Money Mischief_ Episodes in Monetary History - Milton Friedman [55]
In subsequent publications Jevons repeated these objections in ever stronger terms. In 1875, after the closing of the mints to silver in France and the adoption of the gold standard by Germany: "The price of silver has fallen in consequence of the German currency reforms, but it is by no means certain that it will fall further than it has already done. That any great rise will really happen in the purchasing power of gold [that is, a fall in the price level in terms of gold] is wholly a matter of speculation.... [A]s a mere guess, I should say that it is not likely to rise" ([1875] 1890, p. 143). In 1877 (1884, pp. 308, 309, 311; italics in original):
In nothing is the English nation so conservative as in matters of currency....
[I]f the United States were to adopt the double standard, they would throw into confusion the monetary relations of the foremost commercial nations, while the universal bimetallism essential to the success of M. Cernuschi's schemes would be as far distant as ever....*
To say the least, it is quite open to argument that silver is now a metal less steady in value than gold.... Under these circumstances, it is probable that the double standard, or, as it ought to be called, the alternative standard will be really less steady in value than the gold standard alone.
Despite his deserved reputation as a pioneer in economic statistics, Jevons was almost consistently wrong in his empirical predictions. The price of silver in terms of gold fell drastically, the real price of gold rose (that is, the nominal price level fell), and, if anything, gold became more unstable in production than silver.†
Jevons's famous journalistic contemporary, Walter Bagehot, wrote a series of articles in The Economist in 1876 on the silver question. These were collected and published, shortly after Bagehot's death in 1877, in a monograph entitled Depreciation of Silver. The articles deal mainly with the problems raised for Britain's trade with India by the depreciation of silver—inevitably leading to a discussion of bimetallism, which Bagehot vigorously opposed. Although Bagehot's theoretical analysis is much inferior to Jevons's, the practical considerations he cites in opposition to bimetallism duplicate Jevons's, including Jevons's erroneous predictions, in particular the prediction that the "fall" in the price of silver in 1876 was "only a momentary accident in a new and weak market, and not the permanent effect of lasting causes" (Bagehot [1877] 1891, 5:523). Like Jevons, Bagehot regards as a major consideration (5:613) the fact that "England has a currency now resting solely on the gold standard, which exactly suits her wants, which is known throughout the civilized world as hers, and which is most closely united to all her mercantile and banking habits. What motive, that an English Parliament could ever be got to understand, is there that would induce them to alter it?"*
I have quoted at length the practical considerations stressed by Jevons and Bagehot because, while these two were among the first to stress them, the same considerations undoubtedly played a major role in the opposition to or lukewarm support of bimetallism by almost all later British writers on the subject, including both Marshall and Edgeworth. Similarly, the very different practical circumstances of France and the United States explain why those countries produced the most vigorous support for bimetallism, not only by Schumpeter's "monetary monomaniacs" but also by respected scholars.
Gold versus Silver Monometallism
Britain's adoption of a monometallic gold standard in 1816, and its subsequent resumption of the convertibility of legal tender into specie on the basis of gold on May 1, 1821, as a result of Peel's Act of 1819, was undoubtedly the key factor that made gold the world's dominant monetary metal (Feavearyear 1963, [>]). It had that effect partly because Britain's subsequent rise to economic preeminence in the world was attributed in considerable measure, rightly