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Chapter 7. The Concept of the Value of Money
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Money_101-200.indd 17 6/17/08 9:26:42 AM CHAPTER 7 The Concept of the Value of Money 1 Suvjective and Objective Factors in the Theory of the Value of Money The central element in the economic problem of money is the objective exchange value of money, popularly called its purchasing power. This is the necessary starting point of all discussion; for it is only in connection with its objective exchange value that those peculiar properties of money that have differentiated it from commodities are conspicuous. This must not be understood to imply that subjective value is of less importance in the theory of money than elsewhere. The subjective estimates of individuals are the basis of the economic valuation of money just as of that of other goods. And these subjective estimates are ultimately derived, in the case of money as in the case of other economic goods, from the significance attaching to a good or complex of goods as the recognized necessary condition for the existence of a utility, given certain ultimate aims on the part of some individual. 1 Nevertheless, while the utility of other goods depends on certain external facts (the objective use-value of the commodity) and certain internal facts (the hierarchy of human needs), that is, on conditions that do not belong to the category of the economic at 1 See Bohm-Bawerk, Kapital und Kapitalzins, pp. 211 ff. 117 Money_101-200.indd 18 6/17/08 9:26:43 AM 118 The Value of Money all but are partly of a technological and partly of a psychological nature, the subjective value of money is conditioned by its objective exchange value, that is, by a characteristic that falls within the scope of economics. In the case of money, subjective use-value and subjective exchange value coincide.2 Both are derived from objective exchange value, for money has no utility other than that arising from the possibility of obtaining other economic goods in exchange for it. It is impossible to conceive of any function of money, qua money, that can be separated from the fact of its objective exchange value. As far as the use-value of a commodity is concerned, it is immaterial whether the commodity also has exchange value or not; but for money to have use-value, the existence of exchange value is essential . This peculiarity of the value of money can also be expressed by saying that, as far as the individual is concerned, money has no use-value at all, but only subjective exchange value. This, for example , is the practice of Rau3 and Bohm-Bawerk.4 Whether the one or the other phraseology is employed, scientific investigation of the characteristic will lead to the same conclusions. There is no reason to enter upon a discussion of this point, especially since the distinction between value in use and value in exchange no longer holds the important place in the theory of value that it used to have.5 All that we are concerned with is to show that the task of economics in dealing with the value of money is a bigger one than its task in dealing with the value of commodities. When explaining the value of commodities, the economist can and must be content to take subjective use-value for granted and leave investigation of its origins to the psychologist; but the real problem of the value of money only begins where it leaves off in the case of commodity 2 See Walsh, TheFundamental Problem in Monetary Science (New York, 1903), p. u ; and in like manner, Spiethoff, "Die Quantitatstheorie insbesondere in ihrer Verwertbarkeit als Haussetheorie," Festgaben fzir Adolf Wagner (Leipzig, 1905), p. 256. 3 See Rau, Grundsiitze der Vo/kswirtschaftslellre, 6th ed. (Leipzig, 1855), p. So. 4 See Bohm-Bawerk, op. cit., Part II, p. 275. And similarly in Wieser, Der natllrliche Wert, p. 45; "Der Geldwert und seine Veranderungen," Scllriften des Vereins fiir Sozialpolitik 132: 507. 5 See Bohm-Bawerk, op. cit., Part II, pp. 273 ff.; Schumpeter, Wesen und Hauptinllalt der theoretiscllen Nationalokonomie (Leipzig, 1908), p. 108. [54.163.62.42] Project MUSE (2024-03-28 16:40 GMT) Money_101-200.indd 19 6/17/08 9:26:43 AM The Concept of the Value of Money 119 values, viz., at the point of tracing the objective determinants of its subjective value, for there is no subjective value of money without objective exchange value. It is not the task of the economist, but of...