The times. [volume] (Washington [D.C.]) 1897-1901, 1900-10-06
THE ECONOMIC SOCIETY
The Quantitative Theory of Money
the Subject Discussed.
Addresses by Secretary Gnge, George
f. Roberts. Director of the Mint,
and Prof. Joseph French johnson
Effect of the Volume of the
Medium on Prices of Commodities.

The Washington Economic Society,"
formed last November to discuss political
economic subjects, resumed its work for
the fall last evening. The meeting was
held in the red parlors of the Ebbitt
fouse. Each of the members, numbering
nearly sixty. was privileged to invite
friend. and in consequence the parlors
were well filed. Owing to an erroneous
announcement that the session would be
public. a number of persons called with
the expectation OF hearing the discus
sions. In conformity with the established
rule of the society. however, admission
was limited as usual to members and in
yited friends.
The society has arranged for discussing
a series of subjects. THE Quantitative
Theory of Money was discussed last
night. Lyman J. Gage. Secretary of the
Treasury; George E. Roberts. Director of
the Mint. and Prof. Joseph French John
son. who occupies a chair in the Uni
versity of Pennsylvania, each delivered an
address. They were followed by other
members in short speeches.
Secretary Gage in his address reviewed
the history Of money from the time when
all transactions were carried on with an
immediate exchange Of cash. He traced
the development of credit, which at pres
ent Is the largest factor in all business en-
terprises. He dwelt upon the growth of
modern business methods whereby, through
credit, 81 in coin is made to serve the
public perhaps ten times over at the same
time. Touching on the quantitative theory
of money stated by the classic school
headed by John Stuart Mill, Mr.. Gage de-
clared that the definition should be re-
stated. He was not prepared to accept
the old formula that there was a direct
and absolute relation between the volume
OF money and prices. He pointed out the
increased operations of credit, which, he
declared make money so useful that the
Mill definition cannot be accepted outright
The rapidity of circulation also is an ele
ment, said Mr.. Gage, which must enter
into a right consideration of the quanti-
tative theory. In conclusion he declared
that while there is a relation between the
volume Of money and prices. yet it is not
arbitrarily fixed. The element OF credit.
which is capable Of increasing indefinitely
the power OF money, must be considered
in stating the theory.
Prof Johnson. who also spoke, was dis
posed to accept the quantitative theory. He
declared that credit is not a substitute for
money. but a device for making 1t more
useful. Consequently the supply is of the
utmost Importance, since credit at most
can only magnify the usefulness of the
money stock
Mr.. Roberts was also an advocate of the
theory. He said in part:
That the power of money over com
modities is affected by the quantity of
money in circulation does not seem 10
be questioned by any economist 1t is
difficult for that reason to define what
is disputed in the quantitative theory of
money. l suppose there can be no bet
ter statement of the broad theory than
that made by John Stuart Mill that the
value of money, other things being the
same, is in The inverse ratio of its guam
tity; an increase lowering its purchasing
power and decrease advancing il in ex-
act proportions. To double the guam
tity of money would double prices and TO
halve the quantity would cut prices in
two. This is because money as money
has no other use than to buy things II
the number of things for sale remains
the same, and the demand for them the
same. but the medium of purchase is
doubled in quantity, il must ultimately
be that each purchase will necessarily
absorb twice as much money as before.
When all the productive forces Of
country are employed, when every man
has work, that country is doing all the
business it can, and using all the money it
can. At the existing scale Of prices, with
the mines Of Australia producing at then
present rate, goli would pile up in the
banks without demand for 1t. The interest
rate on loans would go down, and the own
ers OF money would look about for some
thing that paid better. Ii the interest rate
on loans went down to or per cent and
certain railway continued to pay or 8
per cent dividends the selling price of its
stock, that is. the money value OF the rail-
way, would go up correspondingly. and
har
another railway built. All property that
was earning better returns than money at
interest would be in demand and every in
vestment that could be duplicated or null
TITLED would be. This would cause an in
creased demand for labor, and result in
higher wages and thus gradually a new
level of values would be established The
advance of wages and commodities would
continue until it increased the cost OF
mining so that ores of lowest grade could
no longer be worked
with the excessive supply thus cut off
the various industries would gradually
readjust themselves to the new stock OF
money and regain the same relation to
each other that they had wher the ad-
vance began. The period of advancing
prices would seem to be one of pros
perily, but it would be a fictitious pros
perity.
But the greatest and most variable fac
tor in prices is credit. Whatever the vol
ume of money may be there will be a su-
perstructure of credit. There is q vague
idea afioat and entertained by not a few
that it might be possible TO have money
enough so that all business could be done
for cash But as we have seen an in
crease in the volume of money causes a
corresponding increase in prices, so that
it is Just as difficult 10 obtain what you
want as before and consequently there is
the same occasion TO incur debt The idea
that you might have cash enough to avoid
any business on credit belongs with the
idea that debt always stands for poverly
and distress. Debt commonly signifies
enterprise and confidence. People go into
debt for profit. They use their credit
to supplement their capital. to enable
them to do more business than they other
wise could. 1t is effective agency for
utilizing the resources OF society to the
best advantage. for 1t gathers up the Idle
capital and puts ii to use"
The next of the monthly meetings will
be held on November Is, and Prof. T. S.
Adams viii speak on THE Proper Sub
1. sts of Taxation" Charles A. Conant,
correspondent OF the New York Journal
OF Commerce." Carroll d. Wright, Chief
of the Department OF Labor; Prof. Emory
r. Johnson OF the Isthmian Canal Com
mission: Martin A. Knapp of the Inter-
state Commerce Commission, and Prof.
Henry T. Newcomb. of the Census Office.
will deliver addresses during the winter.