Benjamin wrote an anonymous pamphlet entitled “A Modest Enquiry into the Nature and Necessity of a Paper Currency” that was published in April 1729. I am not going to go into detail about this pamphlet, but want discuss just one aspect of it. Since I am not a great American economist, most of it I have a hard time understanding. So if you want to read the entire pamphlet, and read someone else’s commentary on it, you can by going to Virginia.edu.
The point that this pamphlet brings up, that I want to talk about, is the idea that paper currency should not be backed by Gold or Silver, but should be backed by the peoples labor.
“For many Ages, those Parts of the World which are engaged in Commerce, have fixed upon Gold and Silver as the chief and most proper Materials for this Medium; they being in themselves valuable Metals for their Fineness, Beauty, and Scarcity. By these, particularly by Silver, it has been usual to value all Things else: But as Silver it self is no certain permanent Value, being worth more or less according to its Scarcity or Plenty, therefore it seems requisite to fix upon Something else, more proper to be made a Measure of Values, and this I take to be Labour.”
I don’t know if I completely understand what he says, but what I get from it is that he thinks that items should be based on how long they take to produce them, not based on their Scarcity or Plenty.
“By Labour may the Value of Silver be measured as well as other Things. As, Suppose one Man employed to raise Corn, while another is digging and refining Silver; at the Year’s End, or any other Period of Time, the compleat Produce of Corn, and that of Silver, are the natural Price of each other; and if one be twenty Bushels, and the other twenty Ounces, then an Ounce of that Silver is worth the Labour of raising a Bushel of that Corn. Now if by the Discovery of some nearer, more easy or plentiful Mines, a Man may get Forty Ounces of Silver as easily as formerly he did Twenty, and the same Labour is still required to raise Twenty Bushels of Corn, then Two Ounces of Silver will be worth no more than the same Labour of raising One Bushel of Corn, and that Bushel of Corn will be as cheap at two Ounces, as it was before at one; ceteris paribus. “
My understanding of what he is saying is that if it takes 12 days (or any other time frame) to produce a bushel of corn, and 12 days to mine 6 ounces of silver, then a bushel of corn should be worth 6 ounces of silver. I don’t think that this would work in our current society. We have a society where a person is paid for an honest days labor, and someone is paid through welfare programs to not produce an honest days labor.
But, if you did an honest days labor, and everyone else did an honest days labor, then everyone pooled the outcome of that labor, and you were given what you needed from that pool, then it would work. Then you would be being paid for your talent, and your days labor. Sounds kinda familiar to me… Wonder where I have heard of that idea before?
NOTE: One interesting point is that after this pamphlet was written, more money was printed and’s press was employed to print it.