Book I, Chapter XI, 7

Third, they also seem to have been misled by the extremely low prices at which wheat was sometimes sold in very early times, imagining that because its lowest price was far below that of later times, its ordinary price must also have been far lower. Yet they might have found that in those early times its highest price rose as far above anything known in later times as its lowest price fell below it. Fleetwood, for example, gives two prices for a quarter of wheat in 1270: one is four pounds sixteen shillings in the money of the time, equal to fourteen pounds eight shillings in present money; the other is six pounds eight shillings, equal to nineteen pounds four shillings in our present money. No price near such extremes can be found at the end of the fifteenth or beginning of the sixteenth century. Although the price of corn varies at all times, it varies most in turbulent and disorderly societies, where disruptions to trade and communication prevent the abundance in one part of a country from relieving the shortage in another. In England's disorderly condition under the Plantagenets, who ruled from about the middle of the twelfth century toward the end of the fifteenth, one district might have plenty while another, quite nearby, endured all the horrors of famine after its harvest was destroyed by an accident of the seasons or a neighboring baron's incursion. Yet if the lands of a hostile lord lay between the two, the first district might be unable to offer the other the least assistance. Under the vigorous administration of the Tudors, who governed England during the latter part of the fifteenth century and throughout the sixteenth, no baron was powerful enough to dare disturb public security.

At the end of this chapter, the reader will find all the wheat prices Fleetwood collected from 1202 to 1597 inclusive, converted into present-day money and arranged chronologically into seven groups of twelve years each. At the end of each group the reader will also find the average price for its twelve years. Over this long period Fleetwood could find prices for no more than eighty years, leaving four years missing from the last group of twelve. I have therefore supplied, from the accounts of Eton college, the prices for 1598, 1599, 1600, and 1601. This is my only addition. The reader will see that from the beginning of the thirteenth century until after the middle of the sixteenth, the average price in successive twelve-year groups falls steadily lower, and that toward the end of the sixteenth century it begins rising again. Indeed, the prices Fleetwood was able to collect seem chiefly to be those notable for unusual height or lowness, and I do not claim that they support any very certain conclusion. To the extent that they prove anything, however, they confirm the account I have tried to give. Fleetwood himself, nevertheless, seems to have believed, like most other writers, that silver steadily lost value throughout the period because it grew more abundant. The corn prices he himself collected certainly do not support that belief. They agree perfectly with Mr Dupré de St Maur's view and with the one I have tried to explain. Bishop Fleetwood and Mr Dupré de St Maur appear to be the two authors who collected ancient prices with the greatest care and fidelity. It is rather striking that although their opinions differ so sharply, their facts, at least concerning the price of corn, agree so precisely.

Yet the most discerning writers have inferred the great value of silver in those very early times less from the low price of corn than from low prices for other unprocessed products of the land. Corn, it has been argued, is a kind of manufactured product, and in those undeveloped ages was much dearer in proportion than most other commodities—most other unmanufactured commodities, I suppose, such as cattle, poultry, every kind of game, and so on. It is undoubtedly true that in those times of poverty and barbarism these were proportionately much cheaper than corn. But their cheapness resulted not from silver's high value but from their own low value. It was not that silver would then buy or represent a greater quantity of labor, but that these commodities would buy or represent a much smaller quantity than in times of greater prosperity and improvement. Silver must certainly be cheaper in Spanish America than in Europe: cheaper where it is produced than where it must be taken after a long journey by land and sea, with freight and insurance to pay. Yet Ulloa tells us that not many years ago an ox selected from a herd of three or four hundred cost one-and-twenty pence halfpenny sterling at Buenos Ayres. Mr Byron tells us that a good horse cost sixteen shillings sterling in the capital of Chili. In a naturally fertile country whose greater part remains entirely uncultivated, cattle, poultry, every kind of game, and so on can be obtained with very little labor, and will therefore buy or command very little labor. The low money price at which they sell proves not that silver has a very high real value there, but that those commodities have a very low one.

It must always be remembered that labor, not any particular commodity or group of commodities, is the true measure of the value both of silver and of everything else.

But in countries that are largely wilderness or sparsely populated, cattle, poultry, every kind of game, and so on are products that nature supplies of her own accord, often in quantities far beyond what the inhabitants need to consume. Under such conditions supply generally exceeds demand. At different stages of society and improvement, therefore, these commodities will represent, or be equivalent to, very different quantities of labor.

In every kind of society, at every stage of improvement, corn is the product of human industry. The average output of every industry, however, is always adapted, more or less closely, to average consumption: average supply to average demand. Moreover, at every stage of improvement, raising equal quantities of corn in the same soil and climate will require, on average, nearly equal quantities of labor, or, what amounts to the same thing, the price of nearly equal quantities of labor. This is because the steady growth of labor's productive powers under improved cultivation is more or less offset by the steadily rising price of cattle, the principal instruments of agriculture. For all these reasons we can be confident that, at every stage of society and improvement, equal quantities of corn will more closely represent, or be equivalent to, equal quantities of labor than will equal quantities of any other unprocessed product of the land. As already observed, corn is therefore a more accurate measure of value than any other commodity or group of commodities at every stage of wealth and improvement. At all those stages, consequently, we can judge silver's real value better by comparison with corn than with any other commodity or group of commodities.

Corn, moreover, or whatever vegetable food is generally preferred by the people, makes up the greater part of a laborer's subsistence in every civilized country. As agriculture expands, every country's land produces far more vegetable than animal food, and the laborer everywhere lives chiefly on the wholesome food that is cheapest and most abundant. Except in the most prosperous countries, or where labor receives the highest rewards, butcher's meat forms only a negligible part of the laborer's diet; poultry forms an even smaller part, and game none. In France, and even in Scotland, where labor is rewarded somewhat better than in France, the working poor rarely eat butcher's meat except on holidays or other extraordinary occasions. The money price of labor therefore depends much more on the average money price of corn, the laborer's subsistence, than on the price of butcher's meat or any other unprocessed product of the land. Consequently, the real value of gold and silver—the real amount of labor they can buy or command—depends much more on the amount of corn they can buy or command than on the amount of butcher's meat or any other unprocessed product of the land.

Such cursory observations of the prices of corn or other commodities would probably not have misled so many intelligent authors, however, if they had not also been influenced by the popular belief that as a country's wealth increases, its quantity of silver naturally increases and its value therefore falls. This belief, however, seems wholly without foundation.

A country's quantity of precious metals may increase for two different reasons: first, because the mines supplying it become more abundant; or second, because its people become wealthier as the annual product of their labor grows. The first cause is undoubtedly and necessarily associated with a decline in the value of the precious metals; the second is not.

When richer mines are discovered, more precious metal comes to market. Since the amount of life's necessities and conveniences for which the metals can be exchanged remains as before, equal amounts of metal must exchange for smaller quantities of goods. Thus, insofar as a country's increased supply of precious metals results from more productive mines, it is necessarily associated with some reduction in their value.

When, on the contrary, a country grows wealthier and the annual product of its labor gradually increases, it needs more coin to circulate more commodities. Its people, being able to afford it and having more commodities to offer in exchange, will naturally buy more and more silverware. Their quantity of coin will grow from necessity; their quantity of silverware from vanity and ostentation, or from the same cause that is likely to increase the number of fine statues, paintings, and every other luxury and curiosity among them. But just as sculptors and painters are unlikely to be paid less in times of wealth and prosperity than in times of poverty and hardship, so gold and silver are unlikely to command a lower price.

Unless an accidental discovery of richer mines holds down the price of gold and silver, it naturally rises as a country grows wealthier; and whatever the state of the mines, that price is naturally higher at all times in a rich country than in a poor one. Gold and silver, like every other commodity, naturally seek the market that pays the best price, and the best price for anything is generally paid by the country best able to afford it. We must remember that labor is the ultimate price paid for everything; and where labor is rewarded equally well in two countries, its money price will be proportional to the price of the laborer's subsistence. But gold and silver will naturally exchange for a greater quantity of subsistence in a rich country than in a poor one, where subsistence is plentiful rather than only moderately supplied. If the countries are far apart, the difference may be very large: although the metals naturally flow from the worse market to the better, transporting enough of them to bring their prices nearly level in the two may be difficult. If the countries are close, the difference will be smaller and may at times be barely noticeable, because transport is easy. China is much wealthier than any part of Europe, and the difference between the price of subsistence in China and in Europe is very great. Rice is much cheaper in China than wheat is anywhere in Europe. England is much wealthier than Scotland, but the difference in the money price of corn between the two is much smaller, scarcely noticeable. By quantity or measure Scottish corn generally seems considerably cheaper than English corn; by quality, however, it is certainly somewhat dearer. Scotland receives very large supplies from England almost every year, and a commodity must ordinarily cost somewhat more in the country to which it is brought than in the country from which it comes. English corn must therefore be dearer in Scotland than in England; and yet in proportion to its quality—that is, to the quantity and quality of flour or meal it yields—it generally cannot sell there for more than the Scottish corn with which it competes in the market.

The difference in the money price of labor between China and Europe is even greater than the difference in the money price of subsistence. This is because labor's real reward is higher in Europe than in China: most of Europe is improving, while China appears to be standing still. The money price of labor is lower in Scotland than in England because its real reward is much lower. Although Scotland is growing wealthier, it does so much more slowly than England. Frequent emigration from Scotland, and its rarity in England, sufficiently demonstrate the difference in the demand for labor in the two countries. We must remember that the relative real rewards of labor in different countries are naturally determined not by their existing wealth or poverty but by whether their condition is improving, stationary, or declining.

Just as gold and silver naturally have their greatest value among the richest nations, they naturally have their least value among the poorest. Among peoples living in the most primitive conditions, the poorest of all nations, they have hardly any value.

Corn always costs more in large towns than in remote parts of the countryside. This, however, results not from silver's real cheapness but from corn's real dearness. It takes no less labor to bring silver to a large town than to a remote rural district, but it takes a great deal more to bring corn there.

Third, very low prices at which wheat was sometimes sold in very early times also seem to have misled them. They assumed that because its lowest price was much lower then than later, its ordinary price must have been much lower too. But they could have found that its highest price in those early times was just as far above later prices as its lowest price was below them. Fleetwood, for example, records two prices for a quarter of wheat in 1270. One was four pounds sixteen shillings in the money of that time, equal to fourteen pounds eight shillings in our present money. The other was six pounds eight shillings, equal to nineteen pounds four shillings in our present money. No price near these extraordinary levels can be found at the end of the fifteenth or the beginning of the sixteenth century. Corn prices can always change, but they change most in unsettled, disorderly societies. When trade and travel are interrupted, plentiful supplies in one district cannot make up for shortages in another. The Plantagenets ruled England from about the middle of the twelfth century until near the end of the fifteenth. In those disorderly times, one district might have plenty while another close by suffered all the horrors of famine after a crop failed because of the weather or an attack by a neighboring baron. If a hostile lord's land lay between them, the first district might be unable to help the second at all. Under the firm rule of the Tudors, who governed England in the latter part of the fifteenth century and all through the sixteenth, no baron was powerful enough to dare threaten public safety.

At the end of this chapter readers will find all the wheat prices Fleetwood gathered from 1202 through 1597, inclusive. I have converted them into the money of our time and arranged them in chronological order in seven groups of twelve years each. Each group also gives the average price for its twelve years. Across that long period Fleetwood could find prices for only eighty years, leaving four years missing from the last group of twelve. So I added prices for 1598, 1599, 1600, and 1601 from the accounts of Eton college. Those are my only additions. Readers will see that the average for each twelve-year group falls steadily from the start of the thirteenth century until after the middle of the sixteenth, then begins to rise again toward the end of the sixteenth. Admittedly, Fleetwood seems mostly to have found prices worth recording because they were unusually high or low. I do not claim we can draw a very certain conclusion from them. Still, to the extent that they show anything, they support the account I have been giving. Fleetwood himself, like most other writers, seems to have thought silver's value fell continuously throughout this period as it became more abundant. The corn prices he collected certainly do not support that view. They fully support Mr Dupré de St Maur's view and the one I have been explaining. Bishop Fleetwood and Mr Dupré de St Maur seem to have been the most careful and reliable collectors of ancient prices. It is striking that their facts agree so closely, at least on corn prices, while their opinions differ so much.

Yet the most thoughtful writers have based their inference that silver was very valuable in those early times less on low corn prices than on the low prices of some other raw land products. People have said corn was a sort of manufactured product and therefore much more expensive than most other goods in those rough times. I assume they mean most other unmanufactured goods, such as cattle, poultry, game, and so forth. Those goods certainly were much cheaper relative to corn in times of poverty and little development. But they were cheap because they themselves had little value, not because silver had great value. Silver did not buy or represent more labor then; those goods bought or represented far less labor than in richer, more developed times. Silver must surely be cheaper in Spanish America, where it is produced, than in Europe, where it is brought after costly transport over land and sea, freight charges, and insurance. Nevertheless, Ulloa tells us that not many years ago an ox chosen from a herd of three or four hundred cost one-and-twenty pence halfpenny sterling at Buenos Ayres. Mr Byron says a good horse cost sixteen shillings sterling in the capital of Chili. Where land is naturally productive but most of it remains uncultivated, cattle, poultry, game, and the like take little labor to obtain and so command little labor in exchange. Their low money prices do not show that silver's real value is very high there. They show that the real value of those goods is very low.

We must always remember that labor, not any particular good or group of goods, is the real measure of the value of silver and everything else.

In countries that are mostly undeveloped or thinly populated, cattle, poultry, game, and the like arise naturally. Nature often produces far more of them than the inhabitants can consume. Supply therefore commonly exceeds demand. In different kinds of society and at different stages of development, these goods will consequently be worth very different amounts of labor.

At every stage of society and development, people must work to grow corn. The average output of any industry, however, more or less matches average consumption: average supply matches average demand. Also, growing the same amount of corn in the same soil and climate takes about the same amount of labor on average at different stages of development, or costs about the same price for that labor. Better farming continually raises labor's productive power, but the price of cattle, the main tools of agriculture, continually rises too and more or less offsets that gain. For all these reasons, the same amount of corn represents about the same amount of labor at every stage of society and development more closely than the same amount of any other raw land product does. As noted already, corn is therefore a more accurate measure of value than any other good or group of goods at every stage of wealth and development. We can judge silver's real value better by comparing it with corn than by comparing it with any other goods.

Corn, or whatever plant food people commonly favor, also makes up the main part of a laborer's food in every civilized country. As farming spreads, land everywhere produces far more plant food than animal food. Laborers mainly eat the wholesome food that is cheapest and most plentiful. Except in the richest countries or where labor is paid best, butcher's meat forms only a tiny part of their diet. Poultry forms an even smaller part, and game forms none. Working poor people in France, and even in Scotland where labor pays somewhat better than in France, rarely eat butcher's meat except on holidays and other special occasions. Money wages therefore depend much more on the average money price of corn, the laborer's chief food, than on the price of butcher's meat or any other raw land product. The real value of gold and silver—the amount of labor they can buy or command—thus depends far more on how much corn they can buy than on how much butcher's meat or any other raw land product they can buy.

Still, these limited observations of corn and other prices probably would not have misled so many intelligent writers without the popular belief that as a country grows wealthier, its silver supply naturally grows, and the silver loses value as its supply grows. But this belief seems completely unfounded.

A country's supply of precious metals can grow for two reasons. First, the mines supplying it may become more productive. Second, its people may become wealthier because their annual labor produces more. The first cause certainly reduces the metals' value. The second does not.

When more productive mines are found, more precious metal reaches the market. If the supply of life's necessities and comforts for which the metal can be exchanged remains unchanged, a given quantity of metal must buy fewer goods. Thus, insofar as a country's supply of precious metals grows because mines become more productive, their value must fall to some extent.

But when a country becomes wealthier and its workers produce more each year, it needs more coins to circulate more goods. People can also afford, and have more goods to exchange for, a steadily growing quantity of silver plate. Their coin holdings grow out of necessity. Their plate holdings grow out of vanity and display, or for the same reason that wealthy people acquire more fine statues, paintings, luxuries, and curiosities. Yet sculptors and painters are unlikely to be paid less in prosperous times than in poor times. Gold and silver are equally unlikely to fetch less.

Unless the chance discovery of more productive mines holds it down, the price of gold and silver naturally rises as a country grows richer. Whatever the condition of the mines, it is naturally higher at any given time in a rich country than in a poor one. Like all goods, gold and silver go where buyers pay the best price, usually the country best able to pay it. Remember that labor is the ultimate price paid for everything. Where workers are paid equally well in real terms, their money wages vary with the price of the food they live on. But gold and silver naturally buy more food in a rich country than in a poor one, because the rich country has plenty of food while the poor country has less. If the two countries are far apart, the difference can be very large. Even though the metals tend to move from the worse market to the better one, it may be difficult to move enough to bring their prices close together. If the countries are near each other, the difference will be smaller and may barely be noticed, because transport is easy. China is much richer than any part of Europe, and food prices differ greatly between China and Europe. Rice is much cheaper in China than wheat is anywhere in Europe. England is much richer than Scotland, but the difference in their money prices for corn is much smaller and only just noticeable. Measured by volume, Scotch corn generally appears quite a bit cheaper than English corn. Measured by quality, it is certainly somewhat dearer. Scotland receives very large supplies from England almost every year, and goods generally cost somewhat more where they are brought than where they come from. English corn must therefore cost more in Scotland than in England. Yet when allowance is made for quality—the quantity and goodness of the flour or meal it produces—it cannot generally sell in Scotland for more than the Scotch corn competing with it there.

Money wages differ even more between China and Europe than food prices do, because workers receive more in real terms in Europe than in China. Most of Europe is developing, while China appears to be standing still. Money wages are lower in Scotland than in England because real pay is much lower there. Scotland is growing wealthier, but much more slowly than England. The frequency with which people leave Scotland, and the rarity of their leaving England, clearly show that the demand for labor differs greatly between the countries. Remember that differences in real pay between countries are naturally determined not by how wealthy or poor they are now, but by whether they are advancing, standing still, or declining.

Gold and silver are naturally worth most among the richest nations and least among the poorest. Among peoples living outside developed society, the poorest of all nations, they are worth almost nothing.

Corn always costs more in large towns than in remote rural areas. This does not mean silver is really cheaper in towns. It means corn is really more expensive there. It takes no less labor to bring silver to a large town than to remote parts of the country, but it takes much more labor to bring corn there.