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By Root 343 0

level and, as a by-product, the hypothetical gold-silver price ratio that would have prevailed if the United States had returned to the prewar bimetallic standard after the Civil War. These estimates indicate that the market gold-silver price ratio would have remained fairly close to 16 to 1 until at least 1914, when World War I started. The ability of France to maintain an effective bimetallic standard for seventy years, despite wide swings in the relative supplies of silver and gold, strengthens my confidence in these estimates. If I am anywhere close to right, as I wrote in chapter 3, "the United States could have played the same role after 1873 in stabilizing the gold-silver price ratio that France did before 1873" (see [>]). The result would have been a more stable price level in both the United States and the gold-standard countries.

The Scholarly Literature on Bimetallism

Like the historical evidence, the scholarly literature of the time does not support the conventional view. On the contrary, as Schumpeter put it in his History of Economic Analysis (1954, p. 1076): "[Bimetallism was the chief hunting ground of monetary monomaniacs. Nevertheless, it is the fact—a fact that these semi-pathological products and also the victory of the gold party tend to obliterate—that, on its highest level, the bimetallist argument really had the better of the controversy, even apart from the support that a number of men of scientific standing extended to the cause of bimetallism." Schumpeter adds in a footnote that the "outstanding purely analytic performance on bimetallism is that of Walras (Éléments, leçons 31 and 32)" (1954, p. 1076).* As Walras (1954, lesson 32, p. 359) put it, in a carefully qualified statement: "In short, bimetallism is as much at the mercy of chance as monometallism so far as the stability of value of the monetary standard is concerned; only bimetallism has a few more chances in its favour."

Schumpeter may be right in his judgment of the quality of Walras's analysis. However, Irving Fisher's analysis is equally rigorous and far more accessible. His succinct conclusion (1911, chap. 7, [>]) is that "bimetallism, impossible at one [legal] ratio [between the prices of the two monetary metals], is always possible àt another. There will always be two limiting ratios between which bimetallism is possible." Note that Fisher's limiting ratios are not the gold-silver price ratio points referred to earlier: those define the range of market price ratios consistent with a fixed legal price ratio. Fisher's limiting ratios define the range of legal price ratios at which it would be feasible to keep both gold and silver in circulation under given conditions of demand and supply of gold and silver. A different division of new production of gold and silver would correspond to each such legal ratio. At the lower limiting gold-silver price ratio, the bulk of new gold production would go to nonmonetary uses, and the bimetallic standard would be on the verge of becoming a monometallic silver standard; at the upper limiting ratio, the bulk of new silver production would go to nonmonetary uses, and the bimetallic standard would be on the verge of becoming a monometallic gold standard.

No great importance attaches to the maintenance of one or another market ratio for its own sake (except perhaps to persons involved in the mining of silver or gold). The important general question is the behavior of the price level. Which monetary system, bimetallism, silver monometallism, or gold monometallism, will lead to the most stable price level over time, that is, to the most stable real value of the monetary unit? Fisher's answer (1911, chap. 7, [>]) is that, when the legal bimetallic ratio is effective, then "in a series of years, the bimetallic level [of the real value of the monetary unit] remains intermediate between the changing levels which the two metals would separately follow. Bimetallism spreads the effect of any single fluctuation over the combined gold and silver markets....It should be pointed out that the equalizing effect