Birmingham age-herald., 1895-05-21
Money as a Measure of Value.


 Besides the use of money as medium of exchange fully explained yesterday, money Is necessarily used as a means of comparing the values of various goods. This function is a very simple one. One article is compared with money and its value relatively to money is Its price. Another article is compared with money, and its price, thus obtained, enables us to see at once how the two articles compare with each other in value. As horse is in value equal to the grains of gold in $200. and B's wagon is likewise equal in value to 200 gold dollars Hence we know that As horse and Bs wagon will exchange even for each other. No exchange may result from this comparison, money not being used as a medium of exchange.
 In the use of money as measure of value commodities are referred to a com mon article. It Is like reducing fractions to a common denominator before we can compare their relative value. A certain quantity of some article, like gold or sil- yer, is taken as a means of comparison. Thus, 23.2 grains of gold or 371H grains of silver may be taken. This is a unit of value in a monetary system, to be called by any name for convenience. The value in the unit resides in the value of the ma terial in which the unit Is expressed. The number of times wheat will buy 232 grains of gold is the number of units of gold the wheat will exchange for. The essential thing is that the unit must it. : self have value. With us the name given to 23.2 grains of gold or to 371A grains oi' silver is a dollar,
 In a similar way a quart cup is a meas ure of capacity. With one quart cup one may measure hundreds and even thousands of quarts of milk There IS not needed a separate quart cup Tor every quart of milk in existence on given day. One cup may serve a thou sand times or more. At no time are there in use so many quart measures as there are quarts of milk. So in like manner it is evident that when gold or silver IS used as common denomlnator. or meas ure of value, one can measure hundreds and thousands of goods with the same measure. There is no need for a separate gold dollar for every bit of goods in the country each worth a dollar. All these articles are never being exchanged at once directly for gold dollars. So one gold dollar is able to serve as a meas ure of value for countless articles And then we can see at another time now goods, expressed in the terms of gold. may be exchanged even without the use of money. At present we are not con cerned with the medium of exchange. What, however, Is perfectly clear IS that there does not need to be as many gold dollars in use as measure of value as there are goods in value. That is as clear as that in dry goods store the number of yardsticks need not be as many as there are yards of cloth on the
 
 on the counter some brass nails driven in serve as a means of measuring all the goods in the store. The yardstick does not walk off after 1t is once used.
 Nor does gold or silver. As common measure they serve for endless compari- sons. Then we see that as concerns measuring goods, the idea of great number of measures Is of no advantage. Quantity of measures becomes ridicu- lous. They are nuisance If they become too numerous. It Is only in connection with the idea of money as medium of exchange that the desirability of a quan- tity of money can ever arise and we saw yesterday the whole meaning of that very clearly. In connection with the function of money as a common meas ure, the really important and exceeding ly serious requirement. Is that it should not change nor f1uctuate rapidly. If the quart cup gets to growing small the cus- toners cry out; if 1t grows larger the milkman complains. So if money, of it. self, begins to change much, then on one side or the other complaint will arise. So the whole problem about money as a measure of value Is to get something having stability, or as much stability as a mere commodity can have. But of this we may have something to say again.
 J. LAURENCE LAUGHLIN,
 Professor of Political Economy, Univer-
 sity of Chicago.