Antoin E. Murphy

Paper credit and the multi-personae Mr. Henry Thornton

The bicentenary celebration of the publication of Henry Thorntons An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802) presents an appropriate time for a reconsideration of this great work on monetary economics. This paper highlights Thorntons criticisms of Adam Smith along with the importance that Thornton attached to the lender of last resort role of the Bank of England. It suggests that there are three Mr. Thorntons who appear in Paper Credit. The first is the concerned anti-inflationist of the first section. The second is the worried anti-inflationist of the second section of the book. Besides these, there may be a third Mr. Thornton. This persona was that of the practical banker who understood the new emerging financial architecture that had resulted in paper credit supplanting metallic money. Thornton understood this new transformation of the monetary system. It is conjectured that the existence of the usury laws, inter alia, may have prevented Thornton from fully investigating the possibility of the UK moving to a specie-less system.

Rejoinder to Skaggs's Treating schizophrenia: a comment on Antoin Murphy's diagnosis of Henry Thornton's theoretical condition

Neil Skaggs is unhappy with my interpretation of Henry Thornton’s An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802) and wishes to restore Thornton to single rather than multi-personae status. As I understand it, Skaggs’s main criticism is a development of a comment made by David Laidler – acknowledged by Skaggs – that Thornton was using a reductio ad absurdum, on page 240 of Paper Credit, when describing the effects of a sizeable increase in the money supply. My reaction to David Laidler’s comment was that Thornton was a very serious individual not prone to using such ironic literary devices in his writings. I would still hold to this view after reading Skaggs’s comments. Skaggs is generous in acknowledging that my paper increased his understanding of the extent to which Thornton disagreed with Adam Smith. Here may I return the compliment by stating that his rejoinder has pushed me to further reflection on Thornton’s analysis of the consequences of a sizeable increase in the money supply. On re-reading chapter 10 of Paper Credit, where Thornton analysed this issue, I believe I can advance some further material to support my approach over and above the reductio ad absurdum argument. It is obvious that in this chapter Thornton wished to attack the view that it was not dangerous to increase the money supply by a substantial amount. However, Thornton faced a problem in that the French revolutionaries had done exactly this with the assignats in the 1790s. Furthermore, and this added to Thornton’s dilemma, the policy had worked without any significant inflationary consequences for a couple of

John Law and Richard Cantillon on the circular flow of income

This paper aims to demonstrate that John Law has a prior claim to both Richard Cantillon and Francois Quesnay as the originator of the circular flow of income and expenditure. Laws use of an island model in chapter VII of Money and Trade (1705) shows the circular flow process amongst three socio-economic groupings-landlords, farmers and manufacturing workers. It seems likely that Cantillons analysis of the circular flow process may have been inspired by Laws earlier work. Law used the circular flow process to show the importance of what is now termed the money in advance requirement for an economy suffering from unemployment and underutilization of resources. Richard Cantillon, who, as a banker in Paris during 1719/20, had profited enormously from the excesses of Laws Mississippi System, used it to examine the equilibrium amount of money needed in an economy where resources were fully utilized and the way in which over expansions of the money supply would have adverse balance of payments and inflation...

‘The Elements of Commerce Delineated in Aphorisms’ – An analysis of a newly discovered manuscript written by Joseph Massie∗

Abstract This paper discusses a recently discovered unpublished manuscript, ‘The Elements of Commerce Delineated in Aphorisms’, which can now be attributed to Joseph Massie, author of The Natural Rate of Interest (1750). It is conjectured that Massie wrote this manuscript to present pithily the outline of a book ‘The Elements of Commerce’ that he proposed to write. This book was to be used for educating students in what would have been Britains first business school. The British Government turned down Massies proposal for this business school. However, the manuscript ‘The Elements of Commerce Delineated in Aphorisms’ outlines the skeletal outline of part of the course that Massie would have liked to present. It shows Massie making significant contributions to economics in the areas of price theory, tax incidence and the role of money and the rate of interest.

The evolution of John Law's theories and policies 1707–1715

Abstract This paper analyzes the way in which John Laws economic theory evolved between 1707–1715. This evolution involved the abandonment of his earlier land bank project in favour of the Bank of Englands fractional reserve model. Law went further than this. He believed that while a bank was necessary to tackle a monetary crisis , further financial innovation, in the form of trading companies swapping shares for government debt, was necessary to meet the financial crisis produced by a high level of state indebtedness in France. Using Laws pre 1716 writings, and a hitherto unpublished manuscript, it is contended that Law had drafted the ‘grand design’ of what later came to be known as the Mississippi System, prior to the establishment of the General Bank in May 1716.