162 MONEY AND CREDIT 



II 



Functions of Money 



Since the time of Ricardo there has been a magnificent confidence 

 that the theory of money has been so well settled that there was 

 little more to be said on the subject. The economic dogma of money, 

 at least, was supposed to be fairly complete. And yet, in my 

 judgment, the systematic treatment of the principles of money 

 has remained undeveloped almost to the present day. There is 

 scarcely any part of the field which can be regarded as thoroughly 

 disposed of. Indeed, the very definition of money itself is to-day 

 under the most critical examination; and with the definition goes 

 the question as to the functions performed by money. On these 

 points, like investigators in other sciences, we must frankly admit 

 our lack of agreement. 



First of all it should be emphasized that the dispute about the 

 definition and functions of money is not merely a question of words; 

 it relates, in truth, to fundamental problems of great practical im- 

 port. Every day the statesman and man of affairs are confronted 

 by difficulties connected with the primary effect of " money " on 

 prices in general; but it is at once patent that the relation of the 

 value, or quantity, of " money " to prices cannot be disposed of 

 until we have determined what we mean by " money." As at 

 present used, " money " has no scientific precision; it is often care- 

 lessly employed in many different senses by one and the same author. 



Evidently before a rational definition of money can be found, 

 some agreement based upon an analysis and description of the 

 functions actually performed by money must be reached. If 

 several dissimilar services are rendered by monetary instruments; 

 if each of these services is associated by usage with " money," and 

 if it happens that different things are employed in these different 

 services, then, while authors may agree as to many of the func- 

 tions of money, it may easily happen that they may still disagree 

 as to which shall be regarded as essential to the definition of money. 

 Money may have different meanings according as it is made to in- 

 clude, or exclude, some or any unquestioned services associated by 

 usage with money. In such ways, an important difference might 

 arise between that which is money in an economic, or true sense, 

 and that which is money in a legal sense. In fact, the economic 

 relations of money ought to be scientifically ascertained before legal 

 functions should be assigned to it. If, for instance, the state should 

 apply the quality of legal tender loosely to some instrument which 

 does not completely fulfill all the functions of money, then that 

 money is not, in the economic sense, true money. It thus often 

 happens that incomplete forms of money exist, which give the public 



