5359. MONEY, Circulating Medium.—[continued].
The adequate price of a
thing depends on the capital and labor nec
essary to produce it. In the term capital,
I mean to include science, because capital as
well as labor has been employed to acquire it.
Two things requiring the same capital and
labor, should be of the same price. If a
gallon of wine requires for its production the
same capital and labor with a bushel of
wheat, they should be expressed by the same
price, derived from the application of a common
measure to them. The comparative
prices of things being thus to be estimated
and expressed by a common measure, we May
proceed to observe that were a country so
insulated as to have no commercial intercourse
with any other, to confine the interchange
of all its wants and supplies within
itself, the amount of circulating medium, as
a common measure for adjusting these exchanges,
would be quite immaterial. If their
circulation, for instance, were a million of
dollars, and the annual produce of their industry
equivalent to ten millions of bushels
of wheat, the price of a bushel of wheat might
be one dollar. If, then, by a progressive
coinage, their medium should be doubled, the
price of a bushel of wheat might become
progressively two dollars, and without inconvenience.
Whatever be the proportion of the
circulating medium to the value of the annual
produce of industry, it may be considered as
the representative of that industry. In the
first case, a bushel of wheat will be represented
by one dollar; in the second, by two
dollars. This is well explained by Hume,
and seems to be admitted by Adam Smith.
But where a nation is in a full course of
interchange of wants and supplies with all
others, the proportion of its medium to its
produce is no longer indifferent.—
To J. W. Eppes. Washington ed. vi, 233.
Ford ed., ix, 406.
(M.
1813)
