The Circulating Medium of Exchange in Colonial Pennsylvania, 1729-1775: * New Estimates of Monetary Composition and Economic Growth Farley Grubb Economics Dept. Univ. of Delaware Newark, DE 19716 USA July 3, 2001 Preliminary Draft Comments Welcome * The author is Professor of Economics, University of Delaware, Newark, DE 19716 USA. E-mail:
[email protected]. The author thanks Peter Coclanis, Joseph Mason, Ronald Michener, and Richard Sylla for helpful suggestions. Anne Pfaelzer de Ortiz provided research and editorial assistance. The Circulating Medium of Exchange in Colonial Pennsylvania, 1729-1775: * New Estimates of Monetary Composition and Economic Growth Market transaction data are used to estimate the composition and quantity of specie in circulation. This estimate is used to provide the first comprehensive measure of the colony's money supply. This estimate, along with data on population and prices, is used to measure the growth in output using the quantity theory of money. Output growth is found to depend on periodization and the extent to which rising commercialization increased the velocity of circulation. Specie was scarce but becoming less so as the Revolution approached, and specie and paper currency were both substitutes and complements depending on the period of analysis. Nobody knows the amount of specie in circulation in colonial America. The absence of this one piece of information has left unanswered a number of important questions about how colonial economies worked. One such question is whether specie was scarce in colonial America. Some writers believe it was scarce (Brock 1975, pp. 86, 267, 386; Bouton 1996; Lester 1938; Walton and Shepard 1979, pp.