Ricardo on Money: A Reappraisal, 1st Edition (Hardback) book cover

Ricardo on Money

A Reappraisal, 1st Edition

By Ghislain Deleplace


418 pages

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Despite his achievements, David Ricardo’s views on money have often been misunderstood and underappreciated. His advanced ideas had to wait until the twentieth century to be applied, and most historians of economic thought continue to consider him as an obsolete orthodox. The last book devoted in tribute to Ricardo as a monetary economist was published more than 25 years ago.

Ricardo on Money encompasses the whole of Ricardo’s writings on currency, whether in print, unpublished notes, correspondence, or reported parliamentary speeches and evidence. The aim of the book is at rehabilitating Ricardo as an unorthodox theorist on money and suggesting his relevance for modern analysis. It is divided into three parts: history, theory and policy. The first describes the factual and intellectual context of Ricardo’s monetary writings. The second part puts the concept of standard centre stage and clarifies how, according to Ricardo, the standard regulated the quantity – and hence the value – of money. The final part shows that Ricardo relied on the active management of paper money rather than on flows of bullion and commodities to produce international adjustment and guarantee the security of the monetary system.

Published to coincide with the 200th anniversary of the publication of On the Principles of Political Economy, and Taxation, this book will be of great interest to all historians of economic thought and scholars of monetary economics.

Table of Contents

List of tables



1. Why a book on Ricardo on money?





2. An evolution in Ricardo’s theory of money

The relation with the theory of value and distribution

Ricardo’s mature theory of money in brief

3. The content of the book: history, theory, policy

Part I. History

Part II. Theory

Part III. Policy

4. Two hundred years after

PART I History

1 The historical context

1.1 The English monetary system at the time of Ricardo



1.2 International monetary relations in Europe: London, Paris, Hamburg

1.3 From Hume to the Bullionist Controversy

David Hume and James Steuart

The Bullionist Controversy

A central question: the role of note-issuing in monetary disorder

1.4 The first round of the Bullionist Controversy (1797‒1803)

The search for analytical foundations

Thornton’s Paper Credit of Great Britain

Appendix 1: Ricardo on the bullion and foreign exchange markets

1. Ricardo contradicts Bosanquet on the rise of gold on the Continent

2. Ricardo contradicts Vansittart on the state of the exchange with Hamburg in 1760

2 Ricardo’s battles on currency and banks

2.1 Ricardo and the Bullion Controversy (1809‒1811)

The second round of the Bullionist Controversy

Ricardo’s positions

2.2 Ricardo and the resumption of convertibility (1816‒1823)

The third round of the Bullionist Controversy

Ricardo’s two plans

2.3 Conclusion: the legacy of Ricardo’s monetary battles

Appendix 2: Attacks and weapons

1. Attacks: critical opinions on Ricardo

2. Weapons: Ricardo’s contributions on money

PART II Theory

3 Money and the invariable standard

3.1 Some definitions

Commodities: exchangeable value, money price, absolute value

Money: measure of price, circulating medium, standard of money

The condition of coherence of the price system

3.2 Value of money, price of gold bullion, and the general price level

The legal and the current value of money

The purchasing power of money over all commodities except gold or over gold alone

The condition of conformity of money to the standard

A non-monetary cause of rise in the general price level? The question of taxation

3.3 The standard of money and the standard of value

The invariable standard of value: "a mean between the extremes"

The standard of money

A dilemma

3.4 Conclusion

Appendix 3: An aborted attempt at the non-neutrality of money in respect to relative prices

4 The two causes of change in the value of money

4.1 The direction of the causality between the quantity and the value of money

An alleged inconsistency or contradiction

The "analogy" with a gold mine

The effect of a monopoly in issuing money

4.2 Ricardo’s distinction between "a fall in the value of money" and "a depreciation of money"

From the Bullion Essays to Proposals and beyond

The definition and measure of depreciation

4.3 The Money–Standard Equation

Two channels of change in the value of money

Ricardo’s factual illustration

4.4 Conclusion

Appendix 4: Evidence on the Money–Standard Equation: The "Draft on Peel" (1821)

1. The context

2. Ricardo’s "Draft of a letter to a newspaper on the effects of Peel’s bill", December 1821 (V: 515‒21)

3. Ricardo’s letter to McCulloch of 3 January 1822

4. The pamphlet On Protection to Agriculture, April 1822

5 The adjustment to a change in the value of the standard

5.1 From an ambiguity in the Bullion Essays to a clarification in Principles

Criticising Bentham on the cause of the general rise in prices

From the mine to the mint

5.2 The extension of the theory of rent from land to mines

5.3 The specificity of gold bullion in respect to corn

The adjustment to a new land growing corn with a higher productivity

Two differences between gold bullion and corn

5.4 The adjustment in the gold-producing country: a new "distribution of capital"

A fall in the value of gold bullion

The closure of existing mines as a consequence of the discovery of a new one

A formalisation of the adjustment

A numerical example

5.5 The adjustment in the gold-importing country: minting

From the foreign mine to importation

From importation to the mint

5.6 The effect of an increased demand for bullion by the issuing bank

The case of the Bank of England from 1819 to 1821

The adjustment

5.7 Conclusion: The Money–Standard Equation and a real shock on the value of money

A change in the value of money, but no depreciation or appreciation

The timing of the adjustment

Symmetrical real shock versus asymmetrical monetary shock

Appendix 5: Taxes on gold

1. The case examined by Ricardo

2. Ricardo’s numerical example

3. Three questions

4. A generalisation

6 The depreciation of metallic money

6.1 Convertibility and adjustment in the market for bullion

The effect of the melting pot on the upper limit of variation in the market price of bullion

The effect of seignorage on the lower limit of variation in the market price of bullion

6.2 Price adjustment in the markets for other commodities than bullion

The effect of a change in the value of money on the competition of capitals

From the market price of bullion to the market prices of commodities

A bullion-price channel of transmission of a monetary shock

6.3 Debasement of the coin and depreciation of money

The effect of debasement on the market price of gold bullion

Debasement and "the principle of limitation of quantity"

6.4 The instability of the double standard

The variability of the relative market price of gold in silver and the alternating standard

The behaviour of the Bank of England and the prospective fall in the value of money

Appendix 6: A letter on the double standard of money

7 The regulation of the quantity of convertible notes by the standard

7.1 The Money–Standard Equation and the quantity of money

7.2 The adjustment of the value of money to an increase in the "wants of commerce"

The notion of wants of commerce

An endogenous adjustment

The superiority of paper money over coins

7.3 The adjustment to a discretionary increase in the convertible-note issue

"Forcing" Bank of England notes into circulation

The melting of circulating coins

The Penelope effect

7.4 A non-quantitative approach

7.5 Money without a standard

A double inconvertibility

The Money–Standard Equation and inconvertibility

7.6 Conclusion: the specificity of the market for gold bullion


Appendix 7: The effects of a change in the money supply: real balances, rate of interest and Say’s Law

1. The real-balance effect

2. The rate of interest and changes in commodity prices

3. Say’s Law


8 The international adjustment to a monetary shock

8.1 Real par of exchange and bullion points

The legal par of exchange

The real par of exchange according to Steuart

The bullion points in Ricardo

The real par computed on gold bullion, not the purchasing power parity over commodities

The limits to the variations of the exchange rate

8.2 A two-stage international adjustment process

A double condition on the exchange rate

The first stage: the exportation of gold bullion

The second stage: the additional importation of commodities

"The natural trade of barter"

8.3 The redundancy of money as the sole cause of fall in the exchange rate

Real and nominal variations in the exchange

A matter of fact or of theory

8.4 Price-specie flow mechanism versus active management of the currency

8.5 The Ingot Plan and the gold-exchange standard

The reduction of the range of variation in the exchange rate

Domestic management of the note issue rather than international bullion flows

A prototype of the gold-exchange standard

Appendix 8: The boundaries constraining the exchange rate

1. The proportions in which the transfer cost of bullion and the depreciation of the note accounted for a fall in the exchange rate

2. The complications introduced by a difference in standard


9 Central banking and the euthanasia of metal currency

9.1 The public nature of paper money

Justice and security

The danger of "this great Leviathan, the Bank" for security

9.2 The Ingot Plan

The 1811 outline

The 1816 plan

A permanent plan

The unhappy fate of the Ingot Plan

9.3 The Plan for a national bank

The main provisions of the plan

The question of the independence of the national bank

The ingot principle again

9.4 The management of the note issue

A controversial question

Bank issues and the rate of interest

Avoiding an undue contraction of the note issue

9.5 Increasing the security of the monetary system

The ingot principle and the management principle

Stabilising the market price of the standard

Preventing the drain of the Bank’s metallic reserve

9.6 An application of Ricardo’s theory of money

Appendix 9: The Ingot Plan in perspective


1. Results

2. The legacy of Ricardo’s theory of money for today

A contribution to the modern theory of Classical prices

A contribution to the modern approach to money

Appendix 10: Ricardo’s model of a monetary economy with a standard

1. Domestic relations

2. International adjustment


Name index

Subject index

About the Author

Ghislain Deleplace is Emeritus Professor of Economics at University Paris 8 at Saint-Denis, France. His fields of research are the history of monetary thought (Steuart, Ricardo, Marx, Keynes, Sraffa), the history of the international monetary system (sixteenth century, nineteenth century), and the Post-Keynesian theory of money.

About the Series

Routledge Studies in the History of Economics

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Subject Categories

BISAC Subject Codes/Headings:
BUSINESS & ECONOMICS / Economic History
BUSINESS & ECONOMICS / Money & Monetary Policy
BUSINESS & ECONOMICS / Economics / General
BUSINESS & ECONOMICS / Economics / Theory