---
id: book-1-chapter-05
title: "OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY."
book: "1"
chapter: 5
artifact_type: content
---

CHAPTER V.
OF THE REAL AND NOMINAL PRICE OF
COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY.



      Every man is rich or poor according to the degree in which he can afford
      to enjoy the necessaries, conveniencies, and amusements of human life. But
      after the division of labour has once thoroughly taken place, it is but a
      very small part of these with which a man’s own labour can supply him. The
      far greater part of them he must derive from the labour of other people,
      and he must be rich or poor according to the quantity of that labour which
      he can command, or which he can afford to purchase. The value of any
      commodity, therefore, to the person who possesses it, and who means not to
      use or consume it himself, but to exchange it for other commodities, is
      equal to the quantity of labour which it enables him to purchase or
      command. Labour therefore, is the real measure of the exchangeable value
      of all commodities.

      The real price of every thing, what every thing really costs to the man
      who wants to acquire it, is the toil and trouble of acquiring it. What
      every thing is really worth to the man who has acquired it and who wants
      to dispose of it, or exchange it for something else, is the toil and
      trouble which it can save to himself, and which it can impose upon other
      people. What is bought with money, or with goods, is purchased by labour,
      as much as what we acquire by the toil of our own body. That money, or
      those goods, indeed, save us this toil. They contain the value of a
      certain quantity of labour, which we exchange for what is supposed at the
      time to contain the value of an equal quantity. Labour was the first
      price, the original purchase money that was paid for all things. It was
      not by gold or by silver, but by labour, that all the wealth of the world
      was originally purchased; and its value, to those who possess it, and who
      want to exchange it for some new productions, is precisely equal to the
      quantity of labour which it can enable them to purchase or command.

      Wealth, as Mr Hobbes says, is power. But the person who either acquires,
      or succeeds to a great fortune, does not necessarily acquire or succeed to
      any political power, either civil or military. His fortune may, perhaps,
      afford him the means of acquiring both; but the mere possession of that
      fortune does not necessarily convey to him either. The power which that
      possession immediately and directly conveys to him, is the power of
      purchasing a certain command over all the labour, or over all the produce
      of labour which is then in the market. His fortune is greater or less,
      precisely in proportion to the extent of this power, or to the quantity
      either of other men’s labour, or, what is the same thing, of the produce
      of other men’s labour, which it enables him to purchase or command. The
      exchangeable value of every thing must always be precisely equal to the
      extent of this power which it conveys to its owner.

      But though labour 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 labour. 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 labour 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 labour 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 hardship or ingenuity. In exchanging, indeed, the different productions
      of different sorts of labour 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 equality which, though not exact, is sufficient for carrying on the
      business of common life.

      Every commodity, besides, is more frequently exchanged for, and thereby
      compared with, other commodities, than with labour. It is more natural,
      therefore, to estimate its exchangeable value by the quantity of some
      other commodity, than by that of the labour which it can produce. The
      greater part of people, too, understand better what is meant by a quantity
      of a particular commodity, than by a quantity of labour. The one is a
      plain palpable object; the other an abstract notion, which though it can
      be made sufficiently intelligible, is not altogether so natural and
      obvious.

      But when barter ceases, and money has become 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
      his mutton to the baker or the 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 and for beer. The
      quantity of money which he gets for them regulates, too, the quantity of
      bread and 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 immediately 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 three-pence 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 labour or of any other commodity which can be had
      in exchange for it.

      Gold and silver, however, like every other commodity, vary in their value;
      are sometimes cheaper and sometimes dearer, sometimes of easier and
      sometimes of more difficult purchase. The quantity of labour which any
      particular quantity of them can purchase or command, or the quantity of
      other goods which it will exchange for, depends always upon the fertility
      or barrenness of the mines which happen to be known about the time when
      such exchanges are made. The discovery of the abundant mines of America,
      reduced, in the sixteenth century, the value of gold and silver in Europe
      to about a third of what it had been before. As it cost less labour to
      bring those metals from the mine to the market, so, when they were brought
      thither, they could purchase or command less labour; and this revolution
      in their value, though perhaps the greatest, is by no means the only one
      of which history gives some account. 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 continually varying in its own
      value, can never be an accurate measure of the value of other commodities.
      Equal quantities of labour, at all times and places, may be said to be of
      equal value to the labourer. In his ordinary state of health, strength,
      and spirits; in the ordinary degree of his skill and dexterity, he must
      always lay down the same portion of his ease, his liberty, and his
      happiness. The price which he pays must always be the same, whatever may
      be the quantity of goods which he receives in return for it. Of these,
      indeed, it may sometimes purchase a greater and sometimes a smaller
      quantity; but it is their value which varies, not that of the labour which
      purchases them. At all times and places, that is dear which it is
      difficult to come at, or which it costs much labour to acquire; and that
      cheap which is to be had easily, or with very little labour. Labour alone,
      therefore, never varying in its own value, is alone the ultimate and real
      standard by which the value of all commodities can at all times and places
      be estimated and compared. It is their real price; money is their nominal
      price only.

      But though equal quantities of labour are always of equal value to the
      labourer, yet to the person who employs him they appear sometimes to be of
      greater, and sometimes of smaller value. He purchases them sometimes with
      a greater, and sometimes with a smaller quantity of goods, and to him the
      price of labour seems to vary like that of all other things. It appears to
      him dear in the one case, and cheap in the other. In reality, however, it
      is the goods which are cheap in the one case, and dear in the other.

      In this popular sense, therefore, labour, like commodities, may be said to
      have a real and a nominal price. Its real price may be said to consist in
      the quantity of the necessaries and conveniencies of life which are given
      for it; its nominal price, in the quantity of money. The labourer is rich
      or poor, is well or ill rewarded, in proportion to the real, not to the
      nominal price of his labour.

      The distinction between the real and the nominal price of commodities and
      labour is not a matter of mere speculation, but may sometimes be of
      considerable use in practice. The same real price is always of the same
      value; but on account of the variations in the value of gold and silver,
      the same nominal price is sometimes of very different values. When a
      landed estate, therefore, is sold with a reservation of a 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 favour it is reserved, that it should
      not consist in a particular sum of money. Its value would in this case be
      liable to variations of two different kinds: first, to those which arise
      from the different quantities of gold and silver which are contained at
      different times in coin of the same denomination; and, secondly, to those
      which arise from the different values of equal quantities of gold and
      silver at different times.

      Princes and sovereign states have frequently fancied that they had a
      temporary interest to diminish the quantity of pure metal contained in
      their coins; but they seldom have fancied that they had any to augment it.
      The quantity of metal contained in the coins, I believe of all nations,
      has accordingly been almost continually diminishing, and hardly ever
      augmenting. Such variations, therefore, tend almost always to diminish the
      value of a money rent.

      The discovery of the mines of America diminished the value of gold and
      silver in Europe. This diminution, it is commonly supposed, though I
      apprehend without any certain proof, is still going on gradually, and is
      likely to continue to do so for a long time. Upon this supposition,
      therefore, such variations are more likely to diminish than to augment the
      value of a money rent, even though it should be stipulated to be paid, not
      in such a quantity of coined money of such a denomination (in so many
      pounds sterling, for example), but in so many ounces, either of pure
      silver, or of silver of a certain standard.

      The 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 rent of all college leases should be
      reserved in corn, to be paid either in kind, or according to the current
      prices at the nearest public market. The money arising from this corn
      rent, though originally but a third of the whole, is, in the present
      times, according to Dr Blackstone, commonly near double of what arises
      from the other two-thirds. The old money rents of colleges must, according
      to this account, have sunk almost to a fourth part of their ancient value,
      or are worth little more than a fourth part of the corn 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, and the same
      number of pounds, shillings, and pence, have contained very nearly the
      same quantity of pure silver. This degradation, therefore, in the value of
      the money rents of colleges, has arisen altogether from the degradation in
      the price of silver.

      When the degradation in the value of silver is combined with the
      diminution of the quantity of it contained in the coin of the same
      denomination, the loss is frequently still greater. In Scotland, where the
      denomination of the coin has undergone much greater alterations than it
      ever did in England, and in France, where it has undergone still greater
      than it ever did in Scotland, some ancient rents, originally of
      considerable value, have, in this manner, been reduced almost to nothing.

      Equal quantities of labour will, at distant times, be purchased more
      nearly with equal quantities of corn, the subsistence of the labourer,
      than with equal quantities of gold and silver, or, perhaps, of any other
      commodity. Equal quantities of corn, therefore, will, at distant times, be
      more nearly of the same real value, or enable the possessor to purchase or
      command more nearly the same quantity of the labour of other people. They
      will do this, I say, more nearly than equal quantities of almost any other
      commodity; for even equal quantities of corn will not do it exactly. The
      subsistence of the labourer, or the real price of labour, as I shall
      endeavour to shew hereafter, is very different upon different occasions;
      more liberal in a society advancing to opulence, than in one that is
      standing still, and in one that is standing still, than in one that is
      going backwards. Every other commodity, however, will, at any particular
      time, purchase a greater or smaller quantity of labour, in proportion to
      the quantity of subsistence which it can purchase at that time. A rent,
      therefore, reserved in corn, is liable only to the variations in the
      quantity of labour 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 labour 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. The money price of labour, as I shall
      endeavour to shew hereafter, does not fluctuate from year to year with the
      money price of corn, but seems to be everywhere accommodated, not to the
      temporary or occasional, but to the average or ordinary price of that
      necessary of life. The average or ordinary price of corn, again is
      regulated, as I shall likewise endeavour to shew hereafter, by the value
      of silver, by the richness or barrenness of the mines which supply the
      market with that metal, or by the quantity of labour which must be
      employed, and consequently of corn which must be consumed, in order to
      bring any particular quantity of silver from the mine to the market. 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 half a century or a century
      together. 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 labour, 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 five-and-twenty to fifty shillings the
      quarter. But when corn is at the latter price, not only the nominal, but
      the real value of a corn rent, will be double of what it is when at the
      former, or will command double the quantity either of labour, or of the
      greater part of other commodities; the money price of labour, and along
      with it that of most other things, continuing the same during all these
      fluctuations.

      Labour, 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 values of different commodities, at all times, and at all
      places. We cannot estimate, it is allowed, the real value of different
      commodities from century to century by the quantities of silver which were
      given for them. We cannot estimate it from year to year by the quantities
      of corn. By the quantities of labour, 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 labour 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
      labour.

      But though, in establishing perpetual rents, or even in letting very long
      leases, it may be of use to distinguish between real and nominal price; it
      is of none in buying and selling, the more common and ordinary
      transactions of human life.

      At the same time and place, the real and the nominal price of all
      commodities are exactly in proportion to one another. The more or less
      money you get for any commodity, in the London market, for example, the
      more or less labour it will at that time and place enable you to purchase
      or command. At the same time and place, therefore, money is the exact
      measure of the real exchangeable value of all commodities. It is so,
      however, at the same time and place only.

      Though at distant places there is no regular proportion between the real
      and the money price of commodities, yet the merchant who carries goods
      from the one to the other, has nothing to consider but the money price, or
      the difference between the quantity of silver for which he buys them, and
      that for which he is likely to sell them. Half an ounce of silver at
      Canton in China may command a greater quantity both of labour and of the
      necessaries and conveniencies of life, than an ounce at London. A
      commodity, therefore, which sells for half an ounce of silver at Canton,
      may there be really dearer, of more real importance to the man who
      possesses it there, than a commodity which sells for an ounce at London is
      to the man who possesses it at London. If a London merchant, however, can
      buy at Canton, for half an ounce of silver, a commodity which he can
      afterwards sell at London for an ounce, he gains a hundred per cent. by
      the bargain, just as much as if an ounce of silver was at London exactly
      of the same value as at Canton. It is of no importance to him that half an
      ounce of silver at Canton would have given him the command of more labour,
      and of a greater quantity of the necessaries and conveniencies of life
      than an ounce can do at London. An ounce at London will always give him
      the command of double the quantity of all these, which half an ounce could
      have done there, and this is precisely what he wants.

      As it is the nominal or money price of goods, therefore, which finally
      determines the prudence or imprudence of all purchases and sales, and
      thereby regulates almost the whole business of common life in which price
      is concerned, we cannot wonder that it should have been so much more
      attended to than the real price.

      In such a work as this, however, it may sometimes be of use to compare the
      different real values of a particular commodity at different times and
      places, or the different degrees of power over the labour of other people
      which it may, upon different occasions, have given to those who possessed
      it. We must in this case compare, not so much the different quantities of
      silver for which it was commonly sold, as the different quantities or
      labour which those different quantities of silver could have purchased.
      But the current prices of labour, at distant times and places, can scarce
      ever be known with any degree of exactness. Those of corn, though they
      have in few places been regularly recorded, are in general better known,
      and have been more frequently taken notice of by historians and other
      writers. We must generally, therefore, content ourselves with them, not as
      being always exactly in the same proportion as the current prices of
      labour, but as being the nearest approximation which can commonly be had
      to that proportion. I shall hereafter have occasion to make several
      comparisons of this kind.

      In the progress of industry, commercial nations have found it convenient
      to coin several different metals into money; gold for larger payments,
      silver for purchases of moderate value, and copper, or some other coarse
      metal, for those of still smaller consideration, They have always,
      however, considered one of those metals as more peculiarly the measure of
      value than any of the other two; and this preference seems generally to
      have been given to the metal which they happen first to make use of as the
      instrument of commerce. Having once begun to use it as their standard,
      which they must have done when they had no other money, they have
      generally continued to do so even when the necessity was not the same.

      The Romans are said to have had nothing but copper money till within five
      years before the first Punic war (Pliny, lib. xxxiii. cap. 3), when they
      first began to coin silver. Copper, therefore, appears to have continued
      always the measure of value in that republic. At Rome all accounts appear
      to have been kept, and the value of all estates to have been computed,
      either in asses or in sestertii. The as was always the denomination of a
      copper coin. The word sestertius signifies two asses and a half. Though
      the sestertius, therefore, was originally a silver coin, its value was
      estimated in copper. At Rome, one who owed a great deal of money was said
      to have a great deal of other people’s copper.

      The northern nations who established themselves upon the ruins of the
      Roman empire, seem to have had silver money from the first beginning of
      their settlements, and not to have known either gold or copper coins for
      several ages thereafter. There were silver coins in England in the time of
      the Saxons; but there was little gold coined till the time of Edward III
      nor any copper till that of James I. of Great Britain. In England,
      therefore, and for the same reason, I believe, in all other modern nations
      of Europe, all accounts are kept, and the value of all goods and of all
      estates is generally computed, in silver: and when we mean to express the
      amount of a person’s fortune, we seldom mention the number of guineas, but
      the number of pounds sterling which we suppose would be given for it.

      Originally, in all countries, I believe, a legal tender of payment could
      be made only in the coin of that metal which was peculiarly considered as
      the standard or measure of value. In England, gold was not considered as a
      legal tender for a long time after it was coined into money. The
      proportion between the values of gold and silver money was not fixed by
      any public law or proclamation, but was left to be settled by the market.
      If a debtor offered payment in gold, the creditor might either reject such
      payment altogether, or accept of it at such a valuation of the gold as he
      and his debtor could agree upon. Copper is not at present a legal tender,
      except in the change of the smaller silver coins.

      In this state of things, the distinction between the metal which was the
      standard, and that which was not the standard, was something more than a
      nominal distinction.

      In process of time, and as people became gradually more familiar with the
      use of the different metals in coin, and consequently better acquainted
      with the proportion between their respective values, it has, in most
      countries, I believe, been found convenient to ascertain this proportion,
      and to declare by a public law, that a guinea, for example, of such a
      weight and fineness, should exchange for one-and-twenty shillings, or be a
      legal tender for a debt of that amount. In this state of things, and
      during the continuance of any one regulated proportion of this kind, the
      distinction between the metal, which is the standard, and that which is
      not the standard, becomes little more than a nominal distinction.

      In consequence of any change, however, in this regulated proportion, this
      distinction becomes, or at least seems to become, something more than
      nominal again. If the regulated value of a guinea, for example, was either
      reduced to twenty, or raised to two-and-twenty shillings, all accounts
      being kept, and almost all obligations for debt being expressed, in silver
      money, the greater part of payments could in either case be made with the
      same quantity of silver money as before; but would require very different
      quantities of gold money; a greater in the one case, and a smaller in the
      other. Silver would appear to be more invariable in its value than gold.
      Silver would appear to measure the value of gold, and gold would not
      appear to measure the value of silver. The value of gold would seem to
      depend upon the quantity of silver which it would exchange for, and the
      value of silver would not seem to depend upon the quantity of gold which
      it would exchange for. This difference, however, would be altogether owing
      to the custom of keeping accounts, and of expressing the amount of all
      great and small sums rather in silver than in gold money. One of Mr
      Drummond’s notes for five-and-twenty or fifty guineas would, after an
      alteration of this kind, be still payable with five-and-twenty or fifty
      guineas, in the same manner as before. It would, after such an alteration,
      be payable with the same quantity of gold as before, but with very
      different quantities of silver. In the payment of such a note, gold would
      appear to be more invariable in its value than silver. Gold would appear
      to measure the value of silver, and silver would not appear to measure the
      value of gold. If the custom of keeping accounts, and of expressing
      promissory-notes and other obligations for money, in this manner should
      ever become general, gold, and not silver, would be considered as the
      metal which was peculiarly the standard or measure of value.

      In reality, during the continuance of any one regulated proportion between
      the respective values of the different metals in coin, the value of the
      most precious metal regulates the value of the whole coin. Twelve copper
      pence contain half a pound avoirdupois of copper, of not the best quality,
      which, before it is coined, is seldom worth seven-pence in silver. But as,
      by the regulation, twelve such pence are ordered to exchange for a
      shilling, they are in the market considered as worth a shilling, and a
      shilling can at any time be had for them. Even before the late reformation
      of the gold coin of Great Britain, the gold, that part of it at least
      which circulated in London and its neighbourhood, was in general less
      degraded below its standard weight than the greater part of the silver.
      One-and-twenty worn and defaced shillings, however, were considered as
      equivalent to a guinea, which, perhaps, indeed, was worn and defaced too,
      but seldom so much so. The late regulations have brought the gold coin as
      near, perhaps, to its standard weight as it is possible to bring the
      current coin of any nation; and the order to receive no gold at the public
      offices but by weight, is likely to preserve it so, as long as that order
      is enforced. The silver coin still continues in the same worn and degraded
      state as before the reformation of the cold coin. In the market, however,
      one-and-twenty shillings of this degraded silver coin are still considered
      as worth a guinea of this excellent gold coin.

      The reformation of the gold coin has evidently raised the value of the
      silver coin which can be exchanged for it.

      In the English mint, a pound weight of gold is coined into forty-four
      guineas and a half, which at one-and-twenty shillings the guinea, is equal
      to forty-six pounds fourteen shillings and sixpence. An ounce of such gold
      coin, therefore, is worth £ 3:17:10½ in silver. In England, no duty or
      seignorage is paid upon the coinage, and he who carries a pound weight or
      an ounce weight of standard gold bullion to the mint, gets back a pound
      weight or an ounce weight of gold in coin, without any deduction. Three
      pounds seventeen shillings and tenpence halfpenny an ounce, therefore, is
      said to be the mint price of gold in England, or the quantity of gold coin
      which the mint gives in return for standard gold bullion.

      Before the reformation of the gold coin, the price of standard gold
      bullion in the market had, for many years, been upwards of £3:18s.
      sometimes £ 3:19s, and very frequently £4 an ounce; that sum, it is
      probable, in the worn and degraded gold coin, seldom containing more than
      an ounce of standard gold. Since the reformation of the gold coin, the
      market price of standard gold bullion seldom exceeds £ 3:17:7 an ounce.
      Before the reformation of the gold coin, the market price was always more
      or less above the mint price. Since that reformation, the market price has
      been constantly below the mint price. But that market price is the same
      whether it is paid in gold or in silver coin. The late reformation of the
      gold coin, therefore, has raised not only the value of the gold coin, but
      likewise that of the silver coin in proportion to gold bullion, and
      probably, too, in proportion to all other commodities; though the price of
      the greater part of other commodities being influenced by so many other
      causes, the rise in the value of either gold or silver coin in proportion
      to them may not be so distinct and sensible.

      In the English mint, a pound weight of standard silver bullion is coined
      into sixty-two shillings, containing, in the same manner, a pound weight
      of standard silver. Five shillings and twopence an ounce, therefore, is
      said to be the mint price of silver in England, or the quantity of silver
      coin which the mint gives in return for standard silver bullion. Before
      the reformation of the gold coin, the market price of standard silver
      bullion was, upon different occasions, five shillings and fourpence, five
      shillings and fivepence, five shillings and sixpence, five shillings and
      sevenpence, and very often five shillings and eightpence an ounce. Five
      shillings and sevenpence, however, seems to have been the most common
      price. Since the reformation of the gold coin, the market price of
      standard silver bullion has fallen occasionally to five shillings and
      threepence, five shillings and fourpence, and five shillings and fivepence
      an ounce, which last price it has scarce ever exceeded. Though the market
      price of silver bullion has fallen considerably since the reformation of
      the gold coin, it has not fallen so low as the mint price.

      In the proportion between the different metals in the English coin, as
      copper is rated very much above its real value, so silver is rated
      somewhat below it. In the market of Europe, in the French coin and in the
      Dutch coin, an ounce of fine gold exchanges for about fourteen ounces of
      fine silver. In the English coin, it exchanges for about fifteen ounces,
      that is, for more silver than it is worth, according to the common
      estimation of Europe. But as the price of copper in bars is not, even in
      England, raised by the high price of copper in English coin, so the price
      of silver in bullion is not sunk by the low rate of silver in English
      coin. Silver in bullion still preserves its proper proportion to gold, for
      the same reason that copper in bars preserves its proper proportion to
      silver.

      Upon the reformation of the silver coin, in the reign of William III., the
      price of silver bullion still continued to be somewhat above the mint
      price. Mr Locke imputed this high price to the permission of exporting
      silver bullion, and to the prohibition of exporting silver coin. This
      permission of exporting, he said, rendered the demand for silver bullion
      greater than the demand for silver coin. But the number of people who want
      silver coin for the common uses of buying and selling at home, is surely
      much greater than that of those who want silver bullion either for the use
      of exportation or for any other use. There subsists at present a like
      permission of exporting gold bullion, and a like prohibition of exporting
      gold coin; and yet the price of gold bullion has fallen below the mint
      price. But in the English coin, silver was then, in the same manner as
      now, under-rated in proportion to gold; and the gold coin (which at that
      time, too, was not supposed to require any reformation) regulated then, as
      well as now, the real value of the whole coin. As the reformation of the
      silver coin did not then reduce the price of silver bullion to the mint
      price, it is not very probable that a like reformation will do so now.

      Were the silver coin brought back as near to its standard weight as the
      gold, a guinea, it is probable, would, according to the present
      proportion, exchange for more silver in coin than it would purchase in
      bullion. The silver coin containing its full standard weight, there would
      in this case, be a profit in melting it down, in order, first to sell the
      bullion for gold coin, and afterwards to exchange this gold coin for
      silver coin, to be melted down in the same manner. Some alteration in the
      present proportion seems to be the only method of preventing this
      inconveniency.

      The inconveniency, perhaps, would be less, if silver was rated in the coin
      as much above its proper proportion to gold as it is at present rated
      below it, provided it was at the same time enacted, that silver should not
      be a legal tender for more than the change of a guinea, in the same manner
      as copper is not a legal tender for more than the change of a shilling. No
      creditor could, in this case, be cheated in consequence of the high
      valuation of silver in coin; as no creditor can at present be cheated in
      consequence of the high valuation of copper. The bankers only would suffer
      by this regulation. When a run comes upon them, they sometimes endeavour
      to gain time, by paying in sixpences, and they would be precluded by this
      regulation from this discreditable method of evading immediate payment.
      They would be obliged, in consequence, to keep at all times in their
      coffers a greater quantity of cash than at present; and though this might,
      no doubt, be a considerable inconveniency to them, it would, at the same
      time, be a considerable security to their creditors.

      Three pounds seventeen shillings and tenpence halfpenny (the mint price of
      gold) certainly does not contain, even in our present excellent gold coin,
      more than an ounce of standard gold, and it may be thought, therefore,
      should not purchase more standard bullion. But gold in coin is more
      convenient than gold in bullion; and though, in England, the coinage is
      free, yet the gold which is carried in bullion to the mint, can seldom be
      returned in coin to the owner till after a delay of several weeks. In the
      present hurry of the mint, it could not be returned till after a delay of
      several months. This delay is equivalent to a small duty, and renders gold
      in coin somewhat more valuable than an equal quantity of gold in bullion.
      If, in the English coin, silver was rated according to its proper
      proportion to gold, the price of silver bullion would probably fall below
      the mint price, even without any reformation of the silver coin; the value
      even of the present worn and defaced silver coin being regulated by the
      value of the excellent gold coin for which it can be changed.

      A small seignorage or duty upon the coinage of both gold and silver, would
      probably increase still more the superiority of those metals in coin above
      an equal quantity of either of them in bullion. The coinage would, in this
      case, increase the value of the metal coined in proportion to the extent
      of this small duty, for the same reason that the fashion increases the
      value of plate in proportion to the price of that fashion. The superiority
      of coin above bullion would prevent the melting down of the coin, and
      would discourage its exportation. If, upon any public exigency, it should
      become necessary to export the coin, the greater part of it would soon
      return again, of its own accord. Abroad, it could sell only for its weight
      in bullion. At home, it would buy more than that weight. There would be a
      profit, therefore, in bringing it home again. In France, a seignorage of
      about eight per cent. is imposed upon the coinage, and the French coin,
      when exported, is said to return home again, of its own accord.

      The occasional fluctuations in the market price of gold and silver bullion
      arise from the same causes as the like fluctuations in that of all other
      commodities. The frequent loss of those metals from various accidents by
      sea and by land, the continual waste of them in gilding and plating, in
      lace and embroidery, in the wear and tear of coin, and in that of plate,
      require, in all countries which possess no mines of their own, a continual
      importation, in order to repair this loss and this waste. The merchant
      importers, like all other merchants, we may believe, endeavour, as well as
      they can, to suit their occasional importations to what they judge is
      likely to be the immediate demand. With all their attention, however, they
      sometimes overdo the business, and sometimes underdo it. When they import
      more bullion than is wanted, rather than incur the risk and trouble of
      exporting it again, they are sometimes willing to sell a part of it for
      something less than the ordinary or average price. When, on the other
      hand, they import less than is wanted, they get something more than this
      price. But when, under all those occasional fluctuations, the market price
      either of gold or silver bullion continues for several years together
      steadily and constantly, either more or less above, or more or less below
      the mint price, we may be assured that this steady and constant, either
      superiority or inferiority of price, is the effect of something in the
      state of the coin, which, at that time, renders a certain quantity of coin
      either of more value or of less value than the precise quantity of bullion
      which it ought to contain. The constancy and steadiness of the effect
      supposes a proportionable constancy and steadiness in the cause.

      The money of any particular country is, at any particular time and place,
      more or less an accurate measure or value, according as the current coin
      is more or less exactly agreeable to its standard, or contains more or
      less exactly the precise quantity of pure gold or pure silver which it
      ought to contain. If in England, for example, forty-four guineas and a
      half contained exactly a pound weight of standard gold, or eleven ounces
      of fine gold, and one ounce of alloy, the gold coin of England would be as
      accurate a measure of the actual value of goods at any particular time and
      place as the nature of the thing would admit. But if, by rubbing and
      wearing, forty-four guineas and a half generally contain less than a pound
      weight of standard gold, the diminution, however, being greater in some
      pieces than in others, the measure of value comes to be liable to the same
      sort of uncertainty to which all other weights and measures are commonly
      exposed. As it rarely happens that these are exactly agreeable to their
      standard, the merchant adjusts the price of his goods as well as he can,
      not to what those weights and measures ought to be, but to what, upon an
      average, he finds, by experience, they actually are. In consequence of a
      like disorder in the coin, the price of goods comes, in the same manner,
      to be adjusted, not to the quantity of pure gold or silver which the coin
      ought to contain, but to that which, upon an average, it is found, by
      experience, it actually does contain.

      By the money price of goods, it is to be observed, I understand always the
      quantity of pure gold or silver for which they are sold, without any
      regard to the denomination of the coin. Six shillings and eight pence, for
      example, in the time of Edward I., I consider as the same money price with
      a pound sterling in the present times, because it contained, as nearly as
      we can judge, the same quantity of pure silver.
