The theory of money

double coincidences of want and single coincidence of want

The origin of money (as distinct from coin, which is only one variety of money) is, as we have seen, entirely natural and thus displays legislative influence only in the rarest instances. Money is not an invention of the state. It is not the product of a legislative act. Even the sanction of political authority is not necessary for its existence. Certain commodities came to be money quite naturally, as the result of economic relationships that were independent of the power of the state.

Because money is a natural product of human economy, the specific forms in which it has appeared were everywhere and at all times the result of specific and changing economic situations.

The chief defects involved in the use of the precious metals for monetary purposes are: (1) the difficulty of determining their genuineness and degree of fineness, and (2) the necessity of dividing the hard material into pieces appropriate to each particular transaction. These difficulties cannot be removed easily without loss of time and other economic sacrifices.

The economic importance of the coin, therefore, consists in the fact that (apart from saving us from the mechanical operation of dividing the precious metal into the required quantities) its acceptance saves us the examination of its genuineness, fineness, and weight. When we pass it on, it saves us from giving proof of these facts. Thus it frees us from many irksome, wearisome, procedures involving economic sacrifices, and as a consequence of this fact, the naturally high marketability of the precious metals is considerably increased.