Lecture 9 — Money

Therefore, all things capable of exchange ought to be compared in some way. For this purpose, money was invented and became a kind of medium measuring everything including excess and defect. [978]

A certain number of sandals are equal in value to a house or to a quantity of food. Therefore, as many sandals must be exchanged for a house or a quantity of food in proportion as the builder contributes more than the shoemaker (or the farmer). If this is not observed, there will be neither exchange nor sharing. But this reciprocation will not be possible unless things are equated. [980]

Therefore, it is reasonable to measure all things by one norm, as has been pointed out previously. This norm in reality is demand, which connects all things. If men were not in need, there would be no exchange, or if they did not have a similar demand, exchange would not be the same. Money originated by agreement on account of necessary exchange. Hence, money (numisma) has the name because it is a norm not by nature, but by law (nomos). We have the power to change money and to make it useless. [981]

When things have been equated, there will be reciprocation, so that, as the farmer is to the shoemaker, the amount of the shoemaker’s work is to the amount of the farmer’s work. When things are to be exchanged, they ought to be represented in a figure showing proportionality. If this is not done, one extreme will have both excesses, but when all have what is theirs, they will be equal and will do business with one another, because this equality can be brought about for them. [983]

Let A represent the farmer, G the food, B the shoemaker, and D his equated work. If there is no such reciprocation, there will not be any sharing of goods. [984]

That human demand connects everything as by a kind of measure is evident because, when men are so mutually situated that both or at least one is not in need, they do not exchange their goods. But they engage in exchange when one needs what the other has, such as wine, and they give grain for it. An equation then must be made between these goods. [985]

For future exchanges, money is, as it were, a guarantee that a man who has no present need will be helped when he is in want later on. The man who offers currency should receive what he needs. However, currency suffers like other things, for it is not always of the same value, although it tends to be more stable than other things. [986]

Everything then must be evaluated in money, for in this way, exchange will always take place, and consequently association among men. Money equates goods, making them commensurate after the manner of a measure. Indeed, association is not possible without exchange, nor exchange without equality, which cannot exist unless there is commensuration. [988]

It is impossible that things so greatly different be made commensurate according to reality, but they agree sufficiently by comparison with the needs of man, and so there must be one measure determined by man. And this is called money, which makes all things commensurate inasmuch as they are measured by money. [989]

Let A represent a house, and B five minae. Let G represent a bed worth one mina. The bed then will be one fifth the value of the house. Therefore, it is obvious how many beds equal a house, five. Likewise, it is obvious that barter took place before money existed. But it makes no difference whether five beds or the value of five beds are given. [990]

We have now discussed the nature of what is just and what is unjust. [991]

978. After the Philosopher has proposed the form of proportionality with which reciprocation is identified in exchange, he now shows in what way this form of proportionality can be observed.

First, he explains his intention.

Second, at that human demand (1133b6; [985]), he clarifies the previous statements.

He discusses the initial point in a twofold manner.

First, he shows that to preserve the form of proportionality perfectly it is necessary to make everything commensurate.

Second, at when things have been (1133a31; [983]), he explains how a just reciprocation in exchanges may be effected by a commensuration of this kind.

He treats the first point under three aspects.

First, he explains the nature of that which measures all things.

Second, at a certain number (1133a21; [980]), he shows how such a commensuration is established in exchanges.

Third, at therefore, it is (1133a25; [981]), he indicates the nature of this commensuration.

979. He first says that, in order that the products of the different workmen be equated, and thus become possible to exchange, it is necessary that all things capable of exchange should be comparable in some way with one another so that it can be known which of them has greater value and which less. It was for this purpose that money or currency was invented, to measure the price of such things. In this way, currency becomes a medium, inasmuch as it measures everything, both excess and defect, to the extent that one thing exceeds another, as was pointed out before [955, 959–60]. It is a mean of justice—as if someone should call it a measure of excess and defect.

980. Next, at a certain number (1133a21), he shows how exchange takes place according to the preceding commensuration. Although a house is worth more than a sandal, nevertheless, a number of sandals are equal in value to one house or the food required for one man during a long period. In order, then, to have just exchange, as many sandals must be exchanged for one house or for the food required for one man, as the builder or the farmer exceeds the shoemaker in his labor and costs. If this is not observed, there will be no exchange of things and men will not share their goods with one another. But what has been said, that a number of sandals are exchanged for one house, is not possible unless the sandals are equated with the house in some way.

981. At therefore, it is (1133a25), he indicates the nature of this commensuration made by means of money. He states that, for this reason, it is possible to equate things, because all things can be measured by some one standard, as was pointed out [957]. But this one standard that truly measures all things is demand. This includes all commutable things, since everything has a reference to human need. Articles are not valued according to the dignity of their nature, otherwise a mouse, an animal endowed with sense, should be of greater value than a pearl, a thing without life. But they are priced according as man stands in need of them for his own use.

982. An indication of this is that, if men were not in need, there would be no exchange, or if they did not have a similar need—that is, of these things—exchange would not be the same, because men would not exchange what they have for something they did not need. That demand really measures everything is evident from the fact that money originated by arrangement or a kind of agreement among men on account of the necessity of exchange, that is, exchange of necessary goods. There is an agreement among men that what a person needs will be given him in exchange for currency. Hence, currency is called money (numisma), since currency is not a measure by nature but by law (nomos); for it is in our power to change currencies and make them useless.

983. Then, at when things have been (1133a31), he shows how just reciprocation takes place in exchanges according to the preceding commensuration. First, he explains his proposition; and then, at let A represent, puts it in a diagram. He says first that the norm measuring all things by need according to nature and by currency according to human convention will then become reciprocation when everything will be equated in the way just mentioned. This is done in such a manner that, as the farmer (whose work is raising food for men) excels the shoemaker (whose work is making sandals), in the same proportion, the work of the shoemaker exceeds in number the work of the farmer, so that many sandals are exchanged for one bushel of wheat. Thus, when exchange of things takes place, the articles to be exchanged ought to be arranged in a proportional figure with diagonals, as was stated previously [957]. If this was not done, one extreme would have both excesses; if a farmer gave a bushel of wheat for a sandal, he would have a surplus of labor in his product and would have also an excess of loss because he would be giving more than he would receive. But when all have what is theirs, they are in this way equal and do business with one another because the equality previously mentioned is possible for them.

984. Next, at let A represent (1133b4), he puts in a diagram what has been said about the proportional figure. Take then (as in the previous example) a square ABGD, and two diagonals AD and BG intersecting one another. Let A represent the farmer and G the food, his product, such as a bushel of wheat. Let B represent the shoemaker and D his equated product, as many sandals as have the value of a bushel of wheat. There will then be a just reciprocation if A be joined with D and B with G. If there is not such a compensation, men will not share their goods with one another.

985. At that human demand (1133b6), he explains more fully what has already been mentioned.

First, he shows how things are made commensurate;

second, at everything then (1133b14; [988]), how the things made commensurate may be exchanged.

He discusses the first point from two aspects.

First, he shows that necessity is a measure according to reality;

second, at for future exchanges (1133b10; [986]), how currency is a measure according to the provision of law.

He says first that the statement [981–82] that human need contains everything as a certain measure is explained in this way. When men are so situated among themselves that either both, or at least one, do not need a thing possessed by the other, they do not engage in mutual exchange. But exchange does take place when a man owning grain is in need of wine, which his neighbor has, and thus gives the grain for the wine, such that a quantity of grain is allotted according to the value of the wine.

986. Then, at for future exchanges (1133b10), he shows clearly how currency serves as a measure. On this point, we must consider that, if men always needed immediately the goods they have among themselves, they would have no need of any exchange except of thing for thing, for instance, wine for grain. But sometimes one man (who has a surplus of wine at present) does not need the grain that another man has (who is in need of wine), but perhaps later he will need the grain or some other product. In this way, then, for the necessity of future exchange, money or currency is, as it were, a surety that, if a man has no present need but may want in the future, the thing he needs will be available when he presents the currency.

987. The particular virtue of currency must be that, when a man presents it, he immediately receives what he needs. However, it is true that currency also suffers the same as other things, in that it does not always obtain for a man what he wants because it cannot always be equal or of the same value. Nevertheless, it ought to be so established that it retains the same value more permanently than other things.

988. Next, at everything then (1133b14), he explains how, by the measure of currency, there is exchange of things that are made commensurate in currency.

He discusses this point from three aspects.

First, he shows in what manner there is exchange of goods that are measured in currency.

Second, at it is impossible (1133b18; [989]), he discloses under what aspect currency serves as a measure.

Third, at let A represent a house (1133b23; [990]), he puts in terminals what was said.

He states first that, because currency as a measure ascertaining quantity retains its value longer, all goods must be evaluated in currency. In this way, exchange of goods can take place and, consequently, association among men. Money equates commutable goods, as a certain measure making them commensurate. He clarifies what has been said by stating that association is not possible if there is no exchange. But exchange is impossible unless an equality is established in goods, which in turn cannot exist without commensuration.

989. Then, at it is impossible (1133b18), he shows in what way currency is used as a measure. He says that it is impossible that things so greatly different be made commensurate according to truth, that is, according to the peculiar nature of the things themselves. But they can be sufficiently contained under one measure by comparison with the needs of men. Hence, there must be some one criterion that measures all things of this kind and is not a measure by reason of nature, but because so fixed by men. Therefore, this is called money, owing to the fact that it makes all things commensurate insofar as they are measured by money.

990. At let A represent a house (1133b23), he explains in terminals what has been said, stating: let A be a house worth five minae, B a bed worth one mina, and in this way the bed will be one fifth the value of the house. Hence, it is obvious how many beds are equal in value to one house, five. Likewise, it is obvious that barter took place before there was currency, since five beds have been exchanged for one house. But it makes no difference whether five beds are given or only the value of five beds.

991. He concludes, saying that we have now discussed the nature of what is just and what is unjust.