quantities of goods exchanged?[124] I shall not trouble to solve this problem, as it seems to me not the most useful way to approach the problem of the value of money, but I submit it to the consideration of advocates of the quantity theory. My present purpose is accomplished in pointing out the psychological assumptions which the quantity theory makes: a psychology of blind habit, in a situation where the price-level is free from control by customary prices. Now at another point I wish to mediate between the quantity theorists and their extreme opponents. Representatives of the Metallist of Commodity School--like Professor Laughlin, and Professor Scott in his earlier writings--seem to deny that the money-employment has any direct effect in increasing the value of money. The money-employment affects the value of money only indirectly, by withdrawing the money metal from the arts, so raising the value of the money metal, and consequently raising the value of the coined metal. The quantity theory, on the other hand, would utterly divorce the value of money from causal dependence on the stuff of which the money is made. Both these views seem to me extreme. Unless money has value from some source other than the money employment, it cannot be used as money at all. Nobody will want it. On the other hand, the money use is a valuable use. Exchange is a productive process. Money, as a tool of exchange, enables men to create values. And you can measure the value of the money service very easily at a given time if you look at the short time "money-rates," _i. e._, rates of discount on prime short term paper. These are properly to be considered, not interest on abstract capital, but the rent of a particular capital-good, namely, money. The money is hired for a specific service, namely, to enable a man to get a specific profit in a commercial transaction. Money is not the only good which can be thus employed, and which is paid for for this purpose. Ordinarily a man will pay for money for this purpose. Sometimes, however, one needs the temporary use of something else more than one needs money, and the holder of money pays a premium for the privilege of temporarily holding the other thing. I refer especially here to the practice of "borrowing and carrying" on the stock exchange. The "bear" sells stock which he does not possess, and must deliver the stock before he is ready to close his transaction by buying to "cover." He goes to a "bull" who has more stock than he can easily "carry," and who is glad to "lend" the stock in return for a "loan" of its equivalent in money. Ordinarily the bull is glad to pay a price for the money, as it is of service to him. Sometimes, however, the situation is reversed, and the service which the temporary loan of the stock performs for the hard-pressed bears is greater than the service which the money performs for the bulls, and the payment is reversed. When the bull pays a premium to the bear, for the