CAIRN-INT.INFO : International Edition

Ghislain Deleplace, Ricardo on Money: A Reappraisal, London and New York: Routledge, 2017, xiv+417 p.

1The last year, 2017, was the bicentenary of the publication of the first edition of David Ricardo’s magnum opus, On the Principles of Political Economy, and Taxation [hereinafter Principles for short], which is also the representative work of the English Classical Political Economy. Ghislain Deleplace’s book Ricardo on Money: A Reappraisal, published in this year, may be intended to be a commemoration of this memorable year in the history of economic thought. But its significance does not limit itself to this, the book is also an event in the studies of Ricardo’s economics or more widely in the studies on classical monetary theory and thought in general, though the author presents him as an unorthodox, dissident thinker far ahead of his time.

2As is well known, since the publication of The Works and Correspondence of David Ricardo in 11 volumes by Piero Sraffa from 1951 with his impeccable editorial work [only the numbers of volume and page will be indicated for the quotations hereinafter from The Works, like I/50], the studies on Ricardo’s economic theory and thought have greatly advanced in many countries of the world. But these studies were predominantly on his theory of value and distribution embodied in the first chapters of Principles, with the result that another pillar of his preoccupation concerning money and banking during the whole of his career as economist, of relatively short time from 1809 to 1823, was rather neglected as “marginal” and in contradiction with his “main theory”, “although a rough calculation indicates that more than one half of what Ricardo wrote in economics was devoted to money and banking” [p. 3, only the page number will be given for the quotation from the above book of Deleplace]. Ricardo made a brilliant debut of his career as economist with the intervention in the then fiercely debated controversy on the inconvertible banknote with a newspaper article and the ensuing pamphlet entitled The High Price of Bullion, A Proof of the Depreciation of Bank Notes [1810-11]. Most of the small number of commentators on Ricardo’s theory of money and banking have tended to concentrate their attention almost solely on these writings of “early period”, putting aside his related writings in the subsequent years as mainly concerning his theory of value and distribution, in spite of the fact to the contrary evidently shown by the documentary materials collected in The Works.

3As if to contravene such a general trend in Ricardo studies, the author stresses throughout the book the importance of his “mature monetary writings” [p. 2], “mature theory of money” [p. 4], “mature views on money” [p. 7], in contrast with his “immature” views advanced in the “Bullion Essays” [Sraffa calls thus the whole of the monetary writings of Ricardo from 1809 to 1811, cf. III/3], to be found in his later writings subsequent to these essays, roughly speaking after An Essay on the Influence of a low Price of Corn on the Profits of Stock [1815]. In order to attain this objective the author takes into account in this book “all Ricardo’s monetary writings” [p. 4, emphasis in original], “all his monetary writings” [p. 5]. In fact, the list of all these writings of different nature [book, pamphlet, correspondence, manuscript, evidence and speech in parliament] is given in Appendix 2 “Weapons: Ricardo’s contributions on money” in Chapter 2 “Ricardo’s battles on currency and banks” [p. 75-80]. These “weapons” may give this book the right to claim to be the unprecedented tentative of an exhaustively comprehensive study of “Ricardo on money”, since up to the present “no book covers this topic as a consistent whole” [p. 3]. But this does not necessarily mean a total absence of “an important source of inspiration for the present research” [p. 2]. This is the work co-authored by Maria Cristina Marcuzzo and Annalisa Rosselli [1991] Ricardo and the Gold Standard. The Foundations of the International Monetary Order, London: Macmillan, which gained much topicality. To the best of my knowledge, one of the main and novel features of this co-authored work is the decisive importance attached to the notion of “standard of money” —or monetary standard in the author’s parlance— (belonging to a kind of terms used not frequently by Ricardo in his monetary writings) serving as the measure of value of money and also the regulator of its quantity in different ways in different monetary regimes. In this book the author puts “the notion of monetary standard centre-stage” [p. 2, see also p. 262, 272, 296] In this respect he may be said to follow after an important aspect in the interpretation of Ricardo’s theory of money put forward by Marcuzzo and Rosselli.

4During the first years of his academic career mainly in the 1980s, the author had been interested in Ricardo’s “theory of value and distribution in the line of Piero Sraffa” [p. 12]. The turning point seems to have been marked by the publication of the above co-authored work, following which he edited in 1994 a special issue of Cahiers d’économie politique gathering together papers reviewing the work or strongly inspired by it, treating various aspects of Ricardo’s theory of money. However, this does not prevent the book of Deleplace from being a pioneering tentative not simply going in the wake of the foregoing work by Marcuzzo and Rosselli. As the title of their work suggests, “it mainly aimed at integrating theoretical analysis and historical reconstruction in order to account for a particular question: international adjustment” [p. 2-3], while the book of Deleplace intends to integrate “money into Ricardo’s theory of value and distribution” in showing that his theory of money is “neither a quantity theory of money nor a commodity-theory of money” [p. 4]. Only in Chapter 8 “The international adjustment to a monetary shock”, the themes of these two books may overlap to a certain extent. In any case, viewed from the position of the author, the work of Marcuzzo and Rosselli is the only one exception in the form of a book published hitherto. In this regard, this book is unique in its kind.

5Since the publication in 1991 of Ricardo and the Gold Standard, beginning with the above special issue edited by him, the author has published numerous journal articles and books one after the other during the last 25 years, listed in “References” [p. 397-398]. In this sense, “this book is the result of a 25-year companionship with Ricardo on money” [p. 12]. But this is not to say that this book is a simple summing-up of these recent works of the author, though there exist some partial reproductions of them. This book is rather a prolongation and development of them, properly composed, containing new ideas and concepts. The whole of the book is made up of 9 chapters, “Introduction” and “Afterword”, and these chapters are divided into 3 “PART”s as follows:

  • PART I History, 1. The historical context, 2. Ricardo’s battles on currency and banks;
  • PART II Theory, 3. Money and the invariable standard, 4. The two causes of change in the value of money, 5. The adjustment of a change in the value of the standard, 6. The depreciation of metallic money, 7. The regulation of the quantity of convertible notes by the standard;
  • PART III Policy, 8. The international adjustment to a monetary shock, 9. Central banking and euthanasia of metal currency.

6At the end of each chapter, the author adds an “Appendix”, “which provides additional material on its ‘chapter’s’ subject or deals with a particular question, in relation with it”. In addition, the author tries “to formalise in equations Ricardo’s analysis of the determination of the value of money” [p. 12]. In fact, almost in every step of his theoretical analysis in Ricardo’s argument the author reformulates it in the form of mathematical formalisation. Probably Ricardo’s exposition is fit for such a treatment. But unfortunately, because of the total inaptitude in this respect on the part of the reviewer, the mathematical part of the book will have to be passed over in silence.

7The trichotomy of economics into history, theory and policy, adopted in this book by the author is said to have its origin in the early German historical school and reminds the reviewer of the ancient curriculum composed in this way in many of the faculties of economics in Japan until about 25 years ago, maybe a residual of the German influence under which the faculty of economics in a number of universities was established during the early interwar period. But of course the author’s trichotomy may accidentally coincide with such circumstances hence have nothing to do with them.

8PART I traces literally the historical context of the bullion controversy from its prologue in 1797 (suspension of cash payment by the Bank of England) to its final resumption in 1821 as well as its aftermaths going far beyond the beginning of the 19th century. The main figures appearing in this process are Henry Thornton and of course Ricardo, the role of each of them is presented in Chapters 1 and 2, respectively in the first and second round of the controversy. Apart from Ricardo’s criticisms in his “early writings”, Thornton’s role mainly in the first round is analysed only in Chapter 1.

9PART II, situated in the centre of the book and containing more than half of the chapters in it, is the core part. It is precisely in this part that the author attempts to achieve his main objective consisting in integrating “money into Ricardo’s theory of value and distribution” in showing that his theory of money is “neither a quantity theory of money nor a commodity-theory of money” [p. 4]. This attempt of the author crystallises itself in the form of Money-Standard-Equation (MSE), brought forward toward the end of Chapter 4 as a result of the foregoing analyses on the theory of money in Ricardo’s “mature monetary writings” [p. 2]. MSE also expresses in a very simple and clear form how the said “integration” of money into the theory of value and distribution is realized in Ricardo’s monetary writings roughly after 1815, and it plays a crucial role in the subsequent parts of this book.

10PART III, made up of 2 chapters like PART I, treats respectively the aspects of Ricardo’s theory of money relating to the international settlement (foreign-exchange market and price-specie flow mechanism) and to the central banking, the working of which is conceived in Ricardo’s last monetary writing in 1823, thereby is stressed the regulation of the quantity of money through the active management of the issuing bank, “management principle” [p. 69, 356-376, 388].

11The essential point in the author’s interpretation of Ricardo’s theory of money turns on the concept of the “value of money”, which is also one of the most contestable topic disputed for a long time in the literature in its relation with the quantity of money. The author defines this concept in attributing an important role to the “standard of money”, occupying together with the value of money the correlative central place in this book. On this cardinal point he seems to diverge from the point of view advanced in the aforementioned book of Marcuzzo and Rosselli. And this point of view seems to have been shared by the author up to a certain time. In this sense the concept of the “value of money” defended in this book may be considered to belong to its innovativeness. In their book of 1991 the two authors claimed that “the value of money” is “defined as the purchasing power of the currency over its standard” [Marcuzzo, Rosselli, 1991, p. 56], and this interpretation was further developed in their co-authored article of 1994, where they say that “the value of money is always determined by the quantity of gold bullion that one unit of currency can buy on the domestic and foreign markets” [Do, “Ricardo’s theory of money matters”, Revue économique, 45(5), p.1253]. This “quantity” is in proportion to the purchasing power of currency over gold bullion and the reciprocal of its market price, which is quantitatively observable hence easily known and recognized by everyone. The rise and fall in this price indicates immediately the fall and rise in the value of money. It must be added that the usage of this term in Ricardo’s texts is rather multivocal according to the context. If such is the case, the “value of money” according to Marcuzzo and Rosselli, though gaining in influence during the latest time, is not more than one of the possible interpretations. The question is whether it is possible to show how one interpretation can be instrumental in presenting coherently Ricardo’s theory of money.

12The value of money defined as above is inversely proportional to the price of bullion in the market, which Ricardo considers as the precise index of the appreciation or depreciation of currency, as is clearly proclaimed in the title of his first pamphlet High Price of Bullion, A Proof of the Depreciation of Bank Notes (1810-11). And if this price is 3l. 17s. 10½d. per ounce i.e. coincides with the regal mint price, the currency is said to be neither depreciated nor appreciated but in its conformable state, in which the gold bullion is exchanged with (or bought by) currency at par. Therefore the value of money defined as above concerns solely the relation between the currency and its standard. But the currency is used for buying not only gold but also other commodities. If the prices of these commodities change while the price of gold remains stable, the value of money would also be judged to be stable. Such a situation can occur when the value of gold as a commodity falls or rises. Thus we can see that the value of money is here defined in abstracting away from the variation in the value of gold. In High Price…, Ricardo justifies the choice of gold (or silver) as the standard of money on the ground of the stability of its value in the short term as the answer to the question.


Q.: “What is the standard measure of value in this country, and of which ‘…’ our paper currency ought to be the representative, because it can only be by a comparison to this standard that its regularity, or its depreciation, may be estimated” [III/65]. A.: “Experience has indeed taught us, that though the variations in the value of gold or silver may be considerable, on a comparison of distant periods, yet for short spaces of time their value is tolerably fixed. It is this property, among their other excellencies, which fits them better than any other commodity for the uses of money”

14Hence, in so far as any comparison of the value of gold in distant periods is out of question, its value can be safely assumed to be invariable. But afterwards, in his letter to Trower of 25 December 1815, Ricardo recognizes the inappropriateness of this assumption: “The bullionists, and I among the number, considered gold and silver as less variable commodities than they really are” [VI/344]. It was just toward that time that Ricardo set out to draft the first parts of the manuscript (probably including the part on value) of future Principles. And at that time Ricardo had been pushed to become aware of the shortcoming of the assumption by Malthus who criticized one of the essential point contained in his plan of bullion payment in the draft manuscript to be published in the following year as Proposals for an Economical and Secure Currency (hereinafter Proposals for short). In the letter to Trower quoted above, Ricardo factually recognises that Malthus was right in his critical comments to him [see, letter of Malthus to Ricardo of 15 October 1815, VI/298-9, see also IV/62, the first paragraph of Section III of Proposals, which can be taken as Ricardo’s affirmative response to Malthus.].

15However, according to Marcuzzo and Rosselli in their book of 1991, “whenever Ricardo dealt with monetary questions, from the first edition of the Principles on, he never felt the need to modify his original argument” [ibid., p.57]. In this way they consider their definition of the value of money invariably valid throughout all the monetary writings of Ricardo. Incidentally, such a view on his theory of money seems to have been shared by a majority of commentators claiming that he held invariably the same standpoint as for the monetary questions, in contrast to his theory of value and distribution, which underwent unceasing modifications and revisions from early times until the last manuscript on absolute value. It may be in this way that Ricardo’s economic thinking as a whole had to submit to a long-lasting dichotomisation persisting up to the present, separating the two theories of Ricardo, indifferent, or worse, contradictory to each other. But with the aim of integrating “money in the theory of value” and distribution in determining “the value of money in a way consistent with the theory of relative prices of commodities” [p. 89] such as was elaborated in Principles, Deleplace, the author of this book, brings forward an alternative definition of the value of money as follows:


“the ‘value of money’ in circulation is defined by Ricardo as its purchasing power in the market for all commodities taken together except the standard of money, to be distinguished from the purchasing power of money over the standard itself —the reciprocal of the market price of bullion ‘…’. Accordingly, a fall (or a rise) in the value of money meant a proportional rise (respectively a fall) in all money prices except that of bullion, while a depreciation (or appreciation) of money was measured by a rise (respectively a fall) in the market price of bullion”
[p. 88].

17This definition of the value of money is one of the main original points in this book, but may not be able to find a textual evidence or justification in Ricardo’s (even mature) writings, because he never gave a definition in a so elaborated or sophisticated form.

18Contrary to the previous definition of the value of money here is excluded from it the purchasing power of money over the bullion, which measures only the depreciation and appreciation of money with the degree of its rise and fall with regard to the official mint price of bullion, but not the value of money. The latter is to be measured by the purchasing power of money over all commodities in the market. But the money prices of great number of commodities vary continuously and not always in parallel with each other. How is it possible in such conditions to define the value of money if not as a simple set of practically countless figures (for the position of Ricardo on this point, cf. the last paragraph of IV/59)? In Ricardo’s time there existed neither the idea of price index nor the method of computing it. For the value of money it would be out of question to obtain a definite quantitative magnitude at a certain point of time, and if such is the case, its change in time may not be known as a definite figure like +x% or −y%, the computing of which requiring a comparison between the value of money at one point of time and that at another, both of which represent unobtainable magnitudes. The temporal change in the value of money in this sense must remain a vague impression of those who spend money continually in their daily life or in their business on buying various commodities, an impression which cannot be “objective” or “general” i.e. common to all those who buy commodities, since there must be no one who spend money on all kinds of commodities and continue to do so.

19On the other hand, this definition of the value of money excludes the purchasing power of money over the gold bullion, price of which undergoes a logic of movement particular to it never to be seen in the case of all the other commodities. This is because of its function as the standard of money. As such its price is officially or artificially fixed at its mint price, meaning an official quantity of it per unit of money. Prior to the suspension of convertibility, the gold coin of a certain denomination for example of 1 pound-sterling had to contain a fixed quantity of gold (equivalent to an ounce divided by the proportion of the mint price of 3l. 17s. 10½d. to 1 pound) of a fixed fineness, and the banknote had to be converted into such gold coins of the same denomination (though at that time the gold coin actually in circulation was guinea coin worth 1 pound 1 shilling). In this way, before 1797, the currency of 1 pound was equivalent to a quantity of gold bullion as standard at a fixed legal price, hence the purchasing power of money over the standard was unchanging in principle. But under the conditions of suspension of convertibility of the banknote after 1797, the price of the standard deviated according to the evolution of note issue by the Bank of England no more obliged to convert its note into specie, deviated upward for the most part of the time before 1819 and downward from 1819 to 1821, although the fixed mint price continued to be officially valid. In such a situation of changing price of gold bullion, it became the object of arbitrage between the mint price and the current price. The market price of bullion as the standard of money underwent in such a way a very particular type of movement to be distinguished from that of the prices of all the other commodities. Because of this particularity of its price movement, the gold bullion had to be treated apart from the other commodities in the definition of the value of money.

20In this definition of the value of money, it can vary in a relative way according both to the variation of the value of the gold and to the variation of all the other commodities, proportionately to the former and inversely to the latter. Hence the resultant value of money will be a composite of these two factors. Then, on the one hand Ricardo was faced with the problem of determining the value of commodities in general including the value of gold as a commodity, on the other with the problem of isolating the latter from the former in order to obtain a “value of money” purely reflecting only the value of the commodities to be measured by money and its variations. These are problems tackled by Ricardo from the end of 1815 (just after having finished writing Proposals) in the first part of the manuscript of Principles, to become subsequently its first chapter “On value”. There he develops for the first time the theory of value including the discussion on the invariable measure (standard in the author’s parlance) of value, which will later become the main subject of his final manuscript on absolute value. Though Ricardo could not arrive at the final solution to this problem because of the difficulties of finding a commodity requiring invariably the same quantity of labour. In this context of abstract theoretical revel, the variability of the value of a commodity which is to serve as an invariable measure of value i.e. gold as the standard of money, is attributed to the variability in the conditions of its production like discovery of more fertile mines or depletion of existing ones, giving rise to a fall or rise in the value of gold.

21However, when Ricardo spoke of changes in the value of gold in his monetary writings after 1815, considering the current situation of money, he never brought into question the variable conditions of production of gold in the mining industry, but the question was for him the variations in the relation of demand for and supply of gold. And, as far as concerned Ricardo in his lifetime, these changes were always unilaterally upward, taking place in some concrete historical contexts, so that the problem was for him not on the abstract level potentially admitting changes in both directions. First of all, in the letter of Malthus to Ricardo of 15 October 1815 [cf. IV/298-299], mentioned above, which made Ricardo aware of the problem of change in the value of gold, Malthus spoke of this change occasioned not by some change in the condition of its production but by a sudden massive increase of its demand exceeding its supply by the needs of the war their country was engaged in at that time. In the terminology of Principles or more widely of the Classical Political Economy, the question here is not a rise in the value of gold but rather a rise in its market price, considered by Ricardo merely as a temporary phenomenon for a commodity produced in the conditions of unlimited competition, which however does not apply to the production of gold (cf. first pages of High Price…, Chapter 13 “Taxes on Gold” of Principles), because in this context no question is raised about the change in the conditions of gold production.

22The most serious case of the “rise in the value of gold” which confronted Ricardo in his later years was that caused by an inappropriate action taken by the Bank of England from as early as the first months of 1819 even before the adoption of Peel’s Bill in late May of that year, an action emphatically described by the author as something which “torpedoed” [p. 67, 338, 356] the execution of the enacted Bill embodying Ricardo’s plan of monetary reform in its outline. The Bank of England continued to buy up gold and got it minted into coins in order to prepare for the imminent resumption of convertibility, an action entirely unnecessary and contrary to the idea of Ricardo’s plan and to the stipulations of Peels Act. This action resulted in the rise of the value of gold by “five percent” [On Protection to Agriculture (1822), IV/228]. In addition to the result with the estimated figure of 5%, Ricardo says on how it was brought about as follows:


“their ‘Bank of England’s’ issues were so regulated, that the exchange became extremely favourable to this country, gold flowed into it in a continued stream, and all that came the Bank eagerly purchased at 3l. 17s. 10½d. per ounce. Such a demand for gold could not fail to elevate its value, compared with the value of all commodities. Not only, then, had we to elevate the value of our currency 5 per cent., the amount of the difference between the value of paper and of gold before these operations commenced, but we had still further to elevate it to the new value to which gold itself was raised, by the injudicious purchases which the Bank made of that metal”
[ibid., IV/225].

24“Gold flowed” massively into England because of the excessive contraction of note issue by the Bank of England. Ricardo makes no mention of the provenance of the gold flowed from overseas. It must come either from a redistribution of the existing gold in the world market or from sources of new gold production i.e. from extended exploitation of foreign mines. In both cases the influx of gold into England must have been in exchange for its cheap commodities i.e. the result of a “favourable balance of trade”.

25The author seems to explain the origin of gold flowed into England with the increased gold production in a special region of the world rich in gold mines to pay for the English commodities imported at prices lowered in a short time by the contraction of banknote issue by the Bank of England.


“In Spanish America, the higher demand for bullion raised the market price ‘…’ above the natural price ‘…’, making less productive mines profitable; the cost of production in the mine paying no rent rose and so did « the natural price’. The ‘world value’ of gold bullion was consequently increased, in line with its increased value in England: in contrast with what happened in the case of a newly discovered mine, the change in the value of bullion in the gold-producing country was here the consequence —and not the cause— of its change in the gold-importing one”
[p. 195].

27Hence, following the increase in import, the countries in Spanish America had to increase the gold production for the purpose of settlement with England, which caused the cost of production to increase because of the “law of diminishing returns” by enforced exploitation of mines just as in agriculture, which in turn lead to the extension of gold production to less fertile mines. Thus the value of gold rose with the change in the conditions of its production, not only in both gold-exporting and gold-importing countries but worldwide, since gold is a commodity circulating everywhere in the world. But it does not seem plausible that the exportation of English commodities of relatively lower prices would be directed exclusively to a certain number of gold producing countries in Spanish America and not to other countries which may demand such cheap English commodities. It is also unbelievable that these countries in Spanish America at that time could absorb the whole of the English exportation with the dimension of their demands, which could reasonably be imagined to be much more smaller than the demands from other European countries excluded from the destination of English exportation. And even if supposing that the demand from the former can sufficiently meet the scale of English exportation and be backed by the correspondent capacity to pay i.e. to increase gold production, it seems difficult to admit the author’s scenario. According to Ricardo, the rapid contraction of banknote issue in England and ensuing massive influx of gold took place in a short time probably in a year or so. But, the supply of newly produced gold particularly a massive increase of it always requires a lapse of certain time even if it is from already operating mines (in this case the discovery of new ones is out of question, which remains over and above human control.). “The advantage of a paper circulation, when established on correct principles, is, that this additional quantity can be presently supplied ‘…’ either as compared with bullion or with any other commodity; whereas, with a system of metallic currency, this additional quantity cannot be so readily supplied” [Proposals, IV/58]. From the early times Ricardo held invariably such a point of view on quantitative adjustment of gold production [cf. High Price, III/54-55. chapter XIII ‘Taxes on Gold’ of Principles, I/192-194.].

28Although Ricardo speaks about the gold production in Spanish America in Chapter XIII of Principles in a context independent of the rapid contraction of note issue and of the ensuing influx of gold bullion in England from 1819 to 1821, he never mentions the gold production and the change in its conditions in any part of the world in his later monetary writings analysing the situation after the enactment of the Peel’s Bill. Considering the several reasons given above, it may be more suitable to think that the English commodities were exported to various countries where they could be sold in favourable conditions i.e. at lower prices than the same commodities obtainable in their domestic markets, whether they were gold-producing countries or not. And at least the most part of the gold flowed to England in exchange for these commodities were a part of gold already existing in these countries. What was happening then was not a new gold production in some countries of the world for the purpose of payment to England, accompanied with changes in its conditions, but a partial reallocation of the existing gold in accordance with the contraction of English currency, comparable to a virtual shrinkage of the part of existing world gold allotted to it. It was as if the gold existing in the world diminished to the extent of this shrinkage, which changed the relation between the demand for gold and the supply of it, the former remaining the same while the latter in diminution. We would thus have a relative excess of demand vis-à-vis supply.

29Such is a situation corresponding to that described in the first part of High Price…, concerning the allocation and reallocation of gold in the world market: “if the quantity of gold and silver in the world employed as money were exceedingly small, or abundantly great, it would not in the least affect the proportions in which they would be divided among the different nations—the variation in their quantity would have produced no other effect than to make the commodities for which they were exchanged comparatively dear or cheap” [III/53]. If the monetary situation around the year 1820 can be interpreted like this, the general fall in price observed at that time was due to the rise in the market price of gold rather than to its rise in value, though Ricardo talks always about rise in the value of gold. In the case of many commodities produced in the conditions of unlimited competition, a rise or fall of their price above or below their natural price can be only temporary, clearly distinguishable from a rise or fall of their value. But in the case of precious metals including gold, their special conditions of production tend to prevent their market price from converging in a short time to their natural price, to maintain the divergence of the former from the latter for a longer time, so that a rise in the market price can be comparable to a certain extent to a rise in the value. Ricardo was well aware of this difficulty of quantitative adjustment of the supply of gold to the variation in its demand. Though rigorously speaking it would be misleading, Ricardo’s use of the term of “value” for “market price” can be understood like this. We can now conclude that, in the light of his theory of value elaborated in Principles, the variations in the value of gold discussed in his mature economic writings after 1815 were actually variations in its market price and besides unilaterally upward variations.

30Ricardo continued to affirm that the range of rise in the value of gold induced by the improper act of the Bank of England was 5%, i.e. equal to that of the rise in the value of currency after the enforcement of the Peel’s Bill. But what is the ground for this affirmation? On how to calculate the range of rise in the value of gold he says as follows: “to estimate what the effect of this demand for gold had had upon its value in the general market of the world, he [Ricardo] contended, that we should compare the quantity actually purchased, with the whole quantity used in the different currencies of the world” [V/312-313]. Here the “quantity actually purchased” means the quantity of gold which flowed in England because of the contraction of currency in this country. The quantity of money bought in this way is determined by the position of England in the world economy and by the proportion of contraction of banknote. If in addition to these data “the whole quantity ‘of gold’ used in different currencies in the world” is given, it will be possible to calculate concretely how much the value of gold has risen. But as it was practically impossible to procure such numerical data, Ricardo shows only the procedure of calculation as above but does not concretely calculate the figure. Instead of calculating himself in showing empirical data, he adopts as they were the results of calculation by Tooke in saying that “Mr. Tooke, one of the most intelligent witnesses examined by the Agricultural Committee ‘1821’, came to the conclusion that the eager demand for gold made by the Bank in order to substitute coin for their small notes, had raised the value of currency about five per cent. In this conclusion, I quite concur with Mr. Tooke.” (IV/228) We never know how Tooke himself calculated this figure.

31There seems to be the same problem in the key equation in this book the author calls “the Money-Standard Equation” [p. 145, boldface in original] (in short MSE) defined in Chapter “4 The two causes of change in the value of money”, an equation which plays a major role in the author’s analyses of Ricardo’s theory of money in the subsequent parts of the book. These two causes are respectively “change in the value of gold bullion —such as a change in its cost of production following the discovery of a new mine” and “change in the price of gold bullion —that is, a variation in the quantity of money issued” [p. 135, emphasis in original]. And MSE represents concretely the relation between “these causes of change in the value of money being complementary and additive” and expresses compactly how the theory of money of Ricardo in his mature writings is integrated in the theory of value and distribution. MSE consists in the equalisation of the rate of change in the value of money during a certain space of time (on the left side) with the addition of the rate of change in the value of gold during the same space of time and (with minus sign) the rate of change in the price of gold during the same space of time (on the right side). Of course the left side indicates the result of addition (of “two causes”) on the right side. The reason why the variation in the price of gold is with minus sign is that the price of gold varies in inverse proportion to the purchasing power of money over gold bullion. MSE expresses in an extremely condensed form the idea on the value of money and its change as the author conceives in this book. MSE also shows that the value of money and its change are regulated differently in different monetary regimes. Under the regime of suspension of convertibility, they are regulated literally by “two causes” because there both the value and price of gold varies, while under the regime before the suspension and after the resumption of cash payment (or of bullion payment in Ricardo’s plan) they are regulated by only one of these “two causes” since there the price of gold is in principle pegged to its official mint price, so that the change in the value of money is regulated only by that in the value of gold. We can see here that Ricardo’s theory of money “is neither a quantity theory of money nor a commodity-theory of money” [p. 4], the value of money not being regulated by its quantity but by the value of gold as a commodity which is itself non money.

32However, it seems to the reviewer to be practically impossible to deduce concretely the value on the left side from the addition of the values on the right side, made up of two members of different nature. The price of gold is the price at which gold is exchanged against money (banknote or coin) on the market, hence it is an observable and easily confirmable magnitude and the rate of its change can be equally easily calculated. On the contrary, as for the value of gold and its variation in a certain space of time there are particular difficulties for calculating and knowing it concretely, as seen above in Ricardo’s case. In addition, unlike the other industrially produced commodities, the precious metal especially gold is a commodity of extreme durability and immutability which does not perish and disappear from the economic cycle but remains in circulation and consumption in traversing between these two domains for a very long time. Then the variation in the value of gold cannot be determined solely by the change in the conditions of its production by the discovery of new more fertile mines, but the amount of gold accumulated since long time ago, which must be far greater than the newly produced gold and can be in no way distinguished from the latter, should be taken into consideration in determining the “value of gold” and its change. In speaking about the value of gold in Ricardo’s “mature monetary ‘and economic’ writings”, the author seems not to take into account these specificities of gold, as if, according to him, gold can be treated like the other commodities produced in the conditions of unlimited competition, but Ricardo was partially aware of these specificities of gold from very early time on [cf. High Price…, Chapter XIII of Principles]. From this point of view, MSE may be of use only for conveying the author’s idea on how the value of money in his definition (see above) is regulated, but not for calculating concretely its change to obtain a definite figure, irrespective of the objective the author had in mind when conceiving MSE.

33Above we have reviewed some cardinal points in “Part II Theory”, core of this book, rather critically from our personal standpoint. But these comments do not in the least touch on its significance. The readers of this book will find a number of discoveries and innovative views by the author likely to stimulate further advancement of studies on “Ricardo on money” (Hume’s price specie flow mechanism and Ricardo, monetary regime in a country and production of gold, substitution of a public-debt standard for the gold-bullion standard, etc.). Anyway, the present book of Ghislain Deleplace will surely remain a landmark erected in the memorable year in the studies of Ricardo’s monetary theory or more widely of the monetary thought in English classical economics.

Susumu Takenaga
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Uploaded on on 05/02/2019
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