Political Economy to teach the method of wealth, why has not the man of millions the true method; and what need of going beyond his rules? As for the selfishness of the race, we fear that Political Economists have no prescription for its cure.1

In a history of monetary theories, it will be necessary to refer only very briefly to American writers, as they simply echo, without one spark of originality or independence, but with an extravagance perhaps characteristic of the nation, what they have found in the books written on the other side

1 It is hardly necessary to take into account Continental writers upon the subject of money. None of them have treated, to any considerable extent, of symbolic currencies. When these are referred to, Adam Smith seems to have been implicitly followed. The most distinguished of them is Jean-Baptiste Say, whose first work, entitled "A Treatise on Political Economy," &c., was published in 1803. It was for a long time a text-book in the schools of this country. He held with Smith and English Economists, that the value of money depended, or might depend, upon the necessity that existed for a medium of exchange. "The intense demand for money," he says, "has sometimes been sufficient to make paper employed as money equal in value to gold of the same denomination; of which the money of Great Britain is a present example. It must not be imagined that the paper money of that country derives its value from the promise of payment in specie which it purports to convey. That promise has been held out ever since the suspension of cash payment by the Bank in 1797, without any attempt at performance, which many people consider impossible. .. Yet the paper, though depreciated, is invested with value far exceeding that of its flimsy material. Whence, then, is that value derived? From the urgent want, in a very advanced stage of society and industry, of some agent or medium of exchange.1 . . . Paper money is thus left in the exclusive possession of the business of circulation; and the absolute necessity of some agent of transfer in every civilized community will then operate to maintain its value. So urgent is this necessity that the paper money of England, consisting of the notes of the Bank, has been kept at par with specie simply by the limitation of the issue to the demands of circulation."2 In other words, so intense at times has been the demand for food, that people have been forced to eat their knives and forks to appease hunger and support life! Chevalier hardly touches upon the subject of paper-money. He confines himself almost exclusively to metallic money, its sources of supply, distribution, &c. His treatise upon the probable fall of gold, which was translated by Mr. Cobden, seems to be very inadequate, in not sufficiently taking into account, not only the increased amounts necessary to be held for the support of symbolic currencies, but also the vastly increased power of consumption due to the increased wealth of the leading European nations and the United States. Wolowski, whose work is of more recent date, appears to have been wholly ignorant of the nature and object of paper money, as he quotes approvingly Mr. Amasa Walker's dictum, that paper should symbolize nothing but gold.

1 Say's Political Economy, Book i. Chap. xxi.
2 Ibid., Chap. xxii.

of the water. Among the most conspicuous of them is Mr. Francis Bowen, lately Professor of Political Economy in Harvard University, who, pending his professorship, published a voluminous work facetiously entitled "American Political Economy," which was long used as a text-book in that institution. It is a feeble and garrulous restatement of Adam Smith, Stewart, Ricardo, Tooke, McCulloch, and Mill, to whose absurdities and errors an emphasis is given by no means to be found in the originals.

"I say, then, that money is merely a contrivance for diminishing the friction of exchange; and, though safe and convenient, it is also a very costly contrivance for this end. . . . It is a portion of the wealth of the country, it is true; but it is a portion of our unproductive wealth, not our capital. We are the poorer by the loss of profit or interest on all of it which we are obliged to keep on Money (paradoxical as the assertion may seem) yields neither profit nor interest. It is only the goods or commodities that are transferred by means of money which yield profit; and this profit or interest, as we have seen, depends on the mutations or changes of form that they undergo. The very reason which Locke adduces for the high estimate put upon money in comparison with other objects of wealth,—namely, its durability, or the fact that it cannot be consumed, is the cause why it is not productive. The specie which a merchant or a banker holds in store, to provide against daily calls or sudden emergencies, is the only unproductive portion of his capital: he is subject to a loss of interest on the whole amount thus retained. It has been already proved that it is only through the constant transformation of capital, through its repeated consumption and reproduction, that it is made to yield a profit. And even as an article of unproductive wealth, it may be said of money that it gratifies no taste, and in its capacity as money, apart from its character as a portion of wealth, it yields no enjoyment. The coin which a man keeps in his pocket does not, like his shoes or his hat, contribute to his comfort: it is a convenience to him only as it supplies immediate means for making small purchases or satisfying small demands." 1

We have already sufficiently dealt with all such statements as these. It is enough to reply here, that coin has a great many functions beside "diminishing the friction of exchange." It cannot be called unproductive so long as it can be loaned at interest, and is absolutely indispensable in the process of distribution, without which there can be no capital worthy the name. It would be just as proper to say that a wagon or

1 American Political Economy, pp. 281, 282.

railroad car was unproductive, for the reason that it did not produce the merchandise transported by it.

"In every exchange," he continues, "the two values which are exchanged are supposed to be equal. Every exchange is a barter of a quantity of merchandise for a certain sum of money which is its equivalent. But it does not follow that there must be in the community as much money as there is merchandise; for, as the money is not consumed by effecting this exchange, it is ready immediately to effect another purchase. The same piece of money may be exchanged successively for any number of articles of merchandise of the same value; or, in other words, any sum of money can purchase successively a quantity of merchandise worth an infinitely larger sum.

"The circulation of money and of merchandise bears some relation to the momentum spoken of in physical science, which is composed of the velocity multiplied by the mass; the momenta are equal, though the velocity should be increased tenfold, provided that the mass is but one tenth part as great. So, also, the momentum of wealth is its value multiplied by the rapidity of its circulation. As money circulates far more rapidly than merchandise, it is evident that (the number of exchanges on both sides being equal) there must necessarily be less value in the money than in the merchandise, and as much less as the circulation of the money is more rapid than that of the merchandise. If the value of the mer

chandise which changes hands in a country in the course of a year amounts to a thousand millions, and the circulation of the money is ten times as quick as that of the merchandise, a hundred millions of money will effect all the exchanges. Let the quickness of the money circulation be doubled, and fifty millions will suffice.

"Mr. J. S. Mill has stated this point very clearly: If we assume the quantity of goods in sale, and the number of times those goods are resold, to be fixed quantities, the value of money will depend upon its quantity, together with the average number of times that each piece changes hands in the process. The whole of the goods sold (counting each resale of the same goods as so much added to the goods) have been exchanged for the whole of the money, multiplied by the number of purchases made on the aver age by each piece. Consequently, the amount of goods and of transactions being the same, the value of money is inversely as its quantity multiplied by what is called the rapidity of circulation. And the quantity of money in circulation is equal to the money value of all the goods sold (including all the resales as additional goods) divided by the number which expresses the rapidity of circulation.'

"Stating the matter algebraically, we have

gs=mr;

where gquantity of goods on sale;

8=number of times the goods are resold;

mquantity of money in circulation;

rnumber of purchases effected by each piece of money.

"Of course, any three of these quantities being given, the fourth can be deduced from them. Thus,

which is the principle just enunciated. It is also evident, that the value of money will be inversely as its quantity; for, if we suppose the quantity of money to be doubled, we still have

whence,

gs=2mr;

2 m = 2;

that is, 2 m is worth only the same value which was formerly represented by m." 1

The value of money, says Mr. Bowen, is in ratio to its momentum; that is, "to its quantity multiplied by what is called the rapidity of circulation." The degree of one measures that of the other. "If the value of the merchandise which changes hands in a country in the course of a year amounts to $1,000,000,000, and the circulation of money is ten times as quick as that of the merchandise, $100,000,000 will effect all the exchanges. Let the quickness of money be doubled, and $50,000,000 will suffice." So, also, he says, "the momentum of wealth is its value multiplied by the rapidity of its circulation." Momentum and effective value are identical terms. All kinds of merchandise, wealth being a generic term, obey the same law. Whatever value can be predicated of one kind, due to the rapidity of its circulation, can be of all other kinds. Assuming the correctness of his proposition, the great problem for society is to determine the degree of momentum that can be secured for its merchandise, as its wealth will be increased in like ratio. As Mr. Bowen has applied his illustration to only one kind of merchandise, money, we will extend it to others: thus,

gs=mr.

The algebraical formula is the same in its characters; but for the present purpose g stands for goose instead of goods. Now, "the value of the goose is inversely as its quantity multiplied by the rapidity of its circulation." Assuming the formula given to express the ordinary rapidity of circulation, or, what is equivalent, the momentum, and consequently, value of

1 American Political Economy, pp. 306-808.

the goose; then, if its momentum, or value, be doubled, the formula has only to be altered; thus:

The goose has now a value twice greater than it had before. Of course, any three of these quantities being given, the fourth can be deduced from them; thus:

m=2,

which is the principle just enunciated. As the value of the goose will be inversely as its quantity, if this quantity be reduced one-half (the demand the same), we still have

that is, 2 m will have only the value that was formerly possessed by m. If the crop of geese should be short, and it should be desirable to increase their momentum, or effective value, say tenfold, all that would have to be done would be to increase their rapidity of circulation to be expressed by the following change in Mr. Bowen's formula; thus:

When the last degree of momentum was secured, a wing or a leg of the goose would have a value equal to that of the whole bird. Society will be the gainer in an equal degree, by being able to devote to other purposes the land formerly dedicated to goose-culture. Admitting the conclusiveness of his demonstration, it must be applicable to all kinds of merchandise; for, as has already been shown, money, after it has been spent, is as functus officio to its late owner as is the goose to its owner after it is eaten. If it be objected that the money is still in existence, and the goose is not, it may be replied: that the goose has indeed been eaten, but productively, to appear in new geese, or in other kinds of merchandise; so that whoever uses