Therefore his horror, never surpassed by anyone’s outside the United States Senate, of that worst of all disasters—cheap bread. With delightful naïveté he warned lawyers, physicians, actors, and so forth not to clamor for low prices of agricultural products: in doing so they were ‘digging their own graves’; for the landowners, who are nothing but intermediate spenders, would then find their incomes reduced and have to reduce their expenditure, and where would those lawyers, et cetera, be? Thus, his idea of a prosperous society did not involve Cheapness and Plenty but Dearness and Plenty. He did not use the phrase Fallacy of Cheapness of which modern ‘spenders’ are so fond, but it is evident that he meant exactly the same thing. Since this question has never ceased to arouse interest—at least in that no-man’s land that lies between professional and popular economics—we had better take this opportunity to comment upon it. [(d) Dearness and Plenty versus Cheapness and Plenty.] First of all, it is quite clear that both of the opinions envisaged are strongly rooted in the public mind and that the politicians, legislators, and administrators who took action in order to give effect to the one or the other simply responded to popular demands. This is as true today as it was for the price edicts of the later Roman Emperors, and explains not only the contradictions in professed motives and in actual measures that we observe but also the many insincerities in the use of apparently general arguments for what was meant to improve the relative position of some particular group. Broadly speaking, the workman always wanted low prices of commodities, the businessman high prices, and both assumed uncritically the absence of any further effects of either cheapness or dearness. Early analysis, here as elsewhere, proceeded from those popular sentiments and rationalized and reshaped them into doctrines. But in doing so, writers— again: here as elsewhere—usually sided with the one or the other and hence were slow, and often unwilling, to see the elements of truth in the other. The scholastic doctors associated prosperity with cheapness; dearness they associated with famine and mass misery. The English businessmen-economists of the seventeenth century, quite naturally in the conditions of their environment, inclined to the opposite position but not always: some, for example Roger Coke, made a case for Cheapness and Plenty; but the majority associated Dearness and Plenty—and, so we may add, a low rate of interest—with brisk trade and high levels of employment. It will be seen that the difference between them, as well as the difference between their majority and the scholastic doctors, was entirely due to differences in the situations that different writers and groups of writers envisaged, so that there really was no logical incompatibility between what at first blush looks like diametrically opposed views. But nobody saw or admitted this, for everyone wanted to teach a practical lesson. And this remains true for the more refined analysis of the eighteenth century. The high-price argument proved difficult to beat and was, at least in History of economic analysis 272 some respects, upheld by front-rank men, such as Boisguillebert and Quesnay, but it was beaten eventually, the tenable and even suggestive parts of it no less than the really fallacious ones. A.Smith cast his vote for Cheapness and Plenty, and practically all nineteenth-century economists of standing followed him. Again, it is to be observed that all that the Cheapness-and-Plenty school really did was, first, to assert such trivial truths as that any general level of prices and monetary expressions to which the economic process is adapted is, so far as a closed economy is concerned, as good as any other and that, so far as this goes, it is only the relations between some prices and others that matter, for instance, the relation between commodity and factor prices; second, to interpret cheapness in terms of effort rather than in terms of money; third, to accept the fall in money prices that occurs in consequence of accumulation and improvement as the natural method for giving effect to the increasing cheapness of things in terms of effort; and, fourth, to make light, on the one hand, of the disturbances that are inseparable from falling prices and, on the other hand, of the possibilities of stimulation, inherent in policies of rising prices. There was really nothing in all this that can properly be called a fallacy. In important respects, the victory of the Cheapness-and-Plenty advocates spelled analytic advance. But it was a one-sided advance that neglected many promising suggestions of the Dearness-and-Plenty men. But, second, it should be observed that the slogan of Dearness and Plenty is not necessarily connected with Monetary Analysis in the sense of analysis in terms of monetary aggregates. Evidently, there is nothing in the latter to prevent us from associating prosperous conditions with cheapness. On the face of it, then, the connection between Monetary Analysis in that sense and dearness is historical only and therefore calls for special motivation in each case. In the case of Boisguillebert, this re-quirement can be easily met. His high-price argument was really an argument about high prices of agricultural products, and the effects of these on welfare were motivated by the consideration that they meant high incomes for the landowners on whom Boisguillebert principally relied for doing the spending: just as modern economists identify high wage rates with a high total income of the working class and this with liberal expenditure by consumers, so Boisguillebert identified high prices of agricultural products with high rents, high rents with liberal expenditure, liberal expenditure with high levels of employment and welfare. Here, then, we have a logical relation between Monetary Analysis and a high-price philosophy. But Verri’s argument to the effect that an increase in the supply of money, owing to its stimulating effects on production, may induce a fall in prices (Verri is the most important pre-Smithian authority on Cheapness and Plenty) could be worked up into a piece of Monetary Analysis that would be allied to a low-price philosophy. Quesnay was of the same opinion in regards to prices (see, especially, his Maximes générales, 1758). He also thought that, whereas plenty and low value are not riches, and scarcity and dearness spell misery, abundance and dearness spell opulence: prices must not be allowed to fall because telle est la valeur vénale, tel est le revenu (XVIII). One must not think that cheapness is advantageous for the poor—it only makes their wages fall. And the means (aisance) of the lowest classes must not be diminished (XIX), for then their consumption (that is, total demand in terms of money or spending) will be reduced, and this in turn will reduce production and income. But nothing is so characteristic of this type of theory, which can be so easily translated into modern Value and money 273 language of familiar ring, as is the attitude to saving, adumbrated by Boisguillebert, fully developed by Quesnay. In this analytic schema the prompt onward flow of purchasing power is everything. Saving is believed to interrupt it. Hence saving is a sort of public enemy. Quesnay makes it one of his maximes: que la totalité des sommes du revenu rentre dans la circulation annuelle et la parcoure dans toute son étendue (VII). There must be no formation of fortunes pécuniaires (accumulations of actual cash?). Landowners and those who practice lucrative professions must not retain ‘le pécule du royaume au préjudice de la rentrée des avances de la culture…: cette interception du pécule diminuerait la reproduction des revenus et de l’impôt.’ Le pécule may no doubt be interpreted in the sense of uninvested savings. Even so, the similarity with Keynesian views is striking: in itself, saving is sterile and a disturber; it must always be ‘offset,’ and this offsetting is a distinct act that may or may not succeed. A fairly strong anti-saving tradition thus acquired additional support shortly before it almost vanished into thin air. This is all that need be said about the monetary theory of the physiocrats. How was it then that Real Analysis conquered so easily and completely? This question will be answered in the last two sections of this chapter, where two of the chief battlefields of its victorious campaign will be surveyed, the theory of saving and the theory of interest. A general answer may, however, be given at once: the reason for the defeat or rather the collapse of Monetary Analysis in the last decades of the eighteenth century was its weakness. Even if, for the sake of argument, we grant without qualification that the principle of monetary analysis is sound and that the modern development of it is an improvement upon the real analysis of the nineteenth century, it should be clear that the latter was not less superior to the monetary analysis of the eighteenth. Such spirals of advance are, I believe, not uncommon: theories that it is an achievement to displace may return to displace those by which they had been displaced, and both the displacement and the return may benefit that strange thing, scientific knowledge. 2. FUNDAMENTALS 1 We now turn to the theory of money in the narrower and still more usual sense—let us say, briefly though imperfectly, the theory of money as a technical device. For this purpose, it is convenient to introduce a few terms that will facilitate exposition throughout the rest of this book. [(a) Metallism and Cartalism: Theoretical and Practical.] By Theoretical Metallism we denote the theory that it is logically essential for money to consist of, or to be ‘covered’ by, some commodity so that the logical source of the exchange value or purchasing power of money is the exchange value or purchasing power of that commodity, considered independently of its monetary role. It is true that in 1 [J.A.S. had tentatively suggested ‘Ground Theory’ (Grundlagenforschung) as the title of this section, but he used ‘Fundamentals’ as the title of the corresponding sections in Part III (ch. 7, sec. 2) and Part IV (ch. 8, sec. 3).] History of economic analysis 274 principle any commodity can be chosen to serve as money. But the term Commodity Theory of money has also another meaning. This is why, availing ourselves of the fact that in modern times only gold and silver have been normally chosen for that role, we prefer the term Metallism, though it is not strictly correct. It is also true that the ‘standard’ chosen may consist of more than one commodity: the singular is used merely in order to avoid adding ‘or commodities’ each time. By Practical Metallism we shall denote sponsorship of a principle of monetary policy, namely, the principle that the monetary unit ‘should’ be kept firmly linked to, and freely interchangeable with, a given quantity of some commodity. Theoretical and Practical Cartalism may best be defined by the corresponding negatives. Thus, we shall speak of theoretical cartalism wherever we find denial of the proposition that it is logically essential for money to consist of, say, gold, or to be promptly convertible into gold; of practical cartalism wherever we find sponsorship of the principle of policy that the value of the monetary unit ‘should’ not be tied to the value of any particular commodity. 2 These distinctions owe their importance for us to the fact that theoretical and practical metallism need not go together. An economist may, for instance, be fully convinced that theoretical metallism is untenable, and yet be a strong practical metallist. Lack of confidence in the authorities or politicians, whose freedom of action is greatly increased by currency systems that do not provide for prompt and unquestioning redemption in gold of all means of payment that do not consist of gold, is quite sufficient to motivate practical metallism in a theoretical cartalist; this does not involve any contradiction. But the reader will realize that this fact may cause great difficulties in interpreting authors who are in the habit of confusing theoretical and practical considerations. Nor is this the only reason why it is not always easy to tell whether or not a man should be classed as a theoretical metallist. For, without being one, he may still believe that ‘the most salable commodity’ constitutes the historical as distinguished from the logical source of the phenomenon of money. 3 Again, he may wish to stress the role of government in choosing the commodity that is to serve as money and its power to alter this decision in various ways. In doing so he may easily, if not very sophisticated or careful, use language that will tempt us to class him as a cartalist. We remember that this difficulty arose in the case of Aristotle (ch. 1, above). Finally, basic theories are malleable and writers are often inconsistent, still more often vague. When we find that a writer compares money to a ticket—a ticket that admits the bearer to the great social store of all goods—we feel inclined to register him as a cartalist. But the phrase need not mean much, and both J.S.Mill, who used it in the nineteenth century, and Berkeley, who used it in the 2 The words Metallism and Cartalism are borrowed from G.F.Knapp’s State Theory of Money (see below, Part IV, ch. 8, sec. 3). Since, according to the metallist view, the theory of money derives directly from the logically prior theory of barter, metallist theories are (roughly or exactly, I am not quite sure) what L.von Mises has called catallactic theories of money ( to exchange). But the word Metallism conveys the essential point more tellingly, besides offering easy transition to Monometallism and so on. 3 Here we brush against a highly interesting question of methodology. [J.A.S. wrote: please leave rest of page for note.] Value and money 275 eighteenth, are more properly called metallists. There is no denying that views on money are as difficult to describe as are shifting clouds. 4 [(b) Theoretical Metallism in the Seventeenth and Eighteenth Centuries.] Theoretical metallism, usually though not always associated with practical metallism, 5 held its own throughout the seventeenth and eighteenth centuries and prevailed victoriously in the ‘classical situation’ that emerged in the last quarter of the latter. Adam Smith substantially ratified it. And for more than a century to come it was almost universally accepted—by nobody more implicitly than by Marx—so much so, in fact, that the majority of economists came to suspect not only unsoundness of reasoning but something very like obliquity of purpose behind every expression of antimetallist views. This development, as we know, was in accordance with established tradition. The philosophers of natural law and those Consultant Administrators who were directly influenced by them simply repeated and developed the teaching of Aristotle and the scholastic authors. But the majority of those writers on money who cannot be proved to have experienced any influence from that quarter—for instance the English merchant 4 [The next few pages were inserted by J.A.S. from an earlier version typed in March 1944 (see Appendix).] 5 I am taking it for granted that theoretical metallism is untenable, i.e. that it is not true that, as a matter of pure logic, money essentially consists in, or must be backed by, a commodity or several commodities whose exchange value as commodities are the logical basis of their value as money. The error involved consists in a confusion between the historical origin of money—which, in very many cases, although perhaps not universally, may indeed be found in the fact that some commodities, being particularly salable, come to be used as the medium of exchange—and its nature or logic—which is entirely independent of the commodity character of its material. This type of error occurs very frequently in all fields of social analysis, especially in its early stages: it requires considerable analytic experience to perceive that primitive forms of social institutions may be more complex than modern ones and that they may hide, rather than reveal, logical essentials. We shall have to return to this before long. But one may realize all this and yet be a practical metallist, i.e. believe that in some or all cases effective association of the monetary unit with, say, gold is the best or even the only way to establish a monetary system or to make it function. This is not a matter of pure theory, however, and may be right or wrong according to circumstances and individual or group standpoints and interests. But although theoretical and practical metallism are logically independent, the reader will not be surprised to find that they are not always easy to distinguish. Few authors are quite explicit on the subject; the majority is to this day in the habit of confusing them; but practical metallists and practical antimetallists often display a tendency to strengthen their arguments, concerning the practical expediency of associating the monetary unit with a quantity of metal, by a metallist or antimetallist theory. Two additional facts further increase the difficulties of interpretation: on the one hand, metallist and antimetallist opinions are not so strictly incompatible as one would expect but admit of a great many nuances; on the other hand, turns of phrase—such as ‘money is a ticket’—that do seem to point clearly toward one of the alternatives may mean very little if not followed up. Such difficulties we have met already in the case of Aristotle. I am by no means absolutely sure that I was right to class him with the theoretical metallists. Galiani, whom we shall meet presently, interpreted him in the opposite sense. In the case of tracts written without minute attention to fundamentals, these difficulties often become the more insuperable the deeper we probe into an author’s ideas. What follows in the text must be read in the light of these considerations. I prefer putting my doubts frankly before the reader to dogmatizing with a confidence I do not feel. History of economic analysis 276 economists—also fell in with that tradition. Examples abound for all countries. For England it will suffice to mention, first, some economists of the first rank, such as Child, who clearly identified money with those parts of the stocks of gold and silver that fill the monetary function and held that in spite of this function gold and silver, coined or uncoined, still remained commodities exactly like ‘wine, oil, tobacco, cloth and stuff’; Petty, who also reasoned about money in terms of its material; and Locke, 6 who did likewise, though he was more ready to admit that the monetary function makes a diffierence; Hume, 7 whose teaching on this particular point differs from Child’s only in explicitness and polish; Cantillon (op. cit. Part I, ch. 17), whose theoretical metallism exerted considerable influence in France; and, second, the authors of what may be 6 The wide horizon of the author of the Essay concerning Human Understanding and his sustained interest in economic facts and problems (of which his journal gives ample proof) should make it possible to construct a comprehensive system of his economic thought. This has in fact been attempted more than once, most successfully, perhaps, by W.Roscher (Zur Geschichte der englischen Volkswirthschaftslehre, 1851) and J.Bonar (Philosophy and Political Economy, 1893). Nevertheless, though we have had, and shall have again, to mention his name in other connections, his claim to a place in the history of economic analysis rests exclusively on his work on money (mainly in Some Considerations of the Consequences of the Lowering of Interest, and Raising the Value of Money, 1692; the Further Considerations…1695, add but little), which, though date and form of its publication were prompted by current controversies, yet embodies the thought of decades and amounts to much more than a tract for the day, to much more also than the title conveys, by virtue of the energy with which the author digs down to fundamental principles. Even so, however, we cannot speak of a great, still less a faultless, contribution to monetary analysis. Slips are frequent and, whatever the degree of ‘subjective originality,’ there is little that was not said as well or better by other writers at about the same time. The influence exerted was considerable also on the Continent. Our right to class him as a metallist can be fully established from the structure of his argument. Doubts might be raised, however, on the strength of Locke’s statement that money exists by virtue of common ‘consent.’ The question is the same as that which arises in connection with Aristotle’s (see above, ch. 1), and may, I think, be answered in the same way: on the one hand, even though money evolves from the habit of using one commodity for the purposes of indirect exchange of the others—in order to facilitate barter—this might be expressed by saying that people ‘agree’ on the choice of that commodity; on the other hand, even though the monetary commodity acquires a ‘price’ through the market mechanism, this price may be said to arise from ‘consent’ as indeed may any other. 7 David Hume’s ‘Of Money’ is one of the major contributions contained in his Political Discourses (1752). Its position in the history of economics, while not undeserved, is due to the force and felicity with which it formulated the results of previous work rather than to any novelties. However this does not necessarily exclude ‘subjective originality.’ The main items will be mentioned in the text. 8 Rice Vaughan, A Discourse of Coin and Coinage (about 1635, publ. 1675), reprinted in McCulloch’s Select Collection of Scarce and Valuable Tracts on Money (1856). Perusal of this creditable performance may serve usefully as an antidote for all those who have learned to look upon seventeenth-century thought on money as unrelieved nonsense. But it may also serve as an illustration for the difficulties of interpretation alluded to infootnote 6 above. Vaughan falls in promptly with a typically metallist line of reasoning, but when explaining the nature of money, he uses phrases which taken by themselves would also admit of antimetallist interpretation. Value and money 277 considered as the two standard English works on money of the seventeenth and the eighteenth centuries, Rice Vaughan 8 and Joseph Harris. 9 For the rest, we shall confine ourselves to instances from the Italian literature on money, which throughout the period kept a higher level than any other. Practically all the leading men were uncompromising metallists. The most important names are Scaruffi, Davanzati, Montanari, Galiani, and Carli. Beccaria and Verri should be added as examples of the treatment accorded to the subject of money in the comprehensive treatises on general economics. Almost all the works of these authors have been republished in the Custodi collection (see above, ch. 3). In this note an attempt will be made to convey a general idea of the performance of each author excepting those of Beccaria and Verri, which are characterized elsewhere (ch. 3, sec. 4d above). Verri’s and Carli’s contributions, moreover, will again be met with in another connection (ch. 7, Mercantilism). Verri’s monograph Dialogo sulle monete (1762) should not go unmentioned, however. Gasparo Scaruffi (1515?–84), a banker of Reggio in the Emilia, published in 1582 a monograph on money entitled Alitinonfo, which admirably illustrates the range of sixteenth-century thought—starting from the functions of money and dealing with problems of coinage in a strongly metallist vein: money is a stamped piece of metal, the stamp has only declaratory importance. His proposal of international bimetallism (somewhat marred by an irrational faith in an invariable relation of 1:12) with an international unit to be issued (without seignorage) by an international authority implies a lot of fairly advanced theory. But very little of it comes out explicitly. Thus the step is great indeed to Bernardo Davanzati (1529–1606), ‘un mercante letterato Fiorentino,’ as Montanari called him. Davanzati’s Lezione delle monete (1588; see also Notizia de’cambi, 1582) is the ‘all-time high,’ also as regards literary elegance, of the metallist theory of the origin and the nature of money. About a century later, Geminiano Montanari (1633–87), a professor of mathematics and astronomy in Bologna and Padua, wrote a Breve trattato del valore delle monete in tutti gli stati (1680); followed by La zecca in consulta di stato (later title, Della moneta, 1683–7), which presents the same teaching in a more fully developed form but without adding anything essential to it. The Neapolitan, Ferdinando Galiani (1728–87), a typical eighteenth-century abbé, sparkling with esprit, did for his time what Montanari had done for the seventeenth, and Davanzati for the sixteenth, century in his treatise Della moneta (1751; first book: De’metalli; second book: Della natura della moneta; third book: Del valore della moneta; fourth book: Del corso della moneta; fifth book: Del frutto della moneta—not 9 The Essay upon Money and Coins (two parts 1757 and 1758) by Joseph Harris (1702–64) has some claim to being considered one of the best eighteenth-century performances in the field of monetary analysis. Its importance for us does not, of course, consist in his various recommendations that account for the survival of his name (his monometallism, his views on foreign trade, which were not very far removed from those of Hume and Smith, and so on) or in his copious historical references but in what might be termed the theoretical anchorage of this theory of money and of foreign ex-changes; he put the subject into a wide framework of general economic principles of which he never loses sight. His treatment thus contrasts favorably with that of all those authors, old and new, who fail to see that any satisfactory theory of money implies a theory of the economic process in its entirety. History of economic analysis 278 only on interest, however, but also on public debts and exchange), which would have been received with respect if it had appeared in 1851. Another work of Galiani’s will be mentioned in the next chapter. One point about his thought must be emphasized before we tear ourselves away from one of the ablest minds that ever became active in our field: he was the one eighteenth-century economist who always insisted on the variability of man and on the relativity, to time and place, of all policies; the one who was completely free from the paralyzing belief—that then crept over the intellectual life of Europe—in practical principles that claim universal validity; who saw that a policy that was rational in France at a given time might be quite irrational, at the same time, in Naples; who had the courage to say: ‘Je ne suis pourrien…Je suis pour qu’on ne déraisonne pas’ (Dialogues sur le commerce des blés, 1769, first dialogue); and who properly despised all types of political doctrinaires, including the physiocrats. There is quite a Galiani literature, and there are several reprints of, and selections from, his works. They are listed in Giorgio Tagliacozzo’s Economisti Napoletani dei sec. XVII e XVIII (pp. lxv and lxvi), which also contains an essay on Galiani and extracts from Della moneta and the Dialogues. Gian Rinaldo (Conte) Carli (1720–95), professor of astronomy at Padua, later on president of the Board of Finance in the Milanese state (then a part of the Habsburg monarchy), in which capacity he, among other things, reformed the coinage according to a plan of his own, a most versatile writer whose comments on the United States in Delle lettere Americane (1st ed. 1780; 2nd ed., in 4 vols., 1786) deserve mention even in a sketch like this, must be listed here because of his work entitled Delle monete…(first instalment, under the title Dell’ origine e del commercio della moneta…1751, the whole work in 3 vols., 1754–60), which includes the essay Del valore e della proporzione dei metalli monetati con i generi [commodities] in Italia, which contains the contribution to be mentioned below. Other economic writings of his will be noticed in the next chapter. It is but natural that most of such advance as the analysis of monetary processes made links up with metallist foundations, even where, in strict logic, antimetallist starting points would have been more appropriate. This should not surprise us, however: in spite of its shortcomings, theoretical metallism, properly handled, gets us almost as far as would a more correct theory—which is precisely one of the reasons why it proved so hardy a plant. [(c) Survival of the Antimetallist Tradition.] There was also, however, an antimetallist tradition, weaker no doubt but equally ancient, at least if we choose to trace it to Plato. It received impetus from governments in financial difficulties, and from inflationists, ‘reflationists,’ and bank promoters of the period—though the proponents of bank schemes were not all either inflationists or antimetallists, 10 and though there is no necessary relation between inflationism and 10 Examples of metallist sponsors of national-bank schemes are numerous. The author of the proposal of 1576 was one. John Cary (An Essay, on the Coyn and Credit of England, 1696 and An Essay towards the Settlement of a National Credit, same year) was another. The writers who stood for the foundation of the Bank of England were all metallists so far as I know. Value and money 279 theoretical antimetallism—but its survival during our period must not be wholly attributed to this factor. Of continental writers it will be enough to mention Ortes and Boisguillebert. 11 Corresponding English in-stances are Potter, Barbon, Berkeley, Steuart, and, if we claim for England that Scotsman who became a Frenchman, Law. William Potter’s The Key of Wealth, published (anonymously) 1650 and followed by two interpretative publications, recommends a plan, namely the foundation of a corporation of tradesmen (to be strengthened by another body ‘insuring’ the credit of these tradesmen) which was to accept—or, what in this case amounts to the same thing—to issue ‘bills’ secured by land, buildings, and other assets and intended to circulate like legal tender money. This plan for mobilizing physical property not only puts Potter in the position of a forerunner of the land-bank projectors (sec. 5) but also obscures the analytic work behind it, which is of considerable interest. The antimetallist character of both the plan and the analysis is beyond doubt, though Potter does not entirely sever the connection of his bill currency with gold and silver, because, if such a plan were adopted, that connection would reduce to one of historical origin only: though money would have originated in the form of a commodity, its value and behavior would no longer be governed by that commodity. The reputation of Nicholas Barbon, a physician who embarked upon various business enterprises, suffered in his own time as well as later on, from the many freakish elements not only in his plans but also in his analytic arguments. In addition, he was one of the land-bank projectors. In spite of this, he must, I think, be ranked with, say, the top half-dozen English seventeenth-century economists. We shall also meet him in another connection, but his main importance for us is in the field of money and interest. His Discourse of Trade (1690) has been republished by J.H.Hollander. Reference must also be made to: A Discourse concerning Coining the New Money Lighter (1696). 11 Ortes, Economia Nazionale (1774). His theoretical antimetallism—money defined as a symbol of wealth and expressly excluded from the items that constitute wealth itself—is another one of the striking parallelisms with the work of Sir James Steuart. Boisguillebert was antimetallist in the sense that he did not consider gold and silver—or, so we may obviously add, any other commodity—to be the essential material of money. The question why, if that be so, money should ever have been made from a material that could serve other uses he answers correctly by pointing to the fact that money so made is a pledge or security (gage) for the future delivery of whatever the payee really wants to have and that such a pledge is practically necessary where the payer’s credit is not beyond all doubt. To deny that the concept of money requires a commodity element in order to be logically complete and then to introduce the latter on the score of (good or bad) reasons of practical convenience is the very definition of theoretical antimetallism, combined (if these reasons are held to be valid) with practical metallism. But the term ‘pledge’ is also used by writers of metallist persuasion. It occurs, e.g., in R.Vaughan’s explanation of the nature of money. History of economic analysis 280 George Berkeley’s (1685–1753)—Bishop Berkeley’s—contribution to economic analysis is not on a level with his contribution to philosophy. It is chiefly contained in his Querist (1st ed., 1735–7). The idea of putting a prolonged argument into an endless string of wearying questions may not be to everyone’s taste. But the forceful common sense, which is the strong point of his philosophic thought, is conspicuous in almost every one of them. Sir James Steuart we have met already. For the subject of money it is necessary to add other publications to his Principles, especially the Principles of Money applied to the Present State of the Coin of Bengal (1772). John Law (1671–1729), I have always felt, is in a class by himself. Fi- nancial adventurers—but is it fair so to call that administrative genius?— often have a philosophico-economic system of sorts. The Pereires of Crédit Mobilier fame had one (of St. Simonist complexion). But Law’s case is different. He worked out the economics of his projects with a brilliance and, yes, profundity, which places him in the front rank of monetary theorists of all times. And this is all that matters for us. Since it is plain, however, that his analysis has been condemned, for about two centuries, primarily on the strength of the failure of his Banque Royale, it is pertinent to point out, first, that its predecessor, the Banque Générale, founded 1716, was a perfectly orthodox bank that was to issue notes and to receive deposits payable on demand and to discount commercial paper—no antimetallism about that—and that the Banque Royale and the Compagnie des Indes, which it absorbed, failed because the colonial ventures combined in the latter did not, for the time being, prove to be the source of anything but losses. If these ventures had been successful, Law’s grandiose attempt to control and to reform the economic life of a great nation from the financial angle—for this is what his plan eventually amounted to—would have looked very different to his contemporaries and to historians. Even as it was, that gigantic enterprise was not simply a swindle and it may well be doubted whether France was the worse for it, on balance. However, economists not only fell in with the popular opinion that the scheme was nothing but swindle but also pointed to certain technical defects in it that were in fact important subsidiary causes of its failure. Thus that event acquired considerable influence on the evolution of what eventually became the classic theory of banking. Law’s performance as a monetary theorist is contained in his tract: Money and Trade considered, with a Proposal for supplying the Nation with Money (1st ed. 1705, 2nd ed. 1720; republ. in Somers’ Tracts, 1809; French version, together with other writings including interesting Mémoires justificatifs, in the Guillaumin edition of Économistes- financiers du XVIII e siècle, under the title of Considérations sur le numéraire et le commerce). The reader who wishes further information about that colorful personality is referred to A.W.Wiston-Glynn, John Value and money 281 . as the title of this section, but he used ‘Fundamentals’ as the title of the corresponding sections in Part III (ch. 7, sec. 2) and Part IV (ch. 8, sec. 3).] History of economic analysis 274. place in the history of economic analysis rests exclusively on his work on money (mainly in Some Considerations of the Consequences of the Lowering of Interest, and Raising the Value of Money,. with that of all those authors, old and new, who fail to see that any satisfactory theory of money implies a theory of the economic process in its entirety. History of economic analysis 278