Populism versus Economic Expertise: J. Laurence Laughlin Debates William (Coin) Harvey

Abstract

William Harvey’s best-selling Coin’s Financial School made the bimetallist case for free coinage of silver through a fictitious debate in which leading bankers, politicians, and economists were humiliated by a young bimetallist. One of Harvey’s targets, J. Laurence Laughlin, challenged Harvey to a real debate, in which populist critique of established authority was confronted with an emphatic defense of monetary orthodoxy and academic expertise by an economist who, though founder of the University of Chicago’s economics department and of the Journal of Political Economy, had a problematic claim to speak for the economics discipline as a whole.

Keywords:

• bimetallism
• William (Coin) Harvey
• J. Laurence Laughlin
• populism

Notes

¹ E.g. Lyman Gage, president of the First National Bank of Chicago, three-time president of the American Banking Association, and later, from 1897, President McKinley’s Secretary of the Treasury (see Harvey, 1894, pp. 128, 129, “Mr. Gage Makes an Admission,” and pp. 115–117, 131, 226–230). Others included Phillip D. Armour (of Armour & Company, meat-packers), Marshall Field (of the eponymous department store), and Senator Shelby Cullom. One supposed attendee, Judge Henry G. Miller of Chicago, did concur with Harvey sufficiently for Harvey to publish a 110-page book, Chapters on Silver, by Miller (1895).

² However, James Livingston, Origins of the Federal Reserve System (Livingston, 1986, p. 91), accepted Coin’s Financial School as “an account of an event as well as a sustained analysis of monetary history and theory. The event was Coin’s six-day lecture series in May 1894, at the Art Institute of Chicago, which became, in effect, a debate between the “little economist” and the leading citizens of the city.” Livingston (1986, pp. 90–96) relied on the original 1894 edition of Coin’s Financial School (and on Harvey, 1899), without reference to the 1963 reprint with Richard Hofstadter’s 80-page introduction or to the journal articles of Jeanette Nichols. Livingston (1986, p. 95) did mention some replies to Harvey, but did not notice that Gage, Kohlsaat, Laughlin and other supposed participants had issued a joint statement that the 1894 debate was fictional (Hofstadter, 1963), pp. 6, 7. McCulley (1992) focused on the period from 1897, and so did not mention Coin. Livingston (1986, pp. 104–110) discussed the Indianapolis Monetary Convention without mentioning that its reports, although issued in the name of all the members of the Monetary Commission, were drafted by Laughlin—but on page 209, discussing events of 1911, quoted a letter from Laughlin to Willis referring to “the Report of 1898 which you and Root helped me to prepare.”.

³ A problem sidestepped by Alfred Marshall’s 1887 suggestion of “symmetallism,” a monetary unit consisting of a certain amount of silver plus a certain amount of gold without any fixing of the relative price of the two metals, a step towards the Simon Newcomb-Irving Fisher proposal to use monetary policy to peg a broader price index.

⁴ After teaching economics in Virginia, Willis helped draft the Owen-Glass Bill as the banking expert of the House Banking and Currency Committee chaired by Representative Carter Glass (Democrat from Virginia), and then was secretary of the organizing committee for the Federal Reserve System and secretary to the Federal Reserve Board.

⁵ Laughlin and Harvey also spoke about plans of national currency reform before the Sunset Club on 6 December 1894 (a transcript is in the Laughlin Papers).

⁶ Milton Friedman (Friedman, 1992, pp. 121, 122, 137 n, 139, 140, 142–145) sympathetically described Walker’s support for establishing bimetallism by international agreement and opposition to attempting to do so by unilateral action. Like Walker, Friedman felt that bimetallism (meaning, in practice, alternating monometallic standards) could result in a more stable price level than either a gold or a silver standard, although inferior to Marshall’s symmetallism (which would avoid pegging the relative price of two commodities).

⁷ In 1884, while still teaching at Harvard, Laughlin abridged John Stuart Mill’s Principles of Political Economy, omitting the chapters on social philosophy but adding charts, data and examples relevant to the United States.

⁸ Both Walker (1896) and Friedman (1992) regarded that low price of silver as the result of demonetization, and felt that bimetallism could have been maintained by international cooperation after 1873 (for Friedman, perhaps at a ratio higher than 16 to 1). There exists a large literature on monetary standards in the nineteenth century, including the switch of the Latin Monetary Union countries (France, Belgium, Italy, Switzerland) from a de facto silver standard to a de facto gold standard (e.g., Einaudi, 2001; Flandreau, 2004; Redish, 2000; Wilson, 2000).