CHAPTER XI

MONEY AND THE MECHANISM OF EXCHANGE

W* have reached a point at which it is convenient to
examine the arrangements by which the exchange
of commodities is carried out. In what precedes it has been
assumed that those necessary exchanges can be effected,
which permit specialisation of employment, and thus are
essential to the economic organisation of productive industry
The direct exchange of commodity for commodity, known
as barter, presents difficulties which would preclude its
adoption on an extensive scale, and, if it could not be
avoided, the productive organisation would be primitive
and inefficient. To allow of the free development of
production, there is required an organisation of exchange
which shall effect the following ends: —(1) The makers or
owners of different goods need to be brought into commercial
 relations with each other, so that each can obtain
what he needs in exchange for what he has to dispose of.
(2) Where the goods which one of the parties needs from
the other exceed in value the amount which the latter requires
of the goods of the former, the differences need adjustment,
or exchange would be blocked.
(3) To this end the balances of such exchanges need to be
made available for the purchase of other varieties of goods
than those concerned in the exchange from which they
arise, and the balances from exchanges of entirely different
characters need to be made available for mutual offset.
That this may be done, these balances, in fact the various
values exchanged, need to be expressed in terms applicable,
not merely to the special exchange out of which they arise,
but to exchanges in general. Their expression in terms of