As Smith made a wide distinction between money and capital, yet, as money was the standard by which all other articles were measured, he was necessarily driven to another distinction, equally absurd, that of the real and nominal prices of commodities. Labor was the measure of their real value or price; money, of their nominal value. To use his own words: "But though labor be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labor. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labor in an hour's hard work than in two hours' easy business; or in an hour's application to a trade which it cost ten years' labor to learn, than in a month's industry at an ordinary and obvious employment. But it is not easy to find any accurate measure, either of hardness or ingenuity. In exchanging, indeed, the different productions of different sorts of labor for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market; according to that sort of rough equity, which, though not exact, is sufficient for carrying on the business of daily life. Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities than with labor. It is more natural, therefore, to estimate its exchangeable value by the quantity of some other commodity than by that of the labor which it can purchase. The greater part of people, too, understand better what is meant by a quantity of a particular commodity than by a quantity of labor. The one is a plain, palpable object; the other is an abstract notion, which, though it can be made sufficiently palpable, is not altogether so natural and obvious.” 1 The preceding paragraph refutes his own cardinal proposition, that labor is the proper measure of values. While assuming that labor is the measure of value, it is impossible, Smith tells us, that it should be a measure of value, for the reason that one hour's labor of one man may have a value equal to ten hours' labor of another man similarly employed; and that, consequently, the true measure of value cannot be the conventional one, that the true measure of value is an 1 Wealth of Nations, Book i., Chap. v. abstract notion, - that the conventional measure is a plain, palpable object. How can there be abstract measures of any thing? What is an abstract foot, yard, pound weight, dollar, or an abstract quantity of labor? All these are concrete, real things. Abstractions are not the subjects which men buy and sell. Why not accept the fact as proving what That Smith in a single paragraph could assert a law, and at the same time show no such law to be possible, is evidence of such a want of the reasoning faculty as to throw a well-grounded distrust over all his conclusions, no matter the questions of which he may treat. it does prove? "When barter ceases, and money becomes the common instrument of commerce, every particular commodity is more frequently exchanged for money than for any other commodity. The butcher seldom carries his beef or mutton to the baker or brewer, in order to exchange them for bread or for beer; but he carries them to the market, where he exchanges them for money, and afterwards exchanges that money for bread or for beer. The quantity of money he can get for them regulates, too, the quantity of bread or beer which he can afterwards purchase. It is more natural and obvious to him, therefore, to estimate their value by the quantity of money, -the commodity for which he exchanges them, than by that of bread and beer, the commodities for which he can exchange them only by the intervention of another commodity; and rather to say that his butcher's meat is worth threepence or fourpence a pound, than that it is worth three or four pounds of bread or three or four quarts of small beer. Hence it comes to pass, that the exchangeable value of every commodity is more frequently estimated by the quantity of money than by the quantity either of labor or of any other commodity which may be had in exchange for it." 1 "When barter ceases," says Smith, "money becomes the common instrument of commerce." Barter never ceases. There is an incomparably greater amount of barter in a civilized than in an uncivilized age, when there are butchers and bakers than before. The exchange of money for bread or beer is just as much an act of barter as an exchange of bread for beer. As equal values are exchanged when money is used, that for which it is exchanged is just as much the instrument of commerce as the money. With Smith, however, money was not the subject, only the instrument, of commerce, like the yardstick or the railroad car, the value of which bears no 1 Wealth of Nations, Book i., Chap. v. relation to the value of the articles to be measured or transferred. To be the subject of commerce, it must, like all other subjects, have a real equal to its nominal value. Figures are the instruments, not the subjects, of commerce. So, with Smith, money was the instrument, not the subject, of commerce. It had value; but it was not chiefly by means of that value that it served as a medium of exchange. From the discussion of the distinction between real and nominal prices, Smith proceeds to show its importance in practice. "Gold and silver, like every other commodity, vary in value; are sometimes cheaper and sometimes dearer, sometimes of easier and sometimes of more difficult purchase. But as a measure of quantity, such as the natural foot, fathom, or handful, which is continually varying in its own quantity, can never be an accurate measure of the quantity of other things; so a commodity which is itself constantly varying in its own value can never be an accurate measure of the value of other commodities. Equal quantities of labor, at all times, may be said to be of equal value to the laborer." "When a landed estate, therefore, is sold with a reservation of perpetual rent, if it is intended that this rent should always be of the same value, it is of importance to the family in whose favor it is reserved that it should not consist in a particular sum of money. ... Rents which have been reserved in corn have preserved their value much better than those which have been reserved in money, even where the denomination of the coin has not been altered. By the 18th of Elizabeth it was enacted, that a third of the rents of all the college leases should be reserved in corn, to be paid either in kind or according to the prices at the nearest public market; the money arising from this corn rent, though originally but one-third of the whole, is in the present time, according to Blackstone, commonly near double what arises from the other twothirds. The old money-rents of colleges must, according to this account, have sunk to almost a fourth part of their ancient value, or are worth a little more than a fourth part of the coin which they were formerly worth. But, since the reign of Philip and Mary, the denomination of the English coin has undergone little or no alteration. This depreciation, therefore, in the value of money rents of colleges has arisen altogether from the depreciation in the value of silver (money). A rent, therefore, reserved in corn is liable only to the variations in the quantity of labor which a certain quantity of corn can purchase; but a rent reserved in any other commodity is liable not only to the variations in the quantity of labor which any particular quantity of corn can purchase, but to the variations in the quantity of corn which can be purchased by any particular quantity of that commodity. "Though the real value of a corn rent, it is to be observed, however, varies much less from century to century than that of a money rent, it varies much more from year to year. But the value of silver, though it sometimes varies greatly from century to century, seldom varies much from year to year; but frequently continues the same, or very nearly the same, for a half century or a century: the ordinary or average money price of corn, therefore, may, during so long a period, continue the same or very nearly the same, too, and along with it the money price of labor; provided, at least, the society continues in other respects in the same or nearly in the same condition. In the mean time, the temporary and occasional price of corn may frequently be double one year of what it had been the year before, or fluctuate, for example, from twenty-five to fifty shillings the quarter. But, when corn is at the latter price, not only the real but the nominal value of the corn rent will be double of what it is at the former, or will command double the quantity either of labor or of the greater part of other commodities; the money price of labor, and along with it that of most other things, continuing the same during all these fluctuations. "Labor, therefore, it appears, evidently is the only universal as well as the only accurate measure of value, or the only standard by which we can compare the value of different commodities at all times and places. We cannot estimate, it is allowed, the real value of commodities from century to century by the quantities of silver which can be given for them. We cannot estimate it from year to year by the quantities of corn. By quantities of labor we can, with the greatest accuracy, estimate it both from century to century and from year to year. From century to century corn is a better measure than silver, because from century to century equal quantities of corn will command the same quantity of labor more nearly than equal quantities of silver. From year to year, on the contrary, silver is a better measure than corn, because equal quantities of it will more nearly command the same quantity of labor. . . . "As it is the nominal or money price of goods, therefore, which finally determines the prudence or imprudence of all purchases or sales, and thereby regulates almost the whole business of common life in which price is concerned, we cannot wonder it should have been so much more attended to than the real price."1 Smith has already demonstrated it to be impossible that labor should be the measure of value; yet he continually repeats that it is the only true measure. As that cannot be used, corn, he says, is a much better measure of value than coin. This assertion, like the previous one, is contradicted by the whole experience of society. If corn were a more accurate measure of value than coin, it would have been adopted 1 Wealth of Nations, Book i., Chap. v. as such. That it never has been adopted is proof that coin is the better measure. His assertion that the price of coin has fluctuated through long periods more than that of corn is not supported by a particle of evidence. No one has ever hesitated to enter into contracts payable in coin, no matter the time that was to elapse before they were to mature. No one would ever enter into contracts, the consideration or value of which was to be measured by corn, from an entire uncertainty as to its future value. This is decisive of the whole question. Coin is the better measure of values, because its value is more uniform. The illustration he uses, the leases of the college lands, proves the exact opposite of that which he assumed it to prove. With him, corn should be made a measure of value, from the greater uniformity of its value than that of coin. The leases should be made payable in corn, for the reason that it was certain to appreciate much more rapidly in value than coin, securing a corresponding advantage to the landlord. Here is another palpable contradiction almost in the same paragraph. In order to prove the depreciation in the value of silver, Smith should have shown it to have fallen in value in reference to other kinds of merchandise or property as well as food. It might require twice the weight of silver to purchase in his day a given quantity of corn that it did two centuries previous; but one-half or one-quarter of the weight of silver might purchase twice the quantity of iron, or of other articles entering into domestic economy, that it would in the sixteenth century. What does this prove? Not that the value of silver had changed; but that other articles had fallen in price, from their reduced cost of production. The increase of population in England may have increased the value of food, while such increase, from the better combination and direction of industries, may have greatly reduced the price of other articles. It is, therefore, just as proper to infer that the price of silver has appreciated from the fall in value of other articles than food, as that it has depreciated from the increase in the price of food. As the price of the greater part of articles entering into consumption is far lower than it was three hundred years ago, the evidence, if such reduction be evidence, is altogether on the side of an appreciation of the value of gold and silver. The rise or fall of commodities, however, proves nothing on either side. The value of coin depends upon its |