very general descriptions of the leading banking systems of the world, there is, as I have said, nothing about the nature of credit, and no discussion of the advantages of an elastic currency. The word "elasticity" occurs a few times, but he does not tell why elasticity is needed in the currency, nor what are the evils of a rigid currency. I searched also in Professor Laughlin's book for the familiar argument, for I knew him to be an advocate of an elastic bank-note currency and was curious to know how he could justify his position without damage to his theory that prices are antecedently determined by reference to a standard of value. I found nothing on the subject. Professor Scott certainly ought to have thrown some light on it in his book. If he intends to be consistent, he will be wise if he takes the position that elasticity in the currency is not necessary; for the argument upon which the demand for elasticity is based takes it for granted that an increasing demand for cash, if not satisfied, causes a rise in the rate of discount and a fall of prices, — phenomena which both Scott and Laughlin, it seems to me, must deny.

Professor Scott does not feel called upon to discard the classical theory with regard to the international movements of specie. He does not advance the proposition that gold has a world value. An increased output from gold mines, he says, tends to raise all prices by lowering the value of the standard. "This effect is first felt in the country in which the mines are situated, since the new metal finds its way first to the local markets." If the rate of exchange, as the result of increased imports, rises beyond the export point, gold will leave the country. "Its price on the local bullion markets will correspondingly rise and the disturbed equilibrium of prices be thus restored." This would be sound enough if it did not imply that gold has different prices in the bullion market. Does he mean that any banker or dealer in bullion is ever willing to pay over ten dollars for 258 grains of standard gold, or that an eagle will ever sell for less than that? Professor Scott should have explained to his readers how the "prices" of gold on the bullion markets are determined.

Neither Professor Scott nor Professor Laughlin is able to explain the fact of fiat money, i.e., money the value of which does not conform to the value of the material out of which it is made,

free coinage not being permitted. Professor Laughlin, to be sure, admits the possibility of fiat money when he implies that the so-called quantity theory is true if the government has a monopoly of the coinage, but he does not explain the necessity for such admission. Both he and Professor Scott hold that depreciated paper money, such as the greenback during the Civil War, owes its value to constant reference to the standard, a fall in its value being a result of increasing doubt as to its ultimate redemption. Professor Scott holds that during the greenback era this country had two standards, — a primary standard (gold), and a secondary standard (greenbacks), — and that people quoted prices of articles in two standards. As a matter of fact, this practice was never general even during the uncertain years of the war; after 1865 practically all prices (except on the Pacific coast) were in greenbacks, and men in pricing goods gave little thought to the relation of gold to greenbacks. If doubt about the ultimate redemption of paper money is the only cause of its depreciation, how can Professors Scott and Laughlin account for the depreciation of the notes of the Bank of England during the "restriction period"? Gold was then quoted at a premium of 16 per cent, yet the majority of English business men, and people in general, stoutly protested against the resumption of specie payments, holding that the notes of the Bank of England were better than gold. No one had the slightest doubt about the solvency of the Bank of England. There was universal confidence in it. The bullion committee, however, decided that the notes had depreciated because of excessive issues, and gave very good reasons in support of their opinion. I am at a loss to see how Professors Scott and Laughlin can explain the interesting movement of prices in England between 1800 and 1810 without abandoning their theory of money.

To sum up, the peculiar theory of prices put forth by Professors Laughlin and Scott fails to explain the phenomenon of price, for the value-making process which is claimed to be antecedent to price-making is mythical and inconceivable; it fails to explain the international movements of gold; it fails to explain the value of fiat money or of depreciated paper money when used by a people

who have entire confidence in its goodness; it fails to explain the fact that seigniorage raises the value of coins above that of the metal they contain; it fails to explain the fact that speculative and wholesale prices are weak in New York when the country makes its autumnal draft upon that city's cash reserves; it fails to explain the fact that when this country's supply of money or cash is increased arbitrarily, as by an excess of government expenditures, the bank rate of discount is lowered, prices here and there lifted, and gold exported. All these phenomena the demand-and-supply theory of money explains as clearly as the theory of gravitation explains the phenomena of the solar system.

If the demand-and-supply theory of money is as clear and satisfactory as I have declared, how shall we account for the fact that two very intelligent, industrious, conscientious and successful teachers of political economy should find it fallacious? That question is psycho-sociological in character, and any answer I may suggest must be tentative. My own explanation is that this new theory of prices is a posthumous product of the silver scare of 1896. The authors, especially Professor Laughlin, were strenuous defenders of the gold standard in that memorable campaign, and doubtless were much annoyed by the adroit references of the enemy to the writings of Locke, Hume, Ricardo. and Mill. The friends of silver, as can easily be shown, made fallacious use of the so-called quantity theory. They assumed, for example, that the demand for money was practically infinite, and would raise the value of silver to any desired height if that metal were freely coined into money. During the campaign, however, their arguments were very effective, and it is not surprising that they made converts. Many a financial heresy, like Professor Laughlin's new theory of prices, has had its origin in the exigencies of politics. The rigid bank-note system of England, for instance, which cannot perform any valuable service to the country, is the indirect product of the Restriction Act of 1797. That act gave England fiat money and taught the country bankers of England to regard the Bank of England note as being identical with money; so they used it as a reserve for the redemption of their own notes, England thus getting one credit system based upon another. The Restriction period also convinced country

bankers that redemption was of little consequence. In that country, as in the United States at that time, although no economist had sanctioned the idea, business men and bankers quite commonly believed in Professor Laughlin's theory that credit is based upon property, and that redemption in money is an unnecessary imposition upon the banker. The false ideas then prevalent about money and bank notes led to speculation, inflation and panic. In England, Peel's Bank Act of 1844, and in this country the Independent Treasury Act of 1846, were the results of bad banking practices imposed upon bankers by politicians. It would be a pity if the great debate over the standards should impose on the world for any length of time a theory of prices so barren and unreal as that expounded in the books under review.

NEW YORK UNIVERSITY.

Jos. FRENCH JOHNSON.

THE ECONOMIC SIGNIFICANCE OF CULTURE.

T would help to clear up those issues which have been brought forward by the economic interpretation of history if scholars generally understood the true character of certain human interests which we are in the habit of grouping under the word "culture." To the historian who comprehends the part which language and manners, literature and art, amusements and religion have played in the drama of human progress, there is something almost perverse in the proposition that all which has happened in the world can be explained in economic terms. Not only does economic explanation in history savor of materialism in that sense of the word which is ethical rather than scientific, but it seems to be wholly inadequate.

Yet the question raised, as all will admit, is perplexing. The word "economy" has become one of the most elastic in the vocabulary of science. It means the whole system of industry and business whereby a modern population sustains existence. It means the production and distribution of wealth. It also means the total phenomena of wants and satisfactions. Whenever the economist, turned historian, discovers that he cannot account for some social development in terms of industrial organization or of industrial methods, as Karl Marx attempted to do, or in terms of wealth distribution, as Hyndman and Loria have tried to do, he falls back on the most abstract meaning of his words, and has no difficulty in proving that since all the forms of culture are satisfactions of wants, they are economic phenomena. He might demonstrate also that they are cosmic phenomena, and the one "interpretation" would be as illuminating as the other. Admiting that cultural products are both cosmic and economic, our common sense assures us that they are distinguishable from undifferentiated comet tails, and that it would be interesting to know wherein their economic nature differs from that of stock yards and rolling mills. The crux of the whole question is right here. Are the facts of culture economic in some precise sense, as the facts of industry are? Is culture in general an economy,