11. Mercantilism and Freedom in England from the Civil War to 1750 (continued)

0:004. The North Brothers, Deductions from Axioms and Tory Laissez-Faire Weighing in on the side of John Locke, not only on interest rates but also in a general and comprehensive vision of economic laissez-faire that even surpassed Locke, were two brothers, Dudley and Roger North, who came from a distinguished Tory family. Here was a fascinating convergence of views of a radical Whig and high Tories and zealous subjects of Charles and James II. This juncture presaged a later meeting of minds of extreme left and extreme right during the 18th century, when the imperialist Whig-mercantilist one-party establishment from 1715 to the 1750s is Opposed on the Left by Radical Libertarian Commonwealthmen, and on the Right by the Anti-Imperialist, Catholic or Proto-Catholic Opposition, all agreeing on denunciations of the mercantilistic, high-tax, high-public debt, central banking state.

1:17Dudley and Roger North were sons of the 4th Baron North. Showing little aptitude for schooling, Dudley, 1641-1691, went to Turkey and became a prominent trader, as well as a director of both the Levant Company, which had been granted a monopoly of English trade with the Middle East, and the African Company, which enjoyed a monopoly of trade with that continent. Deadly North returned to London from Turkey in 1681, just in time to aid King Charles and his elder brother, Francis, Lord Guilford, 1637-1685, in the patriotic cause of trying to indict John Locke's patron, Lord Shaftesbury, on the charge of treason.

2:08Francis, a distinguished jurist, had risen swiftly from Solicitor General to Attorney General, to Lord Chief Justice of the Common Please, and, finally, in 1682, at the age of 45, to Lord Keeper of the Great Seal, the highest law office in England. Indictments for treason had to be handed down by grand juries appointed by sheriffs of London, and so Dudley North, in a famous and irregular election, ran for and was elected sheriff, after which he and his juries became scourges of the Whig party. At the end of the year Dudley North was knighted by the King for his services and soon rose Those in Appointive Office, Becoming Commissioner of the Customs, Member of Parliament and Manager for King James II of All Revenue Matters in Parliament.

3:08Toward the end of his brief but distinguished term in government service, Sir Dudley was inspired to think deeply about the two main monetary and financial questions agitating in Parliament, The 1690 Law to Push Down the Rate of Interest, and the Recoinage Question. Dudley wrote two discourses upon trade in 1691, one on interest and one on coinage, along with a postscript that was scheduled for publication as a pamphlet when Dudley North died unexpectedly on December 31. His younger brother Roger, 1653-1734, who was helping Dudley edit the booklet, then revised the draft, added a preface, and published it anonymously in early 1692.

4:03Despite the booklet's brilliance and its systematic devotion to laissez-faire and hard-money views, the tract sank without a trace and was not at all influential in the development of 18th Roger North was not only the youngest of the brothers, he outlived them all by decades. Himself a Queen's Attorney General, he spent much of his life defending his brothers' reputations. He wrote voluminously in his lifetime on music, accounting, law, the English Constitution, and on numerous philosophic and scientific subjects. But natural reticence led him to keep all these writings unpublished.

4:50A decade after Roger's death, his biographies, or lives, of three of his eminent brothers were published in two volumes in 1742 and 1744. Even the publication of these two well-written volumes, however, made no dent in the history of economic thought until resurrected and praised by James Mill and by John Ramsey McCullough in the early 19th century. Roger North, who in his preface explained the groundwork and methodology of his brother and made his conclusions more consistent, pointed out the innovation in Dudley's method of economic analysis.

5:37For Dudley pioneered, at least in the history of English thought, the method which would later be adopted by Catillon and Say and Signore, and which Ludwig von Mises would, in the 20th century, call praxeology. Praxeology is economic theory resting on a few broad self-evident axioms grounded in apprehension of reality, then logically deducing the implications of these emphatically true axioms. But if A implies B, C, etc., and A is definitely true, the deductions can be be accepted as truths as well.

6:23Roger wrote of Dudley's method in his preface, I find trade here treated at another rate than usually has been. I mean philosophically, for he begins at the quick, from principles indisputably true. The older method of reasoning, Roger North added, dealt in abstracts more than truths, and forming hypotheses to fit abundance of precarious and insensible principles. In contrast, the new method, which North attributed to Descartes, builds knowledge upon clear and evident truths. In addressing trade and its problems, Dudley North began in his first discourse by setting forth the clear and simple general axiom or principle.

7:14Trade is nothing else but a commutation of superfluities. In other words, as Bourdain and the Scholastics had emphasized but the world had forgotten, men only commute or exchange goods or services because each benefits more from the good he receives than from the good he gives up in exchange, his superfluity. Trade therefore, whether intranational or international, benefits both parties. Trade is not a montane mercantilist form of warfare where one party or nation exploits or benefits at the expense of the other trader.

8:00Wealth and riches, then, are the goods that people are able to produce and accumulate, Dudley North concludes that he who is most diligent and raises most fruits or makes most of manufacturing will abound most in what others make or raise, and consequently be free from want and enjoy most conveniences, which is truly to be rich, although there There were no such thing as gold, silver or the like. There is no magic, then, to gold or silver. They are simply commodities selected by the market for their special qualities to be monies.

8:48As Dudley North says, gold and silver, in contrast to other market metals, are by nature are very fine, and more scarce than others, and imperishable, as well as convenient for easy storage. Proceeding from there, North rediscovers the scholastic analysis of money. If gold and silver are commodities, their value is determined, as are all other commodities on the market, by supply and demand. Having laid the groundwork in systematic and general analysis, Dudley North proceeds to the vexed question of the rate of interest. In the market, North points out, some people, in consequence of hard work and judgment, are able to accumulate property.

9:38If the property is accumulated in the form of land, the landowners will rent out some of the land to those who wish to cultivate it. Similarly, those who accumulate property in terms of money will rent out their money, charging a rate of interest. And just as the rental price of land on the market will be determined by the supply and demand of land, so the interest rate, the price of loans, will be determined by the supply and demand for credit. Since interest is a market price, government control will have consequences as injurious as the control of any price. Interest is low because the supply of capital is high.

10:26Low interest itself does not create abundance of capital. As Letwin paraphrases North, nothing can lower interest rates except an increased supply Supply of Capital, and as no law can by fiat increase the community's supply of capital, the proposed law is futile and injurious. Furthermore, North pointed out, usury laws will reduce the supply of savings and capital and thereby raise instead of lower the market rate of interest, and the quantity of trade will diminish. Moreover, intervention to reduce interest rates is unjust, because all prices should be treated alike and be equally free.

11:16In his discourse on coinage, North did not really deal with the re-coinage question, but he anticipated Smith, Ricardo and the classical economists in his keen and principled hard-money analysis. Everyone cries about a shortage of money, North noted, but what they really want is more goods, or in the case of merchants, what they really mean is that the prices for their goods are not satisfactory. Analyzing the components of the demand for money and its supply, North traced transactions and emergency demands, as well the different aspects of money supply.

12:01Unfortunately, he faltered when discussing how much money a nation really needed, failing to realize that any supply on the market is optimal. He believed that an increase in trade required an increase in the supply of money, not understanding that an increased demand for money could simply raise the market value of money, that is, The Theory of Money and Credit

12:58is regulated by the respective supplies and demands for coin and bullion. Thus if there is an increase in the stock of coin, the premium over bullion would fall, and coin would tend to be melted down into bullion. If on the other hand there is a shortage of coin, the coin premium would rise, and more people would mint bullion into coin. In this way, coin and bullion would tend to be kept in equilibrium. North likened the process to two buckets. Thus, the buckets work alternately. When money is scarce, bullion is coined. When bullion is scarce, money is melted.

13:45So, although Dudley North never reached the point of saying that the supply of money, compared to trade is always optimal. He arrived at a similar laissez-faire or market equilibrating conclusion by saying that no one has to worry about the supply of coin which will always be kept optimal on the market. As a result of his systematic praxeological analysis, Dudley North Roth arrived at firm, principled laissez-faire conclusions across the board. He opposed any usury laws. It will be found best for the nation to leave the borrower and the lender to make their own bargains. He opposed any sumptuary laws. He denounced laws trying to keep gold and silver inside a country as doomed to failure. Government laws and decrees could only diminish and never promote human energy, thrift and ingenuity.

14:51But it was Dudley's brother Roger who took the final step, not only in explaining his brother's methodology, but also in expounding consistent laissez-faire conclusions. Attacking government intervention across the board, Roger North declared, There can be no trade unprofitable to the public, for if it proves so, men leave off, and wherever the trades thrive, the public, of which they are part, thrives also. No law can set prices in trade, the rates of which must and will make themselves. But when such laws do happen to lay any hold, it is so much impediment to trade.

15:37All favor to one trade or interest against another is an abuse. Therefore, concluded Roger, laws to hamper trade, whether foreign or domestic, relating to money or other merchandises, are not the ingredients to make a people rich. What can government do for a prosperous economy? If peace be procured, easy justice maintained, the navigation not clogged, the industrious encouraged. In short, wrote North, it is peace, industry and freedom that brings trade and wealth, and nothing else. 5. The Inflationists It is not surprising that mercantilists, with their concentration on greater revenues and power to the state, should fasten on inflationist schemes of creating bank paper and credit, as well as government paper money.

16:43Such proposals and schemes, however, had to wait for the discovery of printing in the 15th century, for the development of bank paper and fractional reserves in 16th century Italy and finally for the invention of government paper money and central banking, both dubious innovations of Britain in the 1690s. The first English inflationist was William Potter, whose most famous tract was The Key of Wealth, 1650. It was Potter whose theories and proposed schemes set the stage for more famous inflationist followers, such as the Scotsman John Law. Potter, who worked in the government land office, began with the generally agreed axiom that a greater amount of money is beneficial to society.

17:38But with impeccable logic, Potter asked, if more money is good, why shouldn't a perpetual and greater increase of money be even better? Why indeed? Why not an increasing supply of money leading to infinity? Potter offered a plethora of money-creating schemes, in which paper money would be secured not by specie, which is inconveniently scarce, but by the nation's land. More relevantly, of course, paper notes can actually be redeemed in physical gold or silver coin, whereas redemption of notes in land would prove a chimera. How are you supposed to carry around a few acres William Potter saw other wonders emerging from a land bank.

18:48Thus increasing the money supply would increase land values, and thereby increase the value of the Banking of the Money, a sort of magical perpetual motion machine. Actually, of course, the increased land values simply reflect the increasing prices and values caused by the manufacture of more money. Since Potter was anxious to inflate money and land values, he was almost frantically The Theory of Money and Credit

19:48William Potter was cagey about prices rising as a result of his proposed monetary inflation. He believed instead that the increased money supply would greatly expand the volume of trade, and therefore the amount of production of goods, and that wealth would therefore accumulate. Miller preferred to believe that all the increased money supply would be absorbed in increased production, so that prices would not rise at all. But even if prices rose, everyone would be better off. Rising prices, of course, is the Achilles heel of inflationist schemes, so that all of them deprecate the extent of subsequent price inflation and currency depreciation.

20:46They did not recognize, of course, that the volume of trade may increase in money terms, but that this gain, like the alleged rise in land values, would simply reflect the increase in all monetary terms and values as more money supply is created and spreads throughout the system. The argument of the alleged increase of trade and production largely rested on a flimsy and the analogy to the physical sciences. The Englishman William Harvey had only recently, in 1628, discovered the circulation of the blood within the human body. And Potter launched the very popular analogy between blood in the human body and money in the body economic.

21:37Just as people depend on the circulation of their blood, so the economy needs the circulation of money. But the inflationist notion of the more money the better can scarcely be supported by this feeble analogy. After all, who advocates the more blood the better in the human body, or the faster the circulation the better? In his bold moments, William Potter actually maintained that monetary inflation would cause prices to fall. would be vivified and production would increase so greatly that supply would rise and prices would fall. William Potter, however, proved to be only preparation for the locus classicus of inflationism, the prince of proto-Keynesian money-cranks, both theorist and activist, John Law of Lauriston 1671 to 1729 Son of James Law, a wealthy Scottish goldsmith and banker, John was born and grew up in Edinburgh, proceeding to squander his father's substantial inheritance on gambling and fast living.

22:56Convicted of killing a love rival in a duel in London in 1694, Law bribed his way out Out of prison and escaped to the continent. After a decade in Europe pondering monetary problems, Law returned in 1703 to Scotland, where he was not subject to arrest. There, Law concentrated on developing and publishing his monetary theory cum scheme, which he presented to the Scottish Parliament in 1705, publishing the memorandum the same year in his famous The Scottish Parliament considered but turned down his scheme. The following year, the advent of the Union of Scotland with England forced law to flee to the continent once more, since he was still wanted by English law under the old murder charge.

24:01Carl Marx, in a sense, should have been proud of the way John Law unified theory and practice in his proposal. On the one hand, Law was the theorist arguing for a central land bank to issue inconvertible paper money, or rather paper money backed mystically by the land of the nation. As a crucial part of his proposal, the grateful nation, in this case Scotland, was supposed to appoint Law himself, the expert and theoretician, in charge of putting this inflationist central bank scheme into effect. John Law, as his subtitle states, proposed to supply the nation with a sufficiency of money.

24:51The increased money was supposed to vivify trade, increase employment and production. The employment motif providing a nice proto-Keynesian touch. Law stressed, in opposition to the scholastic hard-money tradition, that money is a mere government creation, that it has no intrinsic value as a metal. Its only function is to be a medium of exchange, and not any store of value for the future. Even more than William Potter, John Law assured the nation that the increased money supply and bank credit would not raise prices, especially under Law's own wise aegis.

25:37On the contrary, Law anticipated Irving Fisher and the monetarists by assuring that his paper money inflation would lead to stability of value, presumably stability of the price of labor or the purchasing power of money. Law also anticipated Adam Smith in the latter part of the 18th century in his fallacious justification for fractional reserve banking, that it would provide a costless highway in the air, furnishing a money supply without spending resources on the mining of gold or silver. In the same way, of course, any expenditure of resource can be considered a waste if we supply our own assumptions that are not held by people on the free market. Thus, as Professor Walter Block has pointed out, if there were If there were no crime, all expenditure on locks, fences, guards, alarm systems, etc. could be denounced as wasted resources by external observers criticizing these expenditures.

26:49Similarly, if there were no such thing as governmental inflation, market expenditure on gold or silver could be considered wasteful by observers. If domestic price rises constitute the Achilles heel of monetary inflation, another worry has been the outflow of gold and silver from the country, in short, an unfavorable balance of trade, or of payment. But John Law dismissed this problem too. On the contrary, he declared that an increase in the money supply would expand employment and Output and therefore increase exports, thus causing a favorable balance of payment, with gold and silver flowing into the country. Note that there is no analysis of why an increase in the money supply should increase output or employment, let alone drag exports along along with it in this seemingly universal expansion.

27:57Interestingly enough, one of law's talking points about the need for more money was, as in the case of low interest, based on a striking misinterpretation of the reasons for the prosperity of the Dutch, whom all other nations envied in the seventeenth century. We have seen that everyone saw that the Dutch had low interest rates, leading English mercantile Mercantilists to put the cart before the horse and attribute Dutch prosperity to low interest rates Instead of realizing that high savings and higher standards of living had brought about these low interest rates Hence the mercantilists suggested that England force the maximum usury rate still lower Similarly, John Law saw that prosperous Holland enjoyed a plenty of metallic money. He attributed the prosperity to the abundance of money and proposed to supply paper money instead. Again, he overlooked the point that it was Dutch property and high production and export that that brought a plenitude of coin into the country.

29:11The export surplus and abundant coin was a reflection of Dutch prosperity, not its cause. Not that John Law neglected the low interest argument for Dutch prosperity, but instead of direct usury laws, Law proposed to arrive at low interest rates in what would become from the Standard Inflationist Manner, expanding bank credit and bank money and thereby pushing down the rate of interest. Indeed, law worked out a proto-Keynesian mechanism, increasing the quantity of money would lower interest rates, thereby expanding investment and capital accumulation and assuring general prosperity.

29:59To law, as to Potter before him and Keynes after him, the main enemy of his scheme was the menace of hoarding, a practice which would defeat the purpose of greater spending. Instead, lower spending would diminish trade and create unemployment. As in the case of the late 19th century German money-crank Silvio Gassel, law proposed a It took John Law another decade to find a ruler of a country gullible enough to fall for his scheme. Law found his mark in the regent of France, a country that had been thrown into confusion and turmoil upon the death of its seemingly eternal ruler, Louis XIV, in 1715.

30:52The regent, the duke of Orléans, set law up as head of the Banque Generale in 1716, a central bank with a grant of the monopoly of the issue of banknotes in France. Soon, the Banque became the Banque Royale. Originally, banknotes were receivable in French taxes and were redeemable in silver. Soon, however, silver redeemability was ended. Quickly, by 1717, John Law had all monetary and financial power in the realm placed into his hands. To his old scheme, he added the financing of the massive government debt.

31:38He was made the head of the new Mississippi Company, as well as Director General of French Finances. The notes of the Mississippi Company were allegedly backed by the vast, undeveloped land which the French government owned in the Louisiana Territory in North America. Laws Bank created the notorious hyperinflationary Mississippi bubble. Notes, bank credit, prices and monetary values skyrocketed from 1717 to 1720. One aristocratic observer in Paris noted that for the first time the word millionaire had become prevalent, as suddenly many people seemed to possess millions.

32:26Finally, in 1720, the bubble collapsed. Law ended a pauper, heavily in debt, and he was forced once again to flee the country. As before, he roamed Europe, making a precarious living as a gambler and trying to find another The Cataclysm of John Law's experiment and his Mississippi Bubble provided a warning lesson to all reflective writers and theorists on money throughout the 18th century. As we shall see, hard money doctrines prevailed easily throughout the century, from Law's former partner and outwitter, Richard Catillon, down to the founding fathers of the American Republic.

33:22But there were some who refused to learn any lessons from the Law failure, and whose outlook was heavily influenced by John Law. Perhaps the most prominent of the post-law inflationists in the 18th century was the eminent Anglo-Irish idealist philosopher Bishop George Barclay, 1685-1753. Barclay studied at Trinity College Dublin, the intellectual centre of the Anglo-Irish establishment, and his great philosophical works were all written in his twenties, while he was a fellow at Trinity. Berkley then spent several years in the late 1720s vainly trying to establish a Christian college in Newport, Rhode Island. After that, Berkley was appointed Dean of Derry and then Bishop of Cloyne.

34:19Berkley's major pronouncements on economic questions came in his pamphlet, The Queerist 1735 to 1737, published in three installments. The Queerest was highly influential, ten editions being published in Barclay's lifetime. It was written solely as a series of nine hundred loaded questions by which Barclay hoped to influence public opinion through sheer rhetoric without having to engage in reasoning. Barclay's monetary views were heavily influenced by John Law. A typical example of one of Barclay's loaded queries is whether the public is not more benefited by a shilling that circulates than a pound that lies dead.

35:09Money for Barclay was a mere ticket, and the centerpiece of the querist was the advocation of a law-type central bank that would expand money and credit, lower interest rates, as Barclay put it, put an end to usury, and expand employment and prosperity. Barclay was shrewd enough to recognize that he had to answer objections based on John Law's egregious flop, and so he hastened to put some distance between his own schemes and the madness of France. Like law before him, Barclay promised that his proposed banknotes would only be injected into the economy by slow degrees, and that he or his surrogates would take pains to keep the expansion of bank credit proportional to the multiplication of trade and business.

36:08In that way, prices would supposedly not rise. But of course, Barclay embodied the usual inflationist failure to see that the multiplication of trade and business in money terms would precisely be the result of the monetary inflation and the consequent inflation of all prices and monetary values. Barclay's manipulative query on this theme is, whether therefore bank bills should at 6. The Hard Money Response The bulk of the 18th century response to the doctrines and failures of John Law, however, was understandably to return to and redouble devotion to the original continental tradition of Hard Money, a tradition now challenged by the new institutions of central banking and fractional reserve banking.

37:16One of the earliest and most brilliant responses, which cannot be limited to the term hard money, was that of law's former partner and skeptic in the Mississippi bubble, Richard Cantillon, who virtually founded modern economics in his remarkable essay, written about 1730. The most immediate hard-money reaction to law in England was also one of the most remarkable. Isaac Gervais, died 1739, was born in Paris of a French Protestant father who owned a firm manufacturing and trading in silk. Gervais Sr. moved to London, where his son Isaac was employed in the family firm.

38:04In 1720, Gervais published a brief but extraordinary pamphlet of less than 30 pages, The System or Theory of the Trade of the World. In the course of attacking law's doctrine of bank credit and monetary expansion, Gervais arrived before Catillon and Hume at the process towards international monetary equilibrium, or the specie flow price mechanism. Without artificial bank credit expansion, Gervais pointed out, the supply of money in each country would tend to be proportionate to its production or volume of trade. Each nation's consumption and production, and its imports and exports, would tend to be in balance.

38:55If this equilibrium should be disturbed, and, for example, excessive gold or silver flow into a particular country, then this excess would be spent on imports, the balance of trade would tilt, and imports exceed exports, and this excess would have to be paid for by an Outflow of Species. This outflow, in turn, would reduce the excess of money and return the country to a monetary and foreign trade balance. But, Gervais charged, schemes such as John Laws upset this balance. Bank credit, serving as substitute money, artificially and unnaturally increases the money supply, expanding consumption, including imports, raising domestic prices and lowering exports, so that the increased bank credit will cause an outflow of specie.

39:55The artificial credit can bring no lasting gain. There is also a strong hint in Gervais that the credit expansion will only manage to divert investment and production from those natural fields serving consumers efficiently into to those areas that will prove to be wasteful and uneconomic. Gervais's analysis of the effects of monetary expansion was also significant in being more akin to Catillon, by stressing the expansion of money inducing people to spend more, than to Hume, who confined his analysis to the increased money supply causing rising prices, Neglecting the Outflow of Species Caused by Greater Monetary Spending on Imports as well as on Domestic Products.

40:50From his analysis of natural law, trade, self-equilibration on the market and their disruptions by government, Isaac Gervais proceeded to a strong recommendation of all-out free trade, free of any distortions or restrictions by government. Gervais's uncompromising free-trade conclusion was all the more remarkable because his own firm enjoyed monopoly privileges conferred on it by the English Parliament. But Gervais courageously concluded that trade is never in a better condition than when it's natural and free, and forcing it, either by laws or taxes being always dangerous, because, Although the intended benefit or advantage be perceived, it is difficult to perceive its contrecoup, whichever is at least in full proportion to the benefit.

41:50Here Gervais anticipated the keen insights of the 19th century French laissez-faire economist Frederic Bastiat, who stressed that government intervention stemmed from the fact that the The benefits of subsidies or privileges are often direct and immediate, whereas the greater unfortunate consequences are more remote and indirect. The former are seen, whereas the latter are unseen, and therefore the seeming benefits get all the attention. Gervaise concluded with a plea for freedom and natural law that would anticipate Turgot and other French laissez-faire thinkers of his century.

42:36Man naturally seeks and finds the most easy and natural means of attaining his ends, and cannot be diverted from those means but by force and against his will. Isaac Gervais wrote no more on economic questions, but he did become a distinguished Anglican and Clergymen, which makes it all the more puzzling that his exceptional and innovating pamphlet exerted no influence whatever on English opinion. It was lost to the world until resurrected by historians in the 20th century. Another hard-money advocate who developed a theory of international monetary equilibrium was a timber merchant of Dutch extraction, Jacob van der Lint, died 1740, in his tract, Money Answers All Things, 1734.

43:32Despite the title, van der Lint's theme was that money is distributed properly and optimally on the free market. There is a tendency on the market for all nations' prices to be equal, and if one country If a country should acquire more money, its higher price level would soon draw the money out of the country until prices are back in equilibrium. It doesn't matter, then, how much specie a nation may have, since prices would adjust. Thus, if a nation had little specie, its prices would be low, and it would out-compete other nations, with gold and silver consequently flowing into the country. Indeed, so concerned was van der Lint to keep prices low and competitive with other nations that he unknowingly replicated Cantillon's advice for rulers or other worthies to hoard their gold and silver so as to keep national prices low.

44:35Van der Lint consistently carried over his hard money analysis to the problem of expanding bank credit. Bank credit, Vanderlint pointed out, expands the money supply, and so, as the price of things will hence be raised, it must and will make us the market to receive the commodities of every country whose price of things are cheaper than ours, and hence turn the balance of trade against us. Vanderlindt, like Gervais, was thus a severe critic of inflation and fractional reserve banking, as well as an analyst of the international harmonies of money, prices and the balance of trade on the free market.

45:21Like Gervais, Vanderlint was also an advocate of unrestricted free trade, concluding, in general, there should never be any restraints of any kind on trade, nor any greater taxes than are unavoidable. Attempts to fix the price of gold and silver, or to prohibit the export of coin, are also futile. It is no less absurd for the government to fix the price they will give for gold and silver brought to be coined than it would be to make a law to fix and ascertain the prices of every other commodity. Vanderlindt also deplored the rise during the 18th century of the war-making state and of the high taxes and public debts which war brings in its wake.

46:12Indeed, for van der Lint, free trade and free markets and international peace go hand in hand, while war is the enemy of freedom. War, warned van der Lint, is one of the greatest calamities to which mankind can be subjected, the end of which none can well foresee, and the burdens of which, that is, public debts and taxes, are seldom discharged in one generation. Eloquently, van der Lint concluded that it's monstrous to imagine the author of this world hath constituted things so as to make it any ways necessary for mankind to murder and destroy each other.

46:57The culminating hard-money theorist in 18th century England was Joseph Harris, 1702 to 1764, who published a massive two-volume Essays upon Money and Coins, 1757 and 1758. Harris began life as a country blacksmith, but then went to London, where he became a prominent writer on navigation, mathematics and astronomy. Economy. He was an employee at the Mint and was made assay master of the Mint in 1748. Harris was a hard money critic of debasement or fractional reserve banking and bank credit expansion. He was an explicit follower of Cantillon's analysis of money flows. Thus he saw, with Cantillon, that international monetary matters tended towards an equilibrium.

47:56But he also saw, with Cantillon, that inflows or increases of the money supply did not simply raise prices, they also necessarily affected the distribution of money, benefiting some people at the expense of others. Hence, the flows of money, though self-adjusting, would cause economic harm, especially during the adjustment process. As Hutchison sums up Harris's view, inflows of money enrich some at the expense of others, and such processes may for a time cause distress. Sudden fluctuations of money, therefore, whether flowing in or out, would be pernicious while it lasted, and for some time afterwards.

48:46As a result of his analysis, Harris was determinedly opposed to any alteration whatever of the monometallic monetary standard of a country. Harris favored silver over gold as being more stable. As Harris emphatically warned, the established standard of money should not be violated or altered under any pretense whatsoever. 7. Laissez-faire by Mid-Century, Tucker and Townsend If a hard-money stance had been pretty well established in English thought by the middle of the 18th century, so too had a corresponding, if not fully consistent, commitment to free markets and freedom of international trade. The Vanderlint-Cantillon-Harris Analysis of of International Trade and Money Flows lent powerful arguments in the direction of freedom of trade, and as we shall see in later chapters, the Scottish views of Carmichael, Hutchison and Hume were leading in the same direction in the northern part of Great Britain.

50:01Josiah Tucker, 1713-1799, Anglican clergyman and Dean of Gloucester from 1758 on, was a celebrated 18th century writer on religion, politics and economics, who was extravagantly hailed in his day as a free trader by such men as the great laissez-faire statesman and economist A.R.J. Turgot, who translated two of Tucker's works into French. But Tucker's devotion to freedom of trade was only moderate and marred by inconsistencies and contradictions. Thus Tucker favored absolute prohibition on the export of raw materials, tariffs on manufacturers, protective tariffs for infant industries, government compulsion under severe penalties of landlords to set aside 20 out of every 400 acres for timber, and heavy taxes on consumption of sports, recreation, and luxuries.

51:07In general, even though he anticipated Adam Smith in praising the consequences of self-interest and self-love, he also believed in the importance of government directing and guiding the activities based on self-interest. He was also a characteristic mercantilist in urging the government to encourage ever-greater population. It is true, however, that Tucker attacked the restrictionism of the Navigation Acts and the usury laws, both areas in which he was closer to a free-trade position than that of the chronically over-praised Adam Smith. On one free-market point, moreover, Tucker was consistent and determined.

51:55Opposition to War and Conquest In a letter to Lord Cames during the Seven Years' War with France, Tucker wrote, War, conquests and colonies are our present system, and mine is just the opposite. Interestingly enough, however, Tucker was not at all moved by sympathy for the American cause. On the contrary, he believed that Britain had the full right to tax the colonies. But Tucker's opposition to war triumphed, including a war to keep the colonies. To Tucker, America ever was a millstone hanging about the neck of this country to weigh it down, and as we ourselves had not the wisdom to cut the rope and to let the burden off, the Americans have kindly done it for us.

52:50Actually, Josiah Tucker's main historical contribution was to highlight the views of a far sounder laissez-faire economist who has been shamefully neglected by virtually all historians of economic thought. Charles III Viscount Townsend, 1700-1764, has been virtually unknown, and often confused with his son of the same name who was infamously responsible for the fateful Townsend taxes on tea and other imports into the American colonies. Our Lord Townsend was a scion of one of the great agricultural estates in England, Lord Townsend, son of the well-known diplomat and scientific farmer Turnip Townsend, and husband of the glamorous socialite Audrey.

53:43Lord Townsend's first published pamphlet cut against his own personal economic interest by denouncing the policy of large subsidies on the export of corn. The pamphlet, National Thoughts, 1751, was signed by a landowner to emphasize this point of arguing against his own subsidy. Dean Tucker struck up a correspondence with Townsend in defense of the export bounty on corn, but soon Tucker was converted on the issue. Thus, Townsend pointed out the folly of the British government subsidizing foreigners by allowing them to buy cheaper corn than the British themselves had to pay.

54:30Tucker was especially admiring of Townsend's uniqueness in arguing particular cases from general principles instead of the other way around, and specifically the general interest in favoring free competition as against grants of monopoly by government. Thus Tucker writes to Townsend that I am mightily pleased with your lordship's manner of accounting for people's frequent and gross mistakes in the affairs of commerce, by arguing from particulars to generals, whereas in this case a man should form to himself a general plan drawn from the properties of commerce, and then descend to particulars and individuals and observe Tucker declared himself convinced that bounties cannot be of any national service to a manufacturer which is past its infancy.

55:41A bit later in this correspondence, Lord Townsend demonstrated his adherence to free market principles by criticizing the inconsistencies of Sir Matthew Decker, a director of the East India Company. Decker, 1679-1749, a Dutch immigrant, had also attacked the corn bounty, but Townsend was sharply critical because, notwithstanding this sound doctrine, he, Decker, proposes to form monopoly companies and to erect governmental magazines of corn in every county, a most surprising absurdity and inconsistency. Of course the inconsistency is not so surprising if we realize that Decker was a director of the greatest monopoly company of them all.

56:35Townsend then goes on to point out that if as he advocates, trade and industry and all our ports were thrown open, and all duties, prohibitions, bounties and monopolies of every The Theory of Money and Credit

57:19Lord Townsend was worried about the poor and paternalistically advocated removing the enforceability in court of small amounts of debt in order to help their condition. In later letters, however, Townsend introduced a bill in Parliament which would instead increase the mobility of the laboring poor by removing certain disabilities and restraints upon them. Professor Rashid speculates that the change in stance came about because, having accepted the validity of laissez-faire, Townsend came to believe that the poor could not be helped more than by making them free to help themselves. So eager was Lord Townsend to spread the principles of free markets and free trade that in 1756 We sponsored prizes at Cambridge for essays on economic topics.

58:17Essay contests after the first year were discontinued because Townsend and the University could not agree on essay questions. Thus Cambridge turned down Townsend's suggested topic, What Influence Has Trade on the Morals of a Nation? Lord Townsend was indignant at Cambridge University's implicit denial of any connection between trade and morality, and he replied indignantly and with keen perception, There is not any moral duty which is not of a commercial nature. Freedom of trade is nothing more than a freedom to be moral agents. This latter sentence expresses the crucial libertarian insight of the unity between free moral agency and freedom to act, produce and exchange property.

59:12Other questions suggested by Lord Townsend also put the libertarian rhetorical case very well. Has a free trade or a free government the greater effect in promoting the wealth and strength of a nation? Can any restraints be laid on trade or industry without lessening the advantages of them? And if there can, what are they? Is there any method of raising taxes without prejudice to trade? And if there is, what is it? Despite his neglect by historians, Lord Townsend's views seem to have had substantial influence in his day. The prominent monthly review guessed the identity of the landowner author of National Thoughts immediately upon publication, and the pamphlet was quoted in another tract on the corn bounty the following year.

1:00:11Lord Townsend had a prominent connection with the important periodical The Gazetteer, and in 1768, four years after Lord Townsend's death, an anonymous pamphlet on Considerations Questions on the Utility and Equity of the East India Trade argued once again for breaking the East India Company monopoly and lamented the death of Lord Townsend, so sound and knowledgeable on commercial questions. Clearly, Lord Townsend was far more influential in mid-18th century England than later historians would know. Moreover, he was both an example and an embodiment of a rising tide of laissez-faire sentiment in the Britain of that era.