, amended, and reenacted 
 June 3, 1864, during which month a dollar in coin 
 was worth from $1.93 to $2.50 in paper money. 
 Bank notes not exceeding in amount $300,000,000 
 were to be issued to the banks organized under 
 it, they to deposit United States bonds with the 
 Treasurer of the United States, and thereupon 
 receive from the Comptroller of the Currency 
 notes not exceeding 90 per cent of the amount of 
 
196 
 
 A NATIONAL CURRENCY. 
 
 the bonds at the par value thereof, if bearing 
 interest at the rate of not less than 5 per 
 cent per annum, such notes to be of denomina- 
 tions of $1, $2, $3, $5, $10, $20, $50, $100, $500, 
 and $1,000; not more than one-sixth of the notes 
 to be of less denominations than $5, and, after 
 specie payments were resumed, none to be less 
 than $5. The notes were made redeemable in 
 lawful money, and also " shall be receivable at 
 par in all parts of the United States in payment 
 of taxes, excises, public lands, and all other dues 
 to the United States, except duties on imports, 
 and also for salaries and all other debts and demands 
 owing by the United States to individuals, corpo- 
 rations, and associations within the United States, 
 except interest on the public debt and in redemp- 
 tion of the National curency." It seems, therefore, 
 that Mr. Chase thought a bank note could be 
 made a lawful tender from as well as to the Gov- 
 ernment, although as Chief Justice he denied the 
 power of Congress to make a United States note 
 a legal tender. The National bank notes were 
 made a forced currency, probably because it was 
 feared that they would not circulate without it. 
 
 By the act of July 12, 1870, the limit was 
 increased from three hundred to three hundred 
 and fifty-four millions, and still further by the 
 act of January 14, 1875. 
 
 The independent Treasury act of August 6, 
 1846, proved to be the financial salvation of the 
 Government in the Civil War, which was com- 
 
 A NATIONAL CURRENCY. 
 
 197 
 
 menced on a specie basis, and duties payable in 
 coin furnished the means to pay interest on the 
 public debt in coin. But by the above-mentioned 
 acts, bank notes redeemable in nothing except 
 greenbacks were bred and nursed in the Treas- 
 ury, and made a legal tender to and from the 
 Government, as above stated. 
 
 Mr. Chase left the Treasury June 7, 1864, and 
 Mr. Fessenden became his successor July 5, 1864. 
 In his report of December 6, 1864, he said: 
 "The necessities of former years have led to 
 many expedients, as is apparent from the diversity 
 of forms which our securities present. As the 
 debt increases from year to year, borrowing be- 
 comes more difficult. Embarrassed as the country 
 is with two systems of banking, and obstructed as 
 the Government is by a currency wholly beyond 
 its control, it is manifest that to push its own cir- 
 culation far, if at all, beyond its present limit, 
 could only be justified by extreme necessity. The 
 returns on file show that the whole circulation of 
 the State banks on January i, 1864, was $169,916- 
 129. The total amount issued to National banks, 
 to November 22, 1864, was $65,160,210. The 
 diminution of State bank issues deducted from 
 the National bank issues left an increase of over 
 $21,000,000 in bank circulation during the year. 
 Under these circumstances, the Secretary thought 
 it advisable, in order to meet pressing emergencies, 
 to borrow, upon bonds or notes authorized by the 
 different acts referred to, $50,000,000 of the banks 
 
mm 
 
 f 
 
 198 
 
 A NATIONAL CURRENCY. 
 
 of the cities of New York, Philadelphia, and Bos- 
 ton, and met the representatives of a large num- 
 ber of these institutions in New York. The 
 result proved, however, that notwithstanding a 
 professed and, as the Secretary was convinced, a 
 reasonable desire to aid the Government, these 
 institutions were not able to furnish the assist- 
 ance required upon any terms which, under exist- 
 ing provisions of law. the Secretary felt authorized 
 to accept." 
 
 The State banks had inflated their suspended 
 paper, and were either unable or unwilling to 
 make a loan of fifty millions on any lawful terms. 
 The State and National banks were then reaping 
 a profit of not less than fourteen millions annu- 
 ally from their circulation. It was choking 
 the channels of circulation to the prejudice 
 of the National cause. Every artifice had 
 been used to keep down inflation by the issue 
 of interest-bearing paper, such as seven-thirty 
 notes. 6 per cent compound interest notes, cer- 
 tificates for temporary loans and of indebtedness 
 bearing 6 per cent interest. The times were 
 critical. During the summer of 1864 Sherman 
 was fighting Johnson among the mountains of 
 Georgia ; Grant was fighting Lee on the road to 
 Richmond. In July, 1864, gold reached its high- 
 est point, to wit : $2.85 in paper. Now it is 
 obvious that if there had been no bank notes, and 
 in lieu thereof there had been United States notes, 
 the inflation would have been no greater. This 
 
 ^ 
 
 A NATIONAL CURRENCY. 199 
 
 would have given the Treasury $235,076,339 of 
 additional funds, bearing no interest. The Sec- 
 retary would not have felt compelled to apply to 
 a set of shylocks for a loan, and be refused. The 
 nation was fighting for life, and was forced to 
 fight on credit and pay high rates of interest. At 
 the same time the banks were stuffing the cur- 
 rency with their bank notes for private gain, and 
 did this in a great National crisis involving the 
 country's fate. Sherman took Atlanta September 
 I, 1864, and then marched to the sea. The war 
 was at an end in the spring of 1865. 
 
 The Public Debt. The union forces were paid off 
 and mostly discharged during the summer of 1865. 
 The public debt was at its maximum August 31, 
 1865, to wit: $2,845,907,605, of which $1,109,586,191 
 was in funded debt; about a million and a half in 
 matured debt; something over two millions in 
 suspended requisitions, and the residue was : 
 
 United states legal- tender notes $ 433.160,569 00 
 
 Compound interest legal -tender notes 217,024,160 00 
 
 Five per cent legal-tender notes 33.954.230 00 
 
 Seven-thirty notes 830,000,000 00 
 
 Fractional currency 26,344,742 51 
 
 Temporary loans 107,148,713 16 
 
 Certificates of indebtedness 85 ,093,000 00 
 
 Total floating debt $1,732,725,414 67 
 
 ("United States Notes," Knox, Chap. 9.) 
 
 On June 30, 1865, there was in circulation State 
 bank notes to the amount of $142,919,638, and 
 National bank notes to the amount of $146,137,- 
 860; total of bank notes, $289,057,498 (Statistical 
 
200 
 
 A NATIONAL CURRENCY. 
 
 A NATIONAL CURRENCY. 
 
 201 
 
 *| 
 
 Abstract of the United States for 1887, P- 22), 
 all of which were redeemable in nothing unless 
 in greenbacks. No one can doubt that these bank 
 notes inflated and depreciated the currency quite 
 as much as the same amount in United States 
 notes would have done. 
 
 Contraction. Mr. Fessenden had been succeeded 
 by Mr. McCulloch as Secretary of the Treasury. 
 He had been a banker in Indiana : also Comp* 
 troller of the Currency under the bank act of 1 864, 
 and was an ardent promoter of the National bank 
 scheme, and an enemy of greenbacks. In his 
 report of December 4, 1865, he said : "The reasons 
 sometimes urged in favor of United States notes 
 as a permanent currency are the saving of interest 
 and their perfect safety and uniform value. The 
 objections to such a policy are that the paper 
 circulation of the country should be flexible, 
 increasing and decreasing according to the re' 
 quirements of legitimate business, while if fur- 
 nished by the Government it would' be quite 
 likely to be governed by the necessities of the 
 Treasury or the interest of parties rather than 
 the demands of commerce and trade." And he 
 was urgent to have power given him to sell 
 interest-bearing bonds for the purpose of retiring 
 greenbacks, and by the act of April 12, 1866, was 
 authorized to retire ten millions within six 
 months, and thereafter at the rate of four millions 
 a month. 
 
 On and after August 31, 1865, there was a float- 
 
 ing debt of over $1,273,000,000, two-thirds of 
 which bore interest at 7.3 per cent per annum, 
 and the residue at 6 per cent, excepting a small 
 amount bearing interest at 5 per cent. This mass 
 of matured and rapidly maturing indebtedness 
 was large enough to keep any ordinary financier 
 quite busy in funding it. Probably the interest- 
 bearing legal-tender notes furnished an attractive 
 reserve for his pet banks. 
 
 But the retiring of greenbacks was stopped, 
 and finally, by an act of May 31, 1878, it was pro- 
 vided that it should not be lawful for the 
 Secretary of the Treasury, or other officer under 
 him, to cancel or retire any more of the United 
 States legal-tender notes ; and when the same may 
 be redeemed or received into the Treasury under 
 any law or from any source whatever, and shall 
 belong to the United States, they shall not be 
 retired, canceled and destroyed, but they shall be 
 reissued and kept in circulation ; new notes to be 
 issued for mutilated ones, which were thereupon 
 to be canceled and destroyed. Their amount 
 then was and now is $346,681,016, less the amount 
 lost or destroyed by use and accident. 
 
 On June 30, 1878, National bank notes amounted 
 to $324,514,284, and on June 30, 1882, had in- 
 creased to $358,742,034 (Statistical Abstract for 
 
 1887, p. 22). 
 
 During the war and since, the people were 
 taxed to pay interest in gold on the bonds held to 
 secure payment of these notes in greenbacks, and 
 
202 
 
 A NATIONAL CURRENCY. 
 
 . 
 
 in addition the banks have reaped a profit 
 annually of millions upon the notes in discounting- 
 commercial paper, in consideration of which these 
 banks have assisted in inflating and depreci- 
 ating the currency. Also a bureau was erected 
 in the Treasury, with a Comptroller of the Cur- 
 rency at its head, for the purpose of nursing and 
 managfing this unjust scheme. 
 
 The average circulation of the State and 
 National banks taken together, from 1862 to 1890, 
 was over three hundred millions of dollars. If 
 their place had been occupied by United States 
 notes, the paper inflation would have been no 
 greater during the war, and the resumption of 
 specie payments afterward would have been quite 
 as easy. The limit of paper inflation was fast 
 approaching in 1864, and it is obvious that the 
 risk of financial collapse would have been less if 
 State bank notes had been taxed out of existence 
 immediately after 1861 and no National bank 
 notes had been issued. By using the above addi- 
 tional amount of their own notes during the above 
 period, the people would have saved in interest 
 on debt, at 4 per cent only, payable quarterly 
 and compounded, over five hundred and seventy- 
 five millions of dollars. 
 
 Elasticity. The advocates of bank notes insist 
 that a currency ought to be elastic, ^'increasing 
 and decreasing according to the requirements of 
 legitimate business," provided, however, the 
 issuers of the notes possess the exclusive power 
 
 A NATIONAL CURRENCY. 
 
 203 
 
 to work the "elasticity," and to decide what busi- 
 ness is legitimate. This and other arguments in 
 favor of bank notes are frivolous ; the profit which 
 can be made on them is the real "milk in this 
 cocoanut." For example, if National banks, as in 
 1882, can lend or exchange $358,742,034 of their 
 bank notes bearing no interest, for commercial 
 paper at the current rate of bank discount, then 
 their annual profit, assuming it to be 6 per cent, is 
 $21,524,522, less a tax of i per cent per annum 
 on the notes, and which is deemed by them to be 
 a grievous burden. The money which the notes 
 represent is in Government bonds, and is also 
 drawing interest. 
 
 But these National bank notes are too "inelas- 
 tic" to suit the advocates of bank notes. They 
 want to issue a " credit " currency, say not less 
 than $3 in paper for one in specie, actually or 
 theoretically held in reserve for their redemption. 
 They want to draw interest upon three or more 
 dollars, all of which are wind except the dollar in 
 specie held for their redemption, or supposed so 
 
 to be. 
 
 Mr. Biddle, president of the Second Bank of 
 the United States, understood elasticity quite as 
 well as Mr. McCulloch. There was great rivalry 
 between this bank and the State banks as to 
 which should supply and control the paper circu- 
 lation of the country. And Mr. Biddle, probably 
 for the benefit of the State banks, published in 
 April, 1828, an essay in answer to the question: 
 
 11 
 
204 
 
 
 ■ 
 
 A NATIONAL CURRENCY. 
 
 What is the cause and nature of the present 
 scarcity of money? His answer being, in sub- 
 stance, overtrading brought on by overbanking. 
 He said : " The constant tendency of banks is to 
 lend too much and to put too many notes in cir- 
 culation, which causes a rise in the price of com- 
 modities. This causes large importations, while 
 the high price of domestic products prevents their 
 exportation. When you buy more from foreign- 
 ers than they buy from you, as they can not take 
 the paper part of your currency they must take 
 the coin part. If a bank lends its money for long 
 terms and to persons careless of protests, it runs 
 great risk ; on the one hand its notes are payable 
 on demand, while on the other its debts can not 
 be called in without great delay. But a well- 
 managed bank has its funds mainly on short 
 loans to persons in business, payable on a day 
 named, which the parties are able to pay and will 
 pay at any sacrifice in order to escape mercantile 
 dishonor. Such a bank has its funds constantly 
 repaid to it and is able to say whether it will or 
 will not lend them out again. Such a bank, 
 when it finds there is too much demand for coin, 
 declines to renew the loans of its debtors. Thus 
 they are obliged to return the bank notes lent 
 them or their equivalents. This makes bank 
 notes scarcer and more valuable— this makes 
 goods less valuable— the debtors in their anxiety 
 to get bank notes sell their goods at a sacrifice— 
 this brings down prices and makes everything 
 
 A NATIONAL CURRENCY. 
 
 205 
 
 cheaper, and finally stops importations, the 
 demand for coin," etc. ("Gouge on Banking," pub- 
 lished in 1833, Part H, p. 189.) 
 
 According to Mr. Biddle, an elastic currency 
 first expands by liberal issues of bank notes; 
 prices rise, inducing importation and preventing 
 exportation; speculation is rife, and everybody 
 flies high on the wings of credit. But the ex- 
 portation of coin puts a limit to the expansion ; the 
 bag of wind becomes liable to explode. Then the 
 " well-managed banks," who have made their loans* 
 on short time to men who will pay at any sacrifice, 
 insist upon payment and refuse to renew their 
 loans. The elastic currency contracts, prices fall, 
 debtors force their goods on the market and im- 
 poverish themselves to meet their notes ; but the 
 " well-managed banks " get out with whole skins, 
 while their customers are flayed alive. The 
 other banks suspend payment and many of them 
 prove to be insolvent ; their notes fall to discount 
 or become worthless. According to the ethics of 
 banking, the only suspension of payment which 
 is justifiable under any state of facts whatever is 
 a bank suspension. 
 
 Mr. Biddle also said: "The substitution of 
 credits for coin enables the nation to make its 
 exchanges with less coin, and of course saves the 
 expense of coin." If the "credits" were in the form 
 of United States notes the nation might make 
 the saving, but when the "credits" are in the 
 form of bank notes the banks make it. These 
 
 I 
 
 % 
 
206 
 
 A NATIONAL CURRENCY. 
 
 ^ 
 
 printed pieces of paper cost them a nominal sum, 
 but cost the borrower and those who otherwise 
 acquire them the same as coin. The banks charge 
 the same interest on them as if the loan were 
 made in coin. After money is made artificially 
 scarce, as above, all the debtor can hope for is to 
 save his name and credit from dishonor by the 
 sacrifice of his property ; if he does not sell it 
 himself the sheriff will finally do it for him. 
 When the banks, the Second United States Bank 
 included, suspended specie payment, the nation 
 enjoyed the benefit of a currency consisting of 
 bank notes at a variable discount, depending upon 
 the supposed solvency of the bank issuing it, and 
 thereby, perhaps, saved the expense of coin alto- 
 gether. 
 
 As shown by Mr. Biddle, no matter how many 
 notes banks are authorized to issue, if they are 
 loaned on long time or to persons who are unable 
 or unwilling to pay their debts when due, the 
 currency is not elastic, for that quality includes 
 contraction as well as expansion. The present 
 National banks thrust their notes into the cur- 
 rency when received, as far away from home as 
 possible, and cry for more ; they also lend out as 
 large a per cent of their deposits as the law will 
 allow ; therefore, in the direction of expansion, the 
 present currency is quite elastic. But unless 
 their loans are made on short time to persons 
 who will pay at any sacrifice, the currency is in- 
 elastic in the direction of contraction. When 
 
 A NATIONAL CURRENCY, 
 
 207 
 
 they have brought on, or made imminent, a finan- 
 cial panic by lending too large a per cent of 
 their deposits on long or short time, with a nar- 
 row margin on the collaterals, and have sur- 
 rounded themselves with flocks of lame ducks, 
 they expect the Jupiter who officiates as the 
 Comptroller of the Currency to nod and to wink 
 at their bogus clearing-house certificates. If 
 these institutions would hold their notes in re- 
 serve for such an emergency, the sudden expan- 
 sion of the currency at that time by their issue 
 might avert the impending panic brought on by 
 their excessive greed. 
 
 The lo per cent tax on State bank circulation 
 exterminated State bank notes, but not State 
 banks. These banks are not obliged to report to 
 the Comptroller of the Currency. But from his 
 report for 1896, Vol. I, p. 16, the condition of 3,705 
 State banks reporting to him showed the follow- 
 ing items: Capital, $240,i33»835 ; deposits, $695,. 
 659,914; loans, $702,505,798; stocks and bonds, 
 $97,234,561 ; also, 1,195 State banks, with an aggre- 
 gate capital of $87,985,913, reported dividends 
 paid of $5,985,222, the average being 6.8 per cent ; 
 also, loan and trust companies to the number of 
 115, with capital of $52,715402, paid dividends 
 amounting to $5,254,200, an average of 9.9 per 
 cent. Of the savings banks 1,299 reported depos- 
 its, $1,935,466,468, of which $1,907,156,277 were 
 savings deposit accounts; loans, $1,055,187,769; 
 United States bonds, $148,525,375; other bonds 
 
208 
 
 A NATIONAL CURRENCY, 
 
 « V 
 
 and stocks, $756,676,312; surplus and undivided 
 profits, $174,714,993. Such is the showing of 
 these concerns during a period of hard times 
 ensuing the panic of 1893. There are also 
 numerous private banks, some of them very 
 large, e. g. the leading exchange houses. 
 
 This statement proves that it is not necessary 
 to hire people, with or without capital of their 
 own, to engage in the legitimate business of 
 banking, by authorizing and assisting them to 
 establish paper-money factories to be operated in 
 competition with the Government mint. 
 
 The proper office and function of a bank is to 
 reduce the currency and not to increase or dilute 
 it. Having a capital in money not of its own 
 manufacture, others deposit money with it, rely- 
 ing upon its solvency. There is a book account 
 between it and each of its customers, each of 
 whom, to the extent of his credit, can purchase 
 property and pay his debts by checks and bills 
 drawn on the bank. These are deposited by 
 those who receive them with the same or some 
 other bank. The various banks settle their 
 respective claims upon each other by an exchange 
 of the checks and drafts drawn on them respect- 
 ively, paying any balances in money, which are 
 usually merely nominal sums. Thus the great 
 mass of moneyed transactions are settled by an 
 adjustment of mutual accounts. Great financial 
 centers operate as clearing houses for large dis- 
 tricts of country, New York being the financial 
 
 W : 
 
 A NATIONAL CURRENCY. 
 
 209 
 
 center tor this country, and London for Great 
 Britain, and indeed for the whole commercial 
 world. By the legitimate use of credit, banks 
 facilitate exchanges and thereby greatly reduce 
 the quantity of money which would be otherwise 
 required. The more metallic the currency the 
 better fitted it is as a basis for these credit trans- 
 actions. The preeminence of London as the 
 great financial center is largely due to the fact 
 that a debt payable there is certain to be paid, if 
 at all, in gold coin of a fixed weight and fineness. 
 
 A bank with an actual capital of its own and 
 the average amount of its deposits has an ade- 
 quate fund to operate with. In fact, such banks 
 eagerly solicit deposit accounts, and many of them 
 pay interest thereon, thereby paying depositors a 
 bonus for the privilege of keeping their money 
 safely and paying it to them on demand, or at 
 least agreeing to do it. The profits are so great 
 that a law is necessary to prevent them from 
 lending too large a per cent of their deposits, and 
 a law to prevent them from paying interest on 
 deposit balances which are payable on demand 
 would probably be beneficial. A bank which 
 can not make a profit out of its actual capital and 
 deposits has no right to exist. 
 
 Fractional Paper Curratcy. By the summer of 
 1862 the paper inflation caused the fractional silver 
 coins to disappear from circulation. Under the 
 coinage act of 1853 their bullion value was about 
 7 per cent less than standard coin. Postage 
 
 14 
 
 i 
 

 210 
 
 A NATIONAL CURRENCY. 
 
 and other United States stamps were made frac- 
 tional currency, in lieu of which fractional notes 
 were authorized by act of March 3, 1863. In 1877 
 the premium on specie had fallen so that frac- 
 tional silver coins could be and were substituted 
 for the fractional notes. 
 
 The population of the United States in i860 
 was 31,443,321, of which, in 1861, about one-third 
 were in rebellion, so that the currency required, 
 under the facts then existing, was for a population 
 of about twenty-one millions ; in 1865, for a pop- 
 ulation of about thirty-four millions ; in 1 870, for 
 a population of 38,558,371 ; in 1880, for a popula- 
 tion of 50,155783- 
 
 The inflation of the currency excluded coin ; 
 the contraction of the currency reduced prices so 
 that specie payments could be and were resumed 
 January i, 1879, ^^ which time and since green- 
 backs have been redeemed in coin (gold) on pre- 
 sentation for that purpose at the office of the 
 Assistant Treasurer of the United States in the 
 city of New York, in sums not less than $50. 
 
 The paper inflation during the war caused 
 prices to rise, i. e., the exchange value of money 
 to fall. The Government was a great employer, 
 buyer, and consumer ; wages were high, also com- 
 modities. The ranks of the army could be filled 
 by paying large bounties, after the ardor for vol- 
 unteering was past. But after the war was ended 
 the case was reversed. The Government no 
 longer needed an immense army and navy. Con- 
 
 A NATIONAL CURRENCY. 
 
 211 
 
 % 
 
 traction involves falling prices, failing debtors, 
 and a decrease in the army of speculators. No 
 financier has ever invented a successful financial 
 scheme which will cause prices forever to rise 
 and never to fall or collapse. A money inflation 
 produces financial intoxication, which, after the 
 "spree" is over, results in reaction, stagnation, 
 collapse, and the blue devils. After the panic 
 of 1873, an inflation of the paper currency was 
 prevented by a veto from President Grant. 
 
 A single gold standard ^diS adopted by the act of 
 February 12, 1873, "revising and amending the 
 laws relative to the mints, assay offices, and coin- 
 age of the United States." It authorized certain 
 coins therein named, and none other; the stand- 
 ard silver dollar was not one of them. Its 
 metallic value then was a little more than a dollar 
 in gold, the commercial ratio of silver to gold then 
 being 15.92 to i. This act adopted a policy which 
 had its inception in the act of 1834 and declared 
 the gold dollar of the standard weight of 25.8 
 grains to be the unit of value. 
 
 The coins thereby authorized, and still issued, 
 
 are: 
 
 Gold. Double eagle, eagle, half eagle, quarter 
 
 eagle. 
 
 Silver. Half dollar, quarter dollar, dime. 
 
 Nickel. Five-cent piece — 75 percent copper 
 and 25 per cent nickel. 
 
 Bronze. Cent— 95 per cent copper and 5 per 
 cent tin and zinc. 
 
 i 
 
212 
 
 A NATIONAL CURRENCY. 
 
 
 i I 
 
 The provisions relating thereto as contained in 
 the revised statutes of 1 874 are chiefly as follows : 
 
 The standard for both gold and silver coins is 
 nine-tenths fine. 
 
 The standard weight of the double eagle, or 
 twenty-dollar piece, is 516 grains; of the other 
 gold coins in proportion; of the half dollar, i2j4 
 grams (192.9 grains); of the quarter dollar and 
 dime, in proportion thereto. 
 
 Tolerance. No ingots to be used for coinage 
 which shall differ from the legal standard more, 
 in gold ingots, than 0.00 1 ; silver ingots, 0.003 J 
 five-cent piece, 0.025, in the proportion of nickel. 
 In adjusting the weight of the coins the follow- 
 ing deviations shall not be exceeded in any single 
 piece: In the double eagle and eagle, half a 
 grain; half and quarter eagle, one-fourth of a 
 grain ; half and quarter dollar and dime, one and 
 one-half grains ; five-cent piece, three grains ; cent, 
 two grains'. 
 
 Devices and Legends. On one side there shall 
 be an impression emblematic of liberty, with an 
 inscription of the word '* Liberty " and the year 
 of the coinage, and upon the reverse shall be the 
 figure or representation of an eagle, with the in- 
 scriptions "United States of America" and '* E 
 Pluribus Unum," and a designation of the value 
 of the coin ; but on the dime, ^v^ and one cent 
 pieces the figure of the eagle shall be omitted. 
 
 Legal Tender, No foreign gold or silver coin 
 shall be a legal tender in payment of debts. 
 
 A NATIONAL CURRENCY. 
 
 213 
 
 The gold coins of the United States shall be a 
 legal tender in all payments at their nominal 
 value when not below the standard weight and 
 limit of tolerance provided by law for the single 
 piece, and when reduced in weight below such 
 standard and tolerance, shall be a legal ten- 
 der at valuation in proportion to their actual 
 weight. 
 
 The silver coins of the United States shall be 
 a legal tender at their nominal value for any 
 amount not exceeding five dollars in any one pay- 
 ment ; since raised, as to the fractional silver coins, 
 to ten dollars. 
 
 The minor coins of the United States shall be 
 a legal tender, at their nominal value, for any 
 amount not exceeding twenty-five cents in any 
 one payment. 
 
 Abrasion, Any gold coins of the United States, 
 if reduced in weight by natural abrasion not more 
 than one-half of i per cent below the standard 
 weight prescribed by law, after a circulation of 
 twenty years, as shown by the date of coinage, 
 and at a ratable proportion for any period less 
 than twenty years, shall be received at their nomi- 
 nal value by the United States Treasury and its 
 officers, under such regulations as the Secretary 
 of the Treasury may prescribe for the protection 
 of the Government against fraudulent abrasion or 
 other practices. 
 
 Any gold coins in the Treasury when reduced 
 in weight by natural abrasion more than one-half 
 
214 
 
 A NATIONAL CURRENCY. 
 
 ' 9 
 
 . , 
 
 
 - 
 
 ; { 
 
 of I per centum below the standard weight pre- 
 scribed by law, shall be recoined. 
 
 The coinage of standard gold bullion is free 
 and gratuitous (act of January 14, 1875). The 
 coinage of the fractional silver and minor coins 
 is done on Government account. 
 
 The minor coins are redeemed at the Treasury 
 and its offices in lawful money when presented in 
 sums of not less than twenty dollars ; when it ap- 
 pears therefrom that the amount outstanding is 
 redundant, the Secretary of the Treasury is re- 
 quired to direct that their coinage shall cease 
 until otherwise ordered by him. 
 
 The fractional silver coins are redeemed in law- 
 ful money at the office of the Treasurer or any 
 Assistant Treasurer when presented in sums of 
 twenty dollars or any multiple thereof, and are 
 exchanged in like manner for lawful money on 
 demand. (Act of June 9, 1 879.) 
 
 The value of foreign coin^ as expressed in the 
 money of account of the United States, shall be 
 that of the pure metal of such coin of standard 
 value ; and the values of the standard coins in 
 circulation of the various nations of the world 
 shall be estimated annually by the Director of the 
 Mint and be proclaimed on the first day of Janu- 
 ary by the Secretary of the Treasury. In all pay- 
 ments by or to the Treasury, whether made here 
 or in foreign countries, when it becomes neces- 
 sary to compute the value of the sovereign or 
 pound sterling, it shall be deemed equal to 
 
 A NATIONAL CURRENCY. 
 
 215 
 
 $4.8665, and the same rule shall be applied in 
 appraising merchandise imported where the value 
 is, by the invoice, in sovereigns or pounds ster- 
 ling, and in the construction of contracts payable 
 in sovereigns or pounds sterling ; and this valu- 
 ation shall be the par of exchange between Great 
 Britain and the United States. 
 
 The weights of the metric system were legalized. 
 The following coins have been issued at various 
 times and their coinage afterward discontinued : 
 Gold. Dollar, three-dollar piece. 
 Silver. Trade dollar, twenty-cent piece, half- 
 dime; three-cent piece. 
 
 Nickel. Three-cent piece, cent. 
 Bronze. Two-cent piece. 
 Copper. Cent, half-cent. 
 
 The Silver Dollar. By the act of February 28, 
 1878, " To authorize the coinage of the standard 
 silver dollar, and to restore its legal -tender 
 character," it was provided: "There shall be 
 coined, at the several mints of the United States, 
 silver dollars of the weight of 412.50 grains troy 
 of standard silver, as provided in the act of 
 January 18, 1837, on which shall be the devices 
 and superscriptions provided by said act ; which 
 coins, together with all silver dollars heretofore 
 coined by the United States, of like weight and 
 fineness, shall be a legal tender, at their nominal 
 value, for all debts and dues, public and private, 
 except where otherwise expressly stipulated in 
 the contract. And the Secretary of the Treasury 
 
 \\\ 
 
 m 
 
I! 
 
 t 
 
 ' 
 
 H - 
 
 
 216 
 
 A NATIONAL CURRENCY, 
 
 is authorized and directed to purchase, from time 
 to time, silver bullion at the market price thereof, 
 not less than two million dollars' worth per month 
 nor more than four million dollars' worth per 
 month, and cause the same to be coined monthly, 
 as fast as so purchased, into such dollars ;" any 
 gain or seigniorage arising from this coinage shall 
 be accounted for and paid into the Treasury. 
 Certificates for gold coin and bullion deposited in 
 the Treasury were not to be paid in silver dollars. 
 
 This act also provided that any holder of silver 
 dollars might deposit the same with the Treasurer 
 or any Assistant Treasurer of the United States 
 in sums not less than %\o and receive therefor 
 certificates of not less than $io each, correspond- 
 ing with the denominations of the United States 
 notes. The coin deposited for or representing the 
 certificates shall be retained in the Treasury for 
 the payment of the same on demand, such certifi- 
 cates to be receivable for customs, taxes, and all 
 public dues, and, when so received, may be reis- 
 sued. By the act of August 4, 1886, the issue of 
 silver certificates of the denominations of one, 
 two, and five dollars were authorized. 
 
 The coinage act of January 18, 1837, provided 
 that no silver ingots should be used for coinage 
 of which the quality differs more than three- 
 thousandths from the legal standard (i. e., nine- 
 tenths fine); and in adjusting the weights of the 
 coins, the following deviations from the standard 
 weight shall not be exceeded in any of the single 
 
 A NATIONAL CURRENCY. 
 
 217 
 
 pieces : in the dollar, one grain and a half. Per- 
 haps, therefore, under the act of February 28, 
 1878, a silver dollar is a legal tender, provided its 
 fineness is not less than 0.897, and its weight not 
 less than 411 grains. 
 
 By the act of July 14, 1890, the Secretary of 
 the Treasury was directed to purchase, from time 
 to time, silver bullion to the aggregate amount of 
 four million five hundred thousand ounces, or 
 so much thereof as may be offered in each month, 
 at the market price thereof, not exceeding $1 for 
 371% grains of pure silver, and to issue in pay- 
 ment of such purchases of silver bullion, Treas- 
 ury notes of the United States, to be prepared by 
 the Secretary of the Treasury, in such form and 
 of such denominations, not less than $1 nor more 
 than $1,000, as he may prescribe, which notes 
 shall be redeemable in coin at the Treasury of 
 the United States or at the office of any Assistant 
 Treasurer of the United States, and when so 
 redeemed may be reissued, but no greater or 
 less amount of such notes shall be outstanding at 
 any time than the cost of the silver bullion and 
 the standard silver dollars coined therefrom then 
 held in the Treasury purchased by such notes, 
 which notes shall be a legal tender in payment of 
 all debts, public and private, except otherwise 
 expressly stipulated in the contract, and shall be 
 receivable for customs, taxes, and all public dues, 
 and when so received may be reissued. That on 
 demand of the holder of any of the said notes 
 
 ii 
 
 \ 
 
218 
 
 ; ? 
 
 H 
 it 
 
 i 
 
 i 
 
 ^ NATIONAL CURRENCY. 
 
 the Secretary of the Treasury shall, under such 
 regulations as he may prescribe, redeem them in 
 gold or silver coin, at his discretion, it being the 
 established policy of the United States to main- 
 tain the two metals on a parity with each other 
 upon the present legal ratio, or such ratio as may 
 be provided by law. That the Secretary of the 
 Treasury shall each month coin two million 
 ounces of the silver bullion purchased under this 
 act, into silver dollars, until July i, 1891, and after 
 that time he shall coin as much of the bullion as 
 may be necessary to provide for the redemption 
 of the Treasury notes herein provided for, any 
 gain or seigniorage arising from such coinage to 
 be accounted for and paid into the Treasury, 
 the purchase clause of the act of February 28,' 
 1878, being, by this act, repealed. By the act of 
 November i, 1893, the purchase clause of the act 
 of July 14, 1890, was repealed, it being also 
 stated that it is hereby declared to be the policy 
 of the United States to continue the use of both 
 gold and silver as standard money, and to coin both 
 gold and silver into money of equal intrinsic and 
 exchangeable value, such equality to be secured 
 through international agreement, or by such safe- 
 guards of legislation as will insure the mainte- 
 nance of the parity in value of the coins of the two 
 metals, and the equal power of every dollar at all 
 times in the markets and in the payment of debts. 
 And it is hereby further declared that the efforts 
 of the Government should be steadily directed to 
 
 A NATIONAL CURRENCY. 21& 
 
 the establishment of such a safe system of bimet- 
 allism as will maintain at all times the equal power 
 of every dollar, coined or issued by the United 
 States, in the markets and in the payment of debts. 
 Gold Certificates. By the act of July 12, 1882, 
 the Secretary of the Treasury was authorized and 
 directed to receive deposits of gold coin with the 
 Treasurer or assistant treasurers of the United 
 States in sums* not less than $20, and to issue 
 certificates therefor in denominations not less 
 than $20 each, corresponding with the denom- 
 inations of the United States notes. The coin 
 deposited for, or representing, the certificates 
 of deposits shall be retained in the Treasury for 
 the payment of the same on demand, which shall 
 be receivable for customs, taxes, and all public 
 dues, and when so received may be reissued ; also 
 that the Secretary of the Treasury shall suspend 
 the issue of such certificates whenever the gold 
 coin held in the Treasury reserved for the 
 redemption of United States notes falls below 
 
 $100,000,000. 
 
 The money of the United States, on July i, 
 1896, according to the report of the Treasury 
 Department, consisted of : 
 
 Gold coin $567,931,823 
 
 Silver dollars 430,790,041 
 
 Fractional silver coin 75 .730,781 
 
 United States notes 346,681 ,016 
 
 Treasury notes 129,683,280 
 
 National bank notes 226,000,547 
 
 Total $1,776,817,488 , 
 
220 
 
 A NATIONAL CURRENCY. 
 
 i v 
 
 
 To which add the nickels and cents. The 
 Treasury held $111,803,340 in gold, of which 
 $42,818,189 was represented in circulation by gold 
 certificates. The various banks and banking 
 concerns held about $300,000,000, and the residue 
 was estimated as held among the people, gold 
 com being rarely seen in circulation, unless in 
 California. 
 
 The silver dollars, excepting about sixty 
 millions, were represented in circulation by silver 
 certificates. Experience proves that less than one 
 silver dollar per unit of population is all that can 
 be kept in circulation; any excess is returned to 
 the Treasury and certificates taken out instead 
 The free coinage of silver signifies a currency of 
 silver certificates with the silver warehoused in 
 the Treasury; without them the people would not 
 tolerate a bulky currency of silver dollars. 
 
 The fractional silver and minor coins being 
 necessary in any case, in commenting on the 
 currency they may be omitted. 
 
 The quantity of United States notes is a fixed 
 amount, which is probably diminished by loss 
 from use and accident. 
 
 The quantity of Treasury notes decreases as 
 the silver purchased by them is coined into 
 dollars. 
 
 The National bank notes are a variable quan- 
 tity, and are redeemable in lawful money at the 
 bank of issue; also at the Treasury in United 
 States notes, when presented for redemption in 
 
 A NATIONAL CURRENCY. 
 
 221 
 
 sums of $1,000 or any multiple thereof. In 
 October, 1896, there were 3,679 National banks; 
 also 4,944 State banks and trust companies; 764 
 (State) savings banks, and 3,552 private banks. 
 (Report of the Comptroller of the Currency for 
 1896, Vol. I, p. 33.) As only National banks can 
 issue bank notes, their issue is no essential part 
 of the banking business, for otherwise all State 
 and private banks would have died out. 
 
 The above statement shows that the money of 
 the United States consists of about one-third 
 standard gold coin and two-thirds paper and silver 
 dollar tokens, the bullion value, in 1897, of the 
 silver dollar being less than one-half its nominal 
 or legal-tender value. 
 
 During the administration of Mr. Cleveland 
 there was a great demand for gold, caused by the 
 inflated condition of the currency, the proposal 
 indorsed by him to repeal the 10 per cent tax on 
 State bank notes, and the renewed agitation for 
 free silver. Owners of foreign capital wanted to 
 remove it from the country, and home capitalists 
 preferred gold coin to silver dollars or bank notes 
 redeemable in them, and followed the example 
 set by the banks of hoarding gold. This demand 
 fell on the gold reserve held by the Government 
 for the redemption of the United States and 
 Treasury notes, gold not being obtainable in 
 exchange for silver dollars, silver certificates, or 
 bank notes. During the fiscal years 1895 and 1896 
 the net export of gold exceeded $109,000,000. 
 
222 
 
 A NATIONAL CURRENCY, 
 
 The Secretary of the Treasury (Mr. Carlisle), 
 in his December, 1894, report, said, concerning the 
 demand for gold : " With a current revenue in- 
 adequate to defray the ordinary current expenses, 
 and practically no receipts of gold from customs 
 or other sources, it was evident that the Treasury 
 would be unable to meet even the usual demand 
 for export, which, however, would probably be 
 much augmented by the increased apprehension 
 produced by the depleted condition of the re- 
 serve." 
 
 The ''usual demand for export" arose and 
 arises from stuffing the currency with tokens. If 
 the act of July 14, 1890, for the purchase of fifty- 
 four million ounces of silver bullion per annum 
 had not been, providentially, repealed November 
 I, 1893, there would have been added to the 
 already overstock of silver, by November i, 1897, 
 two hundred and sixteen million ounces, which 
 would make, when coined, $278,640,000 in silver 
 dollars. A repeal of the 10 per cent tax on State 
 bank notes would have flooded the already in- 
 flated currency with that kind of paper tokens. 
 The free coinage of silver would have dumped 
 an immense quantity of that material into the 
 already bloated currency. 
 
 There were ''practically no receipts of gold from 
 customs or other sources'' because silver dollars, 
 silver certificates, and Treasury notes were pay- 
 able and paid for duties on imports, and other 
 revenues were payable in silver dollars, silver 
 
 III 
 
 A NATIONAL CURRENCY. 
 
 223 
 
 certificates, National bank notes. Treasury notes, 
 and greenbacks, and paid in them, greenbacks and 
 Treasury notes excepted. 
 
 Secretary Carlisle, in his December (1896) re- 
 port, said the excess of expenditures during 
 the three fiscal years 1894-5-6 over the receipts 
 from the ordinary sources of revenue was $1 37,- 
 811,729.46. And he estimated a deficit for the 
 fiscal year 1897 of $64,500,000; and for the fis- 
 cal year 1898 of $45718,970.60. He also said 
 therein: Since March i, 1893, United States 
 bonds to the amount of $262,315,400 have been 
 issued and sold for $293,481,894.90 in gold. Also 
 that : Singe the resumption of specie payments 
 on January i, 1879, United States notes to the 
 amount of $470,490,987, and Treasury notes issued 
 under the act of 1890 to the amount of $86,428,881, 
 have been redeemed in gold. 
 
 The $262,315,400 of bonds were issued and sold 
 tinder the resumption act of January 14, 1875, to 
 replenish the gold reserve ; the United States and 
 Treasury notes redeemed were reissued in pay- 
 ment of expenditures, and thus the deficit in the 
 revenue was made good. By the sale of these 
 bonds a suspension of payment of all kinds of de- 
 mands in any kind of money was avoided. The 
 great demand for gold to export and to hoard was 
 a godsend to this low-tariff administration. 
 
 If gold is bought for redemption purposes and 
 to maintain the gold standard, and Government* 
 notes are redeemed in gold, and the notes there- 
 
Il ' 
 
 224 
 
 A NATIONAL CURRENCY. 
 
 upon are paid out for expenditure, there is noth- 
 ing to be charged to the notes as cost for their 
 redemption. 
 
 In 1877 ^^^ 1878 ninety millions of bonds were 
 sold for gold which was held for resumption pur- 
 poses ("Money and Politics," Upton, pp. 150-52), 
 ("United States Notes," Knox, p. 141). And no 
 more bonds were sold for resumption purposes 
 until those issued and sold by Secretary Carlisle 
 as above mentioned. 
 
 The gold reserve January i, 1879, proved to be 
 unnecessarily large. At that date the amount of 
 coi^ held in the Treasury as available for resump- 
 tion purposes, after deducting all matured coin 
 liabilities, was $135,000,000; and during that 
 entire year only $1 1,456,536 in legal-tender notes 
 were presented for redemption ("Money and 
 Politics," Upton, p. 155). 
 
 The receipts from customs (coin) during the 
 fiscal year 1864 were $102,316,152.99; in 1866, 
 $179,046,651.58; in 1867, $176,417,810.88 ("Mc- 
 pherson's Histor>' of Reconstruction," p. 375). 
 By the act of March 17, 1864, the Secretary of the 
 Treasury was authorized to anticipate the pay- 
 ment of interest on the public debt by a period 
 not exceeding one year, either with or without a 
 rebate of interest on the coupons, as to him might 
 seem expedient ; also, to dispose of any gold in 
 the Treasury not necessary for the payment of 
 'interest on the public debt, etc. Sales of gold 
 
 
 i 
 
 A NATIONAL CURRENCY. 
 
 225 
 
 were thereafter frequently made during and 
 after the war. 
 
 Whether legal-tender notes were redeemed on 
 and after January i, 1879, with ^^^^ received from 
 customs or with coin belonging to the gold reserve, 
 and the notes reissued in payment of expendi- 
 tures, there is no proper charge to be made 
 against them for the cost of their redemption. 
 Suppose the reserve held for resumption purposes 
 was originally intended to be, and in fact was, 
 $100,000,000; to this add $293,481,894.90 realized 
 by Secretary Carlisle from the bonds sold by him; 
 there ought to be now in the Treasury a gold 
 reserve of $393, 481, 894. 90» ^^^ ^11 the United 
 States notes are still outstanding ; also all of the 
 Treasury notes which have been redeemed in 
 gold. But the fact is, that not only the whole of 
 the original gold reserve, but also that added to it 
 by Secretary Carlisle, except the part of it which 
 may still remain in the Treasury, has been used 
 in payment of current expenses, in this way, 
 to wit, United States and Treasury notes being 
 redeemed in gold have been reissued and paid 
 out in discharge of Government dues. 
 
 Whatever charge is proper against the United 
 States notes on account of the gold reserve, no 
 charge can be made against them for any part of 
 the $86,428,881 paid out in gold for the redemp- 
 tion of Treasury notes. Secretary Carlisle said : 
 "Since the resumption of specie payments in 
 January i, 1879, United States notes to the amount 
 
 16 
 
226 A NATIONAL CURRENCY. 
 
 of $470490,987 have been redeemed in gold," i. e. 
 to December, 1 896. How can this be, for the gold 
 reserve proper is not over $100,000,000? 
 
 By the act of February 28, 1878, for the coinage 
 of silver dollars, only twenty-four million dollars* 
 worth of silver bullion was coined per annum, so 
 that for a long period of time duties on imports 
 were paid almost entirely in gold. But as time 
 elapsed the quantity of silver dollars and silver 
 certificates increased, and also the part of the 
 customs paid in them. By the act of July 14, 1890, 
 four and one-half million ounces of silver bullion 
 were to be and were purchased monthly, and 
 Treasury notes issued therefor, which notes were 
 also receivable for customs, so that by 1893, as 
 Secretary Carlisle said, there were "practically no 
 receipts of gold from customs or other sources." 
 According to his reports for 1894 and 1896, the 
 receipts from customs were, for the fiscal years — 
 
 1893 $203,355,016 73 
 
 1894 131,818,530 62 
 
 1895 152,158,617 45 
 
 1896 160,021,751 67 
 
 Suppose these amounts had been paid in gold, 
 or chiefly in gold, as duties were in 1879 ^^^ ^or 
 a long time thereafter, legal-tender notes could 
 have been redeemed with the gold, and the notes 
 thereupon paid out for Government dues con- 
 tinually and to very large amounts. But by 
 stuffing the currency with bank notes. Treasury 
 notes, silver dollars, and silver certificates, the 
 
 A NATIONAL CURRENCY. 
 
 227 
 
 Government has been put into the condition that 
 if gold is demanded on any liability which is pay- 
 able in coin— e. g., funded debt, interest thereon, 
 etc. — the gold must be bought or payment in gold 
 refused, for an exchange of Treasury notes and 
 greenbacks for gold is an unreliable makeshift. 
 The evil day was only deferred by the repeal of 
 the silver purchase act of 1890, and the purchase 
 of $293,481,894.90 in gold by Secretary Carlisle. 
 
 The redeeming and reissue (in payment of 
 expenses) of the legal-tender notes was called by 
 Mr. Cleveland "an endless chain," which worked 
 well for him. But as he believed that his suc- 
 cessor by, e. g., a McKinley bill, would raise a 
 revenue sufficient to pay expenses, he recom- 
 mended, as a parting bequest, the withdrawal and 
 cancellation of the legal-tender notes, at which 
 suggestion the whole banking fraternity pricked 
 up their ears. For, with an adequate revenue, the 
 notes could not be reissued after their redemption 
 (unless they were given away). This great void 
 in the currency might be filled with bank notes, 
 but the free silver party think it might be filled 
 with silver dollars, and if bank notes were sup- 
 pressed that void also might be filled with the 
 same metal. 
 
 Perhaps if the currency were let alone, the 
 country might eventually grow out of its present 
 financial slough of despond. But if it is to be 
 doctored in order to make it "sound," and a 
 
228 
 
 A NATIONAL CURRENCY. 
 
 money commission composed of experts is to be 
 appointed to suggest the proper method, perhaps 
 it would be judicious to have such commission 
 composed one-half of bankers and the other half 
 of free silverites. 
 
 When the Government ** goes out of the bank- 
 ing business," by withdrawing the United States 
 and Treasury notes, e. g., by funding them, it will 
 be necessary also to abolish the currency bureau, 
 and repeal the act making bank notes a legal 
 tender to and from the Government. When gold 
 is needed to pay interest or principal of the public 
 debt, or for any purpose requiring it, the gold 
 must, as now, be bought. 
 
 Those engaged or ready to engage in ''the 
 banking business " of issuing paper money insist 
 that a " sound " currency might and ought to con- 
 sist of bank notes redeemable in ** lawful money." 
 With the Government notes out of the way this 
 would be gold coin and silver dollars. If the 
 bank notes were made redeemable in gold coin 
 only, that would violate " the established policy 
 of the United States to maintain the parity 
 between the two metals." Supposing the cur- 
 rency to consist of one-third standard coin and 
 two-thirds bank notes ; there is already a sufficient 
 or nearly sufficient stock of silver for the purpose. 
 For there was purchased and coined under the 
 act of February 28, 1878, 291,272,018.50 fine 
 ounces, and under the act of July 14, 1890, 168,- 
 674,682.53 fine ounces (Mint Report of 1895, p. 
 
 A NA TIONAL CURRENCY. 
 
 229 
 
 209). These amounts taken together are sufficient 
 to coin into $594,665,089 in silver dollars. 
 
 The advocates of free silver think that a 
 "sound" and simple currency might and should 
 consist of silver dollars and silver certificates. It 
 is quite obvious that a silver certificate is quite as 
 " elastic " as a bank note for the same amount. 
 
 Instead of the present mongrel currency, the 
 money of the United States might have consisted 
 of two-thirds gold coin and one-third United 
 States notes. There was coined at the mints of 
 the United States from January i, 1873, to June 
 30, 1896, $1,020,722,143 in gold coin, which, with a 
 part of the $793,970,110 coined prior to 1873, 
 would have been quite sufficient for the purpose. 
 In such case any demand for an additional 
 quantity of paper money for use in active circu- 
 lation could have been supplied by additional 
 issues of United States notes for a like amount in 
 gold coin deposited in the Treasury. This coin 
 would have been quite sufficient to redeem all 
 the notes which would ever have been presented 
 for that purpose. The United States, Treasury, 
 and National bank notes outstanding July i, 1896, 
 amounted to $702,364,843, to which add the silver 
 and gold certificates to ascertain the amount of 
 paper money then extant. With a currency as 
 above, the " endless chain " would have needed no 
 lubrication. Also, a greenback is as "elastic" as 
 a bank note for the same amount. 
 
 If the gold standard is to be maintained the 
 
230 
 
 A NATIONAL CURRENCY. 
 
 National bank notes ought to be suppressed; 
 State bank notes kept so ; no more silver dollars 
 coined ; and the present stock of them and of un- 
 coined bullion recoined at the commercial ratio. 
 There is at present more than loo per cent profit 
 in coining silver dollars and shipping them into 
 the country. And this practice has commenced 
 on quite a large scale. (Report of the Director of 
 the Mint for 1896, p. in.) 
 
 In the interest of a bank-note currency it is 
 insisted that while United States notes are good, 
 and of a uniform value at all times and places! 
 yet, like many other good things, they are too 
 expensive. And to magnify this, the endless 
 chain argument has been worked to an absurd 
 extent by persons high in office, as see Report 
 of the Comptroller of the Currency for 1896, p. 
 108. The United States notes being still out- 
 standing, the gold reserve held for their redemp- 
 tion ought to be in the Treasury in its entirety, 
 no matter how often the notes have been 
 redeemed, unless on their reissue they were 
 given away. As before stated, the original gold 
 reserve consisted of the proceeds of the sale of 
 bonds to the amount of $90,000,000, of which 
 $65,000,000 bore interest at 414 per cent, and 
 $25,000,000 at 4 per cent. The 4^ per cents were 
 sold at I y2 per cent premium, the 4 per cents at 
 par. The interest annually on the $90,000,000 
 was $3,925,000. From January i, 1879, to Jan- 
 uary I, 1897, is eighteen years, for which period 
 
 A NATIONAL CURRENCY, 
 
 231 
 
 the above annual interest amounted to $70,650,000. 
 If the greenbacks had been funded January i, 
 1879, to wit, $346,681,016 into $250,000,000 of 4j^ 
 per cents and $96,681,016 into 4 per cents, the 
 people would have been taxed annually the inter- 
 est on these sums, to wit, $15,1 17,240.64, which in 
 eighteen years make an aggregate $272, 109,33 1 .62. 
 Deducting from this the interest paid on the 
 ninety millions of bonds, to wit, $70,650,000, 
 leaves $201,459,331.62 as the amount saved by the 
 people during the eighteen years by using their 
 own notes for money. And a much greater 
 amount than this would have been saved if 
 United States notes had occupied the place of 
 the National bank notes. For the currency 
 would have been no more inflated with paper 
 money, and no greater gold reserve would have 
 been required to maintain the gold standard. 
 All of the legitimate banking business would 
 have been done by State and private banks, issu- 
 ing no paper tokens. Since March 3, 1883, the 
 National banks have paid a tax of i per cent 
 annually on their circulation, and before and 
 since that time they have paid no other taxes 
 than have been charged to other banks, nor have 
 they performed any services for the Government 
 which such other banks could not have rendered 
 and gained a large profit thereby. 
 
 It is about time for the Government to regulate 
 the value of money by furnishing the whole of it, 
 either gold coin and paper representing it or 
 
232 
 
 A NATIONAL CURRENCY, 
 
 silver coin and paper representing it. No bank 
 notes are needed in either case. Bimetallism is 
 impossible except at the commercial ratio, and 
 that has become so variable that no one nation 
 can now control it. 
 
Date Due 
 
 »' 
 
 » t 
 
 JUL -6 W^^> 
 
END OF 
 TITLE