MONEY

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demand  for  it  for  building,  the  demand  for  it
for  furniture,  the  demand  for  it  for  boats,  and
so  on.  However,  the  composite  nature  of  the
demand  for  gold  being  allowed  for,  it  does
become  necessary  to  lay  down  another  proposition ­
  to  complete  the  theory  of  the  purchasing ­
  power  of  money.  This  other  proposition
denotes  the  manner  in  which  supplies  of  gold
are  distributed  between  its  two  broadly  distinguishable ­
  uses,  and  runs  as  follows  :  the
distribution  of  gold  between  its  uses  for  money
and  in  the  arts  is  such  that  its  marginal
utility  is  the  same  in  both  uses  ;  which
means,  in  other  words,  that  the  exchange
value  of  an  ounce  of  gold  must  equal  what  an
ounce  of  gold  will  buy.  An  illustration  of  the
correctness  of  this  proposition  will  be  found
in  the  fact  that  the  price  of  gold  bullion  in
England  never  departs  by  more  than  a
fractional  percentage  from  £3  17s.  lOd.  per
ounce,  that  is  934  pence  per  ounce.  This
apparently  curious  fact,  which  has  caused
not  a  little  misapprehension,  is  simply  a
result  of  the  legal  decision  that  a  sovereign,
which  equals  240  pence,  shall  contain  about
|f£  of  an  ounce  of  gold.
The  second  proposition  relating  to  the
value  of  money  having  been  enunciated  and
defended,  it  must  next  be  pointed  out  that