Front Page Titles (by Subject) Final Selection of the Unit of International Money. - Money and the Mechanism of Exchange
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Final Selection of the Unit of International Money. - William Stanley Jevons, Money and the Mechanism of Exchange 
Money and the Mechanism of Exchange (New York: D. Appleton and Co. 1876).
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Final Selection of the Unit of International Money.
I will conclude this chapter by some remarks on the reasons which should guide us in selecting the monetary unit to be finally established as the basis of a future universal money.
I attribute very little weight to arguments concerning the absolute amount of the rival units. It is said that as the wealth of nations increases, and the value of gold at the same time sinks, we need a larger unit. The pound is recommended on this ground as clearly superior to the franc. If we count in francs our figures will be twenty-five times as large as in pounds sterling. It seems to be forgotten that the same unit can never suit the extremely different sums which we have to express, so that we must use multiples or submultiples of the actual unit. Just as we use inches, feet, yards, furlongs, miles, or diameters of the earth's orbit, according to the magnitudes to be measured, so we vary the unit with money. If we are discussing a workman's weekly wages, we count in shillings; if we speak of a clerk's yearly salary, we speak of pounds; if the fortune of a merchant or banker is in question, we take notice only of thousands of pounds; in matters relating to the revenue of the kingdom or the national debt, we give our exclusive attention to millions of pounds. The Portuguese unit of account, called the rei, is worth only about the nineteenth part of an English penny, and is probably the smallest unit in the world. Practically, however, the milreis, or thousand reis, worth 53 1/3d., becomes the unit. In the same way Indian merchants speak of lacs and crores of rupees. The French estimate their national debt in milliards of francs. No doubt it is puzzling to Englishmen to interpret exactly the meaning of a milliard of francs, but, to those accustomed to count in francs it is no more difficult than a million of pounds. Exactly the same considerations apply to units of weight; thus, though the French use so small an ultimate unit as one gram, or 15.43 grains, yet according to the magnitudes of the objects to be weighed, they use smaller or larger units, centigrams or milligrams on the one side, or decagrams and kilograms on the other. The absolute amount then of the ultimate unit seems to me to be entirely a matter of indifference in this point of view.
As regards the subdivision of the unit there are considerations of more importance. The subdivision ought of course to be decimal, and it ought to be so contrived that the lowest submultiple shall correspond to the smallest sum which is thought worthy of being recorded in mercantile transactions. Now the franc is divided into 100 centimes, so that the centime has a value of less than the tenth of a penny. Though bronze pieces of one and two centimes were coined to the amount of about 5 per cent. of the whole bronze currency, it is found that they hardly circulate. Even if they were used in the smallest retail transactions at baker's shops, they would not be entered in account books. Thus the lowest entry which a French accountant makes is five centimes, and the next lowest ten centimes, corresponding to our penny. A needless complexity is thus introduced into small accounts. It is indeed so inconvenient to have to call the smallest coin in general use cinq centimes that it is still common to speak of it as a sou, in spite of the ninety years during which the decimal system has existed in France. The Portuguese rei is so small a unit that it is not represented by any coin at all. It nevertheless has a place in Portuguese mercantile accounts, and thus needlessly adds a figure to all pecuniary statements.
In England the smallest coin in actual use is the farthing, but in accounts little notice is taken of farthings or halfpennies, so that the penny is the lowest money of account. The post-office, in the regulations of the savings bank business, refuses to recognize any coin less than the penny. But the penny is inconveniently related to the pound, the hundredth part of which is 2.4d., and the thousandth part about a farthing. Thus the decimal system applied to our pound would oblige us to record as the lowest money of account an inconveniently small coin, namely, the mil. In this respect, indeed, the pound, and mil scheme is superior to the franc and centime system. Thus 12s. 6d. may be expressed as 625 mils; but in French money (at twenty-five francs to the pound) it would become 15.625. Taking the ten-franc piece as the principal unit, it would become 1.56 units, or 156 metrical pennies. In many cases it would require less figures to express a sum in pennies than in mils or centimes.
The American system is unexceptionable in this respect. The dollar is divided into one hundred cents, each of which has the value of about one halfpenny. Although half-cents have been coined, and may be used in some trifling purchases, they need never be entered in ordinary accounts. The cent thus seems to me to correspond to the smallest sum which need be treated in accounts, so that money statements are reduced to the greatest possible simplicity. The question may well be asked whether the lowest coin actually recorded is not truly the unit, of which all other coins are multiples. Perhaps the best answer would be to say that the unit is indifferently the cent, or the dollar, or the eagle. In English money it matters not whether we regard the pound, or its twentieth part, or its two hundred and fortieth part, as the unit. The absolute amount of the unit, I repeat, is totally a matter of indifference, and the only point we have to consider is whether it, or any decimal part of it, corresponds to the smallest sum of which we need take account. In this respect the dollar is the best existing unit; but it might admit of discussion whether the double dollar, or ten-franc piece of gold, equal to eight shillings, or one hundred pence, would not be better. If the wealth of nations continues to grow, and the value of gold to fall, even the cent will be too small a coin to appear conveniently in accounts, and the penny will be a better lowest unit. In this case the hundred pennies, or the ten-franc piece, would become the best unit. The choice thus seems to me to lie between the five-franc and the ten-franc piece in gold as the ultimate unit of international money. In favour of the ten-franc piece it may be added, that it would make a convenient gold coin of the smallest size which it would be well to issue. The gold dollar and five-franc piece are too small, and suffer great abrasion.
The Mechanism of Exchange
Having now sufficiently discussed the subject of metallic money, we pass on to consider the devices which naturally develop themselves in a highly organized commercial nation, for the purpose of economizing the precious metals, or even avoiding the use of coins altogether. No sooner have a people fully experienced the usefulness of a good system of money, than they begin to discover that they can dispense with it as a medium of exchange, and return to a method of traffic closely resembling barter. With barter they begin and with barter they end; but the second form of barter, as we shall see, is very different from the first. Purchases and sales continue to be made in terms of gold and silver coin, but equivalent quantities of goods thus estimated are made to pay for each other. If ownership in gold or silver intervenes at all, it is in the shape of warrants or representative documents with which gold can be procured, if desired, but which are seldom used to procure it.
At the outset we found that money performed at least two, and probably four distinct functions (Chapter III.); and, in a simple state of industry, it is convenient that the same metallic substance should fulfil all these functions concurrently. But it does not follow that this union of functions is the best possible arrangement under all conditions. We shall find that gold or silver always continues to be the common denominator of value, but that these metals cease to a great extent to be the actual medium of exchange which is passed about between buyer and seller. In a later part of the book (Chapter XXV.) I shall further show that money may with great advantage be replaced in its function as a standard of value for long periods of time by a Tabular Standard.