measuring the value of the commodities for which they are exchanged. And as the value of commodities depends upon the efforts expended, under the law of supply and demand, in producing and delivering them at the place of need, the ultimate function of paper representatives of value is to measure and reward human effort.
By way of example, let it be supposed that a tailor sells a suit of clothes and receives in payment therefor a check for, say, fifty dollars. He deposits that check in a bank in the belief that he can obtain a definite worth for it in whatever commodities or services he may choose to invest it, and the bank likewise accepts and places it to his credit, in the belief in the ability of the signer and indorser to produce commodities or services of the value for which it calls. If the tailor buys a set of furniture and gives his check for fifty dollars therefor, what he has done has been to exchange the value of cloth as measured, cut, sewed, and trimmed into particular shape for timber, cut, joined, and varnished into a particular shape of what he deems an equal value. The value of the efforts of men expended in producing the clothes has been balanced against the value of the efforts of men expended in producing the furniture. If fifty dollars in coin were received for the clothes and given for the furniture, the effort expended in producing the clothes would be measured against the effort expended in producing the furniture, by the use of an intermediate commodity; if a check were received for the clothes and a check paid for the furniture, effort would be measured against effort by means of paper representatives of value through the agency of a bank. If the tailor, instead of purchasing furniture worth fifty dollars, purchases a number of articles aggregating fifty dollars in value, the result is the same. The efforts of men in producing the number of articles have been measured against the efforts of men in producing the suit of clothes, and this is the function performed by money in every exchange, whether great or small, and whether the money is coin or a paper representative of value. Effort as expressed by result is measured against other effort as expressed by other result.
The test of the efficiency of a paper representative of value, therefore, is the extent to which it can be exchanged for the value which it expresses. But as the value of a paper representative of value is expressed in terms that also express the value of coins, it is a measure of so much value as is represented by the coins, and a paper representative of value is at present almost universally considered as such only to the extent that it is the representative of coin. A certain amount of coin, or the bullion from which it is derived, has a definite and known value
