Hume, Money, and Civilization; or, Why Was Hume a Metallist?

Hume Studies Volume 27, Number 2, November 2001, pp. 301-335 Hume, Money, and Civilization; or, Why Was Hume a Metallist? C. GEORGE CAFFENTZIS Meanwhile, my good lad, here is a trifle for you to drink Vich Ia Vohr's health. " The hawk's eye of Callum flashed delight upon a golden guinea with which these last words were accompanied He hastened, not without a curse on the intricacies of a Saxon breeches pocket, or spleuchan, as he called it, to deposit the treasure in his fob----* Functionalism versus Metallism? Hume's Political Discourses (1752) was his first immediate commercial publishing success—three editions were printed in two years—for it spoke directly to a vital concern of his central audience, the lawyers, lairds, academics, and merchants of the Scottish Lowlands and Borderlands: money. Hume's book was one of the most sophisticated and elegant analyses of the functioning of money available until then. Indeed, a number of his sketches of monetary behavior, especially his hydraulic approach to the flows of money on the international market, have been shaped into paradigmatic textbook examples of economic reasoning since then.2 But modern textbooks do not assume, as Hume is widely thought to have assumed, that money was metallic, i.e., gold and silver. This metallic assumption can be plainly seen in many passages of the Political Discourses. For example, in "Of Money" and "Of Interest" he writes as if this assumption C. George Caffentzis is Associate Professor of Philosophy, University of Southern Maine, Portland, ME 04104, USA. e-mail: caffentz@usm.maine.edu 302 C. George Caffentzis were so obvious to the reader that there is no reason to make it explicit. Money and specie are elided in these chapters without much fuss: It appears, that the want of money can never injure any state within itself: For men and commodities are the real strength of any community . It is the simple of manner of living which here hurts the public by confining the gold and silver to few hands, and preventing its universal diffusion and circulation. (R 45)3 And these commodities [the merchant] will sometimes preserve in kind, or more commonly convert into money, which is their common representation. If gold and silver have increased in the state together with the industry, it will require a great quantity of these metals to represent a great quantity of commodities and labour. If industry alone has encreased, the prices of everything must sink, and a small quantity of specie will serve as a representation. (R 52) There are times when he contrasts metallic money with its alternatives in the Political Discourses, but always in a derogatory way. In "Of Money" he purposely contrasts the international acceptance of gold and silver with the doubts he entertains about "paper-credit": That provisions and labour should become dear by the encrease of trade and money, is in many respects, an inconvenience; but an inconvenience that is unavoidable, and the effect of that public wealth and prosperity which are the end of all our wishes. It is compensated by the advantages, which we reap from the possession of these precious metals, and the weight, which they give the nation in all foreign wars and négociations. But there appears no reason for encreasing that inconvenience by a counterfeit money, which foreigners will not accept of in any payment, and which any great disorder in the state will reduce to nothing. (R 35) In "Of Public Credit" he disparagingly contrasts public securities with gold and silver (even though he categorizes paper-credit as a "species of money"): Public Stocks, being a kind of paper-credit, have all the disadvantages attending that species of money. They banish gold and silver from the most considerable commerce of the state, reduce them to common circulation, and by that means render all provisions and labour dearer than otherwise they would be. (R 95) Hume Studies Hume, Money, and Civilization 303 In "Of the Balance of Trade" he argues that paper money is not "real cash" and drives the level of silver and gold circulating in a country below its "natural level" (R 68). Due to passages like these, historians of...