Superphysics Superphysics
Chapter 7

How the Price of Things is fixed in the Variation of the Sign of Riches

by Montesquieu Icon
3 minutes  • 568 words

MONEY is the price of merchandise or manufactures. But how shall we fix this price? By what piece of money is everything to be represented?

If we compare the mass of gold and silver in the whole world, with the quantity of merchandise in it, every merchandize may be compared to a portion of the entire mass of gold and silver. As the total of the one is to the total of the other, so part of the one will be to part of the other.

Let us suppose that there is only one commodity in the world but is divisible like money. A part of this commodity will answer to a part of the mass of gold and silver. Half of it will answer to the half of the total of the gold and silver. 10%, 1%, and 0.1% of the one will answer to 10%, 1%, and 0.1% of the other.

But:

  • property is not all at once in trade amongst mankind
  • money, which is the sign of property, is not all in trade at the same time.

So:

  • the price is fixed in the compound ratio of the total of things with the total of signs, and
  • the price of the total of things in trade is fixed with the total of signs in trade also

The things which are not in trade today may be in trade tomorrow.

The signs not now in trade may enter into trade at the same time.

The establishment of the price of things fundamentally depends on the proportion of the total of things to the total of signs.*

Thus, the prince can no more ascertain the value of merchandise that he can establish by a decree, that the ratio of 1:10, is equal to 1:20.

Julian’s lowering the price of provisions at Antioch caused a most terrible famine.

*Superphysics Note: Price controls misrepresents the actual supply

THE negroes on the coast of Africa have a sign of value without money. It is a sign merely ideal [nominal], founded on the degree of esteem which they fix in their minds for every merchandize, in proportion to the need they have of it.

  • A certain commodity is worth 3 macoutes.
  • Another is 6 macoutes
  • Another is 10 macoutes
  • As if they said simply 3, 6, and 10.

The price is formed by a comparison of all merchandizes with each other. They have therefore no particular money; but each kind of merchandize is money to the other.

Let us combine both ways of valuation.

  • All the goods in the world would be worth a certain number of macoutes.
  • Let us then divide all the money of the world into as many parts as there are macoutes so that 1 coin = 1 macoute
  • If the quantity of coin is doubled, then 2 coins = 1 macoute
  • If you also double the macoute, then 2 coins = 2 macoutes

If since the discovery of the Indies, gold and silver have increased in Europe 20x, the price of goods must have been enhanced by 20x.

  • But if the quantity of goods increased by 2x, then it means its price only rose 10x.

The quantity of goods increases by an augmentation of commerce. The augmentation of commerce increases by:

  • an augmentation of the coin which successively arrives, and
  • new communications with fresh-discovered countries and seas, which furnish us with new commodities and new merchandizes.

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