Though the functions of the standard of value and the medium of exchange are quite distinct, they may be performed by the same commodity. In a primitive community this is usually the case, because universal exchangeability, a quality essential to both, is rarely possessed by more than one commodity, and that one, therefore, must necessarily serve in both capacities. At the present time, however, the standard of value is only one element of a very complex medium of exchange, consisting of several commodities and a considerable number and variety of credit instruments. Why this is so will be made clear in the two following chapters.


The topics included in this chapter are discussed in most textbooks under the head "The Functions of Money," but they are rarely treated in such a way as to show the true relation between money and the fundamental wants of traders, and to emphasize the distinction between the functions of the medium of exchange and that of the standard of value. The following references are typical of the usual method of treating the subject: Mill, Political Economy, bk. III, ch. vii; Walker, Money, ch. i, and Money, Trade, and Industry, chs. i, ii, and iii; Jevons, Money and the Mechanism of Exchange, chs. i, ii, and iii: Nicholson, Money and Monetary Problems, pt. I, ch. ii. In his article entitled "Geld" in the Handworterbuch der Staatswissenschaften, v. III, Carl Menger treats the subject in an admirable manner. See also Nasse's "Das Geld und Munzwesen" in Schonberg's Handbuch der politischen Okonomie. For a collection of definitions of money see Roscher's Principles of Political Economy, Lalor's translation, v. I, bk. II, ch. iii, note 5, and Hildebrand's Theorie des Geldes, p. 5.