Money is a sign that represents the value, the measure of all useful goods, and that is given as the price of all things. We use a metal so that the sign, the measure, the price will be stable, so that it will be little consumed by use, and so that it may be greatly divided without being destroyed.

We seek earnestly to know: 1) whence money derives its value, 2) whether this value is variable and imaginary, 3) whether the sovereign should make alterations to the money , and set the ratio of the metals. In this essay we propose to resolve all these interesting questions by drawing on the wisdom of the author of the Considérations sur les finances . [1]

To avoid disputes about words, let us distinguish between the denomination or numerical value of money , which is arbitrary; its intrinsic value, which depends on its weight and degree of purity; and its accidental value, which depends on the commercial circumstances of the transaction by which one trades goods for money . Thus money can be defined as a piece of metal to which the prince gives a form, a name and a stamp, in order to certify its weight and standard in any exchange that might occur for all goods that men wish to place in trade.

Mr. Boizard gives us a different idea of money , for he defines it as a piece of matter to which the public authority has given a weight and a fixed value, in order to serve as the price of all things in trade. [2]

Money does not receive its value from the public authority, as Mr. Boizard claims. Its stamp indicates its weight and standard. It demonstrates that the coin is composed of a certain amount of metal of a certain purity, but it does not give value. Rather the matter gives it its value.

The prince may decide to call a coin of twenty sous [i.e., one livre] an écu, and require that it be accepted as four livres. This is a way to tax his subjects, who are obliged to accept it at this rate. Nevertheless he does not augment the value of the twenty-sou coin. It does indeed circulate as four livres, but then the livre is worth only what five sous [i.e., one-fourth livre] was worth before the revaluation.

If the prince gave value to money , he could give the value of an écu to pewter, to lead or to other metals minted into one-ounce coins, and make them serve in trade as silver money currently does. But when the prince had given the form and name of an écu to an ounce of pewter, his subject would not give the value of an écu in merchandise for a pewter écu, because the matter from which it is made is not worth it. [3]

Money is not a fixed value, as Mr. Boizard also says, for even if the prince makes no alteration, and if the coins maintain the same weight and standard and are subject to the same price, still the value of money is variable.

To prove this I will show whence goods derive their value, how this value is perceived, and how it changes.

Goods derive their value from the uses to which they are employed. If they had no use they would have no value.

The value of goods is higher or lower depending on their supply in proportion to demand. Water is not sold but given away because the supply is greater than the demand. Wine is sold because the demand for wine is greater than the supply.

The value of goods changes when the supply or the demand changes. If the supply of wine is great, or if the demand for wine diminishes, then the price falls. If wine is scarce, or if the demand increases, then the price rises.

The good or poor quality of goods, and the greater or lesser use to which they are employed, are assumed. When I say that their value is higher or lower depending on their supply in proportion to demand, the better or worse quality does not increase or reduce the price except to the extent that the difference in quality increases or reduces the demand.

Example: If this year’s wine is not as good as it was last year, then the demand for wine will not be as great and the price will fall. But if wine is also less abundant, and if the decline in supply matches the decline in demand, then it will continue to be sold at the same price even though it is not as good. The decline in supply will increase the price just as the difference in quality will reduce it, and the supply thus has the same proportion to demand as it did the previous year.

Water is more useful and necessary than wine. Thus neither the quality of goods nor the uses to which they are employed alter their price, except to the extent that the proportion of quality [ sic , for supply ( quantité )] to demand is altered. It follows that their value is greater or less depending on how the supply is proportioned to the demand. Their value changes when the supply or the demand changes. In the same way gold and silver, like other goods, derive their value from the uses to which they are employed.

As money derives its value from the matters from which it is made, and as the value of these matters is variable, money is of variable value even if it maintains the same weight and standard and is subject to the same price. If the supply of the matters suffers any change of value, then the écu will have the same weight and standard and will circulate as the same number of livres or sous, but the supply of the sliver matter having increased, or the demand having decreased, the écu will not have the same value.

If a unit of wheat is sold for twice as much money as it was fifty years ago, one imagines that wheat has become more expensive. Yet this difference in price may be the result of changes to the supply of or demand for money . In that case it is the money that has become cheaper.

As long as coins maintain the same weight and standard, and are subject to the same prices, we take little note of changes to the value of money , or of the matter of gold and silver, but that does not mean that their value does not change. Neither the écu nor an ounce of silver is worth what it was a century ago. The value of all things changes, and the value of money has changed more than that of other goods. The increase in its supply since the discovery of the Indies has so diminished its value that ten ounces in matter or in coin is worth less than what one ounce was once worth.

To convince oneself that what I am arguing is true, one may examine the prices of land, houses, wheat, wine and other goods before the discovery of the Indies. At that time a thousand ounces of silver, whether unminted or minted, purchased more of these goods than ten thousand would purchase today. The goods are not more expensive or have changed little. Since their supply is in nearly the same proportion to demand as it was, silver must be cheaper.

Those who use silver plate think that they lose only the interest they forego on the quantity employed, and the cost of the tax and the manufacture, but they also lose the amount that the matter declines in value, and its value declines to the extent that its supply increases, so long as the demand does not increase accordingly. A family that has used ten thousand ounces of silver plate for two hundred years has lost on the value of its silver more than nine thousand ounces, besides the manufacture, the tax and the interest, because ten thousand ounces are worth less than what one thousand were worth at that time.

The Indies Companies of England and Holland have exported a large amount of unminted and minted silver to the East Indies, and Europe also consumes it, which to some extent has supported its value. But despite this exportation and consumption, the great quantity imported has reduced its value by ninety percent.

The supply of gold has increased more than its demand, and gold has fallen in value. But because its supply has not risen in the same proportion as silver, its value has not fallen as much. Two hundred years ago the ounce of gold in France was worth sixteen livres, five sous, four deniers, and the ounce of silver was worth one livre, twelve sous. An ounce of unminted or minted gold was thus worth ten ounces of silver. Today it is worth more than fifteen.  [4] Thus these metals are no longer worth what they were with respect to other goods, nor with respect to each other. Gold, though fallen in value, is worth half again as much in silver as it once was.

On the basis of what I have just said, it is clear that the prince does not give value to money , as Mr. Boizard claims, for its value consists in the matter of which it is made. It is therefore clear that its value is not fixed, because experience shows that it has diminished since the discovery of the Indies by more than ninety percent.

By these diminutions I am not referring to the weakenings of the coinage that princes have carried out. I am speaking only of the diminution of the [value of the] matter caused by the increase in their supply.

When we come to examine these weakenings, we will discover that less than one part remains in fifty. That is to say, there was once as much silver in twenty sous [i.e., one livre] as there is now in fifty livres. This is proven by the ordinances concerning the manufacture of French sous in the year 755. At that time there was the same quantity of pure silver in one sou as there is now in the half-écu, which is worth fifty sous. But without going back so far, over the last two hundred years the silver coins have been weakened in France by about two-thirds of their value.

Those whose income is payable in money have also suffered by the decline in interest. Before the discovery of the Indies, annuities were constituted at one-tenth [i.e., ten percent per annum]. Today they are at one-twentieth [i.e., five percent per annum]. A donation made two hundred years ago, intended for the upkeep of fifty people, today can barely support one. Suppose that the donation was mortgaged for a sum of ten thousand livres. Because money was scarce, annuities were constituted at one-tenth. At that time one thousand livres in interest could support fifty people. Due to its scarcity money was of greater value, but as it became more abundant due to the quantity of matter imported into Europe, interest fell to five percent. The interest on the mortgage has thus fallen from a thousand to five hundred livres. As a result of the weakenings that princes have carried out, there remains only the standard of silver in the money [but two-thirds less weight], which reduces the value of five hundred livres to 166 livres 13 s. 4 d., and since the matter itself fell in value by ninety percent, five hundred livres [in] weak currency are worth no more than what sixteen livres were worth two hundred years ago, and will purchase no more necessities than sixteen livres would have purchased. [5] Based on these assumptions, a sum intended for the upkeep of fifty people can no longer support one person.

The quantity of matter imported into Europe since the discovery of the Indies has not only disturbed the wealth and income of individuals, but has also disturbed states, which are no longer in the same proportion of force. Those that have profited most from trade with Spain abound in specie, while the others can barely sustain their previous condition.

It is not surprising that Mr. Boizard, a Frenchman, erred in his ideas on money , but Mr. Locke, an Englishman and a profound thinker who made himself famous by his beautiful works on this subject, should not have fallen into a misconception similar to that [of] Mr. Boizard. He thinks that men by common consent have given an imaginary value to money . [6]

I cannot conceive how men of different nations, or even those of the same province, could agree to put an imaginary value upon anything, especially upon money , by which the value of all other goods is measured, and that is given as the price of all things, or that any one country would want to receive a value in exchange or payment for more than it was worth, or how that imaginary value could have been kept up. [7]

Suppose that in England money were received at an imaginary value, and that other nations had consented to receive it at that value, then the écu passing in England for sixty pence, should pass in Holland for sixty stivers, the penny and the stiver being nothing but numbers that one uses to count. But we see just the opposite: money is valued and received according to the quantity and quality of matters of which it is composed.

Before silver was used as money , its value depended on the uses to which it was employed. It was received as money on the basis of what it was as matter. If silver had had no value before it was used as money , it would never have been so used. Who would have wanted to receive a matter of no value as the price of his goods? A pound of lead as money would be worth something, since lead has several uses when it is reduced to matter, but a pound of silver would be worthless if, reduced to matter, silver had no use as metal. So before it was employed as money , silver had a value that depended on the uses to which it was employed, and was received as money on the basis of its value as matter.

Being used to make money it increases its value, but this additional value does not derive from the manufacture or minting, for unminted silver is worth as much as minted silver, and this value is no more imaginary than the value that it possessed before it was used to make money . [8]

Its first value, as metal, derived from the fact that silver had qualities that rendered it suitable for several uses to which it was employed. The additional value derived from the fact that this metal had qualities that rendered it appropriate to make money . These values are greater or less to the extent that the demand for this silver is proportioned to its supply.

If either of these values is imaginary, than all value is imaginary, for goods have no value except from the uses to which they are employed, and according to their supply in proportion to demand.

Let us see how and why silver has been used to make money .

Before the use of money was known, goods were exchanged. This exchange was often very cumbersome. At that time there was no measure with which to determine the value that goods had proportionally to each other. For example, A wished to barter fifty bushels of wheat for wine. One could not easily determine the quantity of wine that A should receive for his fifty bushels of wheat. For though the proportion of wine to wheat might be known for the previous year, if the wheat and wine were no longer of the same quality, or if as the result of a good or bad harvest they were more or less abundant, then the supply of wheat and wine being no longer in the same proportion to demand, their proportional value had changed, and fifty bushels of wheat might be worth twice the quantity of wine that it was worth the year before.

Since silver is capable of a certain standard, or in other words to be reduced to a certain degree of purity, being then little subject to changes in supply or demand, and as a result less variable in value, it was used as the middle term with which to determine the proportional value of goods. If fifty bushels of wheat were worth two hundred ounces of silver of a certain standard, and if two hundred ounces of silver of the same purity were worth thirty barrels of wine of the quality that A required in exchange, then thirty barrels of wine would be the equivalent of fifty bushels of wheat. [9]

The proportional value of goods delivered to different places was even more difficult to determine. For example, a hundred pieces of Dutch canvas were delivered at Amsterdam to the order of a London merchant. If the Amsterdam merchant wrote that one should deliver at London, to his order, the value of these hundred pieces of canvas in English woolens, then the value of these hundred pieces of canvas could be determined neither by the supply of English woolens nor by their value at Amsterdam, because these woolens were more valuable at Amsterdam than at London, where they were to be delivered. Reciprocally, the value of the English woolens could be determined neither by the supply of Dutch canvases nor by the value of these woolens [ sic , for canvases] at London, because the canvases were more valuable at London than at Amsterdam, where they were to be delivered.

Silver being highly portable, and thus of nearly the same value in different places, was used as the measure with which to determine the proportion of goods delivered to different places. If at Amsterdam the hundred pieces of canvas were worth a thousand ounces of pure silver, and if at London a thousand ounces of pure silver were worth twenty pieces of woolen of the quality that the Dutch merchant required in exchange, then twenty of these pieces of woolen delivered at London were the equivalent of these hundred pieces of canvas delivered at Amsterdam.

Contracts, promises, etc. , being payable in goods, gave rise to disputes because goods of the same sort differ greatly in value. Example: A lent fifty bushels of wheat to B, and B promised to return them a year later. A claimed that the wheat that B returned was not of the same quality as that which he had lent, and since wheat cannot be standardized there was no way to judge the loss suffered by A in receiving wheat of an inferior quality. But silver, which can be standardized, was used as the value for which one contracted. Thus the person who made a loan received a contract payable in so many ounces of silver at such a standard, thereby avoiding all dispute.

It was difficult to find the goods that were required in exchange. Example: A had more wheat than he could consume and sought to barter it for wine, but since the region did not produce wine, in order to barter the wheat he was obliged to transport it to a place that had wine.

Silver, being more portable, was used as the middle term by which goods could be more easily exchanged. Thus A bartered his wheat for silver and carried the silver to the place where he bought the wine he needed.

Silver, along with its other qualities, being divisible without the loss of its value, as well as being portable, was better suited to these uses, and those who possessed goods that they did not immediately need converted them into silver. It was less cumbersome to store than other goods, its value was less subject to variation, and since it was more durable and divisible without loss of value, one could use all or part of it as the need arose. Thus unminted silver, having the necessary qualities, was employed to serve those uses that money serves today. Since it was capable of being stamped, princes established offices that purified it to a given standard and manufactured it. In this way the standard and the weight were known, and the inconvenience of weighing and refining it was spared.

But the manufacture does not give value to money , and its value is not imaginary. Money receives its value from the matters of which it is composed, and its value is greater or less depending on the proportion of supply to demand. Its value is therefore real, like the value of wheat, wine and other goods. Admittedly, if men found some other metal more suitable than silver to make money , and to serve the other uses to which unminted silver is employed, such as making plate, and if this metal were cheap, then silver would lose much of its value and would no longer be worth the expense of extracting it from mines. In the same way if men found some beverage that was more agreeable, healthier and cheaper than wine, then grapevines would cease to be valued, and would not be worth the expense of cultivation. The land would then be used to cultivate that which supplanted the consumption of wine.

It is not difficult to answer the third question, whether the sovereign should alter the money by weakening it, raising it or fixing the proportion between gold and silver. Experience shows that the first operation is harmful, the second and third are useless. All weakening of the kingdom’s money , far from attracting the coins and bullion of foreign countries, causes the transportation of the country’s coins, however weakened, as well as its bullion to foreign countries. By weakening I mean the minting fees, the taxes that princes levy on money [i.e., seigniorage duties], the raising of the coins and the reduction of their weight or standard.

The raising of money does not increase its price. We have long been misled by this error, that the same quantity of specie, when raised, had the same effect it would have if its quantity were increased. If, by making the écu of three livres pass for four livres, we could actually increase the value of the écu, and if this raised écu produced the same effect that four livres produced when the écu was at three livres, then there would be nothing to say. But this idea is as if a man who had three hundred yards of cloth to cover the walls of his apartment imagined that by simply measuring these three hundred yards with a three-quarter yardstick he would have four hundred yards of cloth, yet his apartment would not be covered any more completely. Raising the coins causes them to be worth more livres, but only by making the livres less valuable.

I assume that the ministers are aware that raising the coins does not make them more valuable, and that they alter the money only to save or raise funds for the prince, but they probably do not understand all the harmful consequences of these alterations.

The ancients considered money sacred . It was minted in the temples. [10] The Romans minted money at state expense. The same weight of matter and of coin of the same standard had the same value.

The public authority, by minting money , is supposed to guarantee that the coins will be of a constant weight and standard, and receivable for the same number of livres, sous and deniers. Justice and honor oblige the prince, both toward his subjects and toward foreigners who trade with them, not to alter the money . It is the quantity and the quality of the matter that give value to the money , and not the price set by the prince. The matters that are suited to be used as money need to be minted, but the price of coins made of different matters should not be regulated by the prince.

Nor should he fix the ratio between gold and silver, because it varies constantly, and in the meantime this alteration causes unprofitable shipments, or harms certain trades. It suffices that the mark of silver should be fixed, and the market, depending on its needs, will determine the price of the mark of gold. In England the price of the gold in a guinea is twenty shillings sterling, yet it passes in trade for twenty-one shillings sterling. Admittedly this is only possible where coin is minted at public expense, and this is the true means to attract gold and silver. But a general rule for states that would fix the [bimetallic] ratio is to avoid both the lowest and the highest. [11]

Some policy makers have claimed that, as a lower [bimetallic] ratio pays less for gold, and consequently attracts silver by preference, it is better suited for countries that trade with the East Indies. But one should also note that these countries have less advantage in their trade with nations who pay in gold. Today all [European] nations trade with the East Indies, and the re-exportation of these products is very limited. Thus this trade will become more and more unprofitable. In order to recoup its costs, it is essential to favor useful trade more and more.

What constitutes the real value of a coin of money is the number of grains of pure gold or pure silver that it contains. A gold coin at 24 karats [ sic , for 23 karats] weighing one ounce contains [five] hundred fifty-two grains of pure gold and twenty-four grains of alloy. A gold coin of 22 karats weighing one ounce, one dram and two grains will have the same intrinsic value as the first coin, the only difference being the twenty-six grains of alloy that it contains more than the first coin, which count for nothing. [12] Not that a goldsmith who needs 23-karat gold for his work will not pay more in the market for the 23-karat gold coin than for the other, due to the cost that it would require to refine the 22-karat coin, as well as the greater expense of minting the 23-karat coin as a result of the same cost. Mines do not ordinarily produce gold finer than 22 karats, besides which the use of very fine gold is rare in trade. We should also note that if one needed 24-karat gold, a 24-karat gold coin would cost as much because of its refinement as the 22-karat gold coin [would cost to refine].

1. John Locke, Some Considerations of the Consequences of the Lowering of Interest, and Raising the Value of Money (London: Churchil, 1692); Further Considerations Concerning Raising the Value of Money (London: Churchil, 1695).

2. Jean Boizard, Traité des monoyes, de leurs circonstances & dépendances (Paris: Coignard, 1692). For the passage here cited, see the article “Monoye” in the glossary (pages unnumbered) that Boizard includes with the front matter to the 3 ^rd edition, 2 vols (Paris: Le Febvre, 1711), vol. 1, and the 4 ^th edition, 2 vols (Paris: Coustelier, 1714), vol. 1.

3. Like most monetary economists of the eighteenth century, Jaucourt fails to anticipate the rise of modern fiat currencies, which (so long as they are not over-issued) can exhibit stable purchasing power despite their lack of intrinsic value.

4. To be precise, according to Jaucourt’s figures the bimetallic ratio in sixteenth-century France was 244/24, or roughly 10.17. At the time he was writing the official bimetallic ratio in Britain was 15.19, but in France it was only 14.58, as can be calculated from tables showing the silver and gold content of European coins in the article “Monnoies” in Encyclopédie méthodique: Commerce , 3 vols (Paris: Pankoucke, 1783-1784) vol. 17, pp. 270-271.

5. That is, the market (and legal) rate of interest having fallen to one-half its former level, the silver content of the coinage having been reduced to one-third its former weight, and the purchasing power of silver having fallen to one-tenth its former value, the purchasing power of the annual coupon earned from the annuity was now only one-sixtieth its former value, thus reducing a coupon of 1,000 livres to the equivalent value of 16 ⅔ livres. Like Locke, Jaucourt here asserts what John Maynard Keynes has called “twin quantity theories,” arguing that the money supply is inversely related to the interest rate as well as to the purchasing power of money, each of which he understands as a “price” of money. Keynes, The General Theory of Employment, Interest, and Money (NY: Harcourt Brace, 1936), p. 343. This quantity theory of interest was characteristic of mercantilist writings, but came to be rejected by many of the liberal economists of the eighteenth century, including David Hume, Adam Smith and Anne-Robert-Jacques Turgot.

6. Jaucourt’s critique of Locke depends in part on a misquotation, since Locke actually states that “Mankind [has] consented to put an imaginary Value upon Gold and Silver,” not upon money, the value of which derives (as for Jaucourt) from its intrinsic gold and silver content. Locke, Some Considerations , 2nd edn (London: Churchil, 1696), p. 31. (The same words do not appear in the comparable passage of Locke’s first edition of Some Considerations , p. 30.) See also Locke, Further Considerations , p. 1: “The intrinsic value of Silver, consider’d as Money, is that estimate which common consent has placed on it.”

7. This and the following five paragraphs are based heavily on a passage in John Law, Money and Trade Considered, with a Proposal for Supplying the Nation with Money (Edinburgh: Anderson, 1705), pp. 9-10. Jaucourt nowhere credits this source, perhaps because Law had such a poor reputation in France following the collapse of his financial “System” in the Mississippi Bubble of 1720.

8. In fact unminted silver was not worth as much as minted silver. Jaucourt here ignores the seigniorage duties that European states imposed on the minting of coin.

9. The mine (here translated “bushel”) was equivalent to about 79 liters, or more than two modern bushels. The muid (here translated “barrel”) varied in size from province to province. Jaucourt was probably thinking of the Paris muid , equivalent to about 268 liters. According to his figures, two liters of wine were thus worth about one liter of wheat. Emile Littré, Dictionnaire de la langue française , 4 vols (Paris: Hachette, 1873-1874), vol. 3, pp. 565, 664.

10. For the source of the first two sentences of this paragraph, see Claude Bouteroue, Recherches curieuses des monoyes de France depuis le commencement de la monarchie (Paris: Cramoisy, 1666), p. 10.

11. This confusingly worded paragraph alludes to the fact that Britain had at that time the highest bimetallic ratio in Europe, which created an incentive to transport the gold coins of other European countries to Britain and sell them to the mint. Of course it also created an incentive to export silver coins from Britain.

12. That is, a 22-karat coin weighing 602.18 grains contains as much pure gold as a 23-karat coin weighing 576 grains. There were 24 grains to the dram ( denier ) and 24 drams to the ounce.