..

Difference between his method and that of Aristotle
Emancipation of the exact sciences from the Aristotelian methods.
In the moral, the methods of the Schoolmen still prevail .
No considerable progress made in any but Law (note)
Unlawfulness of usury first attacked by Bentham
Money not yet emancipated from the teachings of Aristotle
Permanence of theories in themselves wholly absurd (note)

Disastrous consequences of its debasement (Macaulay)
Its reformation proposed

Opposition headed by Lowndes

His proposition for lowering the standard

Locke called upon to refute him. .

Standard value of the coinage to be maintained

Government to assume the loss.

The people for a time without a currency (Macaulay)

The inconvenience and distress

70

71

71

71

73

73

73

His object to supply Scotland with capital

The value of gold and silver their value in barter
They acquire additional value from their use as money

The first proposition correct

The last not. . . .

Objection to gold and silver as money

83

"Money not the value for which goods are exchanged, but the value by

which they are exchanged".

Land better than silver as a basis of currency

88888

86

87

Money for domestic exchanges may differ from that used in foreign

exchanges

Holds that its issues might be made the basis of industrial enterprises

Money a thing of no importance

Its value imaginary . .

An imaginary value no value

Hume's plan for debasing the currency

His untrustworthiness shown by it.

Prices reduced by reducing the amount of the currency
Prices increased by reducing the currency

Money is in ratio to products exchanged

Paper money displaces a corresponding amount of coin
Does not displace a corresponding amount of coin
His views upon money wholly erroneous.
His ignorance, and indifference to truth

The anomalous character of the Bank of England
Its success due to the practical sense of its managers

(For Bank of England, see infra, p. 183.)

ADAM SMITH.

90

90

91

94

94

95

95

95

95

97

98

98

98

99

Divisibility of the material the most important attribute
Coinage an essential attribute of money

Invention of money impossible..

Labor, as an abstract notion, the real measure of values; coin, the appar-

Fluctuates more from year to year: less from age to age

110

The money or coin price the one by which transactions are made

110

The universal preference for the precious metals renders them money

The price of every commodity resolves itself into wages, profit, and rent 112

The gross and neat revenue of society. .

113

The expense of maintaining its fixed capital no part of its neat revenue

The expense of maintaining its circulating capital may form a part of its

Money is the only one the maintenance of which can occasion any

diminution in the neat revenue

114

It forms no part of either the gross or neat revenue

It is the wheel of circulation, not the thing circulated

Smith's elements of price and classifications of property arbitrary and

114

.

114

absurd

115

The legal division into "real" and "personal" the only proper one

Defect of Smith and the Economists in overlooking interest as an element

in price..

The expense of maintaining all kinds of property is in ratio to its cost

Money essential to the value of all other commodities

Need not be actively employed to be productive . .

Groundlessness and absurdity of Smith's assumptions and conclusions

Distinction between real and nominal prices

A person's income is not the money he receives

Absurdity of such distinctions

Paper money a substitute for metallic money

115

115

The word "seems" illustrative of Smith's method

Wholly failed to comprehend the nature of paper money

All notes issued return regularly for redemption.

If good bills only be discounted, the notes return in their payment
Manner in which paper money may be substituted for coin
An amount of coin equal to the issue liberated from use

The channels of circulation will only hold a certain quantity of money
If there be too much, they will overflow.

The available capital of a country increased by the amount issued

Mode of issue of a symbolic currency.

Never issued in the manner supposed by Smith

124

The holders of money never send it abroad as the condition of using it as

capital.

Smith wholly misconceived the object and effect of paper money

Provision, material, and finished work, the only things that can set indus-

try in motion.

Money only a small, and always the most unproductive part of a nation's

capital

Money material for the reason that it is always going into the arts

Capital, as it can always be loaned at interest

All kinds of capital necessary to the operations of society equally valuable

and equally productive. . .

The proportion of money to the merchandise circulated by it
The advantage of substituting paper for gold..

Proper limit of paper money the amount of merchandise to be symbolized

Tendency of all commercial countries to symbolize their products.

Paper money (unless legal tender) cannot be substituted for coin

The greater the amount of paper, the greater that of coin..

The amount of paper money can never exceed that of the coin it displaces 129

All excess immediately drawn in coin

129

Absurdity of such assumptions..

130

Disproved by reference to the currencies of England and Scotland.

130

Paper money used in foreign as in domestic commerce.

132

Only the excess of paper money issued returns to the issuer

132

The coin liberated will go abroad

Increased cost of maintaining excessive issues

There can be no excess of symbolic money.

All regularly returns for redemption

The amount of notes issued has nothing to do with their return

A currency not symbolic is in excess to its whole amount.

Cost of maintaining a currency in ratio to its amount

The advances that Banks may make to merchants never to exceed the

amount of coin which would otherwise be in circulation

Advances to be made to merchants only as the representatives of manu-

facturers..

To equal the amount of merchandise entering into consumption.

Paper money does not supersede, but supplements the use of coin

A community will "absorb" all the money it can get

The promptness in payment of merchants would show that an excess of

currency had not been issued ...

Such promptness for a time rather a proof of excessive issues

All reserves, and all gold and silver used as currency, dead stock

The object of banking to convert this dead stock into active capital

Paper money a wagon-way through the air..

Increase of money increases the price of commodities

The quantity of paper money added to the circulation, always to equal

the amount of coin taken from it

Absurdity of these propositions

132

132

133

133

133

133

Gold and silver as money never dead stock

138

"The principles of the Commercial or Mercantile System"

The assumed science of Political Economy a modern one.

The Greeks, though addicted to commerce, seldom speculated upon subjects

The Romans never a commercial or manufacturing people

The overthrow of the Empire by the Northern races

Freedom the necessary condition and result of the commercial spirit

140

Contempt of the Greeks and Romans for the useful industries

The error not in the importance attached to them, but in the modes in which

2d, That these can be brought into a country having no mines, only by a

favorable" Balance of Trade"

144

Hence it became the great object of Political Economy to increase expor-

tations and diminish importations

144

....

1st, By restraints upon the importation of such articles as could be pro-

duced at home . .

147

2d, By restraints upon importations from countries with which trade

was considered disadvantageous

147

The six preceding provisions the means for increasing the "Balance of

Trade"

The precious metals not wealth. .

The idea that they were arose from the double function of money

Illustration of this distinction

Money the measure of value and money the instrument of commerce, the

147

147

148

same .

A person rich in proportion to the amount he holds

Money an instrument of commerce by reason of its value

Absurdity of Smith's propositions and conclusions

A sale of goods for money an exchange of equal values

Doctrines of Smith and the Economists in reference to "Balance of Trade"

the necessary sequence of those held by them in reference to the

value of money

Absurdity in asserting the universal object of acquisition to possess no

value..

Would not allow that to be an object of commerce which was not even a

subject of commerce

154

Importance of an equilibrium of the precious metals the world over

How this is to be maintained..

Illustrated by the action of the Bank of England

Governments incompetent to control the movements of the precious metals 158

The Bank competent

157

158

Its action a triumphant vindication of the correctness of the doctrine of

"Balance of Trade"

Smith assumed to have demonstrated the superiority of the former

No such demonstration possible. ..

158

158

The opposing doctrines not the result of natural laws, but of conditions

Those possessed of superior capital and skill, Free-traders.

Those lacking and seeking to acquire them, Protectionists

The same parties Free-Traders in one country and Protectionists in

another