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Published by EH.NET (November 2000)
Angela Redish, _Bimetallism: An Economic and Historical Analysis_.
Cambridge: Cambridge University Press, 2000. xii + 275 pp. 4.95
(cloth), ISBN: 0-521-57091-3.
Reviewed by Lawrence H. Officer, Department of Economics, University
of Illinois at Chicago. <[log in to unmask]>
Any historian of monetary standards needs not only to read
_Bimetallism: An Economic and Historical Analysis_ but also to keep a
copy nearby. The book, based on a number of previously published
articles of the author (who is Professor of Economics at the
University of British Columbia), provides an analytical and
descriptive history of the monetary standard, primarily in England
and France, secondarily in the United States, with some attention
also to the countries of the Latin Monetary Union. Redish sees a
dichotomy between the economics literature, which is scanty on the
details of a commodity (metallic) monetary standard, and the
historical literature, which is overly detailed. "The book attempts
to straddle the gap between these two literatures, to allow for a
more complex monetary system than the economists' 'commodity money'
and to find generalities that are buried in the historians' details"
(p. 12). Redish succeeds admirably in this goal.
Chapter 1 outlines the themes of the book and offers a sweep of the
monetary-standard history of Western economies. Two important
questions that will be addressed are (1) why bimetallism evolved into
the gold standard, and (2) why the gold standard did not occur
earlier than it, in fact, did. The answers hinge on two elements not
generally viewed as central to monetary-standard determination: the
role of small-denomination money, and the technology of coining money.
Redish devotes chapter 2 to theoretical issues. She explains the need
for multiple denominations of a medium of exchange. For a commodity
standard, this means either multiple commodities (gold, silver, and
copper coins) or a single commodity with variously sized pure coin,
various-fineness pure coin, or convertible token coin. The latter,
monometallic, standard has problems of coin size (too small or too
large) and of susceptibility to counterfeiting. Therefore the former,
multicommodity, standard was adopted. Its big problem is divergence
between the fixed mint ratio of gold and silver and the market
relative price of the metals. A good summary of the literature on
Gresham's Law is provided. The author notes the traditional response
of monetary authorities to an undervalued coined metal: depreciate
the undervalued metal. Sometimes this policy was followed also to
raise revenue for the monetary authority.
Chapter 3 considers the historical experience of problems with
large-denomination coin. The bimetallic solution led to chronic
undervaluation. The English and French experience from the
mid-fourteenth to the early-nineteenth centuries is examined
meticulously. Especially praiseworthy is a new data set on mint price
and mint equivalent (the difference between which is seignorage),
including the fineness and weight of gold and silver coins issued in
these countries. Running to 15 pages, this tabulation will prove
immensely useful to researchers. Other tables provide details of
great debasements of coinage in the countries.
The corresponding experience of England and France with
small-denomination coin is explored in chapter 4. Full-bodied coins
had the problem of size (too small if silver, too large if copper),
while token coins could be replicated and converted into full-bodied
coins to the disadvantage of the monetary authority, or, if not
convertible, could be overissued by the authority. Again there are
useful tables and in this chapter, as elsewhere, the author exhibits
a strong understanding of both the contemporary and current
literature.
Chapter 5, on the transition to the gold standard in England, is
extremely interesting and provocative. As Redish summarizes: "After
centuries of uncertainty about how to issue small-denomination coins,
the early nineteenth century saw the British government adopt the
principles of a 'sound' token currency. The raison d'Otre of
bimetallism had been removed and England was on the gold standard."
Very important in Redish's view (and she persuades this reviewer) was
new technology for minting coin, which made token coins difficult to
counterfeit. Also pertinent was the willingness of the Bank of
England to convert silver coins (and bank notes) at par into gold.
In chapter 6, Redish studies the transition to the gold standard in
France. The French mint modernized later than the English. After the
mid-nineteenth century the Latin Monetary Union countries (France,
Belgium, Italy, Switzerland) switched from a de facto silver to a de
facto gold standard. Redish disputes the conventional wisdom that the
Union was an attempt to achieve international bimetallism. Rather,
she argues that the Union constituted an optimal currency area and
its formation reflected contemporary interest in economic integration.
The U.S. experience is discussed in chapter 7. This history has been
much discussed elsewhere. The author's contributions are important,
nevertheless. She places the history in its international context,
emphasizes the role of mint technology, and provides an excellent
analysis of legislative developments. The U.S. experience is
consistent with the author's analysis, as is that of the other
countries examined. "In the United States, as elsewhere, the use of
token silver coins eliminated the medium of exchange basis for
bimetallism" (p. 234).
Chapter 8 is the concluding chapter. It not only summarizes the work
but also carries the history to the late nineteenth century and
beyond, through abandonment of the gold standard, to the current
interest in currency unions and currency boards. Fittingly, Redish
observes that, at least in this respect, history does not repeat
itself. These developments do not mean a return to the nineteenth
century; the situation is different from the past.
In sum, Redish has produced a wonderful book that any scholar of
monetary standards will admire. Nevertheless, Redish's work leaves
some questions open. First, the relationship between the monetary
standard and the macroeconomy is not addressed. There is some
attention to the seignorage gain of the monarch in comparison to
normal revenue, but that is all. The impact of the monetary standard
on prices, wages, and output is not considered. Granted, that would
go beyond the author's theme, but the issue is not unimportant.
Second, data, or lack thereof, on circulation (as distinct from
issue) of large and small-denomination coin are not discussed. Third,
the author makes some tantalizing observations that cry out for
elaboration. For example, the relationship of England with Brazil, a
gold-producing country, as a factor leading to England's adoption of
the gold standard, is mentioned only in passing.
However, these are issues that can be explored in future research,
and that research will certainly benefit from Redish's work. All in
all, my reaction to _Bimetallism: An Economic and Historical
Analysis_ is unqualified admiration.
Lawrence H. Officer, Professor of Economics at University of Illinois
at Chicago, is author of _Between the Dollar-Sterling Gold Points:
Exchange Rates, Parity, and Market Behavior_ (Cambridge: Cambridge
University Press, 1996) and co-editor of _Monetary Standards and
Exchange Rates_ (London: Routledge, 1997).
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EH.Net Administrator ([log in to unmask]; Telephone: 513-529-2850;
Fax: 513-529-3308). Published by EH.Net (November 2000). All EH.Net
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