16 NOVEMBER 1907, Page 29



SIR,—The letter in which Mr. Harold Cox had set forth the monetary doctrine which I maintain in "La Science &ono.

mique" has provoked an apology for the quantitative theory. I will not follow the reasonings of my first antagonist, who, after making a Socialist of me, crushes me under the weight of a certain number of economists' names. It is the " authority "

argument, and does not count. The quantitative theory of the value of coin was maintained in the sixteenth century by Jean Bodin and Dazanvati. Its most precise formula was given in 1753 by Montesquieu (" Esprit de Lois," LXXII.,

chaps. 7-8) :—

"If we compare the mass of gold and of silver which is in the world with the amount of goods which are there also, it is certain that each article of merchandise in particular can be compared to a certain portion of the mass of gold and silver. As the total of one will be equal to the total of the other, the portion of one will be equal to the portion of the other. If, since the discovery of The quantity of gold has not ceased to increase, so food should have increased in price ; it has fallen as much as 15 per cent. The quantity of gold is the same for food and materials ; but materials increased in price as much as 11.5 per cent., while food decreased. I would ask the partisans of the quantitative theory to explain this dual movement in inverse sense.

Has the quantity of gold existing in the world suffered the same variations as the price of copper during the last years? Land-value increases in the towns and decreases in the country; is the quantity of gold greater in towns than in the country ? I take the liberty of indicating, for full details of these facts, my book " La Science teonomique," third edition, pp. 194-221. Gold is a merchandise, differing from other merchandises because it is employed as coin, for the following reasons. Producers of gold have not to trouble their heads about finding a market for their goods. Each holder of an ounce of gold is certain that in exchange the Mint in London will give him £3 17s. 100. The gold pro- ducer has, therefore; no need to think of anything but his cost price. Should the cost of obtaining gold exceed 2317s.10id. per ounce, he is losing ; if it does not attain that price, he is certain to be gaining something. This price constitutes the prototype of the price of that metal, round which only slight oscillations can be effected at the same time and place. It is the gold point which determines the exchange rates ; all acts of purchase, sale, loans, agreements, re- muneration of services are ruled by that prototype price. In all transactions it plays the same part as other weights and measures ; and like them it is invariable as regards objects of diverse nature and varying value. It is only possible to appreciate past and present prices, and to foresee future ones, by comparing them with that prototype. A homogeneous merchandise cannot vary in value relatively to itself ; a gramme of gold will always equal a gramme of gold. When it is said : Gold has increased or decreased in value, the following must always be added : In relation to what object ? and the reply will prove that it is the object which has varied in value relatively to. the prototype price constituted by the monetary the Indies, gold and silver have increased in Europe in a propor- tion of 1 to 20, the price of goods and merchandise should have increased from 1 to 20 ; but if, on the other hand, the quantity of goods has increased as 1 to 2, it will be necessary that the price of these goods and merchandise should have risen on the one hand in a proportion of 1 to 20, and that it should have decreased in a proportion of 1 to 2, and that consequently it should only be in proportion as 1 to 10."

I would remark that Montesquieu speaks of the two metals, gold and silver. But my contradictors are only speaking of gold. If the quantitative theory is correct, the prices of all things, both fixed and circulating capital, must be subjected to uniform variations according to the greater or lesser proportion of gold existing in the world. Now I quote the last index-number of Mr. Sauerbeck, which is :—

Food. Materials.

1878-87 84 76 1905 December 681


1906 December 68.4 871 1907 September 721

84.1 [We print M. Guyot's interesting letter as it stands, but may point out that the apparent attribution of Socialistic views to our correspondent was due to an error in " Latona's " typewritten MS. The quotation from Montesquieu is given as we received it.—En. Spectator.]