THE FUNCTIONS OF MONEY AND THE VALUE OF MONEY
In preceding chapters, I have spoken of the "money-service" as a source of additional value of money, under certain conditions. Before money can function as money at all, it must have value from some non-monetary source.[471] But, given this prior value, money performs valuable services. These valuable services, in certain cases, add to the value of money. Moreover, the fact that money, when made of a metal used in the arts, lessens the amount available for use in the arts, raises the marginal value of that metal there, and consequently raises its value in monetary form as well. It is now necessary to analyze the money-service, and to see in precisely what ways it does affect the value of money. And first, we must notice that the money-service is not simple, but compound; that in fact there are several services of money, in many ways distinct from one another; that not all money can perform all of these services; that most of them may be performed by things other than money, that these services are not all equally important as sources of the value of money, and that the same service varies, from time to time and from place to place, in its significance from this angle; and finally, that one of these services which is of the greatest social importance, namely, the "common measure of values" function, does not add to the value of money at all.
I shall not now undertake a history of theories of the functions of money. Many of the points which follow are common property of many writers.[472] The nature of some functions has been more clearly explained than that of others. I have not found in the literature of the subject any very clear statements, moreover, as to the relations of different functions to the value of money. I shall try in what follows, by a series of hypothetical cases, to isolate each function of money, as far as may be, and shall try, by varying my hypotheses, to indicate variations in the influence of the different functions on the value of money.
The functions of money have been variously described and named. The following list seems most satisfactory to me:
1. Common measure of values (standard of value).