A Discourse of Coin and Coinage

I can tell by the language and theory that this book is obviously out of date. First of all, it states that goods have value in themselves. Carl Menger disproved this theory in discovering that the value of economic goods (including money) is subjective based upon the users preference for obtaining it. Gold has no value apart from the fact that the human actor values that particular metal to serve his own ends. All exchange is based upon the fact that one person values the thing obtained more… (more)

I can tell by the language and theory that this book is obviously out of date. First of all, it states that goods have value in themselves. Carl Menger disproved this theory in discovering that the value of economic goods (including money) is subjective based upon the users preference for obtaining it. Gold has no value apart from the fact that the human actor values that particular metal to serve his own ends. All exchange is based upon the fact that one person values the thing obtained more than the thing traded. Equality in trade is impossible, for by not trading his good or service, the individual actor already assumes that he values the good has more than the good or service he can obtain.

I also noticed that the author discusses what sort of money came to be, but not why. This comes from the fact that he completely skips over the stage of barter where gold and silver were first commodities traded for their consumptive use. As Ludwig von Mises stated, all the numerical prices we see can be traced back to the days when money was not a common medium of exchange but was used in barter as a desired economic good. Eventually several goods began to take on the characteristics of being a medium of exchange since people would hold onto them and seek to obtain them for their popularity and use in trading for wider amounts of goods and services in the marketplace. Eventually, certain goods (historically gold and silver) won out and thus became the common medium of exchange. Eventually (through government fiat) gold and silver were replaced by their paper substitutes.

Money prices were thus born because a certain amount of gold (while it was still a bartering tool) was traded for a certain amount of another good. This then, as gold became traded for goods, was simply used to facilitate indirect exchange, it began to catch greater popularity in trade within the market and became the common medium of exchange. Government may have had a hand in gold and silver being traded at a greater rate by requiring gold and silver in taxes. However it must be that rulers found gold and silver useful in the marketplace before ever desiring to use it for taxes.

Money acts as a means to calculate the vast economic structure made up of highly heterogeneous uses for goods and labor mixed in with the subjective values of consumers via the price mechanism. Economic prices serve as indicators to entrepreneurs where, when, and by what means he should produce a good or service to meet the needs of the greatest possibly number of wants in comparison to both competitors and when considering what, when, and where to produce. This is the function in which profit or loss signals to the entrepreneur whether or not he is correct in his assumptions about consumer preference for his goods over his competitors and the wide variety of other possible productive goods and service which are available on the market.

This book was a fun read, but it is highly antiquated and falls into the fallacies which were prevalent up until the end of the 19th Century. Its always fun to go back in time though.

Chapter 15 makes more economic mistakes (mostly violating Say's Law of Markets) which I will be happy to analyze at another time. Chapter 14 seems pretty sound however since the author recognizes the tie between artificial increases of the money supply and increased prices in the market.