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Henry Vaughan argues that it is the voluntary and “universal concurrence of mankind”, not the laws, which makes money acceptable as a medium of exchange (1675)

The English political economist McCulloch was a pioneer historian of economic thought. In his collection of English tracts on money he includes Vaughan’s Discourse of Coin and Coinage (1675) which has an interesting discussion of how the "universal concurrence of mankind" is what makes money money:

But you will say, that gold coins, excepting the difference of colour, and of some other properties of the metals, have as much the appearance of money as silver coins: Granted; and so have copper coins too; and so might pewter ones, &c., but this is nothing to the purpose; it is not the mint, but the laws, and the universal concurrence of mankind, that make money.

But you will say, that gold coins, excepting the difference of colour, and of some other properties of the metals, have as much the appearance of money as silver coins: Granted; and so have copper coins too; and so might pewter ones, &c., but this is nothing to the purpose; it is not the mint, but the laws, and the universal concurrence of mankind, that make money. You will say again, that the laws oblige me to take gold, as, or instead of money; whereas, I am at liberty to refuse any other commodity, that may be offered me instead of money. True; and I have before shewed* the propriety and conveniency of ordaining that gold coins, should pass at certain rates, pro tempore, as or instead of money? But still, this doth not make gold money: These rates are not to be fixed arbitrarily, but are to be regulated by the price which gold then bears, in respect to silver as a standard; and these rates are, and always have been, considered as being subject to this rule, and so to be altered again and again, whenever the case may so require. Under this limitation, it is very convenient, that gold coins should pass as or instead of money, but not as being themselves money, or the standard measure of the values of all other things. It is a fundamental characteristic of money, that, as a measure, it continues invariable; that is, that a payment in the standard coins, of any specific sum or quantity of money agreed upon, is, whenever made, a full discharge of that contract; without regarding at all, how silver may have varied in its value with respect to commodities in general, by an increase or decrease of its quantity. But gold coins are to be considered in another view: Payments in them, may not be by quantity for quantity; it is by the rates only, which gold coins bear in respect to silver as a standard, at the time of payment, that contracts are discharged; and not according to the rates, which these coins might have, at the time when the contracts were made. In this view only, gold coins are to be considered; and, in this view, they are upon a footing with any other commodity; though less liable to a sudden and great change in their value, than most other things.

About this Quotation:

John Ramsay McCulloch (1789-1864) was a follower of David Ricardo, the first professor of political economy at the University of London in 1828, and a pioneer in the collection of economic statistics and historical economic tracts. In 1856 he published two valuable collections of documents, one on commerce and the other on money. Henry Vaughan’s treatise comes from the latter. In it he makes the excellent point that money (in this case gold coins) emerges from a commonly agreed upon standard of exchange. He debates whether “the mint” (i.e. the government) or the “universal concurrence of mankind” is the more powerful force in inducing people to accept certain coins in order to make their sales and purchases. He seems to come down on the side of voluntary, popular acceptance by the users as the key factor. This is a similar theory to that developed by Ludwig von Mises in his 1912 work The Theory of Money and Credit, a cornerstone text in the development of the Austrian school of economics.

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