Book Two - The Age of Greece

Book Two. THE AGE OF GREECE THERE was a time in the Western world when money as we know it was a new thing, and its appearance was like a strange ware which men gathered in the market place to gaze upon in wonder. It was in particular, the age of Greece—an age which in many respects resembles our own, a time when the world was young, when men were fresh with energy and enthusiasm, when there were frontiers to pass and new lands to open up to civilization, and an age when men were enterprising and self-reliant, individualistic, democratic, athletic, and full of the gusto of life. /. Homeric Society IN that day the Greek race was still pastoral and nomadic in fundamental attitude, but the wheeled cart had been abandoned for the fleet running, oar-driven galley, which was carrying the young men to distant and wonderful shores, while at home the shepherd was beginning to till the soil, and plant the olive and the vine.

Life was simple in this early Greek period, but it was not primitive. The civilization which was later to blossom into the Parthenon and the Erechtheum, and the sculpture of Phidias and Praxiteles, in the science of Pythagoras, the ethics of Socrates, the philosophy of Plato, and the scholasticism of Aristotle, was being firmly founded in an environment that was unclouded by a surfeit of material objects, and in experience with nature rather than artifice. Economy was direct, and devoted to serving the needs of the household. Wealth, not absent, was measured by sacks bulging with flour, jars full of wine, and heads of cattle. Such trade as existed was very little developed. A few exchanges took place between district and district, between city and city, within Greece itself. The Phoenicians, the peddlers of 10 MONEY AND MAN the sea, landed in harbors and on the beaches, and there sold the products of their own industries, or foodstuffs, raw materials, and manufactured goods which they had fetched from all the shores of the Mediterranean and the distant lands of the East.

All this trade was done entirely by barter. Money was unknown. Tripods or slave girls were given in exchange for cattle, iron or bronze. Yet it was among these peoples of the Aegean that the device of coined money first appeared in the world. Although stamped metal seems to have been used from the earliest times in China, and primitive forms of money were in use among the rudest tribes of antiquity, and although the more settled civilizations of the Euphrates and the Tigris were acquainted with the banker and debt and financial instruments, it is to the Greeks that must be attributed the inception of that imponderable thing we may call the money mechanism. With their ready adaptability, and the inventiveness for which the race was noted, they began to improve upon the complex system of barter in use in the Mediterranean, in which ingots of copper and silver were used as media of exchange, and soon were using, for their growing trade, the thing we now know as coin.

It is fortunate, in a sense, that coined money was an innovation of the Greeks, for we can trace in the history of this young race the influence of this new device upon the economy of the day, undisturbed by the complicating factors which rob its study in modern times of much of its validity. Fortunately, also, the money mechanism appeared at an age and among a people in which the intellectual capacities of man were highly developed, if their economic organization was not. Upon the phenomenon of money the Greeks focused the light of a philosophy that has never been equalled for its brilliance or lucidity. Life was new and fresh with them, and they looked upon money with an objective detachment which has never been possible for any people since. For this reason, the experience of the Greeks with money is fecund with precept and omen and lesson for a modern world that has become enmeshed in its toils. In the protean conflict that THE AGE OF GREECE 11 was here waged between man and money for the mastery of human destiny, we observe the pattern of all subsequent economic history, an adumbration of the recurrent defeats of the human race in its struggle against the creature of its own devising.

//. The Invention of Coinage THE introduction of coined money in Europe appears to have occurred toward the end of the eighth century B.C.1 The evidence leads us to believe that it did not spring full blown from the inventive genius of the Greeks, but rather that it was the adoption by the ruling powers of a desirable and somewhat obvious step in the simplification of commercial dealings.2 Before the development of coinage the Mediterranean world had been slowly groping toward a more convenient device and measure of exchange with which to facilitate the increasing trade of the day. Oxen and sheep had apparently been used as a standard of value among the nomadic Aryans on the northern coasts of Europe, and in the towns hides, and iron and brass, and even slaves were sometimes used as media of exchange.3 In the older communities of Babylon and Phoenicia, metal ingots bearing the stamp of the merchant who cast them passed by weight and became the basis of a highly developed banking and credit system.

By the eighth century, it seems, the more primitive forms of barter had begun to give way to one or more of the four metals —gold, silver, bronze and iron—that were beginning to appear in sufficient quantity to serve as media of exchange. Made up sometimes into useful forms, and sometimes into pieces of standard weight, they passed by weight, and rendered it possible for commerce to expand throughout the Mediterranean. The particular contribution of the Greeks to the development of money lay in their taking these pieces of metal and casting or striking them into units of uniform weight and imprinted with the sign of state authority. The idea of stamping ingots of copper 12 MONEY AND MAN or silver with a mark of their weight and fineness had been practiced in Babylon, but the marks were merely the certification of the metal dealer or trader. It was when the state stepped in—in the person of the city or the temple—and gave its seal and certification of the weight of these pieces of metal that true money, as distinct from barter, began, and it is to the Greeks that we owe this development.

It is at this point, also, that the controversy begins which persists to this day as to the source of the value of money, i.e., whether the value of money derives from the metal that has been stamped, or from the seal upon the substance which is used as money. <«§ §»> The earliest of the coinages were rude indeed. In some cases they were crude bean-shaped ingots about the breadth of a finger nail, bearing a punch mark, and made of a natural mixture of gold and silver, called by the Greeks "electrum" or white gold. With the artistic instincts for which the race is noted, it was not long before the mints of the Greek cities were turning out coins of a beauty and character that have never since been approached. In the fourth or third century B.C. there was struck at Syracuse what is perhaps the most beautiful coin the world has ever seen. The obverse is a head of Persephone, decked with corn leaves, and surrounded by dolphins; the reverse is a quadriga, with Victory flying above it to crown the charioteer.

<*§ $*> The age which saw the development and spread of coinage constitutes one of the most remarkable periods in the whole of the world's history. The invention of coinage was but one aspect of an intellectual development that embraced philosophy, art and commerce. The full flowering of Greek genius belongs, no doubt, to an era two centuries later, but it was in this epoch that all that is meant by the Greek spirit and Greek genius had its birth. Literature and art, philosophy and science, are still following the course laid out for them in these early centuries, and commerce may also trace its modern manifestations to the practices and precepts developed in these beginnings.

THE AGE OF GREECE 13 ///. The First Money Crisis WE are not so much concerned here with the character of the money that was introduced, or the standards of coinage, as with the economic effects and social consequences that followed. We know that serious consequences did develop. The transition of Greek society from the pastoral and household economy of Homer to the money economy that followed upon the development of coinage was accompanied by an unsettlement of the habits of men, a reorientation of their ideas, and a transformation in the structure of society. It became necessary to reconstruct entirely the foundations of Greek civilization. We know that at Athens this was accomplished only at the expense of a great political revolution—peaceful, fortunately—in the sixth century B.C. and the constitution of that great body of reform with which the name of Solon is connected. Money had, in a word, begun to exercise its fascination over the minds of men. These light, shining discs, adorned with curious new emblems and a variety of vigorous, striking images, made a deep impression upon both Greek and barbarian. And to the more practical minded, the abundance of uniform pieces of metal, each of a standard weight, certified by the authority of the state, meant a release from the cumbersomeness of barter and new and dazzling opportunities in every direction.

Not only did merchants and artisans and shepherds and farmers take readily to this new medium of exchange, with its greater convenience, and more certain value, but the growing abundance of coins gave a tremendous impetus to trade. All classes of men succumbed to money, and those who had formerly been content to produce only for their needs and the necessities of the household, found themselves going to the market place with their handicraft, or the fruits of their soil, to exchange them for the coins they might obtain. And with this succumbing to the fascination of money, and the pursuit of profit, we find the beginnings of that enthralment of the race, the disappearance behind the horizon of history of that golden age to which Herodotus longingly referred, "when all the Greeks were still free."

14 MONEY AND MAN The introduction of coined money produced what might be called in today's parlance "boom times" in the Mediterranean. It was an era of expansion, of the development of frontiers, of the exploitation of natural resources. While the physical results, due to the absence of the machinery and power which have characterized the expansion of European and American civilization in the past hundred years, were small in comparison to the present, and while the beneficial and deleterious results were slower, in point of time, in accumulating, the psychologic, economic and spiritual effects were the same. Cities flourished, trade was active, debtors and creditors appeared, banks were organized, and in the end there grew up a host of attendant evils resulting from an unbalanced economy based too largely on money. The difficulties that arose in the Greek experience with money did not follow so much from an inherent defect in this new instrumentality of exchange as from the fact that, like the overrapid and overextended development of credit in modern times, it forced a premature flowering of the commercial life of the age, and compelled the natural growth of economy to proceed at a pace faster than its results could be assimilated. The intellect and spirit of man could not mature sufficiently in the short period between the blossoming and the fruition of this device to cope with the problems it created.

The commercialization of Greece, the revolution that was carrying the race headlong from a natural or household economy into a complex world of "money economy" was not a steady process, or one which, in terms of today's tempo, would be regarded as rapid. There were, no doubt, pauses in the onward march, lulls in which men had time to contemplate the meaning of it all. Some no doubt looked back with regret upon the placid and secure times that were passing, while others regarded with repugnance those days of hard labor and tilling of the soil, and looked forward to a renewal of the onward trend, to the day when wealth would be universal and poverty annihilated. The urge could not be stayed, and the tide moved irresistibly on, carrying with it the hopes and dreams of a new era for men.

THE AGE OF GREECE 15 And toward the end of the seventh century B.C., the bark of Greek civilization, which had been riding the crest of a sudden prosperity, was being carried, irretrievably, it seemed, toward the dark headlands of disaster We do not, of course, have commercial records of the day to permit us to chart the fluctuations in the business cycle—statistics, which, as Sir Arnold Wilson tartly remarks, the Americans collect like antiques, were unfamiliar to the Greeks—and the influences we have described were perhaps a hundred years in accumulating. We may gather that there were a number of minor depressions before the major crisis occurred which produced the final collapse of the boom and ushered in a social, political and economic revolution under Solon. The inexorable culmination to the era grew out of the growth of debt, and sprang directly from the agricultural depression. In Attica, as in modern America, the incubus of debt had thrust its tentacles into the very vitals of society. The greater part of the peasants' holdings had come under mortgage, the evidences of which were stone pillars erected on the land, inscribed, we may understand, with the name of the lender, the amount, the rate, and the maturity of the loan. A still more insidious form of debt was the chattel mortgage—the personal loans known today under soft sounding phrases like "industrial banking" or "household finance"—by which the farmer could pledge his own person or that of his wife or his children, for the repayment of a loan. These chattels, under Athenian law, could be sold off into slavery, and such was the extent of the existing credit structure that the greater part of the agricultural population was in danger of being converted into bondage.

And while the use of money had encouraged a rapidly growing body of debt, the charges of which were an onerous burden on society, the same money economy was rendering it more and more difficult to discharge the debt. The opening of the Italian and Euxine grain trade by the Greek merchantmen was producing a market situation in which the rocky farm land of Attica had become "submarginal," and the Athenian peasants with 16 MONEY AND MAN their olive and orchard crops could not compete with the cheaper food stores from abroad. While we do not hear them called "farm holidays" or "milk strikes," a state of affairs developed in Greece toward the end of the seventh century B.C. similar, we may believe, to that in the Middle West in the nineteen twenties. Revolution was being talked, with mutterings about "redistribution of the land," and armed insurrection was imminent. IV. The Solonian Reform As Greek intellect had evolved the institution of coined money, so Greek intellect was called upon to devise means of controlling it. The challenge was met with an audacity and intelligence that may even now command the admiration of the world. Solon, whose name is still a synonym for lawgiver, was the man in whose hands was placed the problem of solving the crisis that arose in Athens at the end of the seventh century.

Solon was a member of the upper classes. He had engaged in commerce and had traveled widely. His name was connected in the public mind with the recent victory at Salamis, which had been achieved either through the craft of Solon or his ability to rouse the fighting spirit of the army, and he was a popular figure who was detached from politics. More important for history, he was a dreamy-eyed poet, and it is through fragments of his poems that have come down to us that we learn a great deal of the events of the day. The moneyed classes, the aristocracy, and the merchants, sensed the growing dissatisfaction among the masses, and in the hope of staving off rebellion, put up Solon for the archonship in 594 B.C. Probably they expected only a mild liberalism on his part; at any rate they were glad to support his candidacy, which was at the same time a popular one among the great body of voters. All parties united on Solon, each party no doubt anticipating that its particular vested interests would be his chief regard. Solon was perhaps vague in his campaign promises, for THE AGE OF GREECE 17 Plutarch speaks of the "softness and profuseness, the popular rather than philosophical tone" of his poems.

Inaugurated as archon, Solon moved with amazing speed, and before the country knew what was happening, it was going through a social, economic and political revolution that completely revamped the character of the Athenian state and still amazes historians. Solon assumed extra-legal powers, and with a facility for "catch" expressions that took hold of popular fancy, issued immediately a revolutionary decree under the appealing name "Shaking Off of Burdens" (Seisachtheia). This decree, going at once to the heart of the money problem, tore down all the mortgage pillars of Athens and abrogated at once all agricultural and personal loans. It liberated all those debtors who were actually in slavery under previous legal adjudication, and it forbade any Athenian to pledge his own person or that of any member of his family as security for a loan. The constitutionality of the Seisachtheia was widely questioned, but it was not challenged, and it solved overnight the problem of the poor debtors, the thetes, tenants, and small proprietors. But of course it shattered the credit structure of Athenian economy. Deprived of the security behind their assets, and with obligations of their own to meet, the landlords and the money lenders were thrown into practical bankruptcy.

In solution of this problem, the crumbling financial edifice, Solon provided a partial moratorium by means of a debasement of the currency to the extent of 27 per cent. The mina, which had formerly consisted of 73 drachma, Solon made legal tender to the value of 100 drachma. * * Some doubt exists among scholars as to whether Solon actually debased the coinage, on the ground that no evidence exists that a strictly Athenian coinage was yet in use. The common media of exchange were apparently the drachmas of the neighboring states of Aegina and Argus. Whether actual debasement occurred matters little, however, since it is well settled that Solon did alter the standard of payments from a drachma, possibly that of Aegina, which was widely circulated, to an Athenian drachma of lower content, and authorized the discharge of debts in the lower medium. For a discussion of this question, see Kathleen Freeman, Work and Life of Solon (London, 1926).

18 MONEY AND MAN The money question solved temporarily—it was to come up again and again in Greek history—Solon was now able to lay the foundation for the enduring structure of reform which brought into being that cynosure of history—the Athenian democracy. The remainder of Solon's program, his Eunomia, or Reign of Law, as he called it, consisting of a reclassification of the citizenship, the dissolution of the oligarchy, the codification of the laws, the negotiation of commercial treaties, we may pass over in order to examine the effects of his financial legislation. The immediate popular reaction to the money measures of Solon is somewhat in doubt. Our principal records are the poems of Solon and the report of Androtion, whose account is borrowed by Plutarch and Aristotle. Solon's poems give of course a flattering picture of the effect of the reforms. Plutarch relates, however, that they left the people only more dissatisfied, because the emancipated debtors expected not only remission of debts but also a redivision of the land, along the lines of communistic Sparta. Charges flew about that Solon had allowed "insiders," friends of his, to learn in advance of his plans and to profit by buying up mortgaged land. The permanence of the reforms, and the reviving prosperity of Athens, are evidence, however, substantiating Solon's report, and testify to the general soundness of his program.

But it is the longer range aspects of the Solonian reform that are of concern to us. George Grote, the classic historian of Greece, is of the view that: "The Seisachtheia of Solon, unjust so far as it rescinded previous agreements, but highly salutary in its consequences, is to be vindicated by showing that in no other way could the bonds of government have been held together, or the misery of the multitude be alleviated The foundation on which the respect for contracts rests is.... the firm conviction that such contracts are advantageous to both parties as a class, and that to THE AGE OF GREECE 19 break up the confidence essential to their existence would produce extensive mischief throughout all society. The man whose reverence for the obligation of a contract is now the most profound would have entertained a very different sentiment if he had witnessed the dealings of lender and borrower at Athens, under the old ante-Solonian law. The oligarchy had tried their best to enforce this law of debtor and creditor, with its disastrous series of contracts, and the only reason why they consented to invoke the aid of Solon was because they had lost the power of enforcing it any longer, in consequence of the newly awakened courage and combination of the people."1 The money problem was to creep up again and again in Greece. In the time of Pericles, a bulging treasury led to a vast and uneconomic expenditure on public works which perpetuated the glories of Greek civilization but did not mitigate the hardships and inequalities of the day. Hesiod complained, at a later day, of financial corruption and bribe-taking judges. Diogenes searched the streets of Athens for an honest man, and Demosthenes inveighed against the mercenary spirit of the Athenian naval commanders. Nevertheless, the general effect of Solon's money measures was to purge Greek mentality of its absorption in pecuniary values and to purify the whole spirit of Greek commerce. They created among the Greeks a saner philosophy of values and founded Greek commercial principles on a sounder basis than existed elsewhere in the ancient world.

Speculative enthusiasm was apparently cured in Athens. Grote adds that though there grew up at Athens, following the Solonian reform, a high respect for the sanctity of contracts, never again do we hear of the law of debtor and creditor disturbing Athenian tranquillity. The banking system, he says, assumed a more beneficial character. The old noxious contracts, "mere snares for the liberty of a poor freeman and his children," disappeared and loans of money "took their place, founded on the property and prospective earnings of the debtor, which were in the main useful to both parties, and therefore maintained their place in the moral sentiment of the people." Another thing stands out clearly in Greek history as the result of the Solonian currency experiment. It was never tried again.

20 MONEY AND MAN Though here and there we find instances of currency debasement by various Greek cities, a general tradition grew up in Greek commercial policy of the sanctity of the coinage. Throughout the period of Athenian history, this one instance of formal and deliberate currency depreciation stands alone. Not only was there never any demand in Athenian democracy for new tables or a depreciation of the money standard, but a formal abnegation of any such projects was inserted in the solemn oath taken annually by the numerous diakasts, who formed the popular judicial body. Upon the soundness of her money Athens built a commercial system that dominated the Mediterranean, and of the character of that commerce Augustus Boeckh says: "The purity of the coinage promoted traffic: the merchant was not compelled to take back freight on his return voyage, although there was no lack of articles for that purpose, but he could receive and export the value of his cargo in ready money.

.... Those articles which in other lands could scarcely be obtained singly, were in the Piraeus found together. Besides grain, choice wines, iron, brass, and other staple commodities from all the countries on the Mediterranean Sea, there were imported from the coasts of the Black Sea slaves, ship timber, salted fish, honey, wax, pitch, wool, tackling and cordage for vessels, leather, and goatskins; from Byzantium, Thrace and Macedonia, also timber, slaves, and salted fish; slaves moreover from Thessaly, to which country they came from the interior; and fine wool and carpets from Phrygia and Miletus. All the sweet productions of Sicily, Italy, Cyprus, Lydia, Pontus, Peloponnesus, were collected by Athens through her maritime supremacy."2 The Athenian drachma, consisting, from the time of Solon to that of Alexander, of 67 grains (English) of fine silver, and from that of Alexander to the Roman conquest of Greece, of 65 grains, became the standard coin of Greek trade, and through the Alexandrine conquests the standard for Asia. Athenian drachmas moreover found their way into such distant parts of the world as India and northern Europe. Following the absorpTHE AGE OF GREECE 21 tion of Greece into the Roman Empire, it became the model for the Roman denarius, which was originally minted at an equivalent weight and fineness. In various parts of Asia, however, the Greek drachma was preferred to the fluctuating Roman coinage, particularly for the Indian trade, and consequently we find it minted, under imperial auspices, far into the period of Roman imperialism. While the Roman denarius was constantly being depreciated, until trade in the western parts of the Empire had been reduced almost to a barter basis, the drachma, by the purity of its standard, kept alive the institutions of commerce in the East.

The total value to the world of the Greek commercial tradition is inestimable. Greek money and Greek commercial practices became the standard for the Levantine world. They persisted in the East throughout the period of the Roman Empire and formed a solid rock of principle in the chaotic world of Roman commercialism. And later, as we shall have occasion to discuss, when the Empire had been dissolved into its Western and Eastern halves, the Eastern half was to be resuscitated by the strength it drew from this tradition. In the long history of Byzantium we find Greek monetary policy again dominant, and to it must be attributed, as much as to anything, the vigor of this thousand-year-old empire which remained a center of civilization while Europe was sunk in medieval darkness. And finally, in the renascence of Europe, beginning in the thirteenth century, we may still trace the influence of Greek tradition in the reviving commercialism of Italy.

The Greeks, perhaps the clearest thinking of all peoples of history, met the money question and solved it, as satisfactorily as any people, by an exhibition of intellectual restraint. With one exception, they resisted the cry so common to mankind, as Adam Smith observed, to cheapen the standard of value, and thus they solved the most insidious of its evil influences. V. A Note on Monetary Theory WE have had occasion, in the foregoing discussion, to refer to 22 MONEY AND MAN the controversy in monetary theory as to the source of the value of money. As we go along we shall necessarily touch upon other questions of economic theory, for it is the history of the race that ideas have made events as often as events have made ideas. It seems wise, therefore, to break in upon our story this early with a discussion of abstract theory, in order that we may keep clear our concepts and terminology as we proceed.

One of the most perplexing problems in the realm both of economic theory and of practical statecraft is the nature of money. Generally speaking, the word "money" presents a very clear concept to individuals, but when we analyze that concept we find money taking such a variety of forms, and fulfilling functions so manifold, that the further we advance in our analysis the more we lose sight of what is common and what is essential. So difficult indeed is the definition of money, and so much confusion has resulted from the attempts to define it, that economists have often abandoned the task, and limited themselves to describing money in terms of what it does, i.e., its functions. Money, therefore, is sometimes defined as anything which is generally acceptable in a community for all other goods and services, leaving to the imagination of the reader the formulation of concrete concepts of "anything." Or, in more precise terms, "the complex of those objects which in a given economic area and in a given economic system have as their normal purpose the facilitation of economic intercourse (or the transfer of values) between economic individuals."1 Money, in this view, is not defined as a series of objects, but a series of functions which have as the ultimate object the "facilitation of economic intercourse."

The particular functions of money are generally listed as follows: (a) A medium of exchange, that is, a highly developed form of barter, in which money comes between the exchange of two commodities to facilitate the process. With the use of money the farmer in need of shoes does not take his bag of corn to the shoemaker, but takes it rather to the miller and from him obtains a sum of money therefor, which he gives in turn to the shoemaker. Strictly speaking, money in such a case need have no value beTHE AGE OF GREECE 23 yond the momentary and fleeting one of a medium. Where payment for the bag of corn is made by a due bill issued by the miller, who agrees to honor it for so many pounds of flour, if this due bill is accepted by the shoemaker either because he may be in need of flour and may present it for redemption, or may in turn exchange it for leather with the tanner, the due bill has performed the function of money, and is, to that extent, money.

Cases of "formal" or fiat money, with no other value than that derived from its service as a medium of exchange, are presented in the case of the paper money inflation in postwar Germany. With the German currency depreciating in the 1920's from day to day, even from hour to hour, the only value it possessed was gained by one's hurrying it to the market and spending it, and if not immediately made use of, that value was lost. (b) A measure of value, i.e., a function of price, in which all other commodities and services, or objects of economic intercourse, may be embraced by a common denominator. The due bill of the miller, used above as an illustration, performs a money function in a limited sphere, but it is not a measure of value unless it is accepted generally in the community as a standard for receipts and payments of all sorts. (c) A standard of deferred payments and a store of value (a carrier of value through time and space), in which present transfers of goods and services may be given a future significance, as in contracts of debt, and the fruits of present labor may be given a future value, as savings laid by for old age or emergency. No money so far devised, it may be noted, has ever succeeded in performing this function perfectly, but it may be doubted whether the failure arises from inherent defects of the thing used as money, so much as from tampering with the money in order to destroy or enhance its value—the interposition of the state or of individuals working for antisocial ends.

A description of the functions of money, however, is not a definition of money itself, or its own essential characteristics. Into the ramifications of this question it would be tedious to enter, and perhaps profitless for our present object, which is an 24 MONEY AND MAN objective examination of the working of the money system in the economic life of society with particular reference to the modern aspects of the money problem. The main divisions of the controversy may, however, be briefly outlined. (a) The view that money is intrinsic, that money has a value in its very nature, and is itself an economic good, a commodity. This is the view of those who support the metallic standard, or standards of credit money (state note issues and bank credit) based upon metal and convertible freely into metal. The view is expressed in its most abstract form by Knies as follows: "The laws of nature necessitate that for measuring, i.e., for determining the quantitative relation in terms of some quantitatively determinable object, we can employ only such an object as a measuring instrument or standard of measure as itself possesses to a special degree the quality which is to be measured.

The unknown quantity in the object to be measured is then determined by the application to it of the known quantity of the same kind in the instrument of measurement."2 Thus, a distance of length can be determined only by a medium which in itself has length, and an expanse of surface only by an area. Such instances of measuring distance in terms of time as "an hour's journey" fall within this definition on the ground that they are but an extension of the idea, in which an "hour" becomes the length traversed in that period. Applied to money, Knies continues, "it has therefore been absolutely established that if and so far as this special quantity of economic value which concrete goods contain can be and is to be estimated and measured, that is possible only by means of an object which itself has economic value—that is, which is itself an economic commodity." (b) The view that money is purely conventional, that is, without value as property, as compared with economic goods, merely a "token," and a "symbol." Among those who hold to this view are the "quantitative" theorists (the numerary theorists of former times, such as Alexander Del Mar), who believe that the value of money derives solely from the quantity in circulation in relation to the quantity of transactions to be effected. Involved in the quantity theory, and explicitly stated by many THE AGE OF GREECE 25 writers, is the doctrine that the substance of which money is made is irrelevant, that it is the number, and not the quality or size of the money units that counts. The idea has been expressed by Irving Fisher, a latter-day exponent, as follows: "In short, the quantity theory asserts that (provided velocity of circulation and volume of trade are unchanged) if we increase the number of dollars, whether by renaming coins, or by debasing coins, or by increasing coinage, or by any other means, prices will be increased in the same proportion. It is the number, and not the weight, that is essential. This fact needs great emphasis. It is a fact which differentiates money from all other goods and explains the peculiar manner in which its purchasing power is related to other goods. Sugar, for instance, has a specific desirability dependent on its quantity in pounds. Money has no such quality. The value of sugar depends on its actual quantity.

If the quantity of sugar is changed from 1,000,000 pounds to 1,000,000 hundredweight, it does not follow that a hundredweight will have the value previously possessed by a pound. But if money in circulation is changed from 1,000,000 units of one weight to 1,000,000 units of another weight, the value of each unit will remain unchanged."3 From this clash of opinions over the nature of money, of which the views expressed above represent the two extremes of monetary philosophy, has arisen recurrent political controversy over the "standard," and legislative halls and the council chambers of state have trembled at the thunder of dissentient argument. The view that money has no value of its own, and need have no such value, was very strongly held, especially at the time of the reaction against the Mercantilists, who held emphatically that money represented the embodiment, in quite an especial degree, of value and wealth. Locke expressed the view that humanity agreed upon giving gold and silver "an imaginary value," and Hume described money as a mere "representation of labor and commodities," as a token which serves only for the purpose of measuring and estimating the value of labor and commodities. The opposite view was held mainly by the Physio26 MONEY AND MAN crats (Turgot and others), the classical school of English economists, and by their followers in France, as also by Karl Marx in his Das Kapital. Roscher made the following pointed and frequently-quoted remark in regard to the contrast of these two views: "The false definitions of money are divisible into two groups: those who regard it as something more, and those who regard it as something less, than an economic commodity."4 (c) A third view synthesizes these two extremes and holds that money must possess intrinsic value, but that it derives an additional value from its use. An exponent of this view was Benjamin M. Anderson, Jr., who wrote: "We conclude, then, that money must have value to start with, from some source other than the money function, and that there must always be some source of value apart from the money function, if money is to circulate, or to serve as money in other ways. But this is not to assert the doctrine of the commodity school, that its value must arise from the metal of which it is made, or in which it is expected to be redeemed. Nor is it to deny that the money function may add to the original value. On the contrary, the services which money performs are valuable services, and add directly to the value derived from nonpecuniary sources. Value is not physical, but psychical. And value is not bound up inseparably with labor-pain or marginal utility."5 «§ $»> For our immediate interest, it is to be noted that the philosophical problems of the money mechanism were not overlooked by the clear-thinking Greeks. Aristophanes remarked the phenomenon which is now described as Gresham's Law,* and Aristotle states the gist of the value problem in his Politics?

Money, as it arose in history, was originally natural, deriving its validity from the fact that the objects used as money possessed intrinsic worth, either for use or ornament, or from its connection with religious and customary observances. Such was the case with gold and silver, with cowry shells and wampum, with * "In our Republic bad citizens are preferred to good, just as bad money circulates while good money disappears."—Frogs, p. 717.

THE AGE OF GREECE 27 even the fei, or great stones the size of a mill wheel, used by the natives in the island of Uap. But what made these substances money, in the sense of performing all the monetary functions, was the sanction of society, either by custom or by fiat of the state. When the Greek city placed its emblem upon an ingot of metal and thereby certified to its weight and fineness, the ingot became money in an enlarged sense and capable of functioning on an extended scale. That certificate of the state is a definite and important addition to its value, and as society grows in complexity, and the money function increases, the contribution of the state rises geometrically in importance. In an ideal state of society, perhaps, the intrinsic quality of money might entirely disappear, and be replaced by the value derived from the control of the state. But for that to occur, the control of the state would need be perfect in authority and god-like in intelligence.

What is of immediate importance in the study of money is not a resolution of these diverse theories, or a determination of the relative contribution of social sanction and intrinsic value in the money mechanism, but an appreciation of the means by which the control of money by society may be perfected. Money is a human institution, and as humanity does not live by logic, neither does the money mechanism subject itself to logical analysis and dissection, much as the economist might desire it to. The proper study of money, and its control, must be by the historical approach, by patient study of the manner in which man has lived with money in the past. In this study lies more fruit for hope than all the charts of prices and trends and ratios of statistical and theoretical economics.