Chapter 2a of Book 1

The Origin of Coinage

by Adam Smith Icon

9 The inconvenience and difficulty of weighing those metals precisely gave rise to to the institution of coins.

The stamp entirely covers both sides of the coin and sometimes the edges. It was supposed to ascertain the metal’s fineness and weight. Therefore, such coins were received by tale as today, without the trouble of weighing.

10 The denominations of those coins originally expressed the weight or amount of metal in them.

Servius Tullius first coined money at Rome. During his time, the Roman As or Pondo had a Roman pound of good copper. It was divided into 12 ounces just like our Troyes pound. Each had a real ounce of good copper.

In the time of Edward 1st, the English pound sterling had a Tower weight pound of silver.

  • The Tower pound was more than the Roman pound but less than the Troyes pound.
  • The Troyes pound was introduced into the mint of England in 1526.

In Charlemagne’s time, the French livre had a Troyes weight pound of silver. Back then, the fair of Troyes in Champaign was frequented by all European nations. Its weights and measures were generally known and esteemed. From the time of Alexander 1st [in 1107] to that of Robert Bruce [in 1329], the Scots money pound had a pound of silver of the same weight and fineness as the English pound sterling.

English, French, and Scots pennies also originally had a real pennyweight of silver, 1/20 of an ounce, and the 1/240 of a pound. The shilling too originally stood for a weight.

An ancient statute of Henry 3rd says:

When wheat is at 12 shillings the quarter, then wastel bread of a farthing shall weigh 11 shillings and 4 pence.

However, the proportion between the shilling and the penny or the pound was not so constant and uniform as that between the penny and the pound.

During the first race of the French kings, the French sou or shilling contained 5, 12, 20, and 40 pennies on different occasions.

Among the ancient Saxons, a shilling at one time had only five pennies. It might have been as variable among them as among their neighbours, the ancient Franks. From the time of Charlemagne among the French and from that of William the Conqueror among the English, the proportion between the pound, shilling, and penny, was uniformly the same as now.

But the value of each has been very different. In every country of the world, the avarice and injustice of princes and sovereign states abused the confidence of their subjects.

They gradually reduced the real amount of metal in their coins. In the latter ages of the Republic, the Roman As was reduced to 1/24 of its original value. Instead of weighing a pound, it came to weigh only half an ounce. The English pound and penny currently have around 1/3 only. The Scots pound and penny have around 1/36. The French pound and penny about 1/66 of their original value. Through those operations, the princes and sovereign states were able to pay their debts and to fulfill their engagements with fewer silver. But it was in appearance only.

Their creditors were really defrauded of a part of what was due to them. All other debtors in the state were allowed to pay with the same nominal sum of the new and debased coin whatever they had borrowed in the old. Therefore, such operations were always favourable to the debtor and ruinous to the creditor. They sometimes produced a greater and more universal revolution in the fortunes of private persons, than any great public calamity.

11 In this way, money became the universal instrument of commerce in all civilized nations.

It intervenes to exchange goods for one another.

12 People naturally observe rules in exchanging goods either for money or for one another.

These rules determine the ‘relative’ or ’exchangeable’ value of goods.

13 ‘Value’ has 2 different meanings.

  1. It sometimes expresses utility

This is called value in use.

  1. It sometimes expresses the power of purchasing other goods that object conveys.

This is called value in exchange,

The things which have the greatest value in use have frequently little or no value in exchange.

Things which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water:

  • but it will buy scarce anything, and
  • scarce anything can be exchanged for it.

On the contrary, a diamond, has scarce any value in use.

But a many goods may frequently be had for it.

14 To investigate the principles which regulate the exchangeable value of commodities, I shall try to show=

  • 15 The real measure of this exchangeable value, or what is the basis of the real price of all commodities.
  • 16 The parts that make up this real price.
  • 17 The circumstances which:
    • sometimes raise some or all of these parts of price above, and
    • sometimes sink them below their natural or ordinary rate,
  • What are the causes which sometimes hinder the market price from coinciding exactly with their ’natural price’.

The market price is the actual price of commodities.

18 I shall try to explain those 3 subjects in the three following chapters.

I very earnestly entreat the reader’s patience and attention.

  • Patience is needed to examine a detail which might appear unnecessarily tedious
  • Attention is needed to understand what might remain obscure after the fullest explication that I can give.

I am always willing to run some hazard of being tedious to be sure that I am clear. After taking the utmost pains that I can to be clear, some obscurity may remain on a subject which is extremely abstracted in its own nature.


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