Weights and Measures: State or Market?

by Carl Watner
From Number 47 - December 1990

Introduction

Historically, the State has been largely responsible for coinage, and the systems of weights and measures by which the metallic content of coins has been determined, but there is no reason why these operations should not be in the hands of private enterprise. The purpose of this article is to call attention to the parallel between the advocacy of private money and the free market provision of weights and measures.

A Brief History of Weights and Measures

Before there was a State, primitive man perceived a need for measurements of length and weight. For objects which he could lift and handle, nature suggested the arm, the hand's breadth, and the finger as units of measure, while the pace and the foot provided a ready means to measure distance. For small and delicate items, the earliest and most commonly available unit of weight was found in the form of the seeds of plants. The carat weight, used by jewelers and goldsmiths, was originally based on the weight of the carob seed of the near East, or the locust tree seed. In Central Europe, the dry grain of wheat was another natural weight, which gave its name to the standard unit of one grain.' Although seed grains are all not equal, there is a reasonably constant uniformity among samples from the same locality and from the same harvest, which was sufficient to make the early grain' standard widespread from Europe to China.

Apart from the metric system, nearly all of the customary standards of weights and measures used in the western world have evolved from the systems used by the empires of the Middle East. The Beqa Standard, usually associated with the weighing of gold and silver, has by far the longest history of any of the ancient standards. It was used in Egypt throughout 3000 years of dynastic rule, and was then adopted by the Greeks as their standard about 700 B.C. The Romans derived their weights for the silver denarius and the gold aureus from the Beqa Standard. The Arabic empire of the 7th Century A.D. used the Beqa Standard to weigh bulk gold, and ultimately it became the basis for the English troy weight system (which was transmitted to medieval Europe by way of the ancient Greek city of Troy, hence the name).

Since the mining and use of gold and silver were a jealously guarded prerogative of royalty in the ancient world, the provision of coins became a government monopoly. The coining monopoly necessitated government intervention in the definition and promulgation of weights and measures because of the integral connection between measuring gold and silver, and determining the standards by which they were to be measured. To enforce its monopoly in these areas, governments had to erect safeguards for the proper manufacture and use of weights and measures, and simultaneously provide for the prohibition of new standards, which might compete with it's existing standards. The involvement of early governments in these areas is well exemplified by the ordinances found in medieval Germany. The accuracy of early German coinage left much to be desired: many were underweight, others overweight. In an effort to prevent people from discovering and melting down the overweight coins, the government outlawed the private ownership of scales.

There were numerous, other ways in which governments tampered with weights and measures. In the history of nearly every national unit of account, there can be found the story of chronic debasement, either in the form of reducing the weight or the purity of the metal in a given coin, without reducing its legal value. In other times and places, the State has redefined the content or standard of value of the monetary unit. The story of modern State control over currency and coinage may be summed up in the numerous hyperinflations of the Twentieth Century, in which the monetary systems of various countries have been totally destroyed. To say the least, the constitutional mandate of these sovereign nations—generally described as "to coin money, regulate the value thereof, ... and fix the standard of weights and measures "—has demonstrated the total inability of coercive political power to ever accomplish these goals. While there is no guarantee that private enterprise would perform better over the long run, there is at least the assurance that if a private organization fraudulently altered its money or weight standards, other alternatives would be quickly offered by its competitors. The voluntary aspect of market competition in both weights and measures and monies most likely would insure us against the failure of a single coercive monopoly to honor its own laws and standards. In any case, it is hard to imagine private enterprise leaving a more sordid record than the State has left.

The Common Law of Weights and Measures

In any country, there must always be some commonly accepted standard(s) of weights and measures. The use of certain weights and measures, like the use of various kinds of money, originates with the people, in their economic transactions in the marketplace. There is no inherent reason why these common law standards must be legalized or sanctioned by the State; adoption by the government adds nothing to their efficacy. Unless the new system demonstrates an overriding superiority to the one in use, there seems little reason for people to give up the old standard. Indeed, if a new system of weights and measure requires legislation to bring it into use, it must be lacking the advantages which the users consider necessary to cause them to adopt it voluntarily.

The one system developed and promoted by governments, the metric system, has still not been commonly accepted in the United States. Instituted by the revolutionary government of France in 1791, the metric system was supported by compulsory legislation wherever its use became widespread. In the United States, the Metric System Act of 1866, "officially recognized the use of metric weights and measures in commercial transactions," meaning that no contract or pleading in a government court was to be held invalid because the weights or measures expressed or referred to were metric. The Act also provided an official table of equivalents between metric and the customary units of measure. Despite the fact that there was never a similar Act of Congress authorizing the use of our customary systems of English weights and measures, those systems have always been recognized in government courts.

The duty of Congress or some private registry agency with respect to weights and measures is to define and preserve the standard, so that if some dispute arises, there is an independent, third-party verification of the weight or measure used. Lysander Spooner, a 19th Century constitutional lawyer, explained this purpose thusly,

Congress fixes the length of the yard-stick, in order that there may be some standard, known in law, with reference to which contracts may conveniently be made, (if the parties choose to refer to them,) and accurately enforced by course of justice when made. But there is no compulsion upon the people to use this standard in their ordinary dealings. If, for instance, two parties are dealing in cloth, they may, if they both assent to it, measure it by a cane or broom-handle, and the admeasurement is as legal as if made with a yard-stick. Or parties might measure grain in a basket, or wine in a bucket, or weigh sugar with a stone. Or they may buy and sell all these articles in bulk, without any admeasurement at all. All that is necessary to make such bargains legal, is that both parties should understandingly and voluntarily assent to them—and that there should be no fraud on the part of either party.

Spooner's analysis also sheds light on the evolution of new units of measurement, and their legal and commercial use. For example, prior to the development of oil pipelines, oil was commonly moved in barrels, and transported by horse and wagon, or boat. The term barrel' as we know it today, and as used by the OPEC countries, is a measure of 42 gallons of petroleum, that came into use only during the last 125 years. In the early 1860s, a barrel of oil usually meant a cask of oil, regardless of its size, for there were no standard-size casks in use. Variations in the oilman's barrel persisted until at least 1872, when a producer's agreement resulted in a fixed price for a 42 gallon barrel of oil. Today, it doesn't matter if oil was ever shipped in 42 gallon barrels or not, since it is now moved by pipeline, oil tankers, and tank trucks. What is important to us, is that the custom still persists of buying and selling oil by the barrel. The oil pioneers did not (indeed they could not) wait for the government to proclaim a unit by which they should measure and sell the oil they discovered. Rather they adopted measurements from other liquids (the whiskey barrel of western Pennsylvania, where oil was first commercially exploited, was a 42 gallon container). Eventually there arose from the competition of various interests (the producers, transporters, and consumers of oil), the industry standard of a 42 gallon barrel. It did not originate in the halls of any legislature and needed no governmental sanction.

The history of the oilmen's barrel is just one incident in the standardization of weights and measures in modern industrial America (there are many others). For example, the development of the electrical industry explains why product integration and standardization were needed. It also exemplifies the manner in which the free market operates. Light bulbs must screw into household sockets; electrical appliances must be supplied with the proper voltage. The United States electrical industry agreed on standards because it made economic sense, not because they were imposed by Congress.

Producers who do not wish to abide by the standards, or who wish to introduce new standards, are not prohibited from doing so; but neither is there any guarantee that their efforts will find consumer acceptance, which is the ultimate test of the market. Another example, much closer to home to the readers of this newsletter, involves the decimalization of the troy ounce, which was pioneered by Conrad Braun and Gold Standard Corporation. The troy ounce, by which gold has historically been traded in the modern world, is based upon twelve ounces, each of twenty pennyweight. Nevertheless, economists and gold advocates believed that gold gram coinage (rather than pennyweight coins) would be the most appropriate way of introducing gold coins to the public. After gold ownership became legal, several mints, including the South African government, tried to market gold coins of 5, 10, and 20 grams. These coins were not widely accepted by the public since it was difficult to readily calculate their worth. Gold Standard solved this problem by decimalizing the troy ounce, producing coins of 1/10, 1/5, 1/4, and 1/2 of an ounce, whose value could easily be determined in relation to the spot price of gold.

Conclusion: Compulsion or Voluntaryism?

Justice in weights and measures systems means the dominance of those systems which best fulfill the needs and desires of the consumers and users on the market. In the absence of coercion, fraud, and government intervention, those weights and measures systems which prevail are necessarily the most satisfactory (taking into account the past state of affairs). The advantage of market-oriented weights and measures is that they are responsive to changes in consumer needs and demands, as well as new technological developments. Compulsory government standards can only be changed by fiat and must often be imposed by force.

Like the rest of human knowledge, the science of weights and measures is ever-evolving. It has roots in the past, and there exists a capital investment in any given weights and measures system, riot only human inertia, but the financial stake in existing standards impedes the acceptance of new weight and measurement systems. Just as Gresham's Law of Money points out that in the absence of government interference, the more efficient money will drive from circulation the less efficient money (if the individuals who handle money are left free to act in their own interest), so in the absence of government-mandated standards, the most naturally-suited systems of weights and measures will eventually drive the less naturally-suited out of use.

The national Bureau of Standards, the federal agency most responsible for weights and measures, is subject to the same criticisms that can be directed against all governmental operations. It is funded by taxation, so that people who do not desire its services are forced to pay for them anyway. The services it provides are not subject to the test of the market, therefore either their quality and/or price are not as good as those that could be provided by private enterprise. There are no services performed by the Bureau that could not be accomplished by private individuals operating in a free-market framework. The continuing research carried out by scientists at the Bureau may be necessary to the improvement of weights and measures systems and the mastery of metrology (the science of weights and measures). However, there is no reason why, if there is a market demand for such services, they would not be forthcoming from private research labs, each competing with the other to provide the best possible service at the lowest price. If the free market can provide better quality, price, and service in the area of money and banking, there is no reason why it cannot succeed in the realm of weight and measures.