History Of Economic Science

The debate provoked by the Banking Restriction Act of 1797 concerned what was, in a sense, the classical problem of political economy - a conflict between the state's interest in enhancing its own financial efficacy through an extension of national debt, and those of the merchant-community in a secure currency. 24 As Ricardo argued in 1811, the consequence of the Restriction had simply been to enhance the power of state borrowing at the expense of a depreciating currency.25 Thus, when, in the context of a rumored French Invasion, the Restriction Act allowed the banking sector to issue bills of exchange without their immediate convertibility into gold specie, the political terrain on which Political Oeconomy operated was not significantly altered. Rather, the discussion of the relationship between credit and gold, money and value, invoked the problematic of Political Oeconomy as the commercial community declared the autonomy of its interests vis-à-vis state finance. Thus, over the course of the currency controversies, the processes of exchange were conceptualized as economic phenomena; the idea that the market possessed its own autonomous principles of regulation was advanced under the rubric of public justice. In this way, the autonomy of the market was founded not on a set of Economic processes, but, rather, on a conception of the human subject anterior to 'that vast and complicated machine'. As Servet puts it, 'ainsi, grâce à l`économie classique et à son mythe du troc, il est possible de concevoir une société sans monnaie et donc sans Prince'.26 An Enquiry into The Nature and Effects of the Paper Credit of Great Britain (1802), by the banker and Clapham evangelical Henry Thornton, was the most important contribution to the currency debates of the nineteenth century. In repudiating the argument, delivered in the financier Walter Boyd's Letter to the Right Honourable William Pitt, that the expansion of paper credit was the single cause of the depreciation of the value of currency relative to price of bullion, Thornton defended the Bank of England against the charge that it had issued an excess of paper-currency.27 Though Horner was doubtful about Thornton's justification of the Bank, his review is full of praise for the theoretical core of Paper Credit, the repudiation of Boyd's 'antithesis' between the circulating medium and the objects of exchange. Boyd, Thornton argued, was mistaken, for, in practice, 'no definitive boundary' exists 'between the circulating medium' whether paper or precious metal, and 'the commodities of which it facilitates the exchange'.28 With the 'ancient system of gold coin' now 'supplanted', gold acquired the status of a commodity like any other, for 'price of bullion must be affected in the same manner, as that of every other article'.29 In this way, the Restriction Act provoked a repudiation of Smith who assumed the existence of 'paper money consisting in bank notes, issued by people of undoubted credit, payable upon demand without any condition' because 'gold and silver' can 'at any time be had for it.30 In a sense, criticism of Smith's theory of money was necessary after 1797: Smith assumed a relation between specie and currency which no longer pertained. Taking it as axiomatic that gold was a commodity like any other, both Thornton and Horner broke with Smith who accorded gold the privileged status of governing the security of exchange. Thornton now argued that individual profit-seeking led to the export of gold, whereas Smith had referred to a 'fixed channel of circulation', according to which 'every addition of paper to the currency displaces an equivalent quantity of gold' as a matter of necessity.31 In this way, Thornton's opposition to Smith's theory involved posing the autonomous merchant against the state's interest: although, at the level of individual merchants Smith allowed that commerce may be increased by the advance of credit, at the level of the national economy the security of state demanded that the credit-market be treated as a finite domain. 'A prince, anxious to maintain his dominions at all times in the state in which he can most easily defend them', Smith argued, ought not only to guard against the excessive circulation of paper money, but must also prevent 'that multiplication of it' which 'enables [banks] to fill the greater part of the circulation'.32 Indeed, the example Smith adopted to demonstrate the special status of gold spoke to the overbearing presence of reason of state within eighteenth-century Political Oeconomy. Imagine a war, says Smith, in which 'the treasure which supported the credit of the paper money' was seized by the enemy; if 'all taxes' were previously in paper form, the prince would not have the capacity 'either to pay his troops, or to furnish his magazines; and the state of the country would be much more irretrievable than if the greater part of its circulation had consisted in gold and silver'.33 Thus, Smith's fixed-channel of circulation constituted Political Oeconomy's ideal object of empirical representation; the channel represents itself as both site and limit of a superintending power. The advance of private credit must be limited in order to safeguard the autonomy of the state, while its extension can be valid only insofar as it allows commerce to act as a vent for the domestic product of the land, the most significant national sector according for capital according to Smith's hierarchy of capitals.34 If, vis-à-vis market-exchange, Smith resolved the problematic of Political Oeconomy into the dictates of reason of state, it was the new-found sovereignty of the mercantile community which impressed itself upon Horner as he read Paper Credit. 'An important revolution has taken place', he wrote, for 'the power of issuing the medium of exchange has ceased to be the prerogative of the crown' and 'some of the functions of sovereignty are now united to those of the trader' through the Board of the Bank of England.35As a 'national establishment' Horner could hope that the Bank's orientation would be toward 'public policy': 'Perhaps, an unexpected control may be gained to the people, over the views and measures of the executive.'36 Thus, the discussion of convertibility was removed from the rubric of national security; it was now the relation between individual and public interest which concerned the protagonists of the currency controversy. Thornton and Horner's discussion of credit therefore paved the way for a separation between public and juridical conceptions of justice. It was this delineation of state and public which Brougham confronted in 1803. The unknown author of Guineas, an Incumbrance on Commerce designated as 'public' all operations of banking, negotiation of bills, promissory payments - in other words the sum-total of relations at the market-place.37 Despite his protestations that 'public credit' conventionally referred to the 'credit of the state', there is a homology between Brougham's bullionist position and that of the anonymous supporter of the restriction.38 Their disagreement assumed that the limits of the market were defined by the principle of individual interest which, as Brougham argued in 1804, was the 'master principle' of humanity. Whereas, for Smith, it was that an unlimited extension of credit threatened, the point of disagreement between Brougham and the anonymous anti-bullionist was how best to govern the relation between individuals at the market-place. Brougham's concern was not the credit of the state, but the way in which the 'contradiction inherent' in the 'nature' of the inconvertible note - as a promise in the absence of a promise - could deform the power which allowed the system of exchange to subsist. 39 For now No circumstances can so alter the nature of human intercourse, and the ideas of obligation, as to render necessary the perpetual breach of promise, and abuse of confidence, required by the system of the new projectors.40

As in 1804, Brougham described the nature of the human subject as the foundations of the system. Appropriately, it was at this moment that he first invoked 'the machine'. By deforming the trust underpinning human intercourse, the inconvertible note threatened to 'instantaneously derange the whole machine', for 'the operations of this new power' would 'concentrate all the motions and force of the engine' in one 'component part', to 'the infallible destruction of every other'.41 In other words, by founding exchange-relations solely on credit issued by banks, the harmonious balance of the system was thrown into disarray. The profit-seeking merchants which Thornton and Horner advanced as an attack on Smith's 'fixed channel', therefore were not defined by an economic form of agency, for the order of the system of commerce was identified with the natural principles of human intercourse. In this way, the concept of the public was translated into a locus of justice. Thus, the Bank of England becomes a 'monster', for it is able to 'benefit by contracts, from the fulfillment of which it is absolved'.42 In the following number of the Edinburgh, Horner adopted the same position in his review of Lord King's pamphlet. 'The intrinsic value' of gold, Horner argued, was necessary to protect the market from the Bank, for the latter 'cannot resist' seeking 'high profits and extraordinary gains'.43 Thus the fundamental question articulated in the currency controversy was how to insulate the 'human intercourse' from the interventions of an external power. Humanity, rather than Economy, then, was the term which structured the bullion debates. In the second period of controversy, between 1809 and 1811, Ricardo returned to the tension between political and mercantile sovereignty. 'It may be questioned', wrote Ricardo, 'whether a Bank lending many more millions to government than its capital and savings can be called independent of that government'.44 Ricardo formulated the fundamental question of the currency debates with characteristic lucidity: it was the 'legitimate security of the public' from a depreciation of its credit that was at stake, since the now-unregulated government borrowing had the capacity to create 'the evils of superabundant circulation' and thereby deform the very basis of market-relations.45 This demonstrates that, despite the divergent positions up by the protagonists of the currency controversy, it was assumed that the relations of the market-place were a public possession. The point is this public possession could not be thought outside a human subject anterior to the mechanics of exchange. Thornton and Horner theorized the individual interest of the merchant as the fundamental principle of exchange, thus precluding the involvement of the state's interest. Yet they did so in the absence of a concept of autonomous Economic process. It was not Economic forces which defined the commerce, but rather the nature of humanity itself. In Paper Credit Thornton argued that the trust embodied in mercantile credit preceded even the transaction of precious metals in the 'moneyless infancy of society'.46 It was to this concept of the foundations of human relations that Thorton's argument that a 'full-persuasion on the part of the public' would be sufficient to counter the depreciation needs to be related.47 Thornton identified the power maintaining the system of exchange with the characteristics of human nature. It appears that Horner read Thornton's discussion of the foundations of civil society as a criticism of Smith. In his preparatory notes to the review, he stated that Smith 'nowhere explained the principles and history' of 'that private and commercial credit which is the foundation of paper money'.48 A year later, in his review of King, Horner was moved to proclaim: The introduction of paper money, the most refined, perhaps of all the expedients to which the relations of society have given birth, was not only an immense step in the progress of commerce, but may be considered as having marked an epoch in the history of human kind.49

The progress of commerce to which Horner referred was a part of the history of humankind precisely because the nature of humanity was the foundation of the system of commerce. Through confident declaration of mercantile sovereignty and its foundations in natural justice, commercial society was gaining a conception of its own historical purpose. A new question became possible, the nature of which threatened the foundations of reason of state. If credit, and therefore mutual trust, is the first element of exchange prior to the constitution of civil society, does the totality of relations occurring at the level of the market-place not precede the state in defining 'the public'? Perhaps the most striking feature of the confidence with which the Edinburgh projected the natural harmony of individual and public interest, is that such faith concealed the problems which would later trouble Ricardo. It will observed in the following chapter that Ricardo theorized the class antagonism before he considered the labour theory of value, yet James Mill's 1808 discussion of value seems to portray the very absence of such conflict from the market-place. 'How vague, then, and uncertain', remarked Mill, 'must be the language in which [money] is denominated a measure of value'.50 The circularity of Mill's conclusion to the problem suggested that he saw no reason to remove value from the vague determinations of individual subjectivity. 'There can be no conception of value', he proclaimed, 'distinct from the conception of something valued'.51 The calculation Mill proposed operated at a completely subjective level: the mind must simply conceive of the 'actual commodity' in order to compare it with the 'other objects of whose value it desires to ascertain'.52 Mill's associationist faith in the ability of subjective cognition to determine the value of objects exchanged at the market-place reflects the sense of historical purpose and moral confidence which the Edinburgh helped to bestow upon commercial society. This tenor of public discourse suggests that the exchange of public credit reified the affinity between private persons as members of the same society, and therefore led them to consider morality as the foundations of the system: it is to this context that Brougham's anterior subject belongs. It was precisely this anteriority of the human subject on which Mill's reification of exchange-value as relation between mental objects depended: in order to theorize this, Mill had to place the human subject and not Economic process as the foundation of exchange-value. The autonomy of the market from economic process was, in this sense, guaranteed by the reification of the commodity: the market was not, for Mill, a site of the relations between Economically-constituted values, but a domain in which the exchange of subjective desires was governed by the natural order of the human subject. In what estimation would Henry Thornton have held the discourse provoked by his Paper Credit of 1802? As a reader of Mill's contribution to the Edinburgh, it by no means clear that Thornton would have been pleased to observe that his view of the public trust between private persons was now discussed in terms of the moral autonomy of the market. As a Clapham evangelical, Thornton associated public life with religious duty. 53 Therefore, when, in 1807, he proclaimed the 'inconsistency of private vice with public virtue' on the pages of the Christian Observer, journal of the Clapham Sect, Thornton's Christian frame of reference was very different from the discourse to be articulated by Mill in the journal of commercial society a year later.54 While Jeffrey, Horner and Brougham were 'sceptical and indifferent in matters of religion',55and Mill was hostile, the moral order in which commercial society consisted for Thornton was not simply reducible to the subjective order of the morally-autonomous individual. Mill's determination of value was hardly the legacy Thornton would have hoped for his Paper Credit. Pace N.T. Skaggs, Thornton's theology clearly influenced his Paper Credit: for Thornton the moral fabric connecting the public had a more secure principle of arbitration than we find in other contributions to the Edinburgh.56 Ironically for Thornton, it was the very flexibility of moral sovereignty which structured public discourse. In this story of unintended consequences, the Edinburgh's separation of Thornton from his theological background is one of many moments of symptomatic 'unsystem'; in these various displacements, the problematic of Political Oeconomy, by opening up the field of public discourse, paved the way for Ricardo without planting the seed of his Principles. The atheological reading of Thornton is perhaps the first moment that one can detect the vulnerability of organic-man. While for Thornton, Brougham's anthropological figure had theological limits, the language of private credit began to constitute the individual as an almost unlimited domain. In the separation of the public-private relationship from the theological language in which it resonated for Thornton, the Edinburgh allowed the concept of the individual to become so flexible as to cease to place limits on knowledge. Thus, when, in 1817, Ricardo formulated his Principles, he could apply novel determinations to human existence because that concept was so unfixed. The atheological reading of Thornton is, therefore, symptomatic of the way in which the flexibility of public discourse constituted the possibility of Ricardo's scientific object. The doctrinal histories of economic thought have concealed the discursive specificity of the market. Hollander, seeking to make Ricardo's early work prophetic of the turn to 'distribution', argues that 'at the early stage' Ricardo 'clearly recognized' that 'stability in the conditions of the supply of the monetary medium' was requisite for a stable measure of value.57 However, Ricardo's early work on currency replicated the tension between the exigencies of state finance and the interests of merchants and bankers, and, thus, between a juridical and a public conception of justice, which concerned his contemporaries. Thus, his 'failure' to make a decisive statement on the question of value at this stage reflected the harmony between individual and public interest which, as Mill demonstrated, obviated the necessity of a rigorous determination of value. Over the course of the currency controversy 'that vast and complicated machine' was placed firmly in the context of the organic self-governing principles of commercial society, a framework which permitted existence of the market in the absence of economic process.