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Ricardo and Thornton on the Transfer Mechanism
Author(s): Herbert G. GrubelSource: The Quarterly Journal of Economics, Vol. 75, No. 2 (May, 1961), pp. 292-301Published by: Oxford University PressStable URL: http://www.jstor.org/stable/1884203Accessed: 24-06-2015 13:25 UTC
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RICARDO
AND
THORNTON
ON
THE
TRANSFER
MECHANISM*
By HERBERT
G.
GRUBEL
I.
Scope of paper, 292.
-
II.
Basic gold
standard
model
introduced
by
Hume, 293.
-
III. Extension
of
basic model
by Ricardo, 294.
-
IV. Thornton's
refinementsof theory, 297.
-
V. Working
of
models
under
paper standard, 298.
VI.
Analysis
of
subsidy
payments in
both
models, 300.
-
VII.
Conclusion,
301.
Gottfried Haberler's' assertion that
Ricardo
himself
had
already
considered
income
effects
in
the theory of
the
transfer
mechanism
was recently
challenged
by
Will E.
Mason,
who
stated that
implicit
income
effects may
be read
into some
of
Ricardo's
observations.
But,
Mason continued, the latter
may be
explained on other
grounds more consistent with
Ricardian
theory. 2 The main
aspect
of Ricardian theory, which Mason then uses to show that no income
effect
reasoning has
been
involved,
is
the long-run
static
nature of
Ricardo's
analysis.3
In
the
following
an
attempt
will
be made to
demonstrate that
if we
are
willing
to
accept
another
and
equally
typical aspect of Ricardian
theory,
namely that
he held the
quantity
theory
of
money
in
a
sense to
be
defined,
then
we
are led
to the
conclusion that Haberler's statement has
in
fact been
correct. This
approach
to an
interpretation
of
Ricardo's
writings on the
subject
has the added advantage of making many of Ricardo's seemingly
inconsistent
statements mutually
consistent. Also,
the superb qual-
ity of his deductive
reasoning
-
often
as it may have been built on
not so
universally valid premises like the
quantity
theory of money
will
once
more be
asserted.
*
I
wish to
thank
Mark
Blaug
and
Egon Sohmen for their helpful sugges-
tions. Responsibility
for
any
errors
remains,
of
course, entirely
with the
author.
1. Gottfried
Haberler,
Theory of International Trade (London: William
Hodge, 1936), p.
71
and
A
Survey of International Trade Theory published in the
Princeton Series
of
Special
Papers
in
International Economics, No. 1,
1955, p. 7.
2. Will
E.
Mason,
Ricardo's
Transfer
Mechanism Theory,
this Journal,
LXXI
(Feb. 1957), 107.
3. Ibid.,
p.
115.
292
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THE TRANSFER MECHANISM
293
While there has been
a
recognition
of income
effects
by
other
classical
economists
as Mason has shown in two
other
articles,4
it is
the
three names of Hume, Thornton and Ricardo,
which
are asso-
ciated
most
prominently
with the advancement of knowledge as to
how
the transfer mechanism
works. How the last
two men
have
built
upon
Hume's
work while
taking
sides in the famous
bullion
controversy
of the
early
nineteenth
century
and how
they
came
up
with contradictory
conclusions
will be analyzed below.
The
main problems
discussed in this great
debate had
to do with
the effects
on the
exchanges
of (1) England's
paper currency
and
credit creation, (2)
harvest failures,
and
(3)
the payment
of
foreign
subsidies. For the purposes of exposition the analysis at first pro-
ceeds on the
assumption
that a universal
gold
standard
exists. Later
on
the
effects of credit
creation
under an inconvertible
paper
standard
are
examined.
Similarly, disequilibrating
harvest
failures and
sub-
sidy payments
are treated
separately
and
in
succession.
II
David
Hume analyzed
the effects of
only one source
of inter-
national disequilibrium, namely changes in the quantity of money.5
He assumed
that after equilibrium
conditions
existed
money would
be annihilated
or created
and he
then
traced the
consequences:
An
increase
of money by
50 per cent would cause
wages and
prices to
rise
in
an
equal proportion.
As a
consequence imports would
increase
and exports
would decline until
the resultant
gold-flows would re-
establish
equal
levels of
money
in
all countries
and
the
balance of
trade would
return to
equilibrium.
In Hume's
words:
It does not
seem that money, any more than water, can be raised or lowered
anywhere
much
beyond
the
level it has
in
places
where
communica-
tion
is
open. 6
Hume's analysis of changes in
only the stock
of money is curious.
It
has to
be
explained
as his way of demonstrating
the
futility of
policies
advocated
by
the
mercantilists,
which were
mainly
aimed at
increasing the wealth
and
power
of nations by
increasing
their stocks
of
gold.
4. Will E. Mason, Some Neglected Contributions to the Theory of Inter-
national Transfers,
Journal of Political Economy, 1955, pp. 529-35
and Stereo-
types
of Classical Transfer
Theory,
Journal of Political Economy, LXIV (Dec.
1956), 492-506.
5. David
Hurne, Political Discourses (1752) in Essays, Moral,
Political and
Literary (London: Longmans, Green, 1875),
I, 330-45.
6. J.Y.T. Greig (ed.), The Letters of
David Hume
(Oxford: Clarendon,
1932),
Book XX, Chap.
XI, p. 12.
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294
QUARTERLY JOURNAL OF
ECONOMICS
But Hume's state of the theory did not explain
what the results
of disturbances
in
the
markets
for goods and
services, such as caused
by wars and droughts, would be. Ricardo
and Thornton attempted
such
an
explanation.
III
Before presenting Ricardo's theory of the
transfer mechanism
it
will
be necessary to
define
clearly what is
meant by the quantity
theory
of
money
as it is
alleged
to have been
held
by
Ricardo. The
quantity theory
of
money
is best characterized
by the equation of
exchange
M
*
V
=
P
*
T
and the
following three postulates:
(1) V, the velocity of money, is an
institutional datum that
changes only slowly over time.
(2) Changes in M, the quantity of money,
affect only the price
level,
P.7
(3) Conversely,
P
itself is
directly
influenced
only by changes
in M.8
Did Ricardo hold the quantity theory of money? Schumpeter
writes:
I
maintain that Ricardo held ... the quantity theory ... It is true that he
introduced qualifications occasionally and that, here and there, he made state-
ments that were logically incompatible with his strict
quantity theory, exactly
as
he
did
in
matters
of
his labor
quantity
law of
value.
In
both
cases, however,
he mentioned them
only
in order to minimize their
importance.9
What
happens
in an
economy
characterized
by
these relation-
ships
when
bad harvests
occur? The
volume of
transactions
declines.
But according to postulate
three
nothing happens
to the
general
level
of
prices.
And
since
it
is
the
general
level of
prices
in its relation to
prices in the rest of the world which determines the quantities of
exports
and
imports, nothing
has
happened
that
would
cause
an
imbalance
of
trade, depreciation
of
the
exchanges
or outflow
of
gold.
But the
need for
increased
imports
of corn
remains
and the
question
arises
how to
pay
for
it
if
not with
gold?
The
following passage
from
Ricardo
shows how
he
believed that
it could
and would be
done:
7.
See Joseph
A. Schumpeter,
History of Economic
Analysis,
ed.
from ms.
by
Elizabeth
Boody
Schumpeter
(New
York:
Oxford
University Press,
1954),
p. 703.
8. See David Ricardo, in The Works and Correspondence of David Ricardo,
ed. P. Sraffa,
III,
106 and 53-54,
referred to
subsequently only
by
number of
volume.
9.
Schumpeter,
op. cit., p. 704.
In
a
footnote on the following
page the
author
comments:
It serves only to
blur
the
lines
of historical development
if
some historians
.
.
.
insist that
if
all of
Ricardo's asides
be collected
and
worked
out, practically
everything
might be attributed
to him
that we find in
any later
writings.
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THE TRANSFER MECHANISM
295
Under
these circumstances
. . .
every
other commodity
would become
compara-
tively
cheap
as
compared
with corn,
and would therefore be exported
in return
for the corn which would
be
in
demand
in this country. . . If before
the bad
har-
vest the pricesof commodities wereprecisely equal in any two countries,after it,
such
prices
must be lower
in the
country having
the
bad
harvest
than
in the other.,
Thus, while there
has been no
change in the general
level of prices,
the
relative
prices
of commodities
have been altered
and
with
it
the
composition
of
exports
and
imports.
How can such a change
in
relative prices take
place?
There is only one answer, via
some income
effects.
Farmers
are
surprised by
the bad harvest
and their smaller
production leaves
them with
reduced
income and
purchasing
power.
The manufacturers
of other goods, however, produce
quantities
which
would be bought
at current prices
if
the farmers had not
experienced
a reduction
in
incomes. But
with the lack of demand
from the agricultural
sector
of
the economy
there
will
be a
glut
and
downward
pressure
on the
prices
of manufactured
goods.
Corn,
on
the
other
hand,
will
be
relatively
scarce
and its
price
will
rise.2
These changes
in
relative prices
tend
to make corn the object
of
imports
and manufactures
the
object
of
exports
in
degrees
different
from those existing before equilibrium was disturbed.
Mr.
Thornton has
not
explained
to
us,
why
any unwillingness
should
exist
in
the
foreign
country
to
receive our
goods
in
exchange
for their
corn;
and it
would
be necessary
for
him
to
show,
that if such an
unwillingness
were
to
exist,
we
should
agree
to
indulge
it'so
far as to consent
to
part
with our
coin.3
But this
is
not
the
end
of Ricardo's analysis.
It
is
clear that the
reduction
in farmers'
incomes
will
lower the
over-all level of
trade
in
a country,
that
is,
in our
equation
of
exchange
M
-V
=
P*JT,
T
will be decreased. Of the other parameters V is a constant; P, the
general
price level,
remains
unchanged
according
to
postulate
three.
This leaves
only
M to
vary
when
T
changes
as the
equation shows.
In
other words,
the quantity
of
money
has to decrease
when
physical
trade
and
income
go
down.
England,
in
consequence
of a bad
harvest,
would
be
a
country having
been
deprived
of a
part
of its
commodities,
and
therefore
requiring
a diminished amount
of
circu-
lating medium
.
.. causing
the
currency
which was before at
its
just
1.
Op.
cit., VI,
37.
2. In the
absence
of international
trade
it
is
conceivable
that the
demand
elasticities
for
corn
would
be
such that
farmers
end up with
revenue
greater than
in the case
of a
normal harvest.
But with
international
trade
it is
more likely
that
the price
of corn
will
increase
less than
is
necessary
for
this to
happen.
3. Ricardo, op.
cit.,
III, 61.
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296
QUARTERLY JOURNAL OF
ECONOMICS
level
to become redundant. 4 Redundancy of the currency
is, how-
ever, essentially
the situation analyzed
by Hume and should lead
to a loss of gold by the familiar mechanism of temporary increases
in the price
level. But
why
then did
Ricardo insist that
gold would
never
be
exported
under these
circumstances? Ricardo came to this
conclusion by
reasoning
the
following
way.
If
the
bad harvest is a
temporary phenomenon,
then income will return
to
its old level within
a short period
of time.
Any gold
that had been
relatively redundant
will
soon
be needed
again.
If
the
gold
were
exported
during the time
when
it
was
redundant,
it
would
have
to be imported again as soon
as conditions changed. Ricardo believed that people would know this
to be true
and would
therefore
save
themselves
the expense
of shipping
the
gold:
A
succession
of
bad harvests
might
drain a country of its money ... but in
exchange
for
what will it
return? The
answer
is
obvious
-
for
commodities.
The
ultimate result
then
of all
this
exportation
and importation of money is
that ...
the coin
and
bullion
will in
both
countries
have
regained
their natural
level.
Is it to be contended that these results would not be foreseen,
and
the
expense
and
trouble
of
attending
these
needless operations effectually prevented?'
This part of Ricardo's analysis is clearly wrong. People do not
have
the
foresight
he
postulates.
It
is also an example of
Ricardo's
typical analysis
in
long-run
static
concepts.
He
was interested
in
what
the
value
of
variables would
be
after
equilibrium
had
been
restored. But,
of
course,
such
reasoning neglects
the important
dynamic price-level changes
which
bring
about these
adjustments.
The conclusion
holds
in
the
long
run
but
only
due
to
the mechanism
suggested by postulate
three.
Nevertheless Ricardo has made a lasting contribution to the
theory
of
the
transfer
mechanism. It lies
in
his
rejection
of
the
price
level adjustments
and
consequent
recourse to
income and
demand
shift
explanations.
Even
though
he did not
develop
this
aspect
of
the
theory
of the
transfer
mechanism so
fully
and
explicitly
as would
have
been
desirable,
it
is
undoubtedly
true that
economists were
always challenged
by
his criticism
of current
thought,
so that
he
can
be considered
one
of the best known
originators
of what Haberler
calls the modern theory, which is associated with the names of
Iversen,
Wicksell
and
Ohlin.6
4. Ibid., III,
106.
5. Op. cit.,
III, 103.
6.
Haberler,
A
Survey of International
Trade
Theory,
op. cit., p.
7.
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THE TRANSFER MECHANISM
297
IV
Ricardo's
assertion that bad
harvests
would
never lead
to
a loss
of gold' was contrary to Thornton's findings, which in a study pub-
lished
before
Ricardo's
work on the subject
showed
that gold losses
could
be blamed upon
bad harvests.8 Some passages
of Thornton's
book suggest
that he
was aware
of the existence
of income
effects:
If
the
harvest fails,
and imports are necessary,
in order to supply the
deficiency,
payment
for
those
imports
is almost immediately required:
but the means
of
payment
are to
be supplied
more
gradually
through limitations
of
private
expend-
iture,
or the increase
of individual
industry.9
But the
most important
conclusions
of his analysis are
not based
on
the income
effect, mainly
because
he considered
it
to
be
a
long-run
adjustment.
As a banker
and
practical
man he was more
concerned
with short-run
phenomena,
which, however,
did
not
prevent
him
from writing
a
book that,
according
to
Professor
Hayek,
anticipated
in some
points the analytic
developments
of a century
to come.'
How then did
Thornton
use his preference
for short-run
analysis
to explain the
outflow
of
gold
from
the
country
after it
had
experi-
enced
a bad harvest?
Before answering
this question
it is
important
to establish that
in
contrast
with
Ricardo,
Thornton
did not
adhere
to
the
quantity theory
of money. Instead,
he
held a
surprisingly
modern monetary
theory
where all the
magnitudes
of the equation
of
exchange
are truly variable
and interdependent.
In a
world
built
7.
Op.
cit., III, 208,
seq.
8. Henry Thornton,
An
Inquiry
into the
Nature
and
Effects of
the
Paper
Credit
of
Great Britain, (1802)
with
von
Hayek's
brilliant
introduction
to the
1939
reprint
(London,
Allen & Unwin). Thornton cannot easily
be classified
as
a bullionist
or antibullionist
even
though
in the economic literature
he
sometimes
is
referred to
as one
or the other.
Jacob Viner,
on p. 120
of his Studies in the
Theory
of
International
Trade
(New
York:
Harper,
1937),
calls Thornton
a
bul-
lionist,
i.e.,
an opponent
of the Bank
of
England's credit
policies. Hollander
in
The
Development
of
the
Theory
of Money
from Adam
Smith to David
Ricardo
in this
Journal,
XXV
(May 1911),
451, labels him an antibullionist,
a defender
of
current banking
practices.
This
confusion
is a tribute
to
Thornton's
scholarly
analysis
of
the events,
which
made
him
come up with supporting
evidence
for
either side's
case.
Furthermore,
his
point of
emphasis shifted
as time
and
cir-
cumstances
changed.
Thus,
he attached
more
weight
to credit
extension
as
an
explanation
for England's
foreign
exchange
situation
in the testimony
given
before Parliament in 1811 than he had in the Paper Credit published in 1802.
Some
of
the
confusion
in
the literature
may
also
have been due to Henry
Thorn-
ton's mistaken
identification
with his
brother,
Samuel
Thornton
(1754-1839),
who was
a director,
and
from
1799-1801,
Governor
of the
Bank of
England.
9.
Op.
cit., p.
143.
1.
Hayek
in the introduction
to the
reprint
of
Thornton's
work
mentioned
above, p.
36.
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298
QUARTERLY
JOURNAL OF
ECONOMICS
on
such economic
concepts
the
supply
of
money
influences
income
as
well
as the
price level,
while
the demand
for money itself
has to do
with the difference in the real rate of interest and the discount
rate.2
Furthermore, Thornton
explicitly makes it clear that the
velocity of
circulation of money is
a
variable.'
According to
Thornton then, when a bad harvest
occurs, the
immediate demand for corn
is very great and it is imported
in large
quantities. But
in
order
to
make
foreigners accept only
goods in
payment for it, the prices of these goods would have to fall
so low
and
so rapidly, that this process would endanger the
functioning of
the economy altogether:
At
the time
of
a very unfavorable
balance produced through a failure of the
harvest a country has
occasion for a large supply of corn from abroad
. . . but
goods which the country is able to furnish as means of cancelling its
debt are not
in
such
demand as
to
afford
the
prospect
of a
tempting
or
even
of a
tolerable
price...
In
order,
then to
induce the
country having the
favourable
balance
to
take
all its
payments
in
goods
and no
part
of it in
gold
it would be
requisite
. . . to
render
them excessively cheap.
It
would
be
necessary, therefore,
that
the
bank
should
not only
not
increase its
paper,
but that it
should, perhaps,
very greatly
diminish it. . . But the
bank in
the attempt
to
produce this very
low
price
may
so exceedingly distress trade and discourage manufacturesas to impair ... the
restoration of our balance
of
trade. For
this reason
it
may be the true
policy
and
duty
of
the
bank
to permit
the continuance
of
that
unfavorable
exchange.4
While Thornton
recognized
that
adequate price-level adjust-
ments can lead to
the
attainment of
balanced
trade he denies the
usefulness of
such
a
mechanism
in
the short
run
and thus
explains
the loss
of
gold.
He
added to Hume's
analysis by considering
the
effects of
disequilibrating
disturbances
in
the
sphere
of
production
rather than money. As a description of the contemporary scene and
as a basis for
policy
measures
his
analysis
was more relevant than
Ricardo's
long-run
considerations.
England's
economic
position
in
the
world at that
time was
so
strong
that
she
could afford
a
temporary
outflow of
gold
in
order to
maintain a
standard of
living
that
was
endangered by
a bad
harvest.
V
So
far the
analysis
has been in
terms
of
a
gold standard.
But
much of the controversy to which Ricardo and Thornton addressed
themselves
was
centered around
the issue
of
paper currency
and the
2.
Ibid.,
pp.
236-39.
3.
Ibid.,
pp. 96 seq.
4.
Ibid., pp.
151-52.
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THE
TRANSFER
MECHANISM
299
inconvertibility
of
Bank of England
notes.
It
is
a
relatively
easy
task
to
extend
the preceding
analysis
to a paper
standard.
Whereas
in
the
case
of the gold
standard
the
symptom
of
disequilibrium
is
the
outflow
of gold,
in the case of the
paper
standard
the
symptom
is
the
discount
at which
Bank
of
England
notes
sell for
gold
or
other
cur-
rencies.
The
last
symptom
is
better
known
as
the
depreciation
of
the
exchange
rate.
Thornton's
analysis
in
terms
of the
paper
standard
briefly
goes
as follows.
Because
of the
bad harvest England
imports
more corn
than before.
Foreigners
receive
bills drawn
on
London
as
payment
for this corn. Since England's trading partners have not increased
their
imports,
they now
hold
more
bills drawn
on London
than
they
need
in
order
to pay for
their imports
at the old
equilibrium
level.
Under
the
paper
standard
bills
presented
for payment
in
London
can
only
be
exchanged
for Bank
of
England
notes.
But
foreigners
want
the
universally
acceptable
means of
payment,
gold.
For this
they
are
willing
to pay
a
premium.
Therefore,
Bank
of
England
notes
sell
at
a
discount
in terms
of
gold
as well
as foreign
currency,
that is, the exchange has become unfavorable. Now, if a foreign
merchant
can
get
more
English
?
notes for
his
own currency
than
before
the discount,
that means
that
he can purchase
English
goods
at
a
lower
cost than
before
in terms
of his own currency.
This
is
the
same
effect as
if the
domestic price
level
of
England
has fallen.
This
will
eventually
bring
about
equilibrium
just
as
gold
flows
do.
Ricardo's conception
of economic
relationships
did
not
allow for
a
discount
on Bank
of
England
notes
because
of
a
bad harvest.
As
shown above, disturbances of this kind would be confined to changes
in income
and
relative
prices
of goods.
The
quantity
of money
and
therefore
the
general
price
level
remain
undisturbed. But how
then
did
Ricardo
account
for
the
discount
that
in
fact existed?
He
blamed
it on
the
excessive
note
issue
by the
Bank of
England,
which
created
a redundancy
of
money.
While the
redundancy
caused by
a
bad
harvest does
not lead
to
a
gold
export
or discount
for
the
reasons
discussed
above,
such
an
excessive
note issue would.
And since
according to Ricardo the export of gold due to its redundancy is
always
the cause
and
never the
result of
an
import
surplus,
England's
import
surplus
and
depreciated
exchanges
of the
time were due
to the
excessive
note
issue
by
the Bank of
England.
Ricardo's analysis
was
one
of
the
strongest
arguments
available
to
the bullionists.
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300
QUARTERLY JOURNAL OF
ECONOMICS
VI
There remains
now the need for the
extension of Ricardo's and
Thornton's arguments
to another kind of disturbance of international
equilibrium
discussed
at
that
time.
This disturbance was in the form
of subsidies,
which
England provided
for its continental allies fighting
Napoleon's France.
Such subsidies would
in
practice
typically
take the
following
form. Hamburg merchants
are
asked
by English agents to supply
an ally
with
goods.
As a
payment
for
these
goods
the
Hamburg
merchants would draw bills on London.
These bills would either
be
sold
in
Hamburg
to German
merchants
wanting
to
import
British
goods or they could
be
presented
for
payment
in London. Bills
arising from such subsidies have the
same
qualities
and
effects
as bills
arising from imports. Therefore,
if
before
the
subsidies were paid,
exports
and
imports were
in
equilibrium
and
if
the
subsidies
are not
matched by
either reduced imports or
increased exports, gold
will
flow out or Bank
of England notes
will sell
at a discount. This is the
way Thornton would
have argued.
Ricardo,
on the other hand, realized that bills drawn on
London
as the result of subsidy payments would lead to a depreciation of the
exchanges
and in
the case of convertibility,
an outflow of gold. But
he treated these events
as an exception to
the regular course of trade.
Furthermore, he
believed that the encouragement
to export, which
such a
discount represents, would lead to
its elimination.
In terms
of our
equation
of
exchange
and
under
a gold standard,
the grant
of
a
foreign subsidy
is
equivalent to
a
reduction
in M. Since
T
and
V
remain unchanged, the decrease in M causes
a fall in
P
according
to
postulate three. Unless the subsidy payments continue indefinitely,
the
lower
price
level
will
cause exports to
increase and tend
to restore
the old
level of
M. In
the
case of
an
inconvertible paper
standard
the
supply
of
money
is not
reduced. Instead, Bank of England
notes
sell at a
discount at the exchanges, which has the same effect
as
lowering the price
level and leads to
increased exports. These
increased exports
tend to wipe out the existing discount.
A
convulsed state
of
the
exchanges, such as would be caused by a subsidy
granted
to a foreign power, would not accurately measure the value of the currency,
because
a
demand
for bills arising from such a cause would not be
in con-
sequence
of the natural
commerce
of
the country.
Such a demand would there-
fore have
the effect
of forcing the exports of commodities by means of the
bounty
which
the exchange
would afford. After the subsidy was paid, the
exchange
would
again
accurately express the value
of
the currency.5
5.
Ricardo, op.
cit.,
VI, 39.
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THE TRANSFER
MECHANISM
301
If ...
we agreedto pay
a
subsidy
to a
foreignpower,
money
would
not be
exported
whilst
there
were
any goods
which
could more
cheaply
discharge
he
p ayment.
The
interest
of
individuals
would
render
the
exportation
of
the
money
unnecessary.6
For
the
bullionist controversy
of
the
time
this
part
of
Ricardo's
analysis
meant
that
any persistent
depreciation
of
the
exchanges not
accompanied by foreign
subsidy payments
was due
to
excessive note
issues by the Bank of
England.
VII
As a general conclusion
it
may be said
that the beginning of
the
nineteenth century
marked a
great step
forward
in
the
understanding
of the mechanism involved in the transmission of disequilibrating
disturbances
in
the international markets for
goods
and
the
sphere
of
money.
Ricardo and Thornton have
contributed
greatly to this
understanding;
and
while
the
contributions
of
others
are
important
and should
not
be
forgotten,
it
is the
weight
of
their
authority
based
upon the
comprehensiveness
of their
work
as
economists
which
justifies
the
examination of
the
theories of
these
two men in
isolation.
Their contradictory conclusions
did much
in
later times to focus
the
attention of economists on the coexistence of price and income effects
as
essential
parts
of
the
theory
of the transfer
mechanism
and
helped
to
break
the
path
for the more
comprehensive
understanding which
we have
today
of the
forces involved.
YALE UNIVERSITY
6. Ibid.,
III,
63.
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