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The effects would not have been limited to the United States, of course. I have not been able to make anything like as thorough an empirical study for the rest of the world as for the United States. However, in the course of preparing the U.S. estimates, it was necessary to estimate the effect on the price level in the gold-standard world, for which I used Britain as a proxy. Figure 4 gives the actual and hypothetical level of prices in Britain. The estimated effect, though smaller than in the United States, is clearly substantial. The price level would have been consistently higher. The decline in the price level from 1875 to 1895 would have been cut from 0.8 percent a year to 0.5 percent; the subsequent rise would have been increased from 0.09 percent a year to 1.1 percent. Here too, however, effects other than those encompassed in our simple calculation would clearly have been present. The changes in the United States would doubtless have produced echoes elsewhere. A healthier U.S. economy would have meant a healthier world economy. In addition, the consistently lower real price of gold would have reduced the incentive to produce gold. That might have delayed the introduction of the cyanide process for extracting low-grade ore, which was responsible for the flood of gold that produced worldwide inflation after 1896. I have not allowed for any such effects.

Whether or not a verdict of guilty would have been appropriate in a court of law for "the crime of 1873," that verdict is appropriate in the court of history. The omission of the fateful line had momentous consequences for the subsequent monetary history of the United States and, indeed, to some extent, of the world. The rhetoric was overheated, but the importance of the issue was not overstated. The real issue was the monetary standard: gold and silver bimetallism, which in practice in the United States had meant alternating silver and gold standards. The act of 1873 cast the die for a gold standard, which explains its significance. Moreover, while the conventional view is Laughlin's, that "the act of 1873 was a piece of good fortune" ([1886] 1895, p. 93), my own view is that it was the opposite—a mistake that had highly adverse consequences.

I hasten to add that this is a judgment about 1873, not 1896. By 1896 it was too late to undo the damage, for reasons discussed in chapter 5. Bryan was trying to close the barn door after the horse had been stolen.*

I also hasten to add that this judgment is not intended either to denigrate or to praise the character or the intentions of the various parties in the long-running dispute. The pro-silver group contained silver producers seeking to promote their special interests, inflationists eager to seize any vehicle for that purpose, and sincere bimetallists who desired neither inflation nor deflation but were persuaded that bimetallism was more conducive to price stability than monometallism was. Similarly, the pro-gold group contained producers of gold, deflationists (pilloried by the free-silver forces as Wall Street bankers), and sincere believers that the gold standard was the only satisfactory pillar for a financially stable society. Motives and intentions matter far less than the outcome. And, in this as in so many other cases, the outcome was very different from that intended by the well-meaning advocates of the Coinage Act of 1873.

CHAPTER 4

A Counterfactual Exercise: Estimating the Effect of Continuing Bimetallism after 1873*

This chapter provides the analysis that underlies the conclusions in the final section of the preceding chapter about the likely effects of continuing bimetallism after 1873. It is a what-if examination of a hypothetical development that, as I have argued in chapter 3, would have had major and far-reaching effects, not only in the United States but in the entire world. As such, my results are inevitably subject to much uncertainty and wide margins of error, which I have tried to allow for in reaching the conclusions stated