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ART. III. Effay on the Theory of Money and Exchange. By

Thomas Smith. 8vo. pp. 231. London, Cadell & Davies.

1807. M oney is fo remarkable an agent in that class of transactions w about which political economy is conversant, that vague and confused ideas on that subject almost necessarily infect our modes of thinking in regard to the whole science. The great difficulty with which the falutary doctrines of political economy are propagated in this country, is, in truth, a very serious object of curiosity, as well as of regret. So long have the leading prin. ciples been demonstrated, and so industriously have they been inculcated, that nothing short of direct experience could convince us of the extent to which ignorance prevails. The late Orders in Council, however, respecting the trade of neutrals; the popularity of Mr Spence's doctrines in regard to commerce ; our laws concerning the corn trade; a great part of our laws, in fact, respecting trade in general; the speeches which are commonly delivered, the books which are often published, and the conversations which are constantly held, supply that experience in melancholy abundance.

There is, unfortunately, something extremely fallacious in the ftudy of money. Its common uses are so familiar to every man, that there appears no difficulty whatever in comprehending its nature; while many of the transactions in which it is concerned are so complicated, and many of the terms employed to denote its functions are so, abridged, that it requires one of the moft subtle processes of thought to trace its real operations, and refer them to the original principle on which they depend. It has happened, accordingly, that though our countrymen have, in general, but little taste for abstract disquisitions, this, the most abstract of all the inquiries connected with political economy, has engaged an extraordinary share of their attention; and, since the crisis in our pecuniary affairs which terminated in the suspension of cashpayments at the Bank of England, it would not be easy to enumerate the books and pamphlets in which instruction has been offered to us on this difficult subject. .

On this succession of authors, one remark very forcibly suge gests itself; that each, while he naturally imagined that he him. self had made important discoveries, uniformly found that no dif. coveries had been made by his predeceffors, but that every new idea on which they had ventured was a delusion and mistake. In this course they proceeded, till Mr Smith himself appeared, who finds, in his turn, that all which on this subject so many authors before him have written, is perfectly nugatory. How surpril

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om theiched with efore alluded, on money lincemarkable, il

ing is it,' he says, ? that no real theory of money has yet been given to the public! All the writers on this subject hitherto appear to have amused themselves with speculations on the practical part; and having no fixed principle laid down, whereon to found these speculations, their different conclusions have been as oppasite to one another, as east is to weft; in consequence, the subject has been daily more and more involved in obscurity.'. It. may, indeed, be affirmed, and it is not a little remarkable, that, numerous as have been the writers on money since the memorable event to which we before alluded, the science has not, in fact, been enriched with a single idea. If any benefit has accrued from their labours, it has arisen from the greater clearness with which they have explained some of the more complicated operations of business; but the doctrine of money, in truth, remains as it was left by the great Father of political economy. Every writer, froni Mr Henry Thornton downwards, has found this philosopher, indeed, to have been egregiously ignorant; but the doc, trines, which each proposed to substitute, have been rejected by the successors of each; and it is to be feared that Mr Thomas Smith will not experience more favourable treatment. Nothing can afford a stronger proof than this alternation of positions and refutations, that the ideas which prevail on the subject of money are in the highest degree perplexed, obscure, and defective; nor can we be surprised, while this is the case, that absurd theories in political economy find so many supporters and profelytes. If wę can point out, therefore, some of the principal sources of that confusion, from which so many pernicious consequences appear to flow, and introduce but fo much light as may guide the inquirer into the path which leads to truth, we shall have performed a service, however humble, of no little importance to the best interests of mankind and of our country.

Mr Smith divides his discourse into four inquiries ; ' first, (he proposes)' to state what appears to be the groundwork, or true first principle, upon which the existence of money, or a circulating medium, depends ;-second, to show the nature and properties of coins, and their connexion with the first principle ;-third, to Thow the nature and properties of paper money, and its connexion with the first principle; -fourth, to show the true theory of exchange, or connexion with foreign countries.' As this distribu. tion is not liable to much objection,-as it conducts, at least, to no confusion,-it will enable us to state the reflections which we mean to offer in more intimate connexion with the criticisms which the present work suggests, if we content ourselves with the fame ar.' rangement.

1. It would contribute greatly to infuse clearnefs into the views

of many authors on abstract subjects, if they would comprehend, and express to themselves, in one simple and direct propofition, the main object of the inquiry. Thus, had Mr Smith, under the first of the above heads, put to himself this precise question, What is money? (which, without his knowing it, is really the problem he proposes to solve), he would either have answered the question juftly and satisfactorily, or he would at least have had a chance of discovering that he did not know how to answer it. As the case now ftands, he has miffed both objects. °. It may be useful to Mr Smith and other inquirers, if we explain a little more fully the meaning which we attach to the question, What is money? Money, like other general terms, denotes a certain combination or large class of objects, which are distinguished into various fpecies or subdivisions. Thus, guineas are money-and shillings, and crowns; fo are dollars, and francs ; fo, too, are bank-notes, -and cowries, and bullion : salt and nails are in some places money; and theep and oxen. The armour of Diomede, says Homer, cost so many oxen; the armour of Glaucus so many more. Now, the word money, being a general term, is "to be analyzed pretty nearly in the same way in which other general terms are analyzed ; viz. by ascertaining the chief qualities in which the different species of objects included under it agree, and the quality or qualities by which they are distinguished from all other objects. Were it, for example, the question, What is a quadruped ? it would immediately occur, that sheep, and horses, and oxen, and animals of various other denominations, are included under this term; and if a number of errors were derived from a certain obfcurity and confusion in the ideas commonly attached to that term, it would be necessary to analyze and define it by the fame process. Thus horses, oxen, and the other species of quadrupeds, agree together in all the cominon qualities wbich constitute an animal or living creature, and in this other quality of walking on four feet. This last quality, however, in which quadrupeds agree, is one in which they differ from all other animals. A quadruped is, therefore, properly defined to be, an animal or living creature which walks on four feet; and if the ideas were well ascertained which belong to the term animal, one great source of confusion, in any speculation relating to the abltract term quadruped, would thus neceffarily be removed.

We have introduced this example of a definition in the antient form, not certainly with a view of instructing our readers, but undoubtedly in the hope of instructing a very large proportion of those authors who, during the last ten or twelve years, have fawoured the public with speculations on money; and of whom we do not believe that above one or two, at the very utmolt, ever

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heard or read what a definition means. It' is obvious, too, that the species of analysis, which we have here recommended, is different in its object from the mere declaration of the sense in which any general term is about to be employed. When the ideas involved in the abstract term are themselves the object of inquiry, the definition is the last result of the investigation; and the rules of definition pointed out in the antient logic, are, on many occasions, a very useful clue to guide us through the intricacies of a very complicated and abstract problem. They ferve, at least, to keep the object of inquiry Readily in view; and although of no use in that great department of philosophy which consists in tracing, by observation and experience, the laws of nature, yet, in examining the accidental combinations of human ideas, which have become obscure by their complexity and abstraction, the principle, on which these rules are founded, might often be applied with fingular advantage. A very clear and penetrating mind might proceed, no doubt, without them. But they would certainly have saved many of the writers on money from that loose and unprofitable talk, which runs on without meaning and without object, and in which so much of our late writings on that subject consists. What are those particulars in which the different fpecies of money agree, is an inquiry in which hardly any man can lose his way; and hardly any man who should use but ordinary pains, could make an enumeration, which should not be ata fended with advantage. If an enumeration tolerably complete were once formed, a careful inspection of it could hardly fail to discover some important article, in which moneys do not agree with any other class of objects; and thus a general expreslion or definition of money would be obtained, which, even if not perfeet, would at least disengage some combination hitherto unperceived, or exhibit some relation hitherto undiscovered ; and would, by this light, afford the means of renewing the same process with additional chance of success.

The common mode, without any of this preparation and labour, is, to guess at a definition, from some striking appearance; and then to write about it and about it, either. deducing erroneous conclusions from a mistaken principle, or drawing unmeaning propofitions in loose and indefinite language. Thus, it has been extremely common to say of money, that it is the measure of value.' This, indeed, is a standard propofition, which the writers on this subject, with hardly any exception, seem to have adopted as a first principle ; and as it is an expression extremely vague and obscure, it has too often and too necessarily communicated those character. iftics to the speculations founded upon it. Nothing can be more initructive to writers of this description, than to analyze such ex

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pressions as those by which they are apt to be led astray. Thus, ; when they talk of money as being the measure of value, they never consider, that measure,' in this proposition, is only a metaphor. When we say that a pint is a measure of water, or that a yard is a measure of length, the expression is literal, and the idea. conveyed is clear and distinct. We know exactly how a pint measures water,—and how a yard measures extent. But how does a shilling measure a quartern loaf, or a hundred guineas an acre of land? They are said to measure one another merely when one may be exchanged for another; but between this operation and real measuring, the analogy is very remote, and affords a most. frail foundation on which to erect any general conclusions. The extreme inaccuracy of the expression may be proved by the most obvious considerations. Nothing can be looked upon as a standard of measurement which is itself perpetually subject to variation. Were the pint, or the yard, continually altering in quantity, now less, and then more, they would be entirely useless as measures, and it would be absurd to speak of them in that sense. But money is confefsedly subject to great variations. It is computed to have funk in this country more than one half in value within the last fifty years. How vague, then, and uncertain must be the language in which it is denominated a measure of value !

It must be mentioned, to the praise of our author, that he has seen into this subject so much further and clearer than most of his countrymen and contemporaries, as to perceive the force of these considerations, as far as the precious metals are concerned ; and he has, with justice, ascribed a great part of the futile speculations which have appeared, to the notion that these, or coins compofed of them, are the measure or standard of value." The great mis. take,' says he,' into which it is conceived the writers upon money have fallen, is, that they have not gone deep enough for a, foundation whereon to rear their speculations. Finding that gold and filver had, in all ages, been employed as the circulating medium, and that the quantity of these in a coin was always equal or nearly equal, to the value it passed for, they concluded ihat these metals were the “ Standards of value ;” and therefore, they have employed all their labour and skill, in vain endeavours to reconcile the different phenomena of money to this idea ; and this they did, although, at the same time, they allowed that the me. tals themselves varied in value; consequently they ought to have seen the absurdity of attempting to establish any article of variable value, the invariable standard of value.' But the idea of a standard of value, which had so greatly milled his predeceffors, had too firmly taken root in the mind of Mr Smith, to be easily remoyed. When he discovered, accordingly, that the precious me

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