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adequate, his method in part defective, and his conclusions sometimes misleading; but his inestimable service was in definitely converting economic speculation from detached inquiry or specific theorization to an organically related body of general principles. If the validity of certain of his doctrines has been questioned, if the universality of many of his conclusions has been denied, such results reflect the incredible expansion of the subject matter of political economy which a century of industrial growth has brought forth. What Ricardo did remains the corner stone of economic science. But more than this, what he tried to do gave the momentum to scientific study of economic principles and has continued its chief inspiration.

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In this year, 1910, we are just one hundred years away from the time when certain events occurred in English history with which David Ricardo was closely connected and which first brought him into notice.

They concerned the currency. The Report of the Bullion Committee was laid on the table of the House of Commons on June 8, 1810. The Committee (Francis Horner, chairman) had been appointed in February of that year, largely because of the "feeble efforts" of Ricardo and others to rouse the nation's attention to what was happening to its paper currency.1 What had been happening may be judged from the fact that in the first three months of 1810 the price of gold bullion in that same paper currency was £4, 10s. an ounce, the mint price being then as now, £3, 17s. 1011⁄2d., the excess consequently about 15 per cent; to send gold was to buy gold at £4, 10s. an ounce or more in the currency as it then was.

Ricardo's "Letters to the Morning Chronicle" of August, Sep-
tember, and November, 1809, declared depreciation of bank notes
to be an evident fact, and the overissue of them to be the demon-
strable cause of it. The superfluous notes could not come back to
the bank, for the restriction of cash payments enacted in 1797
still lasted, and the still valid laws against the melting of coin for
exportation had the effect of extending the depreciation to the
guineas. The whole currency was therefore depreciated, including
such guineas as were visible; and, as to silver, whether in good or
bad condition, a law of 17982 by limiting its sufficiency to £25
had thrown it out of court; it was token money.

Ricardo put his case more formally in the pamphlet on "The
High Price of Bullion a Proof of the Depreciation of Bank
Notes", the preface of which is dated December 1, 1809. Profes-
sor Hollander's republication of the "Letters to the Chronicle"

1 Cf. Letters to Malthus, p. 17, foot. "Feeble efforts”, High Price of Bullion,
Wks. 290.

'Reenacting law of 1775. See Letters to the Chronicle (ed. Hollander),

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has shown us how far the "Letters" are at one with the pamphlet. They agree, of course, in principle, but the pamphlet is more systematic. The paragraphs most nearly identical are those relating to the fancied connection of the rate of interest with the condition of the currency, and the supposed equality of silver with gold as standard money. But the clear statement of the general principle the clue to all the difficulties of this particular economic question is given only in the formal treatise and its Appendix refuting Malthus. Ricardo's idea is that the extent of a nation's need for currency is a definite fact about it, depending on its industrial and commercial peculiarities, as compared with those of another nation. It bears a definite proportion to that nation's trade and to the trade and currency of other nations. Just as in each society of men over any considerable time there is a definite and characteristic need of a certain quantity of food and raiment and the comforts of life generally, so there is a quantum of currency needed by each society. Neither the first (the other goods) nor the second (the currency) can be judged to be the same as for other societies; in fact each nation (and a nation is the most measurable kind of society, being the likeliest to furnish us with statistics) has a different scale and amount of wants from its fellows. But over any considerable time this is a standing difference, consistent with itself; and its unlikeness toward its fellows is a standing unlikeness. It does not stand so firmly that it cannot be shaken. Ricardo's "equilibria" are always those of the sea; his sea is never quite calm though always tending to be so; market fluctuations are its waves.1

Ricardo conceives that every disturbance of the proportion between the currency of one nation and the currency of another will cause a flow of the precious metals from one to the other, and such disturbance is not only an occasional cause of such a flow but (in spite of Malthus) it is the only cause under normal conditions and even under conditions, such as those of a war, not quite normal but not inconsistent with the action of economic forces. If a country in the flow and ebb of trade has proportionately too little currency, gold will be dearer there, and gold will go thither. Gold will become the means of payment most profitable to employ there, for it will be going from where it is less wanted to where it


See "Appendix" in McCulloch's Works of Ricardo, pp. 292-3.

Cf. Letters to Malthus, p. 16, top.

Cf. Letters to Malthus, p. 15, middle.

is more wanted. If on the contrary, the currency of a country has swollen beyond its needs, gold will leave it for the country where it is relatively dearer. This is true of other goods; in fact it is a deduction from the general principle applied by Adam Smith and others to all commodities.


It is no peculiarity of so-called international trade, in the narrow sense, for it holds between provinces of the same country. "The money of a particular country is divided among its different provinces by the same rules as the money of the world is divided amongst the different nations of which it is composed. Each district will retain in its circulation such a proportionate share of the currency of the country as its trade, and consequently its payments, may require, compared to the trade of the whole; and no increase can take place in the circulating medium of one district without being generally diffused or calling forth a proportionable quantity in every other district. It is this which keeps a country bank note always of the same value as a Bank of England Note." He goes on: "If in London, where Bank of England notes only are current, one million be added to the amount in circulation, the currency will become cheaper, or goods dearer. Goods will therefore be sent from the country to the London market to be sold at the high prices, or, which is more probable, the country banks will take advantage of the relative deficiency in the country currency, and increase the amount of their notes in the same proportion as the Bank of England had done; prices would then be generally, and not partially affected. This local experience had been utilized by the Bullion Committee which had taken notice of two striking incidents illustrating the case before them and drawn from the history of the banks of Scotland (1760 seq.) and Bank of Ireland (1804).o

Ricardo gained his point. The Committee reported that the evil was as he described it and was to be cured by the remedy he prescribed for it. The House of Commons was no doubt persuaded to reject this verdict; but there is no question that it was the right verdict, and within ten years the legislature gave it the force of the law.

Yet the name of Ricardo does not appear in the Report of the Committee; he was not examined before it, as far as the records show. An unnamed "Continental Merchant" holds sensible views

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High Price, McCulloch's edition of Ricardo's Works, 283.

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not unlike his so far as they go; but they do not go very far. Both refer to the Hamburg trade; but Ricardo could hardly be set down as a merchant, and his identity could hardly have remained concealed if the anonymous witness had been he. Other men too had been active on the same side.

It was, however, generally acknowledged that Ricardo's advocacy of the cause had been the most potent; he was as truly the protagonist of currency reform as Cobden, at a later date, of Corn Law Repeal. We may apply to his principles the eulogy of Marshall "That doctrine was established by Ricardo and I do not know that any person has shaken it in the least."10 When you turn to Marshall's context you will observe that Marshall is speaking apparently of something different, namely, the general theory of international trade; he is speaking not of currency but of oranges and cutlery, as embraced in the general theory of international trade. This general theory, however, seems to have been formulated by Ricardo out of the theory of the local equilibrium of currency in the form in which it has just been described here. As Malthus and others have laid stress on tendencies, Ricardo, without ceasing to respect tendencies, 11 was coming to see the significance of proportions. Perhaps we might say that this is the dominant feature of his reasonings in economics. Where the theory of another economist was a statement of a tendency, his theory would be a statement of a proportion. "No law can be laid down respecting quantity."12 The theory of foreign trade laid down in the "Political Economy and Taxation" (1817) is a statement of proportions.

It depends largely on the fact, more true in 1817 than in 1910, that capital does not move easily from country to country and therefore competition does not bring profits to a level all over the world or even all over Europe. There is one rate of profit in one country and a different rate in another. Each country has an equilibrium of its own, a level of profits to which domestic competition tends to reduce the profits of all commercial undertakings within the country. But the level of the foreign country

'He quotes the anonymous merchant more than once; see McCulloch's edition of his Works, pp. 308, 311, 322.

10 Answ. 9735, Gold and Silver Commission, Evidence, December 19, 1887, p. 11; cf. p. 42 (English blue book).

" E. g., pp. 51, 52.

12 Letter to Malthus, October 10, 1820, p. 175.

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