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in a small retail trade, to change silver money, and to even such reckonings as cannot be adjusted with
the smallest silver pieces.... Now, as the proportion of the number of farthings requisite in commerce
is to be taken from the number of people, the frequency of their exchanges: as also, and principally,
from the value of the smallest silver pieces of money; so in like manner, the proportion of money
[gold and silver specie] requisite in our trade, is to be likewise taken from the frequency of
commutations, and from the bigness of the payments.” (William Petty, “A Treatise of Taxes and
Contributions.” Lond. 1667, p. 17.) The Theory of Hume was defended against the attacks of J.
Steuart and others, by A. Young, in his “Political Arithmetic,” Lond. 1774, in which work there is a
special chapter entitled “Prices depend on quantity of money, at p. 112, sqq. I have stated in “Zur
Kritik, &c.,” p. 149: “He (Adam Smith) passes over without remark the question as to the quantity of
coin in circulation, and treats money quite wrongly as a mere commodity.” This statement applies
only in so far as Adam Smith, ex officio, treats of money. Now and then, however, as in his criticism
of the earlier systems of Political Economy, he takes the right view. “The quantity of coin in every
country is regulated by the value of the commodities which are to be circulated by it.... The value of
the goods annually bought and sold in any country requires a certain quantity of money to circulate
and distribute them to their proper consumers, and can give employment to no more. The channel of
circulation necessarily draws to itself a sum sufficient to fill it, and never admits any more.” (“Wealth
of Nations.” Bk. IV., ch. 1.) In like manner, ex officio, he opens his work with an apotheosis on the
division of labour. Afterwards, in the last book which treats of the sources of public revenue, he
occasionally repeats the denunciations of the division of labour made by his teacher, A. Ferguson.
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“The prices of things will certainly rise in every nation, as the gold and silver increase amongst the
people, and consequently, where the gold and silver decrease in any nation, the prices of all things
must fall proportionately to such decrease of money.” (Jacob Vanderlint: “Money Answers all
Things.” Lond. 1734, p. 5.) A careful comparison of this book with Hume’s “Essays,” proves to my
mind without doubt that Hume was acquainted with and made use of Vanderlint’s work, which is
certainly an important one. The opinion that prices are determined by the quantity of the circulating
medium, was also held by Barbon and other much earlier writers. “No inconvenience,” says
Vanderlint, “can arise by an unrestrained trade, but very great advantage; since, if the cash of the
nation be decreased by it, which prohibitions are designed to prevent, those nations that get the cash
will certainly find everything advance in price, as the cash increases amongst them. And ... our
manufactures, and everything else, will soon become so moderate as to turn the balance of trade in our
favour, and thereby fetch the money back again.” (l.c.. pp. 43, 44.)
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That the price of each single kind of commodity forms a part of the sum of the prices of all the
commodities in circulation, is a self-evident proposition. But how use-values which are
incommensurable with regard to each other, are to be exchanged, en masse for the total sum of gold
and silver in a country, is quite incomprehensible. If we start from the notion that all commodities
together form one single commodity, of which each is but an aliquot part, we get the following
beautiful result: The total commodity = x cwt. of gold; commodity A = an aliquot part of the total
commodity = the same aliquot part of x cwt. of gold. This is stated in all seriousness by Montesquieu:
“Si l’on compare la masse de l’or et de l’argent qui est dans le monde avec la somme des
marchandises qui s’y vend il est certain que chaque denrée ou marchandise, en particulier, pourra être
comparée à une certaine portion de la masse entière. Supposons qu’il n’y ait qu’une seule denrée ou
marchandise dans le monde, ou qu’il n’y ait qu’une seule qui s’achète, et qu’elle se divise comme
l’argent: Cette partie de cette marchandise répondra à une partie de la masse de l’argent; la moitié du
total de l’une à la moitié du total de l’autre, &c.... L’établissement du prix des choses dépend toujours
fondamentalement de la raison du total des choses au total des signes.” [“If one compares the amount
of gold and silver in the world with the sum of the commodities available, it is certain that each
product or commodity, taken in isolation, could be compared with a certain portion of the total amount
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of money. Let us suppose that there is only one product, or commodity, in the world, or only one that
can be purchased, and that it can be divided in the same way as money: a certain part of this
commodity would then correspond to a part of the total amount of money; half the total of the one
would correspond to half the total of the other &c. ... the determination of the prices of things always
depends, fundamentally, on the relation between the total amount of things and the total amount of
their monetary symbols”] (Montesquieu, l.c. t. III, pp. 12, 13.) As to the further development of this
theory by Ricardo and his disciples, James Mill, Lord Overstone, and others, see “Zur Kritik, &c.,”
pp. 140-146, and p. 150, sqq. John Stuart Mill, with his usual eclectic logic, understands how to hold
at the same time the view of his father, James Mill, and the opposite view. On a comparison of the text
of his compendium, “Principles of Pol. Econ.,” with his preface to the first edition, in which preface
he announces himself as the Adam Smith of his day — we do not know whether to admire more the
simplicity of the man, or that of the public, who took him, in good faith, for the Adam Smith he
announced himself to be, although he bears about as much resemblance to Adam Smith as say General
Williams, of Kars, to the Duke of Wellington. The original researches of Mr. J. S. Mill which are
neither extensive nor profound, in the domain of Political Economy, will be found mustered in rank
and file in his little work, “Some Unsettled Questions of Political Economy,” which appeared in 1844.
Locke asserts point blank the connexion between the absence of value in gold and silver, and the
determination of their values by quantity alone. “Mankind having consented to put an imaginary value
upon gold and silver ... the intrinsic value, regarded in these metals, is nothing but the quantity."
(“Some Considerations,” &c., 1691, Works Ed. 1777, Vol. II., p. 15.)
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It lies of course, entirely beyond my purpose to take into consideration such details as the s
eigniorage on minting. I will, however, cite for the benefit of the romantic sycophant, Adam Muller,
who admires the “generous liberality” with which the English Government coins gratuitously, the
following opinion of Sir Dudley North: “Silver and gold, like other commodities, have their ebbings
and flowings. Upon the arrival of quantities from Spain ... it is carried into the Tower, and coined. Not
long after there will come a demand for bullion to be exported again. If there is none, but all happens
to be in coin, what then? Melt it down again; there’s no loss in it, for the coining costs the owner
nothing. Thus the nation has been abused, and made to pay for the twisting of straw for asses to eat. If
the merchant were made to pay the price of the coinage, he would not have sent his silver to the Tower
without consideration, and coined money would always keep a value above uncoined silver.” (North,
l.c., p. 18.) North was himself one of the foremost merchants in the reign of Charles II.
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“If silver never exceed what is wanted for the smaller payments it cannot be collected in sufficient
quantities for the larger payments ... the use of gold in the main payments necessarily implies also its
use in the retail trade: those who have gold coin offering them for small purchases, and receiving with
the commodity purchased a balance of silver in return; by which means the surplus of silver that
would otherwise encumber the retail dealer, is drawn off and dispersed into general circulation. But if
there is as much silver as will transact the small payments independent of gold, the retail trader must
then receive silver for small purchases; and it must of necessity accumulate in his hands.” (David
Buchanan; “Inquiry into the Taxation and Commercial Policy of Great Britain.” Edinburgh, 1844, pp.
248, 249.)
36
The mandarin Wan-mao-in, the Chinese Chancellor of the Exchequer, took it into his head one day
to lay before the Son of Heaven a proposal that secretly aimed at converting the
assignats of the
empire into convertible bank-notes. The assignats Committee, in its report of April, 1854, gives him a
severe snubbing. Whether he also received the traditional drubbing with bamboos is not stated. The
concluding part of the report is as follows: — “The Committee has carefully examined his proposal
and finds that it is entirely in favour of the merchants, and that no advantage will result to the crown.”
(“Arbeiten der Kaiserlich Russischen Gesandtschaft zu Peking über China.” Aus dem Russischen von
Dr. K. Abel und F. A. Mecklenburg. Erster Band. Berlin, 1858, p. 47 sq.) In his evidence before the