THE NOTION OF MONEY 175
And so our first conclusion is that, contrary to the
classical theory, the exchange value of precious metals
accepted for free coinage is not determined like that of
any commodity on any market, for the very reason that a
metal accepted for free coinage is not subject to supply
and demand and enjoys an unlimited market at a fixed
rate. On the other hand, the amount of precious metals
produced has only a partial and indirect effect on the
value of the monetary unit.
S 3. The exact meaning of the idea of a monetary standard.
But the preceding observations have also a different
significance; for it was possible for two metals, i.e., two
different products, to appear simultaneously as the basis
of a monetary system, because the idea of a monetary
standard is not as important as the promoters of bi-
metallism thought and as many people still think. The
rates of the two metals produced under different con-
ditions would necessarily have been independent and the
exchange ratio between them would necessarily have
varied if they had not been both accepted for free coinage,
with the result that the producers were certain to obtain
a constant number of monetary units in exchange for a
given weight of metal in spite of variations in the cost
of production. 7z was therefore impossible that both should
at the same time have determined the value of the monetary
unit.
We are therefore led to the paradoxical but logical con-
clusion that neither gold nor silver has been a monetary
standard in the ordinary sense of the word. Under the system
of free coinage neither has determined the value of
monetary units theoretically defined as a certain weight
of fine gold or silver, and in practice embodied in mone-
1Is it not surprising, on further consideration, that phenomena con-
nected with the value of monetary metals should continue to be explained
so obstinately on the supposition of a commodity which is supplied and
demanded on the ordinary market, whereas we have here a market on
which the commodity offered is exchangeable for a constant number of
monetary units, whatever the supply ?
