The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface.
• Advertisement.
• Letters, &c.
• Letter I.
• Letter II.
• Letter III.
• Letter IV.
• Letter V.
• Advertisement.
• Catechism of Political Economy; Or, Familiar Conversations On the Manner In Which Wealth Is Produced, Distributed, and Consumed.
• Chapter the First.: On the Composition of Wealth and the Use of Money.
• Chapter II.: On the Utility and Value of Products.
• Chapter III.: On Production.
• Chapter IV.: On the Operations Common to All the Species of Industry.
• Chapter V.: On Capital and Land.
• Chapter VI.: On the Formation of Capital.
• Chapter VII.: On the Manner In Which the Value of Products Is Established, and of the Charges of Production.
• Chapter VIII.: On the Profits of Industry, Capital, and Land; That Is, Income.
• Chapter IX.: On Wages, Interest, and Rent.
• Chapter X.: On Incomes Founded On Immaterial Products.
• Chapter XI.: On Consumption In General.
• Chapter XII.: On Private Consumption.
• Chapter XIII.: On Public Consumption.
• Chapter XIV.: On Public Property and Taxes.
• Chapter XV.: On Public Loans.
• Chapter XVI.: On Property, and the Nature of Riches.
• Chapter XVII.: On the Real and Nominal Price.
• Chapter XVIII.: On Money.
• Chapter XIX.: On Signs Representing Money.
• Chapter XX.: On Markets.
• Chapter XXI.: On Regulations Or Restraints of Industry.
• Chapter XXII.: On Importations, Duties, and Prohibitions.
• Chapter XXIII.: On Exportation.
• Chapter XXIV.: On Population.
• Chapter XXV.: On Colonies.
• Erratum.

CHAPTER THE FIRST.

On the Composition of Wealth and the Use of Money.

What do you understand by the word wealth?

Whatever has a value; gold, silver, land, merchandise . . . . .

Are not gold and silver preferable to other wealth?

That is preferable in which the greatest value is to be found. One hundred and ten guineas in corn are preferable to one hundred guineas in gold.

But, where the value is equal, is not the money better than the merchandise?

In fact, it is preferred.

What is the reason of it?

The custom generally established of using money as a medium in exchanges, renders that species of merchandise more convenient than any other for those who have purchases to make; that is, for every body.

What do you mean by money being a medium of exchanges?

If you are a farmer and desire to exchange a part of your corn for cloth, you begin by procuring money for your corn; then with that money you buy cloth.

Without doubt.

You have in reality made a double exchange, in which you have given corn to one man, and another has given cloth to you.

That is true.

The value of this corn was transitorily in money, afterwards in cloth; and though you have in fact exchanged your corn for cloth, money was the intermediate form which that value assumed in order to change itself into cloth. Such is the use of money.

Well! But if all these values are equal, why is that of money preferred?

Because, when a man once possesses money, he need make only one exchange, in order to obtain what he may want; while he who possesses every other merchandise, has two exchanges to make. He must, in the first place, exchange his merchandise for money, and afterwards his money for merchandise.

Can you make use of any other thing for this purpose instead of money?

Yes; there are countries in which shells and other articles are used; but the metals, and principally gold and silver, are of all materials, the most convenient to be used as money. It is that which has caused them to be adopted by all civilized and commercial nations.

Then in those countries in which shells are used as money, they are the objects which, the value being equal, are preferred in exchanges?

They are so in effect: but the precious metals are more sought after than the other monies, because they possess, as merchandise, certain advantages which increase the preference they possess as money. They contain much value in small bulk, which permits them to be easily concealed and carried from place to place; they do not spoil by keeping; they may be divided or reunited at will, almost without loss; in fine, they are valuable all over the world, and whatever frequented place we travel to with this sort of wealth, we are sure, on more or less favourable conditions, to be able to exchange it for whatever we may want.

I comprehend the reason why money, and, above all, money of gold and silver, is more desirable than any other merchandise; but how can we procure it?

As we procure every thing else that we want, by an exchange when we have not a mine that produces it; in the same way that we procure fruit when we do not possess the tree that bears it.

How can we obtain a thing in order to give it in exchange for money?

Produce it.

Produce a thing! But supposing that possible, how shall I be certain that I shall get money for that thing?

You may assure yourself of that by giving it a value.

But how can a value be given to things?

We shall see that in the following chapters.