Resource Mechanisms: Stores of Value
Table of Contents
Chapter 1 explained the origin of nominal price as the need to have a common medium and measure of exchangeable value.
In order to facilitate exchanges of goods and services from common economic interest, humans need a tool.
Commodities as Store of Value
Historically, the tools for exchange have been commodities:
Homer says that the armour of Diomede cost only 9 oxen, and that of Glaucus cost 100 oxen. The following were the common instrument of commerce:
- salt in Abyssinia
- shells in some parts of the coast of India
- dried cod at Newfoundland- tobacco in Virginia
- sugar in some of our West India colonies
I am told that to this day, workers in a village in Scotland can carry nails instead of money to the baker’s shop or the ale-house.
Adam Smith
Wealth of Nations, Book 1, Chapter 4
These were exchanged based on volume or weight:
The following people trade by exchange:
- savages who have few merchandise
- civilized nations who have only two or three species.
The caravans of Moors who go to Timbuktu, in the heart of Africa, do not need money. They exchange their salt for gold. The Moor puts his salt in a heap. The Negro puts his gold dust in another. If there is not gold enough, the Moor takes away some of his salt, or the Negro adds more gold, until both parties are agreed..
Montesquieu
Spirit of the Laws, Book 22, Chapter 1
Basing value on weight is really basing it on its material density, since denser bodies are heavier. This is really a quantitative way.