Section 8: The Absence of any fixed ratio of Value between one Metal and another

The same error, which led public functionaries to believe, that they could fix the relative value of any metal to com- modities, has also induced them to determine by act of law the relative value of the metals employed as money, one to the other. Thus, it has been arbitrarily enacted, that a given quantity of silver shall be worth 24 liv., and that a given quan- tity of gold shall likewise be worth 24 liv. In this manner, the ratio of the nominal value of gold to that of silver came to be legally established.

Since 1797, all payments have been made in paper. But, if England shall return to a metallic currency, framed upon the former monetary principles and regulations, it is probable that payments will be made in silver instead of gold, as before the suspension; for gold has risen in relative price to silver in the English market, probably in consequence of the large export of specie for commercial purposes, and greater difficulty of prevention in gold than in silver. Gold bullion in the English market is now to silver bullion in the ratio of about 1 to 15½, although the mint ratio is still 1 to 15 1/14. A payment in gold The pretension of authority was in both cases equally vain and impotent; and what has been the consequence? The rela- 107Jean-Baptise Say, A Treatise on Political Economy The value of a piece of silver is arbitrary, and is established by a kind of mutual accord on every act of dealing between one individual and another, or between the government and an individual Why, therefore, attempt to fix its value before- hand? since, after all, the fixation must be imaginary, and can never answer any practical purpose, in the money transac- tions of mankind. Why give a denomination to this fixed, imaginary value, which money can never possess? For what is a dollar, a ducat, a florin, a pound sterling, or a franc; what, but a certain weight of gold or silver of a certain established standard of quality? And, if this be all, why give these re- spective portions of bullion any other name, than the natural one of their weight and quality?

instead of silver would therefore be a gratuitous sacrifice of the difference between 15 1/14 and 15½.. Hence may be drawn this conclusion; that it is impossible in practice to assign any fixed ratio of exchangeable value to commodities whose ratio is for ever fluctuating, and, there- fore, that gold and silver must be left to find their own mutual level, in the transactions in which mankind may think proper to employ them. 285

The above remarks upon the relative value of gold and silver are equally applicable to silver and copper, as well as to all other metals whatever. There is no more propriety in declar- ing, that the copper contained in twenty sous shall be worth the silver contained in a livre tournois, than in enacting, that the silver contained in 24 liv. tournois shall be worth the gold in a louis d’or.

However, little mischief has been occasioned by fixing the ratio of copper to the precious metals, because the law does not authorize the payment of sums stipulated in livres tournois and francs in either copper or the precious metals indifferently; so that, in reality, the only metal money recognised by law as legal tender, for sums above the value of the lowest denomination of silver coin, is silver or gold. Five grammes of silver, says the law, shall be equivalent to a franc= which is just as much as to say, 5 grammes of silver is equivalent to 5 grammes of silver. For the only idea presented to the mind by the word franc, is that of the 5 grammes of silver it contains. Do wheat, chocolate or wax, change their name by the mere act of apportioning their weight?

A pound weight of bread, chocolate, or of wax candles, is still called a pound weight of bread, chocolate, or wax candles. Why, then, should not a piece of silver, weighing 5 grammes, go by its natural appellation? Why not call it simply 5 grammes of silver?

This slight alteration, verbal, critical, and nugatory as it may seem, is of immense practical consequence. Were it once ad- mitted, it would be no longer possible to stipulate in nominal value; every bargain would be a barter of one substantial com- modity for another of a given quantity of silver for a given quantity of grain, or butcher’s meat, of cloth, &c. &c. When- ever a contract for a long prospective period was entered into, its violation could not escape detection= a person taking an obligation to pay a given quantity of fine silver, it a day certain, would know precisely how much silver he would have to receive at the period assigned, provided his debtor continued solvent.