This section is from the "The Science Of Wealth" book, by Amasa Walker.
2d, Does a mixed currency act justly as a standard of value?
This function of money is of a very important character. It lies at the foundation of all credit and all business calculations. If no man dealt with or trusted another, or waited a day to receive and consume the reward of his labor, there would be no great need of such a standard. It would then be only of scientific interest, to show what was the comparative wealth of different communities and ages, and what the fairness of their several systems of distributing the result of industry among the producing classes. If every act of labor received its own reward, in a distinct form, at the time, to be consumed then and there, a standard of value would be of less practical importance.
But whenever there is the slightest exchange of commodities or association of laborers; whenever one man trusts another for recompense of service, or applies wealth and toil to an enterprise in the faith of receiving a reward at a future time,—a standard of value must be had, so that all can be done safely, expeditiously, and justly. Unless something possessed the property of being a standard of value, all exchange would inevitably be confined to the gross and clumsy form of barter. It has already been included in the definition of money, that it performs this office. There is not a possibility of taking a scientific exception to this statement; yet a great deal of popular controversy has arisen, which we are obliged to stop here to notice. It has been said, that a dollar, for example, no more measures the value of wheat, than wheat does the value of the dollar; that " the dollar is wholly an arbitrary, conventional standard, forced on the people, unjustly, by legislative enactment."
Much confusion has undoubtedly been caused by mistaken views of what is really meant by a standard of value.
Suppose A sells B a tract of land, and agrees to take five hundred oxen in payment at a future day. The value of the land sold is, in this case, clearly measured by the oxen. These latter are the standard by which the value of the land is determined. They form the money, or currency, by which the debt is legally and rightfully to be discharged. The oxen here occupy precisely the position of the dollar in ordinary contracts; and, if we suppose a community in which they are altogether used as money, they become, without any necessary legal enactment, the universal standard, or that by which all other values are measured and expressed. Value must be determined in some way; and it can only be done by comparison,— by measuring the land against oxen, wheat, gold, or something else that has value.
As long as the land was measured, in the single instance, by the oxen, so long each measured the other alike; but, when the use of the oxen was extended to a comparison with each other commodity in the market, and all others together, then it became as improper to say that the land measured the oxen as to say that the wood or the cloth measure the yardstick by which their length and breadth are universally determined. The government does not insist that length or breadth shall be determined in all bargains by the yardstick. Men can and do take arms and fingers for the purpose, or any thing else they please: it is nothing to government, which only says what a yard shall be.
So, by universal consent, mankind have agreed to measure every thing by the precious metals. The laws of the United States, for example, enact that a certain coin, or planchet, of gold, nine-tenths fine, and weighing 25 8/10 grains,.shall be called a dollar. That is all the government does, all it ought to do. It compels no one to receive the dollar for any thing, unless he has agreed to do so, any more than it compels him to receive hats or boots, wheat or cotton. But, the government having provided the coin, — that is, having certified to its weight and fineness,—the people, of their own choice, make use of it to measure every other thing. If they buy merchandise or land or cattle, they agree to take so many of these dollars in payment. They might say, so many oxen or horses, or any thing else; but they prefer dollars, merely because they have the most convenient form of value, and are universally acceptable. As society in general adopts this way of determining the worth of property, the dollar, not by law, but by the voluntary preference of the people, becomes the measure, or standard, of value, in all transactions.
So far as indebtedness between individuals is concerned, the government makes the dollar lawful tender; that is, if an individual has a just claim for a given number of dollars, the government enacts that the same number of dollars shall discharge the debt.
True it is, that every object, having value and used in exchange, is really, in so far, and for the time, a measure of value; but that which has been selected by mankind as the best adapted for a universal equivalent, and actually so used, is emphatically, and for all purposes, the measure or standard.
Some writers have insisted that people should not be compelled to pay so many dollars in coin; then they should not promise dollars merely, but any thing else.
The establishment of such a standard is no wrong to the people; for it can easily be seen that payments in any other specific product would be more likely to involve hardships; e.g., an obligation to pay wheat or potatoes or cotton at any certain time, would bring infinitely more chances of distress resulting from a failure of the crop in that particular article.