The Press.
London, England, 1858-01-23 00:00:00

PRESS, JANUARY 23, 1858.

that cannot be produced in indefinite num-
bers, yet, in the case of all which are capable of
indefinite multiplication,demand and supply de-
termine only the temporary value,• the perma-
nent or limiting value always depending on the
cost of production. Mr. Macleod is excessively
angry at this as an unscientific statement, and
refutes it by attempting to prove that a change
in value can depend only on a change in the
relation of demand to supply ; cost of produc-
tion only entering secondarily into the causes
of value so far as it affects the supply. This
he illustrates in the following way. Sup-
pose a stocking manufacturer to invent a
machine which cheapens the process of stock-
ing-making. So long as he only offers the same
number of stockings for sale as before, he gains
theswhole amountof the reduction caused by his
invention : the price and value of the stock-
ings are not changed : the cost of production
is altered, but no corresponding alteration
takes place in the value. On the other hand,
increase or diminish the supply without any
change in the cost of production, or increase
or diminish the demand without any such
change, and immediately the value changes.
If then, reasons Mr. Macleod, you may alter
the cost of production without altering the
value, and may alter the value without altering
the cost of production, it is clear the latter
cannot be the essential element in the former.
There is a very grave error in this reasoning.
Mr. Macleod says there can be no change in
value in the stockings till the manufacturer,
desirous to increase his business, increases
the supply of stockings, when, in order to
tempt the public to increased consumption, he
must lower his price, and so brings down the
market price of stockings in the neighbour-
hood. Mr. Macleod overlooks the fact that
competition does not necessarily involve any
alteration in the general supply at all, but
only an alteration in the relative supplies of
the various producers. In the' ease cited the
manufacturer would probably lower the price
of his stockings in order to absorb the custom
from other hands. This would oblige the
other competitors to lower their price also, or
to abandon their trade. This process might
go on till the public had the whole benefit of
the lowering of the value due to the saving in'
cost of production, and yet no increased'
general supply might take place at all. Indeed,
so soon as the secret of the inventor was pub-
lished, this process must take place, from the
result of competition. Nor is there any neces-
sity for any increase in the general supply or
general demand at all. The mutual competi-
tion of the various traders • would effect the
whole change, without either any necessary
increase in the general supply, or any change
in the demand. The cost of production is the
natural limiting value, when competition is
free, and unlimited increase possible; nor
does the • relation of supply and demand
necessarily change at all. Mr. Macleod has
confounded the variations of supply as between
trader and trader which are implied in all
competitions, with variations of supply in the
general market which may or may not take
place at all. •
Mr. Macleod's second original thesis is, that
currency is the " representation of transfer-
able debt." He regards gold. and silver coiatl
as a " bill of exchange on every member of
" the trading community," only differing from
other bills of exchange in having an intrinsic
value as a commodity apart from its command
over the services or commodities of others.
Mr. Macleod's definition is very true so far as
it suggests the characteristic difference • be-
tween that which has value only as a buying
medium or power and that which has intrinsic
and ultimate value. But why, as a matter of
verbal criticism, gold- and silver should be
said to represent " debt " more than the com-
modities for which it is exchanged we cannot
see. • When we give a guinea for a book, there
is no scientific reason why the guinea should
be said to represent a debt paid to the book-
seller, more than why the book should be said
to represent the debt paid to the buyer. It is
an ordinary exchange. And the distinction is
not between a " representation of debt" and a
specific commodity, but between that which
is primarily valuable for its command over
something else and that which is primarily
valuable for its own sake. All currency, as

87

currency, whether metallic or paper, has the
former kind of .value, as distinguished from
commodities which have the latter. It is not
at all as a measure of 'debt. that it is distin-
guished from all things else, but simply as a
common measure. This is the only, reason
why paper: currency should be built up on
bullion, and convertible into bullion, rather
than any other commodity; because bullion
gives a recognised power over all kinds of
vendors, while specific commodities give
power over only one class of purchasers, and
everyisolated class is liable to vary greatly in
number, and in the intensity of their desire to
exchange. Hence currency representing any
other kind of property is for long periods
locked up in that sort of property, while cur-
rency convertible into bullion may be again
converted at pleasure into all sorts. ' Mr.
Macleod is so taken up with the perfectly true
notion that unless currency is secured on
bullion it is not secured as currency at all, that
he omits to estimate the valuable additional
security which a lien on other property may
also give. He ridicules the New York bank
system of issuing notes on Government stock,
and forgets that the Government stock is not
a substitute for convertibility into bullion, in
which case the system would be most hurtful,
but an additional security over and above the
convertibility into bullion. Of course a bank
should never he satisfied with having de-
posited stock in the place of its notes ; it
should also secure the convertibility of these
notes by keeping sufficient specie' for that
purpose. • But it is obvious enough that, as a
further security for notes, any lien' on specific
and valuable property helps to secure against
depreciation, as we have recently seen in New
York Mr. Macleod is only so far correct in say-
ing that bankers have no right both to enjoy
their Government stock and to lend its equiva-
lent in notes, as he would bo in saying the
same of bullion. Every banker who issues notes
lends a great part of his bullion and lends the
notes that represent it also. He has only to
look to it that he has enough at all times to
meet all his bona-fide liabilities. If stock
commanded the general market as gold does,
without first needing to be sold, it would be as
good a reserve as gold. It does not, and
therefore it is only useful as an additional
security for ultimate solvency; and for that
purpose it is very useful.
Mr. Macleod has another error, or tendency
to error, in his book. • He speaks of credit as
pure addition to capital. Credit involves
liability, and all liability is a limitation on
capital. - Credit is either an addition to
the effectiveness of existing capital, or is
an- anticipation' of future capital: in either
case it - may really increase the dispo-
sable capital of the present moment, but
never without some corresponding limita-
tion of the present or future caused by the
liability. • If A. by his credit is enabled to
have the use of B's mouey, it is clear that B
cannot generally have the use alit also. If A
by• his credit increases his capital of this
week at the expense of next week, he cannot
use it next week also. • The only exception to
this rule is that given by the superior effective-
ness of clubbed capital and the inferior danger
in clubbed liabilities. The banks and the
insurance-offices really add to the disposable
capital and diminish the risks of liability
without increasing capital at all. But this
is only a result of the greater certainty gained
by estimating risks on an average of many
transactions than from a few. It is not due
to credit so much as to association. Aiid in all
other cases credit limits in one place while it
adds in another. Mr. Macleod has not pro-
perly explained this.
In neither of his great novelties is Mr.
Macleod particularly happy. In many minor
points and explanations his book is of great
value.

The History of Court Fools. By Dr. Doran.

London : Bentley.
IF it be true, as we have heard, that the
learned author of the work before us makes
no pretensions to the character of an historian
or a philosopher, it would be harsh, perhaps
to measure him by a strict literary standard•
Had he indeed been an author of less estab-

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