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ART. III. Efay on the Theory of Money and Exchange. By Thomas Smith. 8vo. pp. 231. London, Cadell & Davies. 1807.


[ONEY is so remarkable an agent in that clafs of tranfactions about which political economy is converfant, that vague and confused ideas on that subject almost neceffarily infect our modes of thinking in regard to the whole fcience. The great difficulty with which the falutary doctrines of political economy are propagated in this country, is, in truth, a very serious object of curiofity, as well as of regret. So long have the leading principles been demonftrated, and fo induftriously have they been inculcated, that nothing fhort of direct experience could convince us of the extent to which ignorance prevails. The late Orders in Council, however, refpecting 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, refpecting trade in general; the fpeeches which are commonly delivered, the books which are often published, and the converfations which are constantly held, supply that experience in melancholy abundance.

There is, unfortunately, fomething extremely fallacious in the ftudy of money. Its common ufes are fo 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 fo abridged, that it requires one of the most fubtle proceffes 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 abftract difquifitions, this, the most abstract of all the inquiries connected with political economy, has engaged an extraordinary fhare of their attention; and, fince the crifis in our pecuniary affairs which terminated in the fufpenfion of cashpayments at the Bank of England, it would not be easy to enumerate the books and pamphlets in which inftruction has been offered to us on this difficult fubject.

On this fucceffion of authors, one remark very forcibly fuggefts itself; that each, while he naturally imagined that he himfelf had made important discoveries, uniformly found that no difcoveries had been made by his predeceffors, but that every new idea on which they had ventured was a delufion and mistake. In this course they proceeded, till Mr Smith himself appeared,-who finds, in his turn, that all which on this fubject fo many authors before him have written, is perfectly nugatory. How furpriling

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ing is it,' he fays, that no real theory of money has yet been given to the public! All the writers on this fubject hitherto appear to have amused themselves with fpeculations on the practical part; and having no fixed principle laid down, whereon to found thefe fpeculations, their different conclufions have been as oppofite to one another, as eaft is to weft; in confequence, the fubject 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 fince the memorable event to which we before alluded, the fcience has not, in fact, been enriched with a fingle idea. If any benefit has accrued from their labours, it has arifen from the greater clearness with which they have explained fome 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, from Mr Henry Thornton downwards, has found this philofopher, indeed, to have been egregiously ignorant; but the doctrines, which each proposed to fubftitute, have been rejected by the fucceffors 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 fubject of money are in the highest degree perplexed, obfcure, and defective; nor can we be furprised, while this is the cafe, that abfurd theories in political economy find fo many fupporters and profelytes. If we can point out, therefore, fome of the principal fources of that confufion, from which fo many pernicious confequences appear to flow, and introduce but fo much light as may guide the inquirer into the path which leads to truth, we fhall have performed a fervice, however humble, of no little importance to the best interefts of mankind and of our country.

Mr Smith divides his difcourfe into four inquiries; firft, (he propofes) to ftate what appears to be the groundwork, or true firft principle, upon which the exiftence of money, or a circulating medium, depends;-fecond, to fhow the nature and properties of coins, and their connexion with the first principle;-third, to fhow the nature and properties of paper money, and its connexion with the first principle;-fourth, to fhow the true theory of exchange, or connexion with foreign countries.' As this diftribution is not liable to much objection,-as it conducts, at least, to no confufion,-it will enable us to ftate the reflections which we mean to offer in more intimate connexion with the criticisms which the prefent work fuggefts, if we content ourselves with the fame ar


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


ef many authors on abftract fubjects, if they would comprehend, and exprefs to themfelves, in one fimple and direct propofition, the main object of the inquiry. Thus, had Mr Smith, under the firft of the above heads, put to himself this precife queftion, What is money? (which, without his knowing it, is really the problem he proposes to folve), he would either have answered the queftion juftly and fatisfactorily, or he would at least have had a chance of difcovering that he did not know how to answer it. As the cafe 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 clafs of objects, which are diftinguished into various fpecies or fubdivifions. Thus, guineas are money,—and fhillings, and crowns; fo are dollars, and francs; fo, too, are bank-notes, and cowries, and bullion: falt and nails are in fome places money; and fheep and oxen. The armour of Diomede, fays Homer, coft fo many oxen; the armour of Glaucus fo many more. Now, the word money, being a general term, is to be analyzed pretty nearly in the fame way in which other neral terms are analyzed; viz. by afcertaining the chief qualities in which the different fpecies of objects included under it agree, and the quality or qualities by which they are diftinguished from all other objects. Were it, for example, the question, What is a quadruped? it would immediately occur, that theep, and horfes, 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 confufion in the ideas commonly attached to that term, it would be neceffary to analyze and define it by the fame procefs. Thus horfes, oxen, and the other fpecies of quadrupeds, agree together in all the common qualities which conftitute an animal or living creature, and in this other quality of walking on four feet. This laft 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 afcertained which belong to the term animal, one great fource of confufion, in any fpeculation relating to the abftract 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 inftructing our readers, but undoubtedly in the hope of inftructing a very large proportion of thofe authors who, during the laft ten or twelve years, have favoured the public with fpeculations on money; and of whom we do not believe that above one or two, at the very utmost, ever heard

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heard or read what a definition means. It is obvious, too, that the fpecies of analyfis, which we have here recommended, is different in its object from the mere declaration of the fenfe 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 laft refult of the investigation; and the rules of definition pointed out in the antient logic, are, on many occafions, 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 fteadily in view; and although of no use in that great department of philofophy which confifts in tracing, by obfervation and experience, the laws of nature, yet, in examining the accidental combinations of human ideas, which have become obfcure 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 faved many of the writers on money from that loofe and unprofitable talk, which runs on without meaning and without object, and in which so much of our late writings on that fubject confifts. 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 fhould ufe but ordinary pains, could make an enumeration, which fhould not be attended with advantage, If an enumeration tolerably complete were once formed, a careful inspection of it could hardly fail to difcover fome important article, in which moneys do not agree with any other clafs of objects; and thus a general expreffion or definition of money would be obtained, which, even if not perfect, would at leaft difengage fome combination hitherto unperceived, or exhibit fome relation hitherto undiscovered; and would, by this light, afford the means of renewing the fame process with additional chance of fuccefs.


The common mode, without any of this preparation and labour, is, to guess at a definition, from fome ftriking appearance; and then to write about it and about it, either deducing erroneous conclufions from a mistaken principle, or drawing unmeaning propofitions in loose and indefinite language. Thus, it has been extremely common to fay of money, that it is the measure of value.' This, indeed, is a standard propofition, which the writers on this fubject, with hardly any exception, seem to have adopted as a first principle; and as it is an expreffion extremely vague and obfcure, it has too often and too neceffarily communicated those characteristics to the fpeculations founded upon it. Nothing can be more intructive to writers of this defcription, than to analyze fuch ex


preffions as thofe by which they are apt to be led aftray. Thus, when they talk of money as being the measure of value, they never confider, that measure,' in this propofition, 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 expreffion is literal, and the idea conveyed is clear and diftinct. We know exactly how a pint measures water,—and how a yard measures extent. But how does a fhilling measure a quartern loaf, or a hundred guineas an acre of land? They are faid 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 moft. frail foundation on which to erect any general conclufions. The extreme inaccuracy of the expreffion may be proved by the most obvious confiderations. Nothing can be looked upon as a standard of measurement which is itself perpetually fubject to variation. Were the pint, or the yard, continually altering in quantity,-now lefs, and then more,-they would be entirely useless as measures, and it would be abfurd to speak of them in that fenfe. But money is confeffedly fubject 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 feen into this fubject so much further and clearer than most of his countrymen and contemporaries, as to perceive the force of thefe confiderations, as far as the precious metals are concerned; and he has, with juftice, ascribed a great part of the futile fpeculations which have appeared, to the notion that these, or coins compofed of them, are the measure or standard of value. • The great mif

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 fpeculations. 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 paffed for, they concluded that thefe 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 fame time, they allowed that the metals themselves varied in value; confequently they ought to have feen the abfurdity of attempting to establish any article of variable value, the invariable standard of value.' But the idea of a standard of value, which had fo greatly mifled his predeceffors, had too firmly taken root in the mind of Mr Smith, to be eafily removed. When he discovered, accordingly, that the precious me

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