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

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

1807. M oney is so remarkable an agent in that class of transactions In about which political economy is conversant, that vague and confused ideas on that subject almost neceffarily infect our modes of thinking in regard to the whole science. The great difficulty with which the salutary 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 study 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 most 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 enu. merate 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 fuggests itself; that each, while he naturally imagined that he himfelf had made important discoveries, uniformly found that no discoveries had been made by his predecessors, but that every new idea on which they had ventured was a delusion and inistake. 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 surprise




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 folve), he would either have answered the question justly and fatisfactorily, or he would at least have had a chance of discovering that he did not know how to answer it. As the case now stands, 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 cther general terms, denotes a certain combination or large class of objects, wluich are distinguished into various fpecies or subdivisions. Thus, guineas are money, -and shillings, and crowns; fo are dollars, and francs; so, too, are bank-notes,--and cowries, and bullion : salt and nails are in some places money; and sheep 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 objets 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 obscurity and confusion in the ideas commonly attached to that term, it would be necessary to analyze and define it by the same process. Thus horses, oxen, and the other species of qua. drupeds, agree together in all the common qualities which consticute 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 abstract 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 favoured the public with speculations on money; and of whom we do not believe that above one or two, at the very utmost, ever.


fure which wall properly defined in all other an

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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 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 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 confessedly subject to great variations. It is computed to have sunk 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 composed of them, are the measure or standard of value. « The great miltake,' 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 silver 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 pafled for, they concluded that these metals were the “ Standards of value;” and therefore, they have employed all their labour and kill, 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 metals 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 misled his predeceffors, had too firmly taken root in the mind of Mr Smith, to be eally removed. When he discovered, accordingly, that the precious meC4


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