Hindrances to the Acceptance of Bimetallism Author(s): R. H. Inglis Palgrave Source: The Economic Journal, Vol. 4, No. 13 (Mar., 1894), pp. 165-168 Published by: Wiley on behalf of the Royal Economic Society Stable URL: http://www.jstor.org/stable/2955888 Accessed: 28-06-2016 00:44 UTC Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://about.jstor.org/terms JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. Royal Economic Society, Wiley are collaborating with JSTOR to digitize, preserve and extend access to The Economic Journal This content downloaded from 129.219.247.33 on Tue, 28 Jun 2016 00:44:14 UTC All use subject to http://about.jstor.org/terms HINDRANCES TO THE ACCEPTANCE OF BIMETALLISM 165 Now my contention was and is that, though there be a common cause it need not ' show itself in all or nearly all I the commodities quoted.' To take a new example, for which the data happen to be ready to hand; suppose that the average height of a regiment of 1,000 Italian recruits selected indiscriminately from all the provinces was returned as half an inch in excess of the average height of the whole army; one might infer with certainty that the difference was due to a real cause (as distinguished from chance); and that cause might well be ' single,' such as the circumstance that the men in the regiment were (contrary to the general practice) measured with their shoes on. But it does not follow that this cause should show itself-by excess above the average of the kingdom-in a large majority. The proportion of men above the general average might be about 57 per cent., 570 out of the 1000.2 Is that ' all, or nearly all'? F. Y. EDGEWORTH HINDRANCES TO THE ACCEPTANCE OF BIMETALLISM. The following letter will explain the origin of this communication. DEAR MR. PALGRAVE, IT would, in my opinion, be a very useful thing to form a collection of the objections to bimetallism which would naturally strike men of business; not so much those who have been engaged in the controversy, as those who are concerned in the ordinary affairs of life in which money bears so great a part. This can only be effectively done by an impartial person who is well acquainted with the main features of the controversy. You are eminently that person, for you have studied the matter for many years and have, as yet, not declared yourself on either side. H. H. GIBBS. (I.) How can an exact ratio be constantly preserved between two different things ? One ounce of pure silver is worth as much as another ounce of pure silver, and the same with gold. But how can an ounce of one metal be made constantly equal in value to a fixed number of ounces of another metal? I See penultimate note. 2 The modulus of errors, or deviation for Italian recruits, as found by Perozzo from some hundreds of thousands of observations (see Journal of the Statistical Society, Jubilee volume, p. 195) being about 3-7; the modulus for the difference between the average of the regiment and the general average is about 3-7 say *06. Whence for the limit of difference possibly due to accident we have, say *15; and for the amount of difference certainly attributable to cause *5 - '15 = -35. Now *35 is about a tenth of the modulus And (by well-known tables) the pro- portion of a group (ranging under a probability curve) intercepted between the centre and 1 of modulus is about 05. Whence the proportion of the regiment show- ing excess over the general average is at least .55 per cent. By parity of reasoning- as the real difference cannot exceed *5 + -15- the proportion is at most 460 per cent. This content downloaded from 129.219.247.33 on Tue, 28 Jun 2016 00:44:14 UTC All use subject to http://about.jstor.org/terms 166 THE E4CONOMIC JOURNAL (II.) The number of ratios suggested for the valuation of silver relatively to gold perplexes men's minds. One distinguished econo- mist, for instance, suggests a ratio of 17 to 1, another a ratio of 24 to 1 People say, and naturally, how can bimetallism be a workable system when different authorities, each so eminent, suggest such very different valuations ? That the particular ratio suggested is not essential to success in dealing with the matter has been rendered very obvious recently by the totally different results obtained in the exchange between the Dutch Indies and Holland, and that between British India and Great Britain. The ratio of silver to gold in Holland is 15f625 to 1. The ratio of silver to gold in India with the rupee at ls. 4d is 22f37 to 1.1 Considering the market price of silver, people naturally might have expected that it would be easier to maintain the exchange at the point desired with the latter ratio than with the former, but the reverse has been the fact. Hence it is clear that the particular ratio is far less important than the surrounding circumstances. It is said, and not without apparent reason, that if all who have discussed bimetallism could have agreed to adopt one ratio and to stick to it they would have found their opinions carry more weight. The question arises, what ratio could they have proposed? It may seem paradoxical at this moment, with silver relatively to gold at something like 30 to 1, to propose the ratio formerly in use in the Latin Union, but up to quite recently, and possibly even now, if bimetallists had proposed 15i to 1 and applied their endeavours to persuade America to assimilate its ratio to that of France, they would have found easier acceptance for the opinions they support. There are large interests in the Latin Union affected by any change of ratio, to say nothing of India, and bimetallists at 15i to 1 might have found allies among those who are indifferent to other ratios. (III.) The idea that bimetallism would raise prices has been a hindrance to the acceptance of the plan. Many people object, and not unnaturally, to prices being raised. The doing this is contrary to the current of modern thought. Most people think only of the moment and of the prices of the moment in relation to their own wants. They cannot bring themselves to see that the level of price is more important than its absolute position. It is severe and unexpected fluctuation in the prices of goods which causes distress amongst the produicers of those goods. If all prices are uniformly high or uniformly low, matters adjust themselves in time accordingly, though the period during which the adjustment takes place may be full of great difficulties-like the present. (IV.) Another reason why bimetallism is not easily accepted is the manner in which bimetallists urge that such a standard is incom- parably the best, that it is less liable to fluctuation than any other, and that it is incumbent on this country to adopt it. 1 See Dictionary of Political Economy, Vol. I., pp. 776-777. This content downloaded from 129.219.247.33 on Tue, 28 Jun 2016 00:44:14 UTC All use subject to http://about.jstor.org/terms HINDRANCES 1TO THE ACCEPTANCE OF BIMETALLISM 167 People find it difficult to see clearly the basis on which any of these opinions is founded. A monometallic standard is undoubtedly and necessarily exposed to fluctuations either way in the direction of appreciation or of depreciation. But it might happen that a double stanclard would fluctuate in exactly the same way. Nor is the point which some bimetallists urge that a double standard tends more in the direction of depreciation than of appreciation likely to be favourably received. A depreciated currency appears to the ordinary enquirer, and not- unnaturally, as a bad currency. People think of depreciated paper and carry the same line of. thought on to the case of a metallic currency. Jevons' remarks, written in 1881, on the slight probability of fixity in a double standard, are of interest in reference to this point. ' Unless clear reasons,' he says, ' can be shown why silver should be more constant in its circumstances of production than gold, there, is no ground for thinking that a bimetallic gold and silver money will afford a more steady standard of value than gold alone.' (Investigations in 'Currency and Finance, W. S. Jevons, p. 318.) This agrees with all my remembrances of Jevons' many conversations with me on 'this point, and of his letters to me. For short periods, however, the two standards appear to have been parallel. It has never, as far as I know, been possible to trace that the purchasing power of money in England differed from that which it possessed in France, while one country was mono- and the other bi- metallic. Hence, for the purpose of a 'measure of value' one standard appears to have been, during that period, on a-level with the other. This, however, is of itself no reason to advocate a change, or to render it necessary that both countries should possess the same standard. Convenience and habit are powerful factors in these matters.