I sent a mail to another group a month or so back – criticising a philosophy Prof who wrote about the intrinsic metal system championed by John Locke. It gets into the nitty gritty of the propaganda surrounding economic systems. My fear is that professionalisation, specialisation and elite funding via modern academia is undermining the modern understanding of the history of economics, and my frail hope is that independent numismatist might be an antidote to what is going on.
Its a bit complicated (economics always is I think) - I am happy to explain further
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I wrote:
The null response to my last here seems to corroborate my claim that in recent times attention has been too focussed up arcane and fantastical philosophical aspects of metrology at the expense of its real history in social contexts. Thus I will push on to illustrate what seem to me troubling consequences of that turn.
In 2013 the journal ‘Annals of Science’ published a paper by Daniel Carey concerning Locke on Money, much concerned with Locke’s philosophy of language.
https://www.academia.edu/4868422
I like the paper in general, but point up a misleading point at the heart of it. I do not view this as a criticism of the author, his referees, or the editor of the journal in question. I view it as a criticism of the direction of 21st century professional academic output in the social sciences in general. I would be delighted to get details of any authors or relevant journals against whom this claim would seem unfair.
Carey suggests that around 1696 : ‘Locke was defending silver according to its current legal weight against efforts to introduce an alteration’
Whilst true in a strict sense – this statement is very misleading. According to the last (1967) traditional grand narrative on weight metrology, English silver coin had carried a seigniorage charge for around 900 years prior to 1666. In 1666 seigniorage was legally abolished. But by 1696 still only a small proportion of the circulating coinage had actually been restruck under the new system. Most of the coinage had been struck under the earlier traditional system, that is to say, overvalued against bullion. Thus Locke was involved in a massive alteration, the belated application, in practice, of the legal alteration of 1666 to the greater part of the national currency
The heavy cost of the recoining exercise fell on the tax payer, short term beneficiaries being the king seeking cheap bullion to finance a French war, and wealthy merchant houses, exporting coin whilst building trading empires in the East. Longer term problems however may have been much greater. Markets and thus market prices seem to have been undermined domestically as the greater bulk of the coinage disappeared over the eighteenth century, exported or hoarded, and the general population was pushed towards trucking and buying on credit in shops at monopoly prices. Arguably Britain’s global reach in the 18th century was in good part financed by widespread domestic quasi-serfdom, as England became “a nation of shopkeepers”. The roots of this transformation seem to me to lie directly in Locke’s ‘philosophy of language’.
Some economists are aware of this seigniorage matter today. The Nobel Laureate Thomas Sargent wrote on it recently, but perhaps others may share my fear that his suggestion, that Locke was perhaps “an idiot”, really gets to the bottom of this matter? Back in the 19th century a sophisticated independent amateur readership still existed, and Del Mar could popularise the view that Locke was a party to “a monetary crime”. Addressing the more mannered independent amateur readership of the 18th century, Adam Smith called this abolition of seigniorage a “vulgar prejudice” of “the mercantile system”. Was he really differing from Del Mar?
My fear is this. Professional academic monetary history in modern times has become heavily funded by potentially interested parties. The rest of the social sciences (including “heterodox economists”) should have offered focused criticism, but have not. They too have become intellectually hobbled, but by a philosophical turn. A minority did loudly oppose that turn – Marwick, Stove, Sokal etc - but it is a minority which seems to be, quite literally, dying out.
The above quote's original is
here.
Analytically, you are dealing with two subjects here: full value coins and sponsoring. I'll leave the philosophical aspects to others and concentrate on the political and economic aspects.
First, a question of terminology. Seigniorage in a metallic system has two senses: there is the difference between the denomination and the value of the metal in the coin. Second, there is the "free loan" aspect. The money in circulation attracts no interest, therefore is a source of income.
The Locke approach is philosophical. It amounts to "the state has no right to profit from issuing coinage". This lead Newton to believe coins should be full value in the sense of "no difference between denomination and metal value". The cartwheel pennies and halfpennies ceased to function (except as weight) when the price of copper went up. That doesn't make them idiots. Neither Newton nor Locke were economists. They would have been idiots if they systematically acted irrationally. For an economist, the state and the people are the same, financially speaking. Whatever income the state has does not have to be paid in taxes. Whatever loss the state has is ultimately borne by the tax payers. That makes profiting from or suffering from the currency a matter of political choice.
This is where the second aspect of seigniorage comes in. The real issue of a currency is its global market share. To put that in practical terms, if today, Russians are fleeing RUB and buying USD and EUR, that amounts to a free loan from Russia to Euroland and the US as far as the Russians are holding coins and banknotes. This was well understood in previous centuries. It is the only way to understand pillar dollars, gold ducats, Maria Theresa thalers and trade dollars. These coins are all about global market share.
I suspect the whole discussion you refer to was based on the American ultra-right contention that the gummint should only issue silver and gold coins and that would stop inflation (btw, what inflation?) and that same gummint from doing stuff because the gummint is bad. Let us agree that they are the real idiots.
That leads me to sponsorships. One extreme is to reject it completely. In the current political climate (see the BM discussion
here) that would be suicidal. The other extreme is to accept it without any reservations. That's way too trusting. In economic terms, it is - as so often - a question of finding and maintaining an equilibrium, where overlapping interests lead to fruitful co-operation and scientific progress. Easy in the abstract, not easy in practice. Certainly not a one-sided affair either. It is not a case of evil commercialism against value-free science. Here is an example.
I was once involved in a case where a professor had won a big money prize for his research in pensions. He wanted to build a pension institute with the money and realised quickly enough his prize wasn't enough. The pension fund I worked for was concerned that politics was undermining pension quality for dogmatic and bureaucratic reasons. They liked his research and decided to support him, hoping that his research would support pension beneficiaries against bureaucrats and simplistic dogmas.
The story gets complicated here, so this is a simplified version. The institute came about. It was populated by people. Some of these people did research and did not get noticed. Others wanted to go into politics and started repeating simplistic dogma. Others yet wanted a nobel prize or at least name recognition and started attacking the system for the sake of attacking the system. The institute is no longer considered an asset, but removing support would destroy it, which would cause scientific outrage at the "biased pension sector." There is no good solution.
Peter
