ABSTRACT OF PAPER
Title: Ricardo's "principle of limitation of quantity" applied to a privately-issued metallic money
Author: Deleplace Ghislain
The comparison between a metallic currency and a paper currency plays a central role in Ricardo's theory of money. A difficulty is however raised by "the principle of limitation of quantity" (Principles: 353) that regulates paper money, when it is applied to metallic money, because gold or silver has a natural price determined by the difficulty of production of the metal, independently of monetary circulation. The paper aims at studying the consequences of an increase in the quantity of gold-money following the discovery of a new mine, by transposing Ricardo's analysis of another supply shock on the production of gold: the imposition of taxes. Two results emerge from this analysis. 1. "The principle of limitation of quantity" applies to a privately-issued metallic currency. 2. The natural price of gold only sets a lower limit to the value of money, which is determined by the ratio of the aggregate value of commodities circulated to the quantity of gold-money. Both results stem from the fact that, even without any State intervention, Ricardo considers metallic money as a "monopolised commodity".
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