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Miscounting Money of Colonial America

Listed author(s):
  • Ronald W. Michener
  • Robert E. Wright
Registered author(s):

    Farley Grubb has developed an ambitious new money-stock time series for colonial Pennsylvania that uses the ingenious method of examining newspaper advertisements promising rewards (e.g., for help in catching runaway slaves) to estimate monies in circulation (Grubb 2004). Grubb asserts that promises of reward payments in “pounds†refer to bills of credit. We contest his interpretation, arguing that “pounds†denotes merely a unit of account. Similarly, ads promising “dollars†cannot be taken to refer to silver coins. Grubb mistakes the mention of a unit of account for the specification of a medium of exchange. We also show that Grubb’s methods are riddled with misinterpretations and inconsistencies, some of which arise from rather serious errors in basic scholarship. For example, Grubb denies that bills of credit readily passed current across the Middle Colonies, although it is a well-established fact. To concede it, however, would upset both his colony-level money supply estimates and his argument that the Constitutional ban on state-issued paper money had nothing to do with seigniorage. Grubb’s time series differs significantly from spot estimates of the money supply arrived at using methods that Grubb himself champions elsewhere, as well as estimates based on archival data.

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    Article provided by Econ Journal Watch in its journal Econ Journal Watch.

    Volume (Year): 3 (2006)
    Issue (Month): 1 (January)
    Pages: 4-44

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    Handle: RePEc:ejw:journl:v:3:y:2006:i:1:p:4-44
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    1. Michener, Ron, 1988. "Backing Theories and the Currencies of Eighteenth-Century America: A Comment," The Journal of Economic History, Cambridge University Press, vol. 48(03), pages 682-692, September.
    2. Stephen T. Ziliak & Deirdre N. McCloskey, 2004. "Size Matters: The Standard Error of Regressions in the American Economic Review," Econ Journal Watch, Econ Journal Watch, vol. 1(2), pages 331-358, August.
    3. McCallum, Bennett T, 1992. "Money and Prices in Colonial America: A New Test of Competing Theories," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 143-161, February.
    4. A. Piatt Andrew, 1904. "The End of the Mexican Dollar," The Quarterly Journal of Economics, Oxford University Press, vol. 18(3), pages 321-356.
    5. Farley Grubb, 2003. "Two Theories of Money Reconciled: The Colonial Puzzle Revisited with New Evidence," Working Papers 03-03, University of Delaware, Department of Economics.
    6. Lydon, James G., 1965. "Fish and Flour for Gold: Southern Europe and the Colonial American Balance of Payments," Business History Review, Cambridge University Press, vol. 39(02), pages 171-183, June.
    7. Richard A. Lester, 1938. "Currency Issues to Overcome Depressions in Pennsylvania, 1723 and 1729," Journal of Political Economy, University of Chicago Press, vol. 46, pages 324-324.
    8. Grubb, Farley, 2004. "The circulating medium of exchange in colonial Pennsylvania, 1729-1775: new estimates of monetary composition, performance, and economic growth," Explorations in Economic History, Elsevier, vol. 41(4), pages 329-360, October.
    9. Sumner, Scott, 1993. "Colonial Currency and the Quantity Theory of Money: A Critique of Smith's Interpretation," The Journal of Economic History, Cambridge University Press, vol. 53(01), pages 139-145, March.
    10. Hanson, John R, II, 1979. "Money in the Colonial American Economy: An Extension," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 281-286, April.
    11. Smith, Bruce D, 1985. "Some Colonial Evidence on Two Theories of Money: Maryland and the Carolinas," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1178-1211, December.
    12. Ronald W. Michener & Robert E. Wright, 2005. "State "Currencies" and the Transition to the U.S. Dollar: Clarifying Some Confusions," American Economic Review, American Economic Association, vol. 95(3), pages 682-703, June.
    13. Bruce D. Smith, 1985. "American Colonial Monetary Regimes: The Failure of the Quantity Theory and Some Evidence in Favour of an Alternative View," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 531-565, August.
    14. Farley Grubb, 2003. "Creating the U.S. Dollar Currency Union, 1748–1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain?," American Economic Review, American Economic Association, vol. 93(5), pages 1778-1798, December.
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