A Scientific Study Of The Money Question

[Pallas_Boreas]

A great book published in 1894 by Arthur Kitson. When this was written science felt something different to men of that time then it does to men of today. The concept was of investigation free of superstition, the use of reason for "progress", more a method of a dreamed Utopia when man had not seen the stupendous result of the modern world; for good or evil. This Utopia it turns out is a Platonic technocratic monster from his Republic; a downward spiraling of material nihilism resembling an Archimedes Spiral, where only the specially curated are allowed to ruin the world.

Sound monetary policy is the root solution to the problems choking out the political economy which is a direct cause to many sociological and political problems.

PREFACE
It is almost a quarter of a century since Professor Jevons launched upon the world his now celebrated work, "The Theory of Political Economy," in which he demonstrated the possibility of treating economics as a purely mathematical science. He showed how all the terms with which it deals involve the consideration of quantities - are, in fact, strictly quantitative terms - such as utility, value, capital, interest, supply, demand and so on.

His treatment of the very ambiguous and hitherto mysterious subject of value, was the beginning of what might be termed - a new era in economic science, so far as the theory of value is concerned, a theory which has held the attention of economists more exclusively during the past twenty years than any other branch of the science. It is to Professor Jevons that we are indebted for having rescued this most important subject from what seemed to be utter chaos, and for having brought the two terms, utility and value, into some sort of coherency. Notwithstanding, however, the importance of his contributions to theory, his labors do not appear to have conferred any practical benefit upon the social affairs to which they relate,- to money, trade and industry; to those things which it is or should be the aim oft he science to both elucidate and facilitate. Nor do

I believe any better showing can be made - anything of what Lord Bacon called 'fruit' will be found - from all the labors of economists in the science of exchanges, during the past twenty years.

And yet there is nothing of more importance to the human race, nothing that stands in greater need of the light of science, than the subject of exchanges. Society is as much divided, and the opinions of the learned are as contradictory upon commercial and financial questions, as they were when Jevons commenced his famous work.

In spite of the able and voluminous contributions to the theory of Value, the Money Question - which is indissolubly associated with it, and depends almost wholly for its solution upon a correct interpretation of this word - remains in the same unsettled, unsatisfactory condition as it did prior to the rise of the modern English and Austrian Schools.

The question arises, then, is this science of economics incapable of solving the all-important social problems with which it deals?

Is the science to begin with and end in mere theories - theories which apart from the mental exercise they afford, have no practical bearing upon the affairs of life? I think not. I believe that a true science of economics can and must answer satisfactorily and conclusively all the riddles that have been for ages propounded by the social sphinx. I believe such a science will enable mankind eventually to abolish want and the fear of it; to create such an abundance of wealth that all will have enough and to spare; a condition where over-production will mean a profusion of wealth, and its antidote will be found in satiety instead of starvation. I see no reason why economics should not do for trade and industry what the science of mechanics has done for the mechanical arts, or medicine and surgery for human life.

In the following pages I have attempted to sketch the direction in which a true science of wealth must inevitably lead, as well as the foundation upon which it must be built.

Although dealing mainly with what I believe to be the greatest and most stupendous problem of this or any age, the Money Question, I have digressed somewhat in the opening chapters, in order to enunciate a few leading principles to which the science must of necessity conform. I have also pointed out where, in my judgment, economists have invariably gone astray - a fact which explains the cause of the barreness of the science, and its failure to bear tangible fruit. One error - probably the most serious of all economic errors - and one which prevented Jevons from developing his theory of value into a practical reform of the highest importance, I may be allowed to touch upon in this preface.

After defining value as the "ratio of exchange," and showing that it can be expressed only in terms of the ideal - numbers- he commits an almost unpardonable solecism in writing of "a standard unit of value "as" a fixed quantity of some concrete substance defined by reference to the units of weight or space." What "a fixed quantity of some concrete substance" has to do with a "ratio," and how a substance can become a standard "ratio," are questions that Professor Jevons failed to answer. The truth is that in spite of the clear definitions with which he set out, he afterwards confused his subject by employing the word "value" in a double sense: first, as the ratio of exchange; second, as purchasing power. Thus when speaking of a standard unit of value, he evidently means purchasing or exchange power, i. e., the power conferred upon a commodity whereby it can be exchanged for a certain quantity of some other article of utility.

Again, how can "a fixed quantity of some concrete substance" represent a power not possessed by, nor residing in, any substance, but merely conferred upon certain objects by human desires - a power that varies and fluctuates, that appears and disappears with those desires? To my mind there is only one way in which a commodity can be rationally considered to represent a unit of "value," i. e., purchasing power. We may select a given quantity of a certain commodity, 25 8-10 grains of gold, for example, and say that whatever the purchasing power of this amount of gold happens to be upon a certain day, or at a given time, shall represent the unit of purchasing power. But this is a very different thing from selecting 25 8-10 grains of gold as a permanent unit of value. No fixed quantity of any substance -not even gold- represents a fixed quantity of purchasing power for any length of time. It is only at any given instant that we may consider a commodity to have a certain amount of exchange power. If then, we follow the variations in the exchange relations of commodities from any given instant, having first prized them all at that time in terms of the commodity selected as a standard, we have an absolutely correct and scientific system by which fluctuations in values may be registered with mathematical exactness, and which will be independent of the fluctuations in gold or any other single commodity.

The mistake of Jevons and other economists was in omitting the element of time from their definition of a standard unit; an error similar to that in disregarding the degree of temperature at which the metallic bar that serves as the standard of length is to be taken. Of course the introduction of time destroys all hope of our ever possessing a material unit of value or purchasing power - a thing to which altogether too much importance has hitherto been given. Values are ideal creations and can only be properly expressed in terms of the ideal - numbers. In chapters V to VIII, as well as XI and XII, I have dealt fully with this question of the ideal, and have shown how an absolutely invariable ideal unit of purchasing power may be obtained, and how impossible and unnecessary it is to employ "a fixed quantity of some concrete substance" as a unit.

The difficulty that the monometallists and bimetallists are vainly contending against, but which they are unable to perceive, is, attempting to do with the material what can, from the very nature of things, only be performed by the ideal, viz., express and register fluctuations in values.

To those who may think the conclusions arrived at in this work visionary or impracticable, I would say that so far as the use of an ideal monetary unit is concerned, we already possess one, and fully 999 out of every 1000 persons use money today in this ideal sense. Probably less than five per cent of the population could tell what the dollar or the pound sterling represents in bullion. What everybody does know, however, is that a dollar and a sovereign represent just so much purchasing power, and that this is not due to the bullion behind them, nor the quantity they represent, but solely on account of the credit of the issuer, and of the fact that the exchange relations of all goods are expressed in pounds, shillings and pence, dollars and cents, or some similar ideal units.

The universal employment of token coins, paper money, etc., is an unanswerable argument to those who believe an ideal monetary system impracticable. It may be thought by some that I have explained certain points with unnecessary prolixity, and the criticism of repetition may likewise be urged with a certain amount of justice. My defense to this is, that as far as I know, my treatment of this question is in the main entirely novel, and the subject one of an exceedingly abstract nature; and in striving to make the subject absolutely clear and intelligent to the average reader, I have preferred incurring the charge of repetition than of ambiguity. The reiteration of a truth will harm no one. The evil to be avoided, especially in a subject of this nature, is obscurity.

The title of the book may seem somewhat pretentious. I do not wish it to be inferred that I am vain enough to believe this work to contain anything more than an indication or suggestion of the direction in which we must necessarily look for the final solution of this problem, which has been the great social riddle for centuries. Before concluding, I desire to acknowledge my deep indebtedness to my friend, Mr. William A. Whittick, of Philadelphia, for the many suggestions and valuable aid he has given me in the preparation of this book. I may say that, in an indirect way, Mr. Whittick is largely responsible for its appearance. It was from numerous discussions and considerable correspondence with him that I was induced to undertake the task. Further, it was originally through reading Mr. Whittick's pamphlet on the"Money Question," that I first saw the natural and inevitable conflict between money and specie, a subject that I have treated at length in chapter IX on the Gresham Law.

In conclusion I wish to say that in my judgment the Money Question is the key to all the various other social questions which are now subjects of so much agitation and political discussion. Much as favor the agitation now in progress towards an improvement in our tariff policy, in our land-tenure system, and in the attempts to adjust the differences between labor and capital, to my mind it is evident that these questions are of secondary importance so long as money remains upon the present inequitable, unscientific basis.

In this discussion I have endeavored to show the necessity for dealing with the question wholly from a scientific standpoint. As a general rule its discussion has heretofore been confined to those who may be regarded merely as representatives of private interests - advocates of certain schemes, monometallists, bimetallists, free-silverites, green-backers, etc. - whose labors consist in vain attempts to create a science that shall harmonize with pre-organized, prearranged institutions. My aim has been simply to arrive at the truth, irrespective of any interests which it may favor or condemn.

If this work should in any way lead to a reconsideration of the laws by which the greatest and most dangerous monopoly of the age is maintained, and by which millions of men are doomed to suffer inevirable failure - if it should assist in freeing money - that most useful and ingenious of all human inventions for facilitating commerce, - and thereby emancipate industry from the restraints with which legislators, either ignorantly or wickedly, have surrounded it, the object for which this book was written will have been fully accomplished.

ARTHUR KITSON.

PHILADELPHIA, August 15, 1894.