Gian Rinaldo Carli (1720-1795): a remarkable early 'money doctor' [First draft]

Gianfranco Tusset

1. Introduction “Some mathematicians maintained that money is like water, which flows and swirls around until it finds its equilibrium again: the matter is totally different, especially in ” (Carli 1751, 164-165). This quotation from one of Gian Rinaldo Carli’s main works, Dell’origine e del commercio delle monete e dei disordini che accadono nelle alterazioni di essa (Of the origin and trade of the coins and the disorders that occur in its alterations) (1751), clearly points to his focus on the conditions in which money circulates in order to guarantee the monetary equilibrium. Aim of this paper is to reconstruct the figure of Gian Rinaldo Carli, a monetarist economist who lived in the eighteenth-century, and whose work mirrored contradictions and strains that characterized the decades preceding the industrial burst. Belonging to a community of monetarist economists who enlivened a sort of golden age of the pre-classical studies on money, Carli stood out for is persistent focus on the need of guaranteeing monetary equilibrium, of intervening to assure conditions favorable to enlarge trade, at that time considered the main factor of growth. The paper is structured as follows. Section 2 lingers over the eighteenth-century monetarist community as whole. Section 3 introduces some biographical notes on Gian Rinaldo Carli. Section 4 concerns the method Carli employed to deal with monetary topics. Section 5 presents the Carli's general view on monetary equilibrium. Section 6 reviews his researches on then increasing prices. Section 6 details threats to international monetary equilibrium and potential remedies. Section 7 concludes deepening the Carli’s proposal of money-doctor.

2. The reception of Galilean method Carli can be included among the Galilean economists, a label that require some explanation. Galileo occasionally wrote about economic topics, though they were certainly not particularly relevant, as demonstrated by the fact that economists quoted him for his methodology, not for his economic insights. The sole exception lies in the dilemma concerning the utility and value of diamonds and water, which Galileo considered long before Smith. Sagredo, one of the three known protagonists of Galileo’s Dialogue, blames vulgar people for considering silver and gold precious, and viewing land and mud as base elements, failing to realize that any prince would spend diamonds and rubies to buy land if it were in short supply. Galileo was aware that scarcity was the main cause behind value, and consequently behind prices too: “Abundance degrades things” (1632, p. 256). The problems of value, particularly of the metals used to make money, also attracted the attention of most of the Italian economists of that time: Geminiano Montanari (1633-1687), Gian Rinaldo Carli (1720-1795), Ferdinando Galiani (1728-1797), (1738-1794), Pietro Verri (1728- 1797), and Giambattista Vasco (1733-1796); we can also add two economists who lived in Galileo’s time, Bernardo Davanzati (1509-1606) and Gasparo Scaruffi (1519-84).

 University of . For correspondence: [email protected] 1

These economists tentatively termed here Galilean because they belonged to scientific circles and academies (the Accademia del Cimento, Accademia dei Pugni, among others) that explicitly followed the great physicist’s method and teachings. The fil rouge linking those circles was their rejection of the approach of Aristotle and the Scholastics, which was abstractly replaced by an experimental method never thoroughly defined when referred to human sciences. It is not easy to sketch the ideal type of Galilean economist, however. What exactly characterizes such an economist? Simply having rejected the Scholastic approach certainly was not enough. The idea of scientific rigor was important but needed to be contextualized. It took several decades for the traits of this ideal type of economist to become apparent.1 A careful reading of these economists’ contributions, which focused mainly on monetary topics, can provide some clarification. On the one hand, Galileo’s rigor was often invoked to justify the adoption of a geometrical method in dealing with practical problems. On the other, Galileo’s imprint was detectable when an economist tried to introduce some primitive form of algorithm to deal with monetary and more generally economic problems. The use of algorithms suggests some mechanism for solving economic problems that avoids the need for any type of moral or ethical, or simply individual, discretionary choice. Evidence of this trait could be seen in the objectivity of Galilean economists’ analyses, and their exclusion of any moral or political considerations. The above idea of an early algorithm emerges more clearly when referred to monetary topics. Quantitative ratios between coins and money represented a first step. It was not true arithmetic applied to monetary relationships, but Carli, Montanari, Scaruffi, Beccaria and Galiani clearly developed their analyses with data and quantitative ratios. Their proofs were built on quantitative demonstrations. Numbers inserted in the literary discourse enabled these economists to make their analyses quantitative and objective, helping them to evade any strictly moral assessments. Was this a legacy of Galileo’s increasingly well-known approach? Not exactly. Certainly, the changing scientific climate drove these authors to make more and more use of data, but this practice seems to have made its appearance even before Galileo’s time. Davanzati’s monetary analysis is proof of this: he may not have employed data in the same was as Carli did later on, but Davanzati undeniably used a quantitative approach. Gasparo Scaruffi also produced a numerical representation of monetary exchanges. Galileo’s message probably accelerated the use of data in monetary analysis, but it would have happened anyway. Galileo’s insistence on the need for scientific rigor and applied mathematics actually favored the encounter between the monetary approach based on pure mathematics and geometry on the one hand, and the commercial use of calculation and numbering on the other. After Galileo, it no longer made sense to distinguish between pure and applied mathematics when referring to monetary studies. The above monetarist economists sought mathematical rigor by taking a concrete, practical approach. Galilean grew from the combination of pure mathematics and geometry with calculations applied to technical and practical issues. In this scientific environment, the approach to monetary issues took a political dimension, it was clearly recognized that the management of money was object of princes and governments, of policy, we would say nowadays.

1 For a more detailed analysis of this label, Galilean economists, see Tusset 2018. 2

A visual representation of monetarist economists Figure 1 shows the words characterizing the main works of six monetarist economists who can be considered as “Galilean” in the sense described above. Beside Carli, we can find: Bernardo Davanzati, Geminiano Montanari, Ferdinando Galiani, Cesare Beccaria, and Giambattista Vasco. The figure was obtained using correspondence analysis to emphasize the words relatively most often used in the main works of the above-mentioned economists.2 The linguistic variance was not very high (see values of inertia on the horizontal and vertical axes), meaning that these economists all discussed similar (monetary) issues, and used similar concepts in their analyses. On the other, both the horizontal (25.02%) and the vertical (22.58%) variances suffice to highlight some differences between these economists, though they followed much the same trend. Considering their lexicon, the figure can be divided into four parts, with Ferdinando Galiani placed in the first quadrant, where the markers of his work on money are nonetheless clearly visible: the terms “moral”, “justice”, “rich”, “unfair”, “virtuous”, “virtue”, “usury”, and “usurers” emphasize his ethical conception of value. Moving counterclockwise, Montanari and Davanzati, in the quadrant II, speak about money too, but they stand apart for their use of words referring to the condition of individuals: “useful”, “wishes”, “families”, “equilibrate”, and “happy”, among others. Montanari cannot move too far away from Davanzati, his acknowledged theoretical reference point. Montanari’s studies and works have frequently led him to be associated with Galileo, but in dealing with monetary topics, he went his own way, emphasizing a subjective approach to monetary analysis that makes his texts distinctive from those of other authors. The distance that separates him from Aristotle is also shorter than in the case of other economists. Continuing, we find Carli in the quadrant III. Words such as “seigniorage,” “equilibrium,” “balancing,” “disorder,” “manipulation,” “governments,” “pestilence,” and “eroded” show his in the depreciation characterizing the money in circulation. The aggregate phenomenon is represented here by the declared value of coins, which did not correspond to their real value. Political distortions lie behind this phenomenon, which cannot be brought down to a specific cause.

2 The vocabulary represented in a scatterplot that “can be regarded as a map, because the position of each [economist] can be regarded as a two-dimensional position, almost like a geographical location in a region defined by latitude and longitude. We say that the scatterplot [...] simply expresses the [words/segments] in a visual format that communicates [...] information” (Greenacre 2007, p.5). Correspondence analysis provides “ways for describing data, interpreting data and generating hypotheses” without a theoretical model or preconceived hypothesis. How can the scatterplots contained in the book be read? A word/segment close to an active variable—economist, year—means that the word/segment in question connotes texts/speeches concerning said active variable. In the censer (centroid) of the figure, we naturally find the words/segments that are common to the active variables we are considering, without characterizing one or few in particular. We find the “inertia” or “variance” of the figure on the two axes: the higher the inertia, the greater the variability of the lexicon concerning the active variables in question; and the lower the inertia, the more homogeneous the lexicon. The analysis of the textual corpora demanded the use of specific software. We used Taltac to manage the corpus and Spad to extract the figures. The final graphical visualization represents the initial corpus in terms of statistical associability between elements. The software thus serves as an advanced text analysis tool for deriving high- quality information from complex corpora. Since we are studying 6 authors in this case, we obtain 5 uncorrelated axes that display the words investigated for each author considered, and the axes can be combined to form different planes. Each plane represents a part of the variability, and shows a single synthetic outcome based on the part of variability it represents. The inertia (roughly speaking, the variability of the words over the set of authors) that can be read on the horizontal and vertical axes indicate how the variability is distributed over the various authors. A high inertia means that each author adopts and plots a different rhetorical style. 3

Carli tried to detect a global remedy (“cure,” “money doctor”). It is worth noting that he came the closest to . Although embodied in the role of the money-doctor, it was just this attention towards the active initiative in the area of that pushed us to deepen the Carli’s monetary analysis and proposal, to emphasize the interest in governments’ activism in monetary and then economic field that became plain in the eighteenth century To conclude the turn, public economy is certainly the key to interpreting the stance taken by Beccaria and Vasco, in the quadrant IV, who stood out for their political approach to monetary issues. Words such as “politics,” “fiscal unity,” “circulation,” “laws,” “nations,” and “policies” emphasized these political and civil aspects. Both these economists were interested in the public management of money.

Figure 2.1 Galilean economists .

3. Gian Rinaldo Carli: Some biographical note Carli was born at (now ), in 1720, in a modest bourgeoisie family. He received an education that introduced him to the more advanced Italian culture of that time. Teenager, he was entrusted to the teaching of the abbot Giuseppe Bini, who introduced him to the work of Ludovico Muratori, whose erudite method and idea of Italian unification will remain important points of reference for Carli, during all his life and work. In 1739, Carli obtained a grant from Koper administration that allowed him to move to Padua where he enrolled himself at Law Faculty (that of arts gathered philosophers, physicians and theologians), even if he soon substituted law with experimentalism and classicism of new friends: the naturalist and biologist Antonio Vallisneri (1661-1730); the physicist and engineer Giovanni Poleni (1683- 1761)—one of the first to be given a teaching post at Padua University to lecture on experimental

4 physics, and the poet, Latinist and writer Jacopo Facciolati (1682- 1769), who taught logic (see Apih 1973). His time went to theater, poetry, and history that he condensed in his erudite reflection on the shipping of the Argonauts (Della spedizione degli Argonauti in Colco), which would have been published in 1745. Betrayed the paternal expectations that wanted him be involved in a law career, it was thanks to the support of Poleni and Marco Foscarini, a man of letters and future doge of Venetian Republic, that Carli was appointed by the university in 1749 to teach Theory of the nautical arts, a topic of interest to Venice. Adopting a more practical than theoretical approach, Carli wrote an essay Intorno alla declinazione e variazione della calamita (On the declination and variation of the magnet), showing that although he was not an engineer, he thought like an engineer. The marriage with Paolina Rubbi, young heiress, seeming as a solution to his economic problems, allowed Carli to move towards the topics that really interested him. Once become prince at the Accademia of Ricovrati in Padua, he enlarged his horizon to the social and economic themes. In 1747, in his Parere sull’impiego del danaro (Opinion about the use of money), he supported Scipione Maffei, another important that time literary man who claimed the lawfulness of the loan with interest. In 1749, because of the sudden and premature death of his wife, he got hold of a discrete heritage, which allowed him taking part to the then public debates on theater, witches and so on, showing always a mildly and never radical position. Just that new economic condition permitted him to leave, in 1750, the chair of nautical art at the University, concluding an academic career which, in reality, he had never sought. The giving up of academic teaching coincided with the publication of his early works on money. In 1751, he published Dell’origine e del commercio delle monete e dei disordini che accadono nelle alterazioni di essa (Of the origin and trade of the coins and the disorders that occur in its alterations), followed in 1754 by Digressione su la proporzione media fra i metalli monetati (Digressions on the average proportion between monetized metals), and then in 1764 Del valore e della proporzione dei metalli monetati con i generi in Italia prima delle scoperte dell’Indie col confronto del valore e della proporzione de’ tempi nostri (Of the value and proportion of metals monetized in Italy before the Indie discoveries, with a comparison of the value and proportion of our times), works that qualified Carli as an “expert” of monetary issues. It was clear that Carli was interested in the concrete management of money. Once remarried with Anna Maria Lanfranchi Chiccoli, widow Sammartini, belonging to a noble Pisa’s family, he moved from the towards other kingdoms that Carli considered more reformer ones and that could appreciate his services as money technician. Turin, Tuscany, and Milan were the new destinations of this thinker who was cosmopolitan within the then Italian space. During those years, he collaborated with important people of his time, as Pietro Verri. Between 1754 and 1760, he published, mainly in Tuscany, other important books among which the Saggio politico ed economico sopra la Toscana (Political and economic essay on Tuscany) (1757) is worth to be quoted. However, these publications did not yield the expected outcome in terms of nominations, obliging him to go back to Koper, also to solve some troubles linked to the heredity after the dead of his father. The shift of his scientific interests towards local history co-existed with some attempts to start entrepreneurial activities that resolved in serious failures that affected his economic condition. The deterioration of the marriage originated a long legal battle over the maintenance of his second wife.

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In 1764, Carli moved first to Emilia Romagna and then to Lombardy, where he succeeded in obtaining a charge as money technical consultant when the Empress Maria Teresa of Austria, appreciating his talent and independence, appoints him president of the new Supreme Council of Economics and Councilor of the New Deputation for Studies in the Duchy of Milan. Immersing himself headlong in the new assignments, he published in those years interesting reports such as Osservazioni preventive al piano intorno alle monete di Milano (Preventive observations on the plan around the money of Milan) (1766), the Saggio sull’economia pubblica (Essay on Public Economy) (1769) and Nuove osservazioni sulla riforma delle monete (New observations on the money reform)(1770). These were the years of the ideological and human conflict with Verri, fueled by the preference that the empress and Chancellor Kaunitz accorded to the moderate Carli with respect to the innovator Verri. In the second half of the eighteenth century, Carli was cited as the “technician” of the coins able, Marcelli writes, to "face the difficult subject of the monetary crises of the time, to remedy them with reforms, or even just to understand them" (Marcelli 1955, 46). These were years of new publications: Breve ragionamento sopra i bilanci economici delle nazioni (Brief reasoning over the economic budgets of the nations) (1770); Relazione del censimento dello stato di Milano (The Milan census) (1770); Del commercio dei grani (On the grain trade) (1771), the controversial Meditazioni sull’economia politica del Verri (Meditations on the political economy of Verri) (1771). In this phase he also resumed his ancient interest for education: Nuovo metodo per le scuole pubbliche in Italia (New method for public schools in Italy) (1774). New familiar conflicts with his divorced wife and then also with his son, together with a progressive decline of his authority as a technical reformer pushed him towards more conservative positions coinciding with a greater interest in politics. In 1778 he published L’uomo libero (Free Man), in an anti-Rousseauian function, testifying to a growing and convinced justification of the absolute power that flows into Lettere americane (American Letters) that he began printing in 1780. Meanwhile, the advent of Joseph II on the throne in Vienna stopped his career as a reforming consultant, with serious consequences for his economic conditions. He rejected a role as a consultant to the Republic of Venice to devote himself to research and publications on history and other disciplines, including medicine. In this time, he published Delle antichità italiche (Italic antiquities) (1788-1791) and Ragionamento sulla diseguaglianza (Reasoning on inequality) (1792). He died near Milan in 1795.

4. The method: erudition According to Schumpeter, Carli should be remembered for being an econometrician ‘ante-litteram’ who proposed an index number to measure the depreciation of money in 1751. However, just because econometrics is quantitative research anchored to theory, Carli does not correspond thoroughly to the Schumpeter’s definition. Carli refused any kind of theoretical anchor. He thought that philosophical reasonings are not necessary to yield assertions about real life adopted as guide to pursuing monetary stability. He simply preferred extract ideas and precepts from real life, as businessmen usually do. He observed history in order to elicit these rules, treating them as empirical rules, and postulating them as key-rules. In practicing an inductive-deductive approach, Carli seemed to be the closest scholar to Galileo among the monetarist economists. He was certainly not the sharpest monetary analyst (the 6

Ferdinando Galiani’s analysis was more elegant and more profound), but he developed what can be called a true experimental approach to monetary topics. As Galileo, he searched for monetary and economic truth in the reality, physically observed in the case of Galileo, historically reconstructed in the case of Carli, according to the idea that lacking observation, nothing that is exact can be stated (see De Stefano 1942, 13). Just because the practice of historical observation prevented us from including Carli among the strict followers of the Enlightenment rationalism (see De Stefano 1942, 37), Carli needs to be clearly understood starting from his acceptance of erudition as method. On the steps of Muratori, erudition means historical continuity, that is, the adoption of an historical approach to explain money and other economic facts. In his turn, Muratori’s articulate thinking on erudition cannot be understood without mentioning his teacher, Benedetto Bacchini (1651-1721), who contributed to import from France the method of Father Maurin concerning historical analysis. As detailed by Golinelli, Bacchini knew and was influenced by a friend of Galileo, Francesco Maria Fiorentini (1603-1673), who claimed the application of a rigorous method in historical research. The historical narrative should be an objective reconstruction of past by means of comparative comparison of documents and sources (Golinelli 2003, 11). Through Fiorentini and Bacchini, Galileo started influencing the historical disciplines. A sort of diachronic progression links Galileo to Fiorentini, Fiorentini to Bacchini, Bacchini to Muratori and, finally, Muratori to Carli. Recognizing this progression is pivotal to understand Carli’s approach to erudition and history. Moreover, one cannot forget that a then common synonym of erudite was ‘literary man”, so, when one refers to a world of letters, she/he refers to a world of erudite men (see Golinelli 2003, 24). According to Carli’s approach to history, erudition found expression in two ways. First, a more in- depth knowledge of (monetary) history was a prerequisite for any analysis of then state of affairs. Second, a quantitative representation of any monetary question was considered to be preferable, so that an outward rationality would prevail over any subjective judgment. In Carli’s view, erudition should be conceived as knowledge and a constant search for facts and data. His was a data-driven knowledge, where data came from history and from then economic and political context. According to Raimondi (1989), this kind of rational approach to facts could be named “moderate rationalism,” and opposed to extreme rationalism of . Even the rhetorical construction of Carli’s expertise as ‘money doctor’ cannot be disjointed from history and erudition he treated as source of the necessary knowledge to practice the job of expert of monetary affairs. Knowledge was grounded on past facts and data, without any recourse to unnecessary speculation and theorization. The focus on the appearance of things could be meant as a recurrence of Medieval thought, in opposition to Descartes’s insistence on the digging under the appearance to discover reality. At first sight, Carli’s emphasis on the metal content of money would reaffirm that any value derives from the physical content of the good. The real value of money mattered, it cannot be hidden under abstract concepts. Carli concentrated his detailed analysis on the characteristics of coins used in ancient times with a view to establish when and how public authorities started to control the money issue and circulation. However, according to Carli's perspective, once that an erudite reconstruction of past and current practices for what concerns the debasement of coins has been done, after that a scrupulous historical observation has been proposed, some empirical law or behavioral rule should be extracted.

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5. Monetary equilibrium There is a point, however, that sets Carli apart from the other, better-known and more frequently studied scholars: his use of the notion of ‘equilibrium’. It could be argued that reference to equilibrium is what makes Carli's money analysis decidedly modern. The notion of equilibrium distinctive of Carli’s work on money is outlined below. A country that closes its economic frontiers, limiting trade with foreign countries and thus almost exclusively using base money (copper or iron), reaches a condition of stationary equilibrium. It is a country that waives the chance of growth; Carli spoke of a ‘frugality-loving nation’. In ancient times, this was the case of the Spartans, the Romans, and the Jews. The notion of equilibrium in this case involved a stationary condition determined by the lack of international trade. To Carli, equilibrium meant frugality (Carli 1751, 91) that could be translated as absence of growth, the latter mainly associated with trade between countries. Carli imagined a sort of dilemma between domestic stability, guaranteed by closing economic frontiers, and dynamic growth, that, involving the openness of the economic boundaries, was accompanied by monetary disorder and instability. However, he implicitly stated that closed economies belonged to past while modern countries were unavoidably involved in international trade. On opening a country to international trade, one way to contain any consequent disorder and instability was to issue two types of money, two different coins: noble metal for foreign exchanges; base metal for domestic transactions. Implicitly Carli stated that golden coins circulate at international level because of their intrinsic value, while domestic coins circulated on legal bases. In such a situation, any alteration of the value of either type of currency would bring disorders and instability. Carli had a modern conception of the workings of the international monetary regime: it can only work if silver and gold employed to issue national coins converge to the same value in the different countries (Carli 1751, 94). In this way, processes of hoarding were avoided. Carli called "equilibration" this process of convergence of the value of gold at international level (1751). So, Carli referred to equilibrium as indicating two distinct situations: domestic equilibrium, which was assured by the closure of economic frontiers; and international monetary equilibrium, which was guaranteed by a convergence of the value of the money used in foreign exchanges. In general terms, Carli stated that monetary equilibrium was assured by avoiding any alteration of coins (Carli 1751, p. 113) used in international exchanges. The domestic monetary circulation was mostly based on the legal presupposes. Differently, international trade, requiring a simultaneous exchange of equal values, as in the barter, called for a consistency between the values of coins and their content. It was the international equilibrium to be mainly threatened by alteration and debasement of money.

The value of money In effect, the world of Gian Rinaldo Carli was marked by the value of the metals used as money being distorted by legislators and their jurisconsults. The underlying equilibrium was damaged by seigniorage and disruptive practices. But what counted was the global phenomenon, the general manipulation, rather than the individual responsibilities. So, he focused on the proper value of money, which could be measured and fixed in such a way that any alterations were clearly visible.

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Briefly, having a thorough knowledge of money and of mathematical calculation was fundamentally important to Gian Rinaldo Carli, an 18th century highbrow whose main ambition was to keep the value of money at a given time anchored to its natural value in order to ensure monetary circulation. Carli was skeptical about applying deductions to concrete problems, preferring pragmatic interventions based on an understanding of monetary reality and computation. In other words, appropriate intervention should be based on the quantification of values. Publicly fixing the value of a coin, as he did in his 1754 Digressions on the average proportion between monetized metals (1754), based on its weight and the value of the raw material, guaranteed against the manipulation of money itself. By empirically assigning money a value, better a natural value, Carli wanted to restrict the freedom of governments to manipulate its value. Clearly, the idea a natural value became pivotal, although Carli linked this concept to the value of gold and silver in the countries where they were mined. Carli’s case is particularly meaningful because it raised the question of the relationships between natural laws and political economy, where the natural laws were those concerning the quantities of metal, copper, silver, or gold, used to make coins. The price of gold and silver had to be decided according to the prices established in the countries where these metals were mined (Carli 1751, 210- 211). The price determined in those markets would represent the reference price for the value of the different national currencies depending on the amount of metal contained in each coin. The natural laws were those governing the mining of the precious metals, laws that were broken by governments that altered the consistency between the face value of money and its metal content. Recognizing many possible why the value of money might be altered, Carli decided that— rather than searching for each specific cause—it was preferable to build a system capable of avoiding such manipulations, whatever caused them. In effect, the Carli’s discourse was more political than economic: a fixed metallic standard was a proof of government integrity, of its reliability, and this could have important returns in terms of legitimization to apply taxation. Anybody could check and compare the mint mark with the value of a piece of gold, silver or copper, but Carli’s detailed historical analysis of the origins of money enabled him to come straight to the point that interested him. Any distortion of the value of a coin, achieved by adjusting its weight or the composition of the alloy, represented a violation of monetary equilibrium. Reading Carli, it is astonishing to see how he often used the notion of equilibrium in a manner clearly not drawn from physics or mechanics, but primarily as a monetary condition. Carli was aware of the question posed by the Scholastic about what would be the ‘fair price’ of money. It certainly could not be that of an altered coin, the price of which no longer corresponded to the value of the metal employed. Counterfeit money could never have a fair price, so the jurisconsults had to guarantee that the legal value of money coincided with its natural value. When Carli wondered about the notion of fair price applied to commodities and money, he reached the conclusion that only the ‘quantity’ of metal can define the value of a coin. He was prompted to emphasize the use of “commodity money” to avoid altering money itself. Carli understood that the price of any commodity (gold and silver included) can change depending on the quantities being mined, with unavoidable consequences on the value of money. The only possible remedy for this situation was to refer to a ‘universal’ value or price that sprung from international trade. Carli rejected the idea of taking any theoretical approach, preferring a strictly realistic, quantitative analysis of monetary problems. What he adamantly refused was the idea that moral and legal

9 principles could guide monetary investigation. There was no room for ‘principles’ in monetary decision-making.

6. The measure of price trends A first threat to monetary equilibrium came from price increase. The crux of the matter was to establish the causes of the then . After recognizing that the kings and tyrants of old could easily alter the value of money, sometimes prompting social disorder as a result, Carli turned to the role of republican legislators in establishing the value of money, emphasizing the fundamental importance of its value. But why did the possible manipulation of this value seem so crucial to Carli and the other 17th century Italian economists? It may be that Carli belonged to that group of scholars of monetary troubles called the “mercantilists”, but there is no denying that commerce, or rather international trade, was at the heart of his thinking. Trade was “the life of people” (1751, 128), wrote Carli, suggesting a sort of innate tendency of humans to trade. In actual fact, Carli, evoking some ideas of Muratori (1783, 20), spoke of this tendency as a social phenomenon: individuals trade because they are social beings. Trade was presented as a constant of human life. As consequence, altering the value of money, that is, influencing prices, could have negative effects on trade. Carli deepened this topic in his “seventh dissertation”: Del valore e della proporzione dei metalli monetati con i generi in Italia prima delle scoperte dell’indie col confronto del valore e della proporzione de’ tempi nostri, first published in Lucca in 1764 and then reprinted in a series dedicated to the Italian Economists in 1804 (Carli 1764). His aim was to demonstrate that the rise of prices occurred in the Italian states and in Europe was due not to the increase of amount of gold and silver, that is, to an enlargement of monetary quantity, but to other causes, first the debasement of metal coins.3 Carli argued that, notwithstanding the flow of precious metals from the Americas, the amount of gold circulating in the Italian area had not increased (Carli 1764, 314). His conclusion was based on data drawn from the registers of the then mints, which showed a decreasing coinage from late sixteenth century onwards. According to Carli, at the time he was writing (mid-eighteenth century), the coinage of new coins in most of the ten- twelve Italian mints were reduce to nil. As other important money scholars, Carli put the monetary erosion, which reached a peak in the sixteenth century, at the core of its analysis, not only of money value, but also of price changes. He described a causal sequence explaining the money situation of his time. The America discovery led to a reduction, not to an increase, of circulating noble metal, obliging the mints to reduce the quantity of gold and silver in the coins. The outflow of gold and silver was due, according to Carli, to the deficit of the balance of payments, worsened just because of the competition of the products coming from the new world. The reduction of precious metal strengthened the practice of money debasement that, according to Carli, was at the root of then inflation. The reduction of metal contained in the coins led inevitably to increasing prices. Debasement did not limit or prevent circulation: it influenced prices.

3 Most of scholars on history of prices agreed on the inflationary effect to the European import of gold and silver that followed the America discovery. See, among others, Romano 1992. 10

Carli compared the price of three representative goods – wheat, wine, and olive oil – in 1450-1500 and mid-1700, that is, his time. He considered mainly cities and areas of the northern Italy and , analyzing first the price of any single good, and then proposing a mean of such prices. The Carli’s conclusion was that the average prices of the three goods increased, over the 250 years he considered, not more than 7.5 per cent. An augmentation, Carli immediately added, that could be explained also because of the increase of taxation – 15 per cent, according to Carli – that occurred in those decades to fund army and other public expenditures. This was confirmed by the fact that prices increased less where the tributes augmented less. It is interesting to note that analyzing the role of taxation to maintain the army, Carli stressed the positive effect that such kind of expenditure could have on the demand, clearly increased by the need of soldiers. Thus, if agricultural products knew a price increase because of growing levies, they could equally meet an increasing demand if levies were employed to finance the consumption of army and other public officers (Carli 1764, 360). According to Carli, the remaining percentage of price increase was due to a loss of value of coins. That diachronic analysis of prices led to celebrate Carli as one of the first scholar to make use of an index number to measure price changes (see Mitchell 1921, 7). He calculated the changes relate to prices, expressed in terms of lire, silver, and gold-of group of commodities: wheat, wine, and olive oil. Carli proposed an arithmetic average that can be expressed as follows: 푁 1 푝푖 푃(푝 , 푝 ) = ∑ 1 0 1 푁 푝푖 푖=1 0 It does not matter here if this index number was the first or followed other similar attempts: the Fletwood and the Dutot’s ones (see Chance 1966). What’s matter is to understand the need of rigor that pushed Carli to calculate the change of prices over time in a way that remained current until the present-day.

7. International monetary equilibrium The innate or natural tendency to trade served as an anchor for Galilean approach. Once a natural behavior had been observed, and consequently acknowledged as a constant, or even a law, then any behavior undermining compliance with this human law was culpable. In his comprehensive notion of balance of payments, Carli was able to see equilibrium as the desirable situation in which ‘active’ commerce (imports) is balanced by ‘passive’ commerce (exports). Carli was really concerned about the risk of imports exceeding exports. The balance between active and passive commerce guaranteed monetary stability, as happened during the Ancient Roman Empire. Payments in copper coins, rather than gold or silver, ensured that trade focused mainly on the exchange of commodities, not on buying or selling money as asset, and this improved global monetary stability. But, according to Carli, world economy was no longer the economy of an empire, international payments required silver and gold coins which knew autonomous flows. A list of threats to monetary stability can be extracted from the various writings of Carli. First, the ancients’ habit of altering the intrinsic value of coins should be condemned if it interfered with the development of international trade. Excess of demand or supply of a noble coins depended on their value. The greatest danger to trade and monetary stability came just from practices such as altering

11 the price and the alloy used to mint coins (Carli 1751, 158). Both these actions could undermine trust in the intrinsic value of money, with unavoidable consequences for a country’s commercial dealings with its foreign partners. But it was this very concern about the quality of coins that led Carli to further analyze the trading of money as a commodity. Trade remained at the heart of Carli’s concerns, but he focused on the trading of coins—a widespread practice in the Italian peninsula at the time, when it was still divided into many small states. In conclusion, the money expert should have been able to guarantee the correspondence of a coin and its declared value, taking account of the international price of the metal. As second potential source un unbalance, Carli would have placed the use of money as asset. The purchase of money because it is undervalued can prompt a shortage of coins in a given country, with the consequent disappearance of trade. This could happen when coins were made of gold in a country with no goldmines. Carli saw hoarding in noble coins as responsible for the overestimation of a coin in relation to its weight and declared value. Third, other parties held responsible for the monetary disorders of the past were the entrepreneurs who managed the many mints operating in Italy. Certainly, competition between mints did not facilitate the monetary equilibrium, particularly when base coins made of copper and other alloys came to the fore. The situation became even more intricate with the arrival – this is the fourth cause of disturbance – of the so-called ‘imaginary’ currency, i.e. coins stamped with a number that had nothing to do with their metal content: this was a sort of legal money, accepted because it was authorized by the jurisconsults. Imaginary money would have brought the world of Carli out of those natural laws he tried to emphasize. Wishing for a world of quantitative certainty, the Galilean Carli could not accept that trade was mediated by money that had a largely legal value rather than a real intrinsic value. He came to conclusion that monetary tools included noble coins and base coins (made of common metals), and the latter had an imaginary content. This was certainly not a good premise for achieving equilibrium. What Carli described was essentially the monetary world that subsequently came about, where a noble coin used for international exchanges coexisted with a legal currency used in domestic trade. Arguing on the above causes of monetary disequilibrium, Carli stated that any price established for money was not immutable, but it could be changed to regain an equilibrium condition. This was also the only way to revitalize trade and the use of coins for commerce. In order to regain equilibrium, the first point he considered was: given a monetary disorder, was there a process capable of restoring equilibrium? Though the question was highly theoretical, the answer was based on observation and could not be generalized. Such an equilibrating process took place in the case of large countries like France or Germany but seemed difficult to achieve in the many small states of Italy (Carli 1751, 165). Carli, who was focused mainly on the Italian situation, concluded that equilibrium could be restored, but not as consequence of an automatic process. Restoring monetary equilibrium is thus object of government initiative, of monetary policies in more modern words. Carli didn't skimp on his advice. A good suggestion in terms of monetary policy was that the proportions between gold, silver and copper in a given country be kept much the same as in other European countries in order to prevent

12 the more precious metals flowing out of one country where they were relatively more abundant into another country where they were less so. was a long way away. In short, monitoring the proportions of the metals in a given country and comparing them with those of other countries would enable a monetary equilibrium to be maintained, and avoid the influx of large amounts of foreign coins. International monetary equilibrium was based just on this equivalence between content of metal and value. How should we interpret Carli’s lengthy analysis, in his Digressions (1754), on the proportions of the metals used as money adopted by the various European countries? Its monetary meaning was plain, but the arithmetic or the quantitative aspects should not be underestimated: monetary equilibrium was a matter of proportions, quantities, and computation. There was no space for moral assessments or, more importantly, for legal intrusions. Speaking of the ratios between metals, Carli blamed the jurisconsults for turning a virtual value into a real one, contrary to the numerical evidence. Equilibrium remained the object of policy, in support of which Carli constructed a table indicating the prices with which each Italian currency could be compared in order to maintain a rate between currencies that corresponded to the respective content of noble metal. This table contains prices similar to fixed exchange rates between different currencies that Carli considered so necessary to improving trade and the wealth of those city-states and republics (Carli 1751, 206). Monetary equilibrium could not be left in the hands of the jurisconsults, however, because they did not understand it. The value of money was fixed according to the rule stating that the quantity and price of the metal determine the value of the coin—and this was a task for experts, or what Carli called ‘money doctors’ (Carli 1764, 296). We can see that Carli’s table symbolized the meeting point between numerical and technical approaches to monetary phenomena. Carli treated money as a payment technology that only demands technical interventions. Having excluded any ethical assessment,4 the economist saw himself as a technician trained to deal with objective and rational arguments. Really, he inherited this view from Ludovico Muratori, who had opened letters to scientific approach.5 In conclusion, Carli’s table brought the monetary debate back to its natural dimension, where ‘natural’ was used to mean a technical feature of money, i.e. consistency between its face value and its real value. A political facet of Carli’s character helps us to understand his view. We should not forget that his work on money made its appearance when the market, trade and money had gradually been replacing the law as supreme regulator of society (Venturi 1998, 483). Money could no longer be subordinated to any power other than that of free competition—and, to be competitive, money could not be altered. According to Pompeo Neri and other political advisors at the time considered as notable experts, Carli’s table on value of different currencies could be seen as the starting point of a process for reorganizing the exchange rates in the Italian peninsula, also with a view to achieving something that Carli considered crucial: national unification. Apart from Ludovico Muratori, Carli was the only monetary technician to envisage Italian unification (Marcelli 1955, 62).

8. Conclusion. The money-doctor

4 Unless we consider an ethics based on mathematics. See R.M. Corona 2013. 5 Ludovico Muratori’s influence is unquestionable. See Chap. XII, Delle Matematiche in L. Muratori. 1749. Della Pubblica Felicità. Lucca. On Muratori, see Raimondi 1989. 13

The Carli’s approach is clearly that of the expert who is able of examining the potential causes of monetary unbalance and, rationally, of suggesting some remedy. Given that the princes or governors had not the knowledge requested to work out the appropriate measure, the monetary expert came to the fore. As Carli amply stressed, the physical social world sometimes demands a physician’s intervention. Carli saw himself as a ‘money technician’, who cures society of a ‘monetary pestilence’. The metaphor of monetary circulation like blood circulation was already common in his time. He felt like a genuine ‘money doctor’ who operates to eradicate debasement (the pestilence of his time), a Medieval legacy. Carli spoke of “monetary cure”, meaning that equilibrium had to be ensured by constantly monitoring monetary conditions and making any necessary adjustments. Persuaded of his ideas, Carli offered his services to then princes and governors, similarly to what physicists and chemists did in other discipline, also competing with other potential expert, as occurred with Pietro Verri about the role in the Supreme Council in Milan. The science of money became, following the use done by Carli, a science like the others, worth of being financed as occurred for hydraulic constructions or similar. In the view of Carli, the monetary expert was closer to an engineer than a philosophe or a politician. It was clear that he cannot offer abstract thinking to the then governors. He offered policies thought in accordance to his view of money working. Carli’s aversion to the conception of economic problems in theoretical form finally originated a gradual and empirical reformism, maybe grounded on contingent politics, on the money-doctor intuition, maybe on the stroke of genius as a response to the problems that gradually arise, but the message was that money stability required continuing interventions an policies.

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