6. We must now say something about an expression which has been the source of enormous confusion in Economics, and has especially obscured the Theory of Credit.

All ancient writers kept their minds firmly fixed on the thing which anything could be exchanged for as its Value; or something external to itself: and we have not found in them any trace of such a confusion of ideas as the expression Intrinsic Value. But their writings on the subject seem to have been totally forgotten. In modern times when men began to consider the subject of Wealth, gold and silver were long held to be the only species of Wealth, because they outlasted everything else, which wasted away while they remained. When men began to see the absurdity of considering specie to be the only Wealth, they looked to some quality of the thing itself, as constituting a thing Wealth, and then they began to speak of Intrinsic Value. So long ago as 1696, an able writer, Barbon, pointed out the confusion which had arisen from mistaking the absolute qualities of a thing for the thing it would exchange for. He says "There is nothing that troubles this controversy more than for want of distinguishing between Value and Virtue.

"Value is only the Price of things; that can never be certain, because it must be there at all times, and in all places, of the same Value; therefore nothing can have an Intrinsic Value.

"But things have an intrinsic virtue in themselves, which in all places have the same virtue: as the loadstone to attract iron, and the several qualities that belong to herbs, and drugs, some purgative, some diuretical, etc. But these things, though they may have great virtue may be of small value, or no price, according to the place where they are plenty or scarce, as the red nettle, though it be of excellent virtue to stop bleeding, yet here it is a weed of no value from its plenty. And so are spices and drugs in their own native soil of no value, but as common shrubs or weeds, but with us of great value, and yet in both places of the same excellent intrinsic virtue."

Again - "For things have no value in themselves: it is opinion and fashion brings them into use and gives them a value."

Barbon thus puts his finger on the very thing which is the bane of Economics at this very day, the expression Intrinsic Value, which is confounding an intrinsic quality with an external relation.

"When men in modern times began to see the absurdity of restricting the term Wealth to gold and silver, they first extended it to mean the annual products of the earth which are useful to men. Thus Cantillon says - "The earth is the source or matter from whence all riches are produced." The Physiocrates defined Wealth to be all the material products of the earth which are brought into commerce. Smith began his work by saying that the real wealth of a country is the "annual produce of land and labour" but in the course of it he enumerates the abilities of men as fixed Capital and Paper Credit as circulating Capital.

Economists then confined their attention solely to things of Value, the produce of Labour, including no doubt the principle of exchangeability as appertaining to Wealth, but only as a secondary and subordinate one, not as the sole and exclusive one, as it was by ancient writers. Then they began to consider that things would exchange in proportion to the Labour employed in producing them. Thus the Value of a thing was considered to depend on the quantity of Labour employed to produce it. Thus the Quantity of Labour embodied as it were in the thing came to be counted as its Value; and Value thus came to be called Intrinsic. This unhappy phrase Intrinsic Value meets us at every turn in modern Economics; and yet the slightest reflection will shew that to define Value to be something External, and then to be constantly speaking of Intrinsic Value, are utterly self-contradictory and inconsistent ideas.

Thus over and over again it is repeated in Economical works that Money has Intrinsic Value, but that a Bank Note, or a Bill of Exchange is only the Representative of Value.

Money no doubt is the produce of Labour; but, as Smith observes, if it would exchange for nothing it would have no Value. So that after all Smith comes to exchangeability as the principle of Value. How then can its Value be Intrinsic? How can anything have Intrinsic Value, unless it has the things it will exchange for inside itself? Money will exchange for anything, corn, houses, lands, horses, carriages, books, etc., and each of these is the Value of the Money with respect to that commodity, but which of these is its Intrinsic Value ?

It is quite clear that Money has not Intrinsic but General Value, because it is generally exchangeable throughout the country. But place it among a race of savages, and where would its Value be ?

Persons throughout a country will always be ready to give things in exchange for the Money of the country, hence Money has General and Permanent Value, but manifestly not Intrinsic Value.

All Economists admit that a Bank Note payable on demand is of the Value of Money. And why is it so ? Simply because it is exchangeable for Money. A Bill of Exchange on a solvent merchant has Value, simply because at a certain time, it will be exchanged for Money. Hence it is clear that Bank Notes and Bills of Exchange have Value for precisely the same reason that Money has, and no other, viz. that they are exchangeable for something else. When Money can be exchanged it has Value; when it cannot be exchanged it has no Value; when a Bill or Note can be exchanged it has Value; when it cannot be exchanged it has no Value.

Hence we see that the Value of Money and Credit of all kinds is essentially of the same nature, though there may be different degrees of it. A piece of Credit by the unanimous doctrine of all Lawyers, all Economists, and all Merchants, is an article of merchandise, and an exchangeable commodity, just as much as Money or any other goods.

The expression Intrinsic Value is so common that persons are apt to overlook its incongruity of idea: but if we use words of similar import whose meaning has not been so corrupted, the absurdity will be at once apparent. Thus who ever heard of an Intrinsic Distance or an Intrinsic Ratio? The absurdity of these phrases is apparent at once: but they are not more absurd than Intrinsic Value. To say that Money because it is material, and the produce of land and labour has Intrinsic Value, and that a Bill or Note is only the Representative of Value, is as absurd as to say that a wooden yard measure is Intrinsic Distance, and that the space between two points one yard apart is the Representative of Distance.

Other writers indeed consider the Value of a thing to be the quality which makes it desired; but this also is an error. The Value of a thing is any other thing for which it can be exchanged. Economics has nothing to do with the agreeable or useful qualities of things, but only with their external relations to other things: and it must always be remembered that Economics is a pure science of Ratios.