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which there is no exchange and in which the only valuations are those of the responsible official body. Opportunities for valuation in such a society would arise in the control of production and consumption, as, for example, in deciding how certain production goods were to be used when there were alternative ways of using them. But in such a society there would be no room at all for money. Under such conditions, a common medium of exchange would have no utility and consequently no value either. It is therefore illegitimate to adopt the point of view of the community as a whole when dealing with the value of money. All consideration of the value of money must obviously presuppose a state of society in which exchange takes place and must take as its starting point individuals acting as independent economic agents within such a society,[24] that is to say, individuals engaged in valuing things.

5 "Monetary" and "Nonmonetary" Influences Affecting the Objective Exchange Value of Money

Now, the first part of the problem of the value of money having been solved, it is at last possible for us to evolve a plan of further procedure. We no longer are concerned to explain the origin of the objective exchange value of money; this task has already been performed in the course of the preceding investigation. We now have to establish the laws which govern variations in existing exchange ratios between money and the other economic goods. This part of the problem of the value of money has occupied economists from the earliest times, although it is the other that ought logically to have been dealt with first. For this reason, as well as for many others, what has been done toward its elucidation does not amount to very much. Of course, this part of the problem is also much more complicated than the first part.

In investigations into the nature of changes in the value of money it is usual to distinguish between two sorts of determinants of the exchange ratio that connects money and other economic goods; those that exercise their effect on the money side of the ratio and those that exercise their effect on the commodity side. This distinction is extremely useful; without it, in fact, all attempts at a solution would have to be dismissed beforehand as hopeless. Nevertheless its true meaning must not be forgotten.

The exchange ratios between commodities—and the same is naturally true of the exchange ratios between commodities and money—result from determinants which affect both terms of the exchange ratio. But existing exchange ratios between goods may be modified by a change in determinants connected only with one of the two sets of exchanged objects. Although all the factors that determine the valuation of a good remain the same, its exchange ratio with another good may alter if the factors that determine the valuation of this second good alter. If of two persons I prefer A to B, this preference may be reversed, even though my feeling for A remains unchanged, if I contract a closer friendship with B. Similarly with the relationships between goods and human beings. He who today prefers the consumption of a cup of tea to that of a dose of quinine may make a contrary valuation tomorrow, even though his liking for tea has not diminished, if he has, say, caught a fever overnight. Whereas the factors that determine prices always affect both sets of the goods that are to be exchanged, those of them which merely modify existing prices may sometimes be restricted to one set of goods only. [25]

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[1] See pp. 99. Also Böhm-Bawerk, Kapital und Kapitalzins, Part II, p. 274; Wieser, Der natürliche Wert, p. 46. (Eng. trans. The Theory of Natural Value.)

[2] See Wieser, "Der Geldwert und seine Veränderungen," Schriften des Vereins für Sozialpolitik. 132:513 ff.

[3] See Knies, Geld und Kredit (Berlin, 1885), vol. 1, p. 324.

[4] Thus Locke, Some Considerations of the Consequences of the Lowering of Interest and Raising the Value of Money, 2d ed. (London, 1696), p. 31.

[5] See Subercaseaux, Essai sur la nature du papier monnaie (Paris, 1909),