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government, or at least on public opinion; and that these can raise its exchangeable value as currency above the exchangeable value which the materials of which it is formed possess as commodities. This position is absolutely denied by others: and both parties, as is usual in all practical questions on Political Economy, appeal to facts and experience. "The money of Lacedæmon," observes Say," is a proof of the position, that public authority is incompetent of itself to give currency to its money. The laws of Lycurgus directed the money to be made of iron, purposely to prevent its being easily hoarded or transferred in large quantities; but they were imperative, because they went to defeat these, the principal purposes of money. Yet no legislator was ever more rigidly obeyed than Lycurgus." The very frequent and repeated attempts also made by the most despotic sovereigns during those periods of history, and in those countries in which the subjects were most disposed to implicit obedience, and when the uses of money were comparatively few, are appealed to in support of the position, that public authority is incompetent of itself to give currency to its money.

Those who support the contrary doctrine, though they modify it in some degree, and thus think they remove the objections deduced from the facts we have just stated, still uphold in reality the doctrine-that the value of money does not depend exclusively on the value of the commodity of which it is formed, but that it may be fixed at first, or raised above that value by the influence of government, or of public opinion, or of both combined. They allege, that government can give currency to articles, as money, above their real value, not from the exercise of despotic authority, but from another cause. The power of a government to select arbitrarily the material of its money, depends principally upon the frequency and amount of its dealings with individuals. On this principle, they account for the currency of inconvertible paper, and of what were called tokens, that is, silver stampt by government, as of a value considerably above the market value of the metal of which it was formed. They likewise appeal to the silver currency of this country at the end of the eighteenth and beginning of the nineteenth cen

turies, at which period the shillings and sixpences passed without difficulty or scruple for their nominal value, though their real value was very much depreciated by their lightness.

Here, then, on this point, we have a fresh instance of contrariety of opinion among Political Economists; and each party appealing to facts in support of his peculiar doctrine. There must be some fundamental error somewhere in the discussion of the subject of the theory of money; the two broad and directly opposite positions, that public authority can give currency to its money,—and that it cannot, cannot each rest on facts: one or other must be erroneous, or there must be some modifications in the positions themselves, and some peculiar and operative circumstances connected with the facts, which ought to be taken into account, but which are not.

But can a nation itself invest with the character and uses of money any article which does not possess real and exchangeable value as a commodity? This question seems to require an answer in the affirmative, from the evidence of the facts already stated; for, by them, we perceive, that silver coin, worn down twenty or thirty per cent in value, still retained all its powers as currency in the interchange of goods. This fact, however, is represented as not bearing so directly and powerfully on the question, as to decide it in the affirmative. Those who embrace the opposite opinion, contend that silver coin being only used as a substitute for gold, where the payments are small, its diminution of weight, while its exchangeable power remains the same, does not prove that custom or consent can invest money with more value than the marketprice of the article out of which it is formed, will warrant and support. If, they add, gold coin, much worn, still were received for its original value, this would be a much more applicable and decisive fact. But, they appeal to experience as witnessing, that whenever and wherever gold coin has been much worn, it has ceased to retain its nominal value. To this, a rejoinder is made, that as even gold coin is declared by law legally current, below its full weight, and as it has often, and for a length of time, passed by common consent for its full value, although weighing less than the law de

clares it to be legally current at, these facts prove the general proposition, that the power of the government, and the consent of the people, can invest money with a greater value than the metal of which it is composed bears in the market.

Thus we perceive that the farther we enter into Political Economy, and the more we extend our views of it, as it is taught by the most celebrated writers on the subject, the more numerous and impressive are the proofs and instances of diversity of opinion, -each opinion supported by plausi ble and ingenious arguments, and appealing to incontestable and apparently decisive facts. But the subject of money will supply us with still more proofs of this diversity of opinion.

The doctrine of Hume is, that money is nothing but the representative of labour and commodities, and serves only as a method of rating or estimating them; and he quotes what he calls the shrewd observation of Anacharsis, the Scythian, who had never seen money in his own country, that gold and silver seemed to him of no use to the Greeks, but to assist them in numeration and arithmetic. He farther observes, money is not, properly speaking, one of the objects of commerce, but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another. It is not one of the wheels of trade; it is the oil which renders the motion of the wheels more smooth and easy! An Italian Political Economist, of considerable repute, defines money, "a commodity-a metal, whose value is represented by the commodity for which it is exchanged; the universal merchandize, that is, the merchandize which, on account of the smallness of its volume, (which renders its transport easy, and on account of its divisibility and incorruptibility,) is universally acceptable, and taken in exchange for any other merchandize."

"In all civilized nations," says Adam Smith, "money has become the universal instrument of commerce, by the intervention of which goods of all kinds are bought and sold, or exchanged for one another."

Lord Lauderdale considers money as part of capital, and, consequently, as agreeing with capital in being useful or profitable to man, from the cir

cumstance of its either supplanting a portion of labour, that would otherwise be performed by the hand of man, or of its executing a portion of labour, beyond the reach of the powers of man to accomplish.

Say observes, that money is employed as a mere intermediate object of exchange between an object in possession, and the object of desire; it is not desired as an object of food-of household use or of personal covering, but for the purpose of re-sale, as it were, and re-exchange for some object of utility, after having been originally received in exchange for one such already. Money is, therefore, not an object of consumption; it passes through the hands without sensible diminution or injury, and may perform its office equally well, whether its material be gold or silver, leather

or paper.

Ricardo, and some other writers, maintain, that the charges of obtaining the metal, wholly determine its price or relative value, in exchange for all other commodities.

Is money then to be regarded mere. ly as counters, to rate and numerate commodities, and can it have no effect, either good or bad, as Hume maintains, where it is in greater plenty, any more than as it would make an alteration in a merchant's books, if, instead of the Arabian method of notation, which requires few characters, he should make use of the Roman, which requires a great many? Hume allows this conclusion to be just, and indeed, it follows from the doctrine, that money serves only to rate and enumerate commodities; and yet he adds, it is certain that, since the discovery of the mines in America, industry has increased in all the nations of Europe, except in the possessors of those mines; and this, he says, may be justly ascribed, amongst other reasons, to the increase of gold and silver. He then explains how this consequence follows; but it is not our present purpose to enter on, or examine his explanation. The remark, however, forces itself upon us, when contrasting his doctrine with his facts that Hume's love of paradoxwhich, to his credit, he seldom permitted to influence his Essays on Political Economy-here breaks out.

It is singular, that those who justly object to his definition of money, and

regard it as something more than a method for rating and estimating commodities, should controvert his position, that an increase of money increases industry.

The question, whether an increase of money is beneficial, injurious, or indifferent to the progress of social wealth, is united with another question, on which also there are different opinions-whether there be a known and fixed proposition between money and the commodities which it is to circulate.

Sir W. Petty and Davenant thought that England required a quantity of currency equal to half the rent of her lands, the fourth of the rent of houses, the weekly expenses of the people, and the value of the fourth of all the commodities exported. Cantillon was of opinion, that the money which circulates in Europe, is generally equal to at least half the produce of the soil, and, at the utmost, to two-thirds of that produce. Montesquieu thinks that the quantity of money is pretty nearly indifferent, because the rising and sinking of its value proportionates it to all wants. On this branch of the question, it is obvious, and it is surprising it did not seem so to the authors just referred to, that all is vague conjecture, and that it is a question of no practical or theoretical importance. Yet, how often in treatises on Political Economy, are the thoughts of the reader diverted from what is attainable and important to such trifling investigations.

Smith perceived the vainness of such an inquiry; he says, "It is perhaps impossible to determine the

proportion which the money of any country bears to the whole value of the annual produce circulated by means of it." He adds, however, not very consistently with himself in other places, "that the circulating money must always bear a very considerable proportion to that part of the produce, which

is destined for the maintenance of industry."

According to his system, gold and silver are quite useless to the formation, progress, and increase of wealth; their plenty or scarcity is indifferent in themselves, and destitute of any influence on the wealth of nations. The increase of the quantity of gold and silver in Europe, and the increase of its manufactures and agriculture, he adds, are two events which, though they have happened nearly about the same times, yet have arisen from very different causes, and scarcely have any natural connexion with one another. How is this opinion reconcilable with what he states respecting the Scotch banks?-by means of the cash accounts, which merchants keep with them, he asserts, and asserts truly, that every merchant can, without imprudence, carry on a greater trade than he otherthese cash ac

wise could do ; and yet

counts enable the merchant to extend his business solely by increasing the circulating medium of a country. His opinions on this subject are therefore contradictory.

The doctrine, that an increased circulating medium does not increase industry, has lately been supported by an argument, at once at variance with fact, and inconsistent with itself. If an increase of money, it is alleged, does not increase price, it cannot increase industry and produce; if it does increase price, the value of money must by this very operation be diminished, and an increase of price can be no motive to increased industry and produce. We have put this argument in all its force of apparently strict and logical reasoning; as it is, if we are not much mistaken, a most illustrative instance of the manner in which questions on Political Economy are treated, even when close reasoning is aimed at.*

It is natural to suppose, that, if increased industry does not flow

• See Mill's Elements of Political Economy, Chap. III. Sect 11. The former part of the reply to Mr Hume's doctrine is, if possible, still less deserving of the name of a demonstration, which, however, Mr Mill expressly calls it. "This doctrine," he says, implies a want of clear ideas respecting production. The agents of production are the commodities themselves, not the price of them. They are the food of the labourer, the tools and machinery with which he works, and the raw materials which he works upon. These are not increased by the increase of money; how then can there be more production? This is a demonstration that the conclusion is erroneous at which Hume has arrived."

Here is assertion certainly, but no demonstration-and here is also displayed an igno

from increased money, when there is no increase in price, it would flow from it when there was an increase of price, since this branch of the argument, in fact, amounts to thisthat the effect cannot exist where the cause is absent. The two branches of the argument, therefore, cannot coexist-they must destroy each other. If increased industry is not produced by increased money, when increased money does not give rise to increased price, it is natural and fair to conclude, that, when it does give rise to it, increased industry will follow.

But a little reflection, as well as an appeal to facts, will convince us, that increased money stimulates industry, even when no increase of price takes place. Let us suppose a demand for an article which is obtained by the rudest and simplest industry, and that the person who supplies this article does not work more than eight hours a-day, because, in that time, he can obtain all of it that is needed. Let us next suppose that, from whatever cause, he finds he could sell one half more, if he had it ;-will not this induce him to work twelve hours instead of eight, even though the price of the article does not increase. This process is often going on, and must have been in operation in a striking manner, especially in all the little villages which have risen to wealth by becoming sea-bathing quarters.

But it will more frequently occur that this increased demand produces increased price for the article. In this case, it is alleged that industry and wealth cannot be increased, because increase in price is, in fact, diminution in the value of money; and it can be no motive to industry to obtain one-and-sixpence, instead of one shilling, if the value of the former

sum, or its command in the market, is no greater than that of the latter sum.

Here again is a fallacy and a variance with fact. Increased demand produces increased price; increased price is, in fact, diminution in the value of money; but, at first, the increased price, and diminution in the value of money, have reference solely to the article for which there is an increased demand; and he who has this article to sell, getting more for it, at a time when money bears its former value with respect to other articles, is thereby enabled to purchase more of them, or, in other words, is richer. The fallacy lies in confounding the diminution in the value of money, compared with one article which the labourer has to sell, with its general diminution, compared not only with that, but also with all the articles he has to buy. If the diminution instantaneously, and in the same degree, extended itself to the proportionate value of money, and all commodities, increased price could be no stimulus to industry; because a person is not benefited by receiving two shillings where he used to receive one, if he has to pay two shillings where he used to pay one: but if, by increased demand for his goods, he receives two shillings instead of one, and, at the same time, purchases what he wants at the old price, an increased circulating medium must act as a stimulus to industry, so long as men wish to be richer than they are. It is evident that the same operation and the same effects will occur when he becomes a purchaser: he is enabled to increase demand and price; this stimulates the industry of others; they in their turn exert the same influence; but, at length, the increased circulating medium, having divided itself among

rance of the mode in which money operates, as well as of one of the modes in which increased produce may arise. If a labourer works one hour more than usual in a day, on the same quantity of food, with the same tools and machinery, and on the same raw material, (on the sea, for instance, in fishing,)—will not there be more production, though the food, the tools, and machinery, and the raw material, are not increased. "These are not increased by the increase of money." This is begging the question, not demonstration; this assertion is also contrary to fact; a demand for more labourers is virtually, and in its consequences, a demand for more tools, food, machinery, and raw materials for them; and what is increased demand, but an increased power to purchase; or, in other words, an augmented quantity of money--and yet this is put forth as reasoning, by one who bears the character of a sound logician, and an excellent Political Economist, and who, seemingly from confidence in his logical powers, is fond of throwing his doctrines into the form of what he calls demonstration.

all the articles, and increased the produce of them all, ceases to have any farther effect; but, till this takes place, it cannot be inefficient, and it only ceases to operate when the whole increase of articles is equivalent to the increase of the circulating medium. It must indeed be acknowledged, and it is proved by fact, that the increase of the circulating medium may be so rapid, or so great, as not to be attended with a corresponding increase of industry.

We shall now turn from the theoretical questions respecting money, to those which are of a practical nature and bearing; and examine whether, so far as these are concerned, the writings of Political Economists are more enlightened and safer guides than they have proved to be on the theoretical division of this interesting and important subject.

The first practical question is, Whether the quality of unity ought to be reckoned among the requisites of money;-in other words, whether gold or silver alone ought to be admitted as money, or whether both these metals ought to be employed indiscriminately. The necessity of having silver to represent such small values as could not be represented by gold coin, except by making it too small, is obvious: the question is, whether the exchangeable rate of gold and silver coin should be. fixed by law, or permitted to fluctuate as the market value of these two metals might happen to fluctuate?

The inconveniency of two metallic currencies was strongly pointed out by Locke; and his opinion has been practically followed by most governments. On the continent, silver chiefly performs the functions of money, and gold is regarded as a merchan dize." In England," observes Smith,

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gold was not considered as a legal tender for a long time after it was coined into money. The proportion between the values of gold and silver was not fixed by any public law or proclamation, but was left to be settled by the market." In fact, it is only since the year 1728 that England has given currency to gold. Silver is a legal tender, to a certain amount, and, of course, below and up to that amount, it must be deemed and taken equivalent to the sum of gold in coin fixed by law, whatever be the relative mar

ket prices of the two metals. All large payments are to be made in gold.

The question, whether one or two metals should be admitted as money, in all payments, to whatever amount, is now almost universally decided by Political Economists in favour of the unity of the currency: but the dependent and subsequent question, whether silver or gold ought to be the legal or governing coin, has not been settled, although it was much agitated a century ago, and lately, when the mint-regulations of the silver coin were changed. The relative value of gold and silver, it is evident, will be affected by the change, in the quantity of both or either, in the great market of the world; and it is equally plain, that that metal, the quantity of which, in this market, is most nearly stationary, ought to be selected as the standard and regulating coin. But this preliminary question has not been satisfactorily solved; chiefly because it is not easy, when the relative value of two articles changes, to determine whether the change is produced by an alteration in the comparative supply of and demand for both, or whether an alteration in the supply of, or of the demand for one, has produced the change in their relative value. Thus, if gold, instead of exchanging for sixteen times its weight of silver, exchanges for fourteenthis may arise partly from silver being scarcer, and gold more plentiful, or solely from gold being more plen"tiful, or solely from silver being more scarce; a single and identical effect, arising from one of two causes, or from the combination of two causes, puzzles Political Economists more than any other case in the practical application of their science.

The famous questions respecting the alleged depreciation of the paper-currency, the unfavourable state of the exchange, the fluctuations in the price of corn and other commodities, besides many other questions which agitated this country within the last half century, afford proofs and illustrations of this position, and put it beyond a doubt that Political Economists are not sufficiently attentive to that process, without attention to which, no science can be placed on a firm foundation, or advance with regular and steady progress towards perfection, not only in its theoretical doctrines, but also in

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