The Price Of Gold As Compared With That Of Silver.
The price of gold as compared with that of silver does not, by any means,
depend entirely on the ratio of the quantities of the two to each other.
Rather is it, in the long run, determined by the average cost of
production necessary at those gold and silver mines which exist under the
most disadvantageous conditions, but which it is still necessary to work
in order to satisfy the aggregate requirement of these metals. On the
whole, with an advance of economic civilization, the dearness of gold as
compared with that of silver has been enhanced. The former, in the middle
ages, was worth from ten to twelve times as much as the latter,(890) while
now it is worth from fifteen to almost sixteen times as much.(891) In the
same period of time, also, gold in highly civilized countries is wont to
be comparatively dearer.(892)
These facts are explained as well by the demand as by the supply. As the
production of gold requires so little skill or capital, and that of silver
so much of both, the former may be considered a natural product to a
greater extent than the latter, and therefore, the rule laid down in § 130
is applicable to it. (_Senior._) Besides, in the higher stages of
civilization, especially when the precious metals are cheap, larger
payments are usual, to the making of which, gold is certainly best
adapted; just as in every day trade merchants are wont to accept a gold
piece in payment, even at something of a premium, while the peasantry
hesitate to do so.(893)
It is very much of a question whether gold or silver is, on the whole,
subject to greater variations in price. The fact that gold is more
strictly a natural product would of itself constitute a powerful element
of variation. (§ 112). But, on the other hand, its greater durability and
the greater care bestowed on its preservation, have for effect to make the
existing quantity preponderate in importance over its annual increase. The
demand for gold varies more suddenly than the demand for silver. In case
of war or sedition, the former is more easily carried away or hidden. It
is also more desirable for the state for its military fund. On the other
hand, on account of its greater capacity for transportation, it may follow
such claims when made on it, more easily, from country to country. On the
whole, I am inclined to think that, for short periods of time, silver
maintains its value better, and gold for longer ones.(894)