To beginwith the’existence of money as.anessential prerequisiteof development. Perception of the inconvenience of barter begins very early indeed. It is to be discerned in the discussions of money-making in Aristotle’s Politics. I The probable lack of coincidence of wants in the absence of a medium of exchange is explicitly stated by the Roman jurist, Paulus; and whether because of this or by reason of independent reflection the same point was emphasised by St Thomas Aquinas and thereafter by other scholastic writers and mercantilist pamphleteers. I So that by the time, 17°5, that John Law came to write his famous tract Money and Trade Considered – in spite of its fateful recommendations for policy, the repository ofso many brilliant intuitions regarding finance – the theory of the subject had become selfconscious and explicit. Law’s formulation was succinct and authoritative.
The’state of barter was inconvenient and disadvantageous:
I. He who desired to barter would not always find people who wanted the goods he had, and had such goods as he desired in exchange.
2. Contracts taken payable in goods were uncertain for goods of the same kind differed in value.
3. There was no measure by which the proportion of value goods had to one another could be known. In this state of barter there was little trade and few artsmen…. The losses and difficulties … would force the landed-men to :::. greater consumption ofthe goods oftheir own product, and a lesser consumption of other goods.’
It wasin some such form asthis, orsomething less well developed, that the theory ofthe subject was transmitted through the works of the classical period from Adam Smith to John Stuart Mill.3 It was not until Walras that the matter was further refined by his beautiful demonstration that, even where there existed a qualita tive coincidence of wants, in the absence of a medium of indirect exchange, it would be a matter of pure accident if the ratios of exchange between pairs’of commodities were mutually consistent.
There is one exception to this sequence from Aristotle onwards of variations on a hackneyed theme. In his Della Moneta, Galiani demonstrates, in a context of much broader considerations, the necessity ofmoney for any advanced community in away which deserves much more notice than it has hitherto received in the literature of the subject. He takes the inconveniences of barter more or less for granted and asks why these cannot be avoided by a communistic organisation such as actually exists in the establishment of. religious orders.
The difficulty, he contends, arises because in larger communities it is not possible to count on the same sense of obligation and honesty as. prevails in small elites where everyone may be counted on to do his fair share of work and to contribute the full fruit~ of his labour to the common pool. But this, he suggests, could be circumnavigated by the issue of tickets acknowledging the receipt of goods and thus entitling the producer to others. These tickets obviously should be eligible for the procurement of more than one other type of commodity and for this purpose, it would be necessary that equivalences should be established: a bushel of corn being equal to so much wine, meat, oil, clothing, cheese, etc. This system would be liable to fraud if the tickets were issued by the various entrepots. But this could be remedied if they were all issued by the Prince. . ..
At this point Galiani recognises that what he has done is to recreate the actual conditions of the world, whereby through the use of money and prices it is possible to transcend the miserable condition in which each works only·for himself and achieve a state of affairs in which each is working for society in general; and this, not by relying on virtue or piety, motives not present in sufficient abundance in large societies, but on the force of individual interest and its urge to satisfaction…. My summary, which perforce omits many felicitous details, including the introduction of a tax system, can give only a faint impression of the elegance and force of Galiani’s argument. As M. Bousquet has rightly remarked, it is ‘une grande page de la litterature economique mondiale’.
I Even Galiani, however, is very general. He shows together with the rest that the existence of money is essential if economic life is to have any degree of complexity. But his demonstration, equally with· that of all the others who have expatiated on the inconveniences of barter, is not explicitly focused on the connection between the use of money and the development of the economic system. For such focus we have to go to Turgot who in his Reflexionssur la Formation et la Distribution des Richesses puts money right in the centre of this picture. ‘The moremoney came to stand for everything else’, he says, ‘the more possible did it become for each person, by devoting himself entirely to the kind of cultivation or industry he had chosen, to relieve himself of all care for the satisfaction of his other wants, and to think only how he could obtain as much money as possible by the sale of his fruits or his labour, very sure that by means ofthis money he can get all the rest. It is thus that the employment of money·has prodigiously hastened the progress of society.’
This puts money into direct relation with the progress consequent on the division of labour. Later on it is linked with increased facility for the accumulation of capital: ‘the ease with which it (money) can be accumulated has made it the most sought-after of moveable riches and has furnished the means to augment (their) quantity unceasingly simply by means of economy’.
