COLLECTION MONETA

.
156
THREE CONFERENCES ON
INTERNATIONAL MONETARY HISTORY
MONETA, WETTEREN 2013
Business with Money: Monetary Politics and Capital Flows in the Era of the First Globalization
Session of the European Business History Association and Business History Society of Japan,
Paris conference on Business enterprises and the tensions between local and global, 30 Aug - 1 Sept 2012
Small change: bronze or copper coins from Antiquity to 19
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(ANR DAMIN, LabEx TransferS), Paris, E cole Normale Supe

rieure, May 13-14, 2013

Transfers of precious metals and their consequences, 16
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Round Table of the Silver Monetary Depreciation and International Relations program
(ANR DAMIN, LabEx TransferS), Madrid, Casa de Vela

zquez, May 16-17, 2013

G. Depeyrot, editor
with the cooperation of C. Bre

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Cover: miners at Salsigne (Aude, France); galleon Kovalenko Inna Fotolia.com;
Muse de Ste: inv. 891.14.1, Robert Mols, "Port de Cette", 1891,
Huile sur toile, 110x210 cm.


This publication was prepared in the framework of the program of the
Agence nationale de la recherche (www.anr.fr)
DAMIN (La Dprciation de l'Argent Montaire et les Relations Internationales
Silver monetary depreciation and international relations) (www.anr-damin.net)
ANR 2011 BSH3 008 01.



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(www.transfers.ens.fr/)
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293
A Restatement of the Price Theory of Monies

Dennis O. Flynn and Marie A. Lee
1

1. Neoclassical Roots of Modern Economics
Pre-20
th
-century Classical economists perceived physical monies, including coins, the
same way they perceived non-monetary goods according to relative costs of production in
terms of embodied labor time. Thus, if production of a specific hand-woven rug-y were to
require 500 hours of labor, while production of coin-x required 25 labor hours (including
labor embodied in production of intrinsic content and machinery), then the price of the rug
would equal 20 coin-x/rug-y. Labor value of the rug (500 hrs/rug) divided by labor value of
the coin (25 hrs/coin) causes labor hours to cancel. What could be more straightforward than
such a calculation? Cost of production was viewed through the prism of embodied labor time,
which in turn regulated respective market values (and thus the rate at which coin-x exchanged
for rug-y).
Diminution in intrinsic content of a coin whether intentional or unintentional (due,
say, to wear and tear) did not pose a theoretical problem for the Classical scheme because
loss of 10 percent of intrinsic content of coin-x, other things equal, simply meant that the
price of rug-x would rise from 20 coin-x/rug-y to 22 coin-x/rug-y. Hence, reduction in coin
content by 10% simply implied that 10% more coins would have to be surrendered in
purchase of the rug, since each coin contained only 90% the embodied labor time of a full-
bodied coin. Other complicating challenges to Classical monetary theory were not so easily
dismissed (one of which will be mentioned in a moment), but the overarching characteristic of
Classical value theory for monetary and non-monetary products alike was reliance upon a
general cost-of-production approach. Classical value theory was based upon an objective
criterion: the amount of labor embodied in production of each product.
The most fundamental building blocks of economic theory today the Laws of Supply
and Demand emerged after the 1870s, derived from a subjective theory of value that
replaced the objective cost-of-production value-theory foundation of Classical economics. For
purposes of this essay, Neoclassical economics refers to supply and demand structures that
emerged from subjective early-20
th
-century utility analysis. Notwithstanding certain
shortcomings within Neoclassical theory itself, it must be acknowledged that the Neoclassical
formulation also boasted advantages over its Classical labor-theory-of-value predecessor. For
instance, subjective utility theory recognized enhancement in value of a product,
notwithstanding fixed embodied-labor production cost. Subjective preferences can (and do)
change over time, so product price can rise in response to emergence of increasingly favorable
perceptions. Utility theory provides mechanisms through which enhanced subjective feelings
can be shown to shift market demand, and thereby raise an items price over time. A
particular style of haircut may rise in popularity and thus its price might rise for a time, for
instance, only to decline in popularity and thus price later on (irrespective of fixed labor-time
cost of production). Borrowing from 19
th
-century Utilitarian philosophers, Neoclassical
economics was able to better describe changing market valuations based upon altered
individual subjective perceptions (aggregated to the market level). This ability to divorce
market values from production costs in part explains why subjective Neoclassical valuation
theory replaced Classical objective valuation theory (based upon production costs) over a
century ago. It is important to emphasize that Neoclassical theory is not a new and

1
University of the Pacific, Stockton, CA 95211
294
improved version of Classical economics; neo terminology can be misleading because
subjective Neoclassical economics replaced objective Classical economics.
While subjective utility analysis since the early-20
th
century may have advanced
economic theory in certain respects, as mentioned above, Neoclassical theorist never managed
to properly integrate monetary theory and subjective non-monetary theory. One formidable
stumbling block has to do with proper conceptualization of time. Utility theory, the
cornerstone of modern Neoclassical economics, asserts that consumption is the sole source
of individual satisfaction (i.e. utility). Consider textbook application of the Laws of Supply
and Demand under competitive conditions to an ordinary item such as milk (Figure 1).
The supply function (S
Milk
) refers to the profit-maximizing rate of milk production (or, milk
sale) at each price, while the demand function (D
Milk
) refers to the utility-maximizing rate of
milk consumption (or, milk purchase) at each price. Consider precise dimensions of labels on
each axis.

Figure 1. Milk Market
Dimensions for the (horizontal) quantity axis in Figure 1 are gallons of milk/week.
Quantity demanded at each price (D
Milk
) refers to gallons of milk customers buy (and
consume/drink) per week, while quantity supplied (S
Milk
) refers to gallons of milk firms
produce (and sell) per week. Specification of a time period is necessary when describing
quantity of milk consumed, since a number such as 30 gallons is impossible to interpret in
the absence of a time dimension. Thirty gallons of milk per week could be considered a high
rate of family milk consumption, for instance, while thirty gallons per century could be
considered a paltry rate of family milk consumption. Unit of time must be specified in order
to assess whether 30 is a big or small number; hence, quantity axes for all microeconomic
analyses must specify a time dimension. Since textbook Laws of Supply and Demand
explicitly assume that consumption is the sole source of utility (i.e. satisfaction), and since
consumption rates must be expressed in terms of time intervals, all horizontal-axis-quantities
for non-monetary products must be labeled units of the item per time period.
295
2. Freezing Time: Is Addition of Monetary Apples and Oranges Legitimate?
Expression of non-monetary supply and demand quantities as time-dimensioned flows
cannot be overemphasized because this requirement contrasts sharply with conceptualization
of supply and demand quantities in conventional monetary theory (Figure 2). Textbook
money supply and money demand functions are explicitly portrayed as inventory stocks,
meaning that monetary quantities are conceptualized at a point in time (think freeze-frame
shot in an old-fashion motion picture reel). Portrayal of monies as point-in-time inventories
contrasts sharply with portrayal of non-monetary items, which are understood to be
produced/sold (supply-side) and consumed/purchased (demand-side) over a specific time
period. Readers need explore no further than their own wallets in order to visualize monies as
inventory-stocks: currency refers to coins, paper bills, and other tangible, transportable
monetary items of various mint dates and intrinsic contents. Irrespective of precise intrinsic
content of an individual dollar-bill or dollar-coin, or the mint date of each, textbook monetary
theory treats all dollar bills and dollar coins as interchangeable (i.e. a 2001 $US-coin is a
perfect substitute for a 2007 $US-note). The key point is this: conventional currency-money
supply refers to accumulated stocks of diverse tangible monetary items, irrespective of the
year of production or intrinsic content of each constituent component. In sum, currencies of
diverse contents both in terms of intrinsic physical quality and date of issue are: (a) added
together (e.g. copper + lead + nickel coins + paper bills), and (b) expressed in inventory-
theoretic-supply-and-demand terms. Physical monies do indeed accumulate over time, so
theorists simply recognize this reality when referring to money supply in inventory terms. On
the other hand, the practice of adding together distinct physical monies is problematic, as will
be shown below.

Figure 2: Textbook Money Supply and Money Demand
Commonplace superimposition of money-supply and money-demand functions
(Figure 2) implies that money demand functions are portrayed in inventory-theoretic terms
along with money supply; that is, money demand is expressed as units at an instant in time.
Money demand refers to the quantity of money an entity (or group of entities) wishes to hold
296
at an instant in time. The bottom line: money-supply and money-demand quantities are
expressed in units of money (no time dimension is permitted); that is, modern monetary
concepts are couched in terms of inventories.
2
This inventory-approach is unique to monetary
theory and contrasts sharply with depictions of non-monetary quantities in Figure 1, which are
expressed strictly as units of the item per time period.
A sketch-summary of the main points covered thus far is perhaps in order. Mainstream
economic theory today portrays monetary quantities in a strikingly-different manner than
mainstream portrayal of non-monetary quantities. First, the textbook money supply function
is uniquely vertical because it is (correctly) portrayed in point-in-time-inventory terms
(Figure 2), while the non-monetary supply function is displayed as a conventional positively-
sloped function (Figure 1). Quantity of money supply is portrayed as fixed because time has
been (conceptually) frozen; thus, quantity of money is viewed as a specific number of
monetary units (irrespective of what the interest rate might be) held at an instant in time.
3
On
the other hand, quantity of milk produced/sold (i.e. supplied) or consumed/purchased (i.e.
demanded) over time varies depending upon the level of price chosen. Second, non-monetary
supply-demand analysis focuses strictly upon each unique product individually (e.g. a dozen
identical Grade-AA eggs), whereas supply of and demand for money refers to hodgepodge
aggregation of diverse items (i.e. coins and notes of various intrinsic contents and original
mint dates). In other words, monetary-versus-non-monetary quantity axes contrast in terms of
(a) inclusion/exclusion of time, and (b) inclusion/exclusion of non-identical items. Monetary
quantities exclude passage of time, whereas non-monetary quantities exclude non-identical
units. Disparate treatment of monetary quantities vis--vis non-monetary quantities is
characteristic of Neoclassical economics, and this helps explain the origin of the fundamental
dichotomy in modern economic theory microeconomics versus macroeconomics a
distinction that never existed under the Classical regime that preceded todays disjoint
theoretical system.
4


2
Unfortunately, velocity terminology continues to appear in monetary history literatures. A leading economist
of the early twentieth century, Irving Fisher attempted to transform monetary stocks into time-
dimensioned flow concepts (in a failed attempt to somehow interface with demand-and-supply-time-
dimensioned flows generated via utility analysis for non-monetary items). Fishers MV = PT
methodology was rightly repudiated by UK-Cambridge monetary theorists. Cambridge monetary
theorists insisted that monies are inherently inventories, and must be conceptualized in point-in-time-
inventory-theoretic terms (i.e. not as quantities over time). Economics textbooks today routinely
reference Fishers quantity theory of money as a precursor to modern monetary thought. This is
nonsense: Fishers attempt to convert point-in-time monetary stocks into time-dimensioned monetary
flows failed, plain and simple. The approach of this essay is the opposite of that of Fisher: Value theory
(i.e. microeconomics in todays jargon) must be broadened to include inventory demand and
inventory supply concepts. Economists today generally consider non-monetary (microeconomic)
demand and supply analysis to be rock solid, in other words, while many perceive macroeconomics as a
mess. I argue the opposite: Canonical microeconomic supply-and-demand structures are inherently
inadequate because they are incapable of integrating inventory stocks. Once non-monetary-supply-and-
demand concepts are expanded to include inventory stocks, this clears the way for integration of monies
into a unified framework. Flynn criticized Fisher MV = PT flows-only explanations for the (European)
Price Revolutions nearly three decades ago (Flynn 1984); nonetheless, application of velocity-based
flows-only arguments continue unabated.
3
Practical businesspeople around the world today routinely evaluate inventory holdings periodically, of course,
and they frequently take stock after normal business hours. Inventory assessment provides a point-in-
time snapshot, since new deliveries and new sales cannot occur while the business is closed. In other
words, inventory analysis is a normal day-to-day activity in the real world, and not something restricted
to abstract analysis of monies. This essays Unified Theory of Prices provides an analytical apparatus
applicable to goods in general, both monetary and non-monetary. Doing so requires disaggregation of
distinct products, however, which explains objections in this essay to the common practice of adding
together diverse monetary quantities. In short, the Unified Theory of Prices dispenses with need for the
microeconomics-macroeconomics dichotomy that characterizes (and plagues) Neoclassical theory.
4
An astute scholar of the history of monetary thought, Mason (1974, p. 568) summarized the fundamental
micro-macro dichotomy nicely in the following passage: The unintentional and generally
unrecognized substantive alteration of classical monetary theory by neoclassical inversion of the
297
3. Scientific Measurement from the Outside
All scientific measurements require imposition of arbitrary metrics that are external to
the object evaluated. A heap of coal, for instance, might be weighed in terms of metric tons, a
unit of measurement strictly independent of the coal itself. It clearly would make no sense to
measure a heap of coal in terms of itself: the heap of coal would weigh one heap of coal
irrespective of its heaviness or mass. The same holds true for expression of microeconomic
price of a non-monetary product: the objects price must be measured in terms of a metric
external to the object itself. Textbook prices of non-monetary items are normally expressed in
terms of an abstract dollar, an intangible-unit-of-account money that is external to the
microeconomic supply-demand system (Figure 1). Textbook authors assign whatever dollar-
price pops into the analysts head, since the abstract dollar itself is assigned no particular
value in any case. It is immaterial whether the author assigns a price of $10/shirt versus
$50/shirt, for instance, since the abstract-measuring-stick dollar is arbitrarily imposed from
outside the analysis in any case. Economist reason that microeconomic prices via the Laws
of Supply and Demand refer to relative prices only, since the abstract dollar is cancelled out
in the process of generating meaningful relative prices. For example, if price were $10/shirt
(for a specific shirt) and price of a particular coffee mug were $5/mug, then division of
$10/shirt by $5/mug yields a relative price of 2 mugs/shirt (since abstract dollars cancel out).
Alternatively, prices of $50/shirt and $25/mug could have been assigned just as easily;
whereupon, division of $50/shirt by $25/mug yields the same relative price of 2 mugs/shirt. In
other words, dollar (nominal) prices can be scaled up or down to any extent chosen by the
analyst: Supply and demand functions yield the same relative prices irrespective of number of
abstract dollars assigned. (This is a version of Monetary Neutrality reasoning in economics
jargon.) A key point to keep in mind is that market value cannot be assigned to such an
abstract dollar ($) within microeconomic analysis, since the dollar is an intangible measuring
stick arbitrarily imposed from outside of the supply-demand system. In sum, microeconomic
supply-demand analysis has nothing to do with valuation of any tangible money. This
conclusion is pre-ordained since microeconomic demand is generated exclusively through
consumption, while physical monies are inventory stocks that are non-consumables. In other
words, tangible monies are precluded from Neoclassical utility-based Laws of Supply and
Demand (a fact recognized by all economists). Given that tangible monies were necessarily
excluded from utility-based microeconomic theory, economists had little choice but to find a
theoretical home for tangible monies. Macroeconomics evolved into a newly-designed
home for tangible monies (along with relatives).
One advantage of standard macroeconomic money supply and money demand (Figure
2 above) is explicit acknowledgement that physical monies must be conceptualized in
inventory terms (notwithstanding Irving Fishers failed MV = PT attempt to re-conceptualize
monetary stocks as monetary flows). Hence, absence of a time-dimension on all monetary
quantity axes is implicit acknowledgement that monies are inventory stocks inherently.
Indeed, couching money supply and money demand in inventory-theoretic terms represents a
core strength of textbook monetary analysis. Unfortunately, theorists have been unable to
successfully integrate tangible monies (inventory stocks) within flows-based microeconomic
value theory, unlike the unified approach of Classical predecessors. This unification riddle
beckons for solution: In what terms can one express the price of money alongside
denomination of non-monetary prices in terms of money itself?

classical monetary theory, the relative values of goods and the value of money relative to goods no
longer had a common explanation. Since different methodologies were employed by neoclassicists in
value theory and monetary theory, respectively, each theory required abstraction from the other.
Consequently, relative values were subsequently explained in real terms, abstracting from the value of
money, while the value of money was illuminated in abstraction from relative values. Also see Mason
(1963, p.57) on this central point.
298
4. Value in Terms of Which Money?
It has been claimed that the first clear statements of the so-called Quantity Theory of
Money date from the sixteenth century, while American treasure flooded Spain and the rest
of Europe. (Grice-Hutchinson 1952) Mintage of American silver is said to have augmented
money supplies, which in turn caused elevation of price levels for over a century; in other
words, increased quantities of money caused the famous (European) Price Revolution. When
1920s archival research by Earl J. Hamilton (1934) seemed to confirm this quantity-theory
contention that percentage growth in money supplies caused sixteenth-century European price
inflations, Hamilton became a worldwide star among monetary economists (and ironically,
for John Maynard Keynes too). Hamiltons landmark explanation eventually floundered,
however, as it relied upon Irving Fishers ill-fated, flows-only version of the Quantity Theory
of Money: MV = PT. Eschewing details here, Hamiltons Fisherian model couched in terms
of time-dimensioned flows rather than inventory stocks was demonstrated inconsistent with
empirical evidence. (Flynn 1978; Flynn 1984)
Given an inability to integrate monetary theory and value theory, textbook monetary
theory has become schizophrenic.
5
Unable to formulate a purchase-price equivalent to
microeconomic price (Figure 1), macroeconomic monetary theory instead offers two models
that are (arguably) irreconcilable: A short-run monetary model (Figure 2) as well as an
entirely separate long-run monetary model (Figure 3). The models look identical, except
that the short-run rental price of money depicted in Figure 2 is the interest rate, whereas
the long-run price of money depicted in Figure 3 is 1/P (reciprocal of a price index). Both
macroeconomic models of money are inapplicable to global monetary history, as mentioned
previously, since historys four main monetary substances over the past five centuries silver,
gold, copper, and cowry shells had separate points of production, distinct end-markets, and
therefore incongruent trade routes connecting respective areas of production with distinct end-
markets (Flynn and Girldez 1997). In other words, aggregation of distinct monetary
substances into catch-all category money precludes proper analysis. Two related points
deserve brief mention: (1) textbook models refer to monetary stocks within a nation-state,
while monetary history is filled with cases of actual monies that roamed across boundaries
uninhibited; (2) it is impossible to speak of the value of a hodgepodge of diverse monies.
Integration of monetary substances within value theory requires disaggregation of monetary
items to the maximum extent possible, and conceptual limitation to nation-state analysis
makes little sense in historical terms.
6
Let us now turn to the central question of this section of
the essay: What is the best way to conceptualize the price axis in monetary (and non-
monetary) analysis?

5
Ludwig von Mises (1971) attempted to integrate monetary and value theory by linking money to future
consumption of non-monetary consumables, but the effort has not been accepted.
6
According to the leading introductory economics textbook, $US 862 billion in currency (not in banks) existed
in 2009, which comes to over $3,600 for every U.S. adult. (Mankiw, 2012, p.225) Other authors
acknowledge that perhaps half of this cash resides outside of the United States, however, so it is not all
clear what economists mean when they reference the United States Money Supply. It makes sense to
speak of the global supply and demand for green dollars, in other words, but what has that got to do
with the U.S. money supply?
299

Figure 3. Long-Run Money Market
The conventional short-run approach to money (Figure 2) is unsatisfactory because
price refers to a rental rate rather than purchase price (for non-monetary commodities).
Lenders rent money in the sense that the monetary item must be returned in good operating
condition (also true for machine rental), plus pay a rental fee (the interest rate). Placement of
an interest rate on the price axis borrowed from John Maynard Keynes liquidity
preference theory is unsatisfactory on at least two counts. First, one could also loan a
hundred pounds of beans at 5%/year with contractual obligation to repay 105 pounds of beans
one year hence: Such legitimate loan does not justify labeling the price of beans 5%/year!
Then how can this slight-of-hand apply to money? Second, how can specialists in commodity-
money histories discuss the price of silver bullion, say, relative to its cost of production in
terms of the interest rate? Do normal profits exist when the price of cowry shells descend to
their cost of production at 5%/year? Neither price, nor production cost, nor profit can be
expressed in terms of pure percentages. Slight-of-hand placement of the interest rate on
moneys vertical axis does at least permit connection between monetary and non-monetary
sectors: Monies (inherently point-in-time inventory stocks) are tied to the non-monetary
real sector (couched in terms of time-dimensioned flows) via interest (percentage growth
over time).
7
But conventional monetary theory is incapable of addressing the fundamental
issue of production costs of the monies themselves.
The conventional long-run approach to money (Figure 3) is unsatisfactory as well, but
(unlike its short-run counterpart) at least Figure 3s vertical axis attempts to conceptualize
moneys purchasing power in value terms. P (a price index) works as follows: P represents
the price of a basket of items (rather than a single product) and is calculated in terms of
countable units of a tangible money (such as the $US); hence, rise in P over time implies
that more $US are required to purchase the basket, which in turn implies decline in
purchasing power of each $US, since a greater quantity of $US must be surrendered in order
to purchase the basket. This long-run approach to money is a clever way to speak about
changing value of money, but it is unconvincing. First, it is hard to imagine a more indirect

7
Open-market operations involve purchase of debt instruments (with interest rates), but historical changes in
monetary quantities did not operate through interest-rate mechanisms.
300
approach to evaluate the worth of an item: Calculate values of all items (in terms of $US)
except the $US, then impute value to the $US (the sole excluded residual item). Imagine
suggestion that the best way to analyze price of a particular pair of stockings: first, determine
prices of all products except stockings, and then impute market value of these stockings as a
residual item. In sum, Figure 3 contains aggregation problems on both axes and also precludes
discussion of production cost for any particular money.
5. Pragmatic Accounting via Intangible Monies
Pragmatic business people sometimes solve an everyday problem that unintentionally
involves profound theoretical implications. Imaginary monies were developed many
centuries ago in Europe (and probably elsewhere) simply to keep bookkeeping straight in
context of formidable practical problems. Monies rarely remained within political borders, as
already mentioned, so everyday business was often conducted via dozens, even hundreds, of
distinct tangible monies. In such context, which tangible money should bookkeepers use to
track all transactions? The short answer: none. Choice of a specific coin (say, the peso) would
not suffice because coins often experienced alteration in intrinsic content after mintage, due to
both intentional and unintentional (normal wear and tear) adulteration. Following a tradition
that perhaps dates back to the time of Charlemagne (Enaudi 1953), the Dutch government and
Dutch East India Company (VOC) recorded all transactions in terms of an imaginary unit-
of-account-money system intangible stivers and guilders (English-language spellings of
Dutch stuiver and gulden) between the 1570s and 1681. (Wolters 2008, p. 42) Intangible,
non-physical stivers and guilders were linked to an actual physical coin: an ideal Riksdollar
(hereafter designated Rx$) that contained precisely 25.7 grams of pure-silver content. Dutch
monetary authorities proclaimed one perfect Rx$ equivalent to 47 intangible unit-of-account
stivers in 1606, which implied that each intangible unit-of-account stiver (UASt) represented
precisely .5468085 grams of fine silver (i.e. one-forty-seventh of 25.7 grams). Since an
intangible unit-of-account guilder (UAG) equalled 20 UASt by definition, each intangible
UAG therefore represented precisely 10.93617 grams of pure silver. This type of link-unit-
of-account-money (LUAM) system was ingenious and time-tested; since actual transactions
involved bewildering varieties of diverse physical media-of-exchange monies, each
transaction could be recorded in terms of its grams-of-pure-silver equivalence. Actual
translation of transactions into silver equivalence on-the-spot must have required tremendous
exchange-rate calculation skills, but what alternative accounting arrangement would be
superior? Physical media-of-exchange monies could not serve as independent accounting
units because they lacked uniformity. Keeping track in a logical and practical manner required
an outside scientific measurement device an intangible, imaginary unit of account money.
Recognition of ubiquitous intangible link-unit-of-account monies (hereafter LUAMs)
for over a thousand years has implications for monetary theory. We are confronted with a
link-unit-of-account money that clearly could serve neither as a medium-of-exchange money
nor as a store-of-value money because the LUAM was not even tangible. Macroeconomic
textbooks implicitly deny existence of such LUAMs, since they explicitly insist that an item
must fulfill all monetary functions simultaneously (1) medium of exchange, (2) unit of
account, and (3) store of value in order to be considered a money. Actual tangible monies
fulfilled medium-of-exchange function (1) and store-of-value function (3) between the 1570s
and 1681, yet only intangible guilders/stivers fulfilled unit-of-account function (2) for the
Dutch global enterprise. According to textbooks today, no money must have existed between
the 1570s and 1681, since no monetary item fulfilled all three monetary functions
simultaneously! When historical reality and economic theory diverge fundamentally in such
cases, it is theory that must give ground to practical reality that persisted for at least a
millenium. Time for a new monetary theory has arrived.
301
6. A Price Theory of Monies
Formulation of a Price Theory of Monies requires imposition of an outside metric,
as is true for any scientific theory. It is tempting to conclude that the imaginary LUAM just
discussed an intangible money separate from tangible medium-of-exchange monies could
serve as such an outside metric. However, while link-unit-of-account monies (such as Dutch
UASt and UAG) have served admirably as abstract accounting units, they are inappropriate
for measuring economic values. This crucial distinction can be clarified through focus on
labels for each axis in Figure 4.
For simplicity, assume that Dutch UASt and UAG are rounded downward to .5 grams
and 10 grams fine-silver equivalence respectively (rather than odd numbers in actual use).
The Unified Theory of Prices is unified in the sense that it is alleged to apply to all
products, including tangible media of exchange, but also including silver bullion. By
assumption, the stock of fine silver indicated by IS
silver
equals 10 million grams (Figure 4).
Since each UASt represents .5 grams of fine silver, one could equivalently state that the stock
of fine silver equals 20 million UASt. Or, one could equivalently state that the stock of fine
silver equals 1 million UAG. Each number 10 million versus 20 million versus 1 million
refers to the same quantity of fine silver.

Figure 4. LUAM Axis versus RUAM Axis
Next, consider initial inventory supply (IS
Silver
) and inventory demand (ID
Silver
)
functions in Figure 5; they are identical to those shown in Figure 4. Then allow inventory
demand in Figure 5 to shift outward to ID
Silver
. Enhanced inventory demand clearly results in
increased price of silver from P
Silver
to P
Silver
, yet IS
Silver
has not changed. Market value has
risen while market quantity is fixed, which is to say that price in terms of the RUAM rises
while quantity in terms of this particular Dutch LUAM has not changed. In conclusion, Stiver
302
and Guilder LUAMs cannot represent the price of fine silver, since they represent quantity of
fine silver; price changed and quantity did not change.

Figure 5. Change in RUAM-Price; Fixed LUAM-Quantity
Since we claim that the Unified Theory of Prices is applicable to all products,
including fine silver, the intangible unit-of-account money label on the vertical axis of Figure
4 and Figure 5 must refer to a unit-of-account money distinct from the accounting LUAM
discussed above. The UTP requires expression of all prices in terms of a ratio unit of account
money the RUAM which must not be confused with the LUAM. Intangible-unit-of-
account monies (e.g. the UASt and UAG, as well as the RUAM) are by definition excluded
from categorization as tangible medium-of-exchange and store-of-value monies. LUAMs
(such as the UASt/UAG) were designed to fulfill the accounting sub-function of the unit-of-
account function of money alone, whereas the RUAM serves a separate valuation-sub-
function of the unit-of-account function of money. The Unified Theory of Prices not only
requires disaggregation of distinct tangible monies, but also mandates disaggregation of
intangible unit-of-account according to unit-of-account-sub-function LUAM versus RUAM.
To our knowledge, no such claim has been advanced previously.
8
Few economists are aware
that intangible unit-of-account monies were foundations of accounting history for centuries,
we suspect, but economics professors routinely (subconsciously) utilize the intangible RUAM
while teaching standard microeconomic theory: Externally-imposed dollar prices under the
Laws of Supply and Demand are RUAMs. Relative price refers to the rate of exchange
between two non-monetary commodities, since cancellation of the numerator-dollar (RUAM)
by the denominator-dollar (RUAM) leaves units of one product per unit of the other product.

8
Except Flynn (2009) and Flynn (forthcoming).
303
7. Does the UTP Apply to Practical Issues Encountered in Historical Sources?
The Unified Theory of Prices can be applied to any topic in economic history, and
indeed can be used to relate branches of history typically thought to be independent.
9
A key
component is the notion of end-market, a term that does not exist in conventional
economics. Inventory Demand determines where a tangible product eventually resides its
end-market. Consider shipment of a large number of a particular high-prestige automobile
the fictional Kor exported from Korea to (and through) Rotterdam, the Netherlands. The
quantity of Kors destined to remain within Rotterdam is determined by (1) resident tastes and
preferences, (2) wealth of Rotterdam residents, and (3) the citys population. Since the
population of Rotterdam is far greater than population of Bilthoven (affluent suburb of
Utrecht), for instance, many more Kors would probably fill garages in Rotterdam than
garages in Bilthoven. End-market locations for Kors in Germany, Belgium, Switzerland,
France and elsewhere would likewise depend upon the same set of determining factors. No
surprise: wealthy neighborhoods contain more units of expensive items than do poor
neighborhoods. Yet the UTP model applies to exclusive and non-exclusive commodities
alike: Salt inventories, for example, are presumably distributed relatively equally across end-
market neighborhoods of various categories. Inventories of paper towels must have been
greater in pre-Hurricane-Katrina New Orleans than after Katrina, but for a different reason
depopulation of that city. Such observations may seem obvious, yet conventional analytical
description of them is precluded since Inventory Supply and Inventory Demand concepts do
not exist for conventional, flows-only Laws of Supply and Demand.
Demonstration of Unified Theory of Prices mechanisms is most easily visualized with
assistance of the Hydraulic Metaphor, an intuitive model of stocks and flows that exhibits
trade goods as if they were liquids. The Hydraulic Metaphor has been applied, for example, to
description of how and why textiles produced in western India were destined for end-markets
in eastern African (including hinterland).
10
Figure 6 reproduces just one Hydraulic Metaphor
visual with focus upon the central role of end-markets (precise mechanisms are demonstrated
via eighteen previous visuals). The Jambusar container of western India, as well as eastern-
African Regional Center containers, and those of eastern-African Hinterlands are filled with
dark liquids, which indicate quantities of textiles at rest in end-markets where indicated in
Figure 6. Respective Inventory Demand at each location determines each containers
capacity-size (not drawn to proper scale). This Figure 6 visual image is consistent with a
central conclusion: Inventory Demand determines Inventory Supply, and absolutely not the
other way around. All flows detailed in the article from which Figure 6 has been extracted
production supply, sales supply, purchase demand, consumption demand, and decay
ultimately respond to Inventory Demand.

9
Flynn and Girldez (2002) have linked global monetary stocks and flows to the spread of plants, animals and
diseases globally; this is the sense in which we say that an economic model focused on inventories can
relate more easily to physical sciences.
10
Our model is based upon historical research on this topic by Machado (2009). For more complete application
of the Hydraulic Metaphor to Machados work, see Flynn and Lee (forthcoming).
304

Figure 6. Textile End-Markets in India and Africa
305
7. Unified Theory of Prices Applications to Monetary History
Direct application of the UTP to valuation of individual monies yields what is in effect
a Price Theory of Monies, in contradistinction to numerous past versions of the Quantity
Theory of Money.
11
Application of this Price Theory of Monies to seventeenth-century Dutch
monetary events should interest monetary historians, since the UTP suggests that mint activity
by Dutch contemporaries was logical and reasonable, in contrast to previous scholarly claims
that Dutch behavior was erratic and irrational. Many mint authorities did in fact debase coins
repeatedly, followed by strengthening of intrinsic coin content, only to revert back once more
to a series of debasements: How can such mint behavior be characterized as rational and
pragmatic?
The Price Theory of Monies suggests logical behavior by mint authorities. Consider
Figure 7.
12
A full-bodied 1681 coin Guilder (CG
1681
) contained 9.61 grams of pure silver.
Since records indicate that the Mint price (and by assumption, the bullion price)
equaled .00993631 CG
1681
per gram of fine silver, mint seigniorage of approximately 4.5% is
implied. In other words, fine silver in money form was worth approximately 4.5% more than
was worth of fine silver in bullion form. Whenever the Mint price equaled or exceeded the
bullion price, guilder coins (1681) were minted (southeasterly-pointing arrow indicates
increase in stock of CG
1681
); on the other hand, whenever the bullion price exceeded the Mint
price by more than 4.5%, full-bodied guilder coins (1681) were melted (northwesterly-
pointing arrow indicating decrease in stock of CG
1681
). A central theoretical contradiction
arises, however, as soon as one attempts to express alteration in value of the coin-guilder
while simultaneously expressing both Mint price and bullion price in terms of coin-guilders:
the value of any item cannot be expressed in terms of itself (since price equals 1 no matter
how market value changes). Specifically, the value of a coin guilder cannot be expressed in
terms of the coin guilder. The Price Theory of Monies avoids this self-contradictory
conundrum by denominating coin-guilder prices in terms of an entirely separate intangible
RUAM (ratio-unit-of-account money).
13

Recognizing that specific coin-guilders experienced greater wear and tear than other
(originally-identical) particular coin-guilders, certain acknowledged specialists differentiated
among coins on the basis of intrinsic silver content. In plain language, full-bodied coin-
guilders were culled. Few market participants possessed specialist skills (by definition)
needed to discern precise coin contents; hence, bullion-market transactions must have
involved use of coins that had deteriorated, but to an extent not precisely known in the general
bullion market. Such was not the case for specialists, however, who valued coins strictly
according to intrinsic content (in a specialist bullion sub-market). Non-specialist bullion
traders presumably recognized deterioration of coin quality over time (since it was known that
specialists culled strong coins), however, even though precise intrinsic content of a particular
coin might remain unknown to most. It is reasonable to assume that general deterioration in
coin value more or less commensurate with deteriorating intrinsic content would be
recognized eventually by general participants in the bullion market. Thus, bullion price would
be expected to rise as weaker coins (on average) exchanged for a unit of fine silver.
14


11
Quantity theories of money generally proclaim that, other things equal, change in the stock of money quantity
results in a proportionate change in the price level. The Price theory of money makes no such claim.
First, each specific money is modeled independently (i.e. not monies added together). Second, there is
no apriori reason to expect that change in the stock of a particular money would cause its market value
to change proportionately (which would imply unitary price elasticity of demand, a restrictive
assumption that is difficult to justify).
12
Reproduced from Figure 4 in Flynn (forthcoming).
13
All non-monetary prices are also expressed in terms of RUAMs, which is another way of stating that the
framework is a Unified Theory of Prices.
14
A more complete explanation of this point can be found in Flynn (forthcoming).
306
The Mint is at disadvantage under such circumstances, since the Mint must purchase
bullion with full-bodied coins, while bullion-market purchases were executed via inferior
coins. The Mint must roughly match rising bullion-market price, notwithstanding the fact that
bullion price inflation resulted from bullion-market transactions conducted via ever-weaker-
intrinsic-content coins over time. Since Mint price had to rise to match bullion-market
competition, the Mint was forced to accept declining seigniorage over time. Continuous
deterioration in coin quality in the bullion market would eventually lead to shrinkage of Mint
seigniorage to zero, which forced cessation of mint activity when bullion price (and thus the
mint price) rose to/above BP = MP = .09936318 CG
1681
/gram fine silver (Figure 7).
15
When
the bullion price rose to BP = .10405827 CG
1681
/gram fine silver (= MLT), it became
profitable to melt full-bodied (9.61 grams of fine silver) coin guilders.

Figure 7. Minting and Melting Physical 1681 Guilder Coins
The Mint found itself at untenable competitive disadvantage relative to the private
bullion market. The Mint was thus forced to debase its own coin, assuming continued coin
production, even though it may have desired to maintain coin integrity. After inevitable
arrival of debasement, the process would repeat, since newly-minted lighter coins also
inevitably suffered differentiated rates of wear and tear. In response to bullion market
pressures once again, the Mint was compelled to debase further yet in order to compete with
the bullion market. This scenario is replicated until coin of the realm contains but a small
fraction of original intrinsic content and worth. When coin deterioration became extreme,
even mintage of severely-compromised coins had to be abandoned, leading at times to
reestablishment of a strong coin (perhaps based upon iconic coin integrity from times past).

15
This complicated-looking number is actually simple: The actual mint price of 1681 is known to have been =
24.45 Coin Guilders per Mark of silver; since there were 246.067 grams in a Mark, division of 24.45 by
246.067 simply translates the actual Mint Price into coin per gram (= .09936318 Coin Guilder per gram
of silver). This same procedure translates the MLT (coin melting price) from 25.605306 Coin Guilders
per Mark of silver into coins per gram (= .10405827 Coin Guilder per gram of silver). The MLT price
exceeds the initial Mint Price (of a perfect Coin Guilder) just enough to compensate for the roughly
4.5% Mint seigniorage siphoned off when a perfect Coin Guilder was originally minted.
307
At this triumphant juncture of reestablished coin integrity, the system is set for repetition of
yet another cycle of coin deterioration, notwithstanding desire by mint officials to maintain
coin strength. Through application of the RUAM intangible money concept, the Price Theory
of Monies reveals market mechanisms that force debasement, followed by coin
reinforcement. Monetary historians know all too well that outcomes different from those
outlined here are possible, yet theoretical imposition of an intangible-ratio-unit-of-account
money (RUAM) at least permits discussion of changing market valuation of specific tangible
medium-of-exchange monies.
16
Actual historical actors, who seem erratic and irrational when
viewed through the lens of conventional economic theory, are resurrected as logical
pragmatists when viewed through corrective lenses offered by the Price Theory of Monies.
8. UTP Compatibility with Other Approaches to Monetary History
A central contention of this essay is that the Unified Theory of Prices can enhance,
rather than displace, other approaches to monetary history (with exceptions, such as Fishers
flows-only MV = PT framework). Visualization of interconnected monetary ponds by
Kishimoto (2011) comes to mind, since metaphorical liquid stocks and flows are central to
her analysis. The Hydraulic Metaphor is consistent with Kishimotos ponds analysis
generally. Since volume capacity of each container (or pond) refers to Inventory Demand
for the particular money in question, however, the UTP framework focuses on factors that
determine pond capacity, an aspect with potential to enhance, rather than contradict,
Kishimotos analysis. Where grown in population and wealth is evident, Hydraulic Metaphor
pond capacity would show visual grow (other things equal); moreover, sufficient demand-side
growth in local container capacity relative to inventories already held locally would cause
elevated market value for that particular monetary item. Arbitrage possibilities then emerge,
resulting in importation of that specific money. (Importation causes the moneys market
RUAM-price to eventually decline, other things equal, thereby ultimately eliminating
arbitrage gains.) Incidentally, there is nothing particularly monetary about these
mechanisms, since UTP Hydraulic Metaphor analysis applies equally to individual
agricultural or manufactured items and to individual monies.
UTP analysis is compatible with multiple monetary units connected to particular crops
and specific locations, as emphasized by Kuroda (2009). Indeed, Kurodas profusion of
heterogeneous coin-content and weight-system examples could be extended indefinitely to
examples of heterogeneous non-monetary products as well. His work demonstrates that
conventional monetary aggregation is unacceptable. Theories based upon disaggregation
must be developed, including models that disaggregate distinct monies to the maximum
extent possible. Disaggregation is a fundamental characteristic of the Unified Theory of
Prices, as is UTP focus on inventory analysis. Kuroda describes complex monetary holdings
within Europe, in addition to Asian counterparts that he has studied intensively:

16
In some cases, for instance, declining coin content may have simply led to differential bullion prices
dependent upon the exact coin quality used to purchase bullion; in other words, the mint is not
necessarily forced to debase in the face of weak-coin usage in the bullion market, if distinct bullion
prices are charged depending upon the strength of the coin offered. Weak coins could simply count as
fractions of strong coins. True, but numerous scenarios are amenable to analysis via the Price Theory of
Monies apparatus. We provide but one simple story here.
308

Figure 8. Kishimotos Chain-of-Ponds and Local Markets
For example, in late sixteenth-century France, 180 kinds of coins, belonging to more
than twenty different sovereign areas, were in circulation. Here again, there was a
clear contrast between a commensurable payment system in upper-level markets,
based on a conceptual unit of account, and the diversity of actual currencies in lower-
level markets. (Kuroda 2009, p.263)
Exchange rates between monies varied enormously, but so did exchange rates between
non-monetary products and between monetary and non-monetary products. This is a normal
state of affairs. The theoreticians task is to properly describe mechanisms that establish
monetary and non-monetary values, as well as mechanisms that cause respective values to
vary through time. Macroeconomic theory misleads historians because quantities and prices
are aggregated and worse yet, aggregated to the nation-state level in a manner that
obscures more than it reveals. Wealth-focused UTP analysis disaggregates to the maximum
extent possible, on the other hand, and treats tangible monetary and tangible non-monetary
items as inventory stocks subject to evaluation within a single coherent system. It is the
contention of this essay that market valuation of all products within a unified framework
monetary and non-monetary alike requires application of an intangible ratio-unit-of-account
money: the RUAM.
Another application of the Hydraulic Metaphor has focused upon research by Seonmin
Kim (2006; 2007), whose work details complex international trade networks that resulted in
overthrow of the Ming Empire by the Qing (1644-1911), mountainous borderlands people
whose wealth and power were generated in large part by control of wild ginseng. The
Hydraulic Metaphor (Flynn and Lee 2013) is applied respectively to several interconnected
markets ginseng, silk, rice, Chinese finished goods, and silver. Figure 9 reproduces only a
final Hydraulic Metaphor figure focused upon Japanese silver production, most of which
gravitated to end-markets within China. Three central points warrant emphasis. First, silver (a
monetary substance) is treated exactly the same as ginseng, rice, silks, or any other trade item;
in other words, the theory is unified. Second, most silver settled in end-market China
(indicated by dark liquid) because Chinas silver-container volume was capacious; again,
container capacity represents extensive Inventory Demand for silver, and it was container
capacity (Inventory Demand) that determined end-market location of Inventory Supply. There
are many advantages to point-in-time-inventory reasoning, one of which relates to durability,
including durable Chinese monetary and non-monetary silver holdings. Assume for simplicity
that Chinas silver stock equaled 500 million pesos at some point during the late 18
th
century.
309
Assume further that just 1% of Chinas silver stock wore out (including the portion lost) per
year (bubbles above Chinas container represents this loss, represented as liquid
evaporation). One obvious conclusion from this Metaphor application is that importation of
5 million pesos worth of silver per year into China is required in order to simply maintain
Chinese holdings of silver, even assuming zero growth in population and wealth. Alone, this
simple point illustrates (part of the reason) why China remained the worlds silver sink for
centuries. Conventional trade history concentration on time-dimensioned flows such as
imports and exports are fine as far as they go, but inventory stocks (including raw materials
for production, through to final goods destined for end-markets) determine time-dimensioned
trade flows.

Figure 9. Silver into End-Market China after 1750 (non-arbitrage phase)
Although not explicitly couched in Unified Theory of Prices (including Hydraulic
Metaphor) terms, Richard von Glahn has long been a proponent of stock-demand-for-money
reasoning. He rejects views of scholars who maintain that Chinese silver exports during the
1830s and 1840s led to depression in China, the Opium War of 1839-42, and European
dominance. Von Glahn criticizes emphasis upon supply-side causation in terms of beneficial
effects (attributed to silver imports) and deleterious effects (attributed to silver exports). Von
Glahn (2011, p.84) takes exception in particular with supply-side emphasis upon causation
external to China:
In my view, the causes of the Daoguang Depression are to be found in Chinas
domestic economic conditions; the reduced demand for money (silver and bronze coin
alike) during these decades was a symptom, not the cause of this economic distress.
Von Glahns analysis is consistent with the Hydraulic Metaphor. Severe economic
crisis implied reduction in Chinese wealth. Reduced wealth implied reduction in Inventory
Demand for numerous items, including stock demand for silver. Whenever Inventory Demand
plunges below Inventory Supply, one straightforward solution is to sell off excess inventory
supplies, which in this case implied export of Chinese silver. The central theoretical point is
that causation is shifted from the (traditional) Inventory Supply side to the Inventory Demand
side. As stated previously, Inventory Demand is a conceptual cornerstone of the Unified
310
Theory of Prices. Consider an everyday example: Fifty bottles of red wine reside in my cellar
because I desire to hold fifty bottles in inventory (given my wealth and tastes/preferences).
Fifty bottles of wine do not flow into my cellar autonomously (or in response to a personal
trade imbalance), causing me to somehow adjust desired inventory demand to accommodate
some supply-side influx. Imputation of Inventory-Supply-side causation in response to
asserted import flows defies common sense. It is Inventory Supply that adjusts to Inventory
Demand. Von Glahn correctly disaggregates specify types of silver items and casts issues in
demand-side terms:
the decline in Chinese silver imports during the second quarter of the nineteenth
century must be considered in the context of the demand for particular types of money,
both in China and in the global market, not simply the supply of silver in general. In
this respect, we must also pay attention to the rapid adoption of the Spanish peso as a
new monetary standard What drove the sharp increase in silver imports during the
1780s-1820s was not the demand for silver in general, but the demand for a stable
means of payment. (von Glahn 2011, p. 75)
Equipped with inventory-theoretic analysis of distinct and disaggregated markets, von Glahn
integrates solid empirical evidence gleaned from primary and secondary historical sources.
Another proponent of inventory-demand reasoning in monetary history, Alejandra
Irigoin (2013 this volume) argues in favor of conceptual disaggregation by type of silver
imported into China. Not only must silver-bullion imports be separated from silver-coin
imports, attention to characteristics of specific coins is also critically important. Specifically,
deteriorating supply-side mint quality of Mexican coins caused remarkable demand-side
reactions within Chinese markets. Widespread recognition of coin integrity had propelled the
Carolus peso to global dominance, China prominently included. An unfortunate byproduct of
the Mexican revolution was mintage of unreliable Mexican coins after 1808, however, which
generated powerfully-negative, demand-side reactions within China. Specifically, Chinese
customers were unwilling to hold new coins that were unreliable, preferring to hold instead
old-reliable Carolus pesos previously minted. In a nutshell, inventory demand for Carolus
pesos soared while inventory supply of Carolus pesos dropped (due to wear and tear, melting,
and other forms of loss). Unsurprising from an inventory-theoretic point of view, market
value of the Carolus peso rose in dramatic fashion. Price premiums for the Carolus rose
sufficiently to prompt import of Carolus coins into China, while Chinese silver bullion was
simultaneously exported. Only with reestablishment of coin reputation with the Mexican
eagle in the 1850s were newly-minted coins once again imported in volume into China.
Irigoins interpretation is advantageous for several reasons. First, specific types of
silver are disaggregated. Second, silver flows are portrayed in terms of direct forces stemming
from specific silver markets, in opposition to trade-imbalance arguments that treat silver (in
various forms) as passive balancing items. Third, Irigoin rejects the view that Chinese (non-
silver) opium imports caused Chinese exports of silver. Fourth, supply-side mint policy in
Mexico is shown to have interacted profoundly with inventory-demand end-market
considerations at a global level. All of these points are consistent with Unified Theory of
Prices reasoning, in the sense that time-dimensioned flows are shown to adjust to point-in-
time inventory stocks.
9. Summary and Conclusions
For any time period prior to the 20
th
century, monetary historians confront monies
with intrinsic content commodity monies. Classical economists tended to view valuation of
commodity monies the same way they viewed valuation of non-monetary commodities
based upon cost-of-production in the form of embodied labor time.
Arrival of utility analysis from the 1870s threw a monkey wrench into production-cost
approaches to evaluation of monies, as cost-of-production theory evolved into microeconomic
311
analysis. Microeconomic Laws of Supply and Demand are restricted to analysis of time-
dimensioned quantities only, while monetary quantities are inherently point-in-time inventory
stocks. Thus, macroeconomic analysis is a 20
th
-century invention necessitated by need for a
conceptual place into which monies (and some other intractable items) could be placed.
John Maynard Keynes furnished a transmission mechanism the interest rate (Theory
of Liquidity Preference) through which monetary stocks could be connected to non-
monetary flows. Keynesian theory doomed cost-of-production monetary theory to an ever
deepening burial ground, since it is impossible to speak of the cost of producing a tangible
money relative to an interest rate (%/time).
The Price Theory of Monies offers an opportunity to reintroduce cost-of-production
reasoning to monetary analysis. Rather than try to accommodate monetary theory to time-
dimensioned microeconomic theory the worst example of which is Irving Fishers ill-fated
MV = PT approach the Unified Theory of Prices instead reformulates utility theory in such
a way that point-in-time inventories can be accommodated. Once Inventory-Supply-
Inventory-Demand analysis is rendered applicable to all tangible items, then monetary supply
and demand already couched in inventory terms can be integrated directly with non-
monetary siblings. It is in this sense that the UTP returns to Classical roots.
A formidable stumbling block on the way to a unified theory involves expression of
prices of tangible monies in exactly the same terms as prices for non-monetary items.
Conventional monetary theory renders this problem unsolvable through its insistence that
each money simultaneously fulfill all monetary functions: (1) medium of exchange, (2) unit
of account, and (3) store of value. Yet we have seen that pragmatic European businesspeople
(and probably people elsewhere) violated this restriction continuously for over a thousand
years: Their imaginary monies were intangible and thus only capable of fulfilling the unit-
of-account function alone. Modern theory contradicts a millennium of everyday reality, so it
is the monetary theory that must be jettisoned! These imaginary link-unit-of-account
monies worked well for accounting purposes, yet they cannot be used for expression of price
of any tangible money in a cost-of-production framework because LUAMs represented
quantities (of silver in the Dutch example). The Price Theory of Monies posits instead
application of a different sort of intangible money a ratio-unit-of-account money (RUAM)
that is applicable for measurement of relative values of all items, monetary and non-monetary
alike. It is hard to imagine legitimate objection to imposition of such an abstract ratio-money
to value theory, since the dollar (or its equivalent) already routinely serves this exact function
in every microeconomics textbook in the world.
The Unified Theory of Prices features Inventory Demand as a centerpiece of analysis.
The easiest version to visualize is the Hydraulic Metaphor mentioned briefly in the body of
this essay. The central idea is simple: Inventory Demand for any tangible item monetary or
otherwise ultimately determines location of Inventory Supply. Inventory Demand is in turn
determined by (1) wealth, (2) tastes and preferences, and (3) population. This theoretical
structure allows us to speak of end markets, a term that does not seem to exist in
conventional economic analysis. Similar to biological models that describe steady-state
populations of living organisms, UTP end-markets refer to populations of (animate and
inanimate) products, as well as forces that determine where these products come to rest.
Since the Price Theory of Monies is just the Unified Theory of Prices applied to
medium-of-exchange and store-of-value monies, tangible monies are treated exactly the same
as any tangible non-monetary item. Just as it would be a mistake to aggregate ones shoes
along with reading glasses in supply-demand terms, so too must each monetary counterpart be
treated distinctly. As for silver monies during the 19
th
century, a topic of interest among
historians, stocks and flows of silver relative to China, Mexico, the USA, or anywhere else on
earth were determined by respective Inventory Demand capacities; inventory holdings are
ultimately determined by Inventory Demand. But this is where economic history begins, not
ends, because the past and present have been theoretically analyzed almost entirely in terms of
312
time-dimensioned flows. But it is wealth and its components (Inventory Supplies) that make
the world go round, so to speak, and monetary stocks comprise but one key and complex
component of global wealth. Time-dimensioned flows are crucially important concepts, but
must be integrated with inventory concepts if we are to make progress in understanding
accumulation.
313
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473
Contents
Georges DEPEYROT, Introduction .............................................................................................. 3
Part 1
Business with Money: Monetary Politics and Capital Flows in the Era of the First Globalization,
Session of the European Business History Association and Business History Society of Japan,
Paris conference on Business enterprises and the tensions between local and global,
Aug. 30 Sept. 1, 2012
Catherine BRGIANNI, Introduction ........................................................................................... 7
Vladimir BAKHTIN, Foreign loans and investments in the Russian Empire in the second half
of the 19
th
century ........................................................................................ 9
Catherine BRGIANNI, Monetary and numismatic mechanisms as an echo of economic
globalisation: the Greek paradigm of the 19
th
century ............................. 19
Michael MRCHER, The Finnish 1 markka 1922 An exceptional coinage in Copenhagen .. 43
Rita MARTINS DE SOUSA, The Lisbon Mint during the Era of the First Globalisation ............ 63
Part 2
Small change: bronze or copper coins from Antiquity to 19
th
c.,
Round Table of the "Silver Monetary Depreciation and International Relations" program
(ANR DAMIN, LabEx TransferS), Paris, cole Normale Suprieure,
May 13-14, 2013
Catherine GRANDJEAN, Les dbuts de la monnaie de bronze dans le monde grec .................. 75
Constantina KATSARI, Exceptional restrictions in the circulation for bronze coinages
in Roman eastern provinces ............................................................................. 85
Claudia DE LOZANNE JEFFERIES, The role of copper money within the dynamics of
sovereign debt and the perception of unsound fiat money in
early 17
th
- century Castile ................................................................................ 91
Michael MRCHER, Bronze and copper coins in 19
th
century Denmark and found
at Koldekilde on Bornholm ............................................................................. 103
Sylvain MICHON, Lchange interrgional et international des espces divisionnaires en
cuivre par les voies fluviales et maritimes au XIXe sicle,
Lexemple du don A.V. Castet au Muse de Ste en 1890 .............................. 123
Emmanuel PRUNAUX, La question du cuivre-papier,
les banques de sols et la loi du 24 germinal an XI ......................................... 147
Brigitte TOUITOU-MICHON, Sylvain MICHON, Mmoire de Lonard de Martin Nadaud ou
De l'usage du sou au XIXe sicle en France ................................................. 171
Raf VAN LAERE, The Nieuwerkerken hoard and the circulation of copper coins in the
Prince-Bishopric of Liege during the late 18
th
century .................................. 179
474
Part 3
Transfers of precious metals and their consequences, 16
th
19
th
,
Round Table of the "Silver Monetary Depreciation and International Relations" program
(ANR DAMIN, LabEx TransferS), Madrid, Casa de Velzquez, May 16-17, 2013
Patrice BAUBEAU, Money, That Obscure Object of Desire .................................................... 231
Allison Margaret BIGELOW, Lost in Translation: Knowledge Transfers and Cultural
Divergences in Early Modern Spanish and English Silver Treatises ............. 237
Catherine BRGIANNI, Stories and myths: Greek gold transfers during the World War II
and beyond ...................................................................................................... 261
Juan E. CASTAEDA, A new estimate of the stock of gold (1492 - 2012) ............................... 271
Dennis O. FLYNN, Marie A. LEE, A Restatement of the Price Theory of Monies .................. 293
Claudia DE LOZANNE JEFFERIES, Silver production in 17
th
- century Spanish America:
A preliminary analysis of its volatility, trajectory and possible effects
on the Castilian monetary system ................................................................... 315
Elisabeth KASKE, The Revenue Imperative: Silver vs. Copper Coin in Government
Finance in 1850s China .................................................................................. 325
Marina KOVALCHUK, Japan. Adoption of the Gold Standard: Economic Problem
from a Historical Point of View ...................................................................... 357
KURODA, Akinobu, What was Silver Tael System?
A Mistake of China as Silver Standard Country .......................................... 391
Claudio MARSILIO, Lisbon, London, or Genoa? Three alternative destinations for the
Spanish Silver of Philip IV (1627-1650) ........................................................ 399
Rita MARTINS DE SOUSA, Transfers of precious metals and the money supply
Portugal 16-19
th
centuries .............................................................................. 415
Rila MUKHERJEE, An Early Medieval Metal Corridor, Silver, Bengal, Bagan:
and Yunnan 7
th
to the 13
th
Centuries ............................................................. 431
Emmanuel PRUNAUX Les transports de fonds et lusage des espces dans les paiements
en France au dbut du XIX
e
sicle .................................................................. 443
Ekaterina SVIRINA, Russian metallic currency of the first half of the 19th century:
introductory analytical characteristics .......................................................... 463
Marc FLANDREAU, Specie in the History of Finance ............................................................. 469

Contents .................................................................................................................................. 473


COLLECTION MONETA
.
156
THREE CONFERENCES ON
INTERNATIONAL MONETARY HISTORY
MONETA, WETTEREN 2013
Business with Money: Monetary Politics and Capital Flows in the Era of the First Globalization
Session of the European Business History Association and Business History Society of Japan,
Paris conference on Business enterprises and the tensions between local and global, 30 Aug - 1 Sept 2012
Small change: bronze or copper coins from Antiquity to 19
th
c.
Round Table of the ``Silver Monetary Depreciation and International Relations'' program
(ANR DAMIN, LabEx TransferS), Paris, E cole Normale Supe

rieure, May 13-14, 2013

Transfers of precious metals and their consequences, 16
th
^ 19
th
c.
Round Table of the Silver Monetary Depreciation and International Relations program
(ANR DAMIN, LabEx TransferS), Madrid, Casa de Vela

zquez, May 16-17, 2013

G. Depeyrot, editor
with the cooperation of C. Bre

gianni and M. Kovalchuk

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M O N E T A
Hoenderstraat 22, 9230 Wetteren, Belgique
FAX (32) 09 369 59 25
www.moneta.be
ISBN 978-94-91384-24-0
The specific interaction between the local and the global, but also between the national
and the private, demonstrating the globalisations mechanisms during the last decades
of the 19
th
century, was the central questions examined in the Session "Business with
money: monetary politics and capital flows in the era of the first globalisation"
organised by C. Brgianni in the framework of the XVI EBHA Conference, Paris,
EHESS, 29 August - 1 September 2012. In this Session we tried to apply a
comparative approach concerning monetary systems and numismatic activity; we
attended to investigate the past experiences of monetary cooperation but also the
cultural transfer and the economic asymmetry that coins fabrication often represents.

The round table "Small change: bronze or copper coins from Antiquity to 19th c.," was
organized by Georges Depeyrot in Paris at the cole Normale Suprieure in 2013 (13 -
14 May) in the framework of the ANR DAMIN program and of the LabEx TransferS.
During this meeting, the participants tried to understand the role of the small coins
(copper, bronze, brass, etc.) in the economy, in the monetarisation of societies and the
relation between small change and gold and silver coins.

The last round table "Transfers of precious metals and their consequences, 16
th
19
th
"
took place in Madrid at the Casa de Velzquez on 16 - 17 May 2013. It was organized
by Georges Depeyrot and Marina Kovalchuk in the framework of the ANR DAMIN
program and of the LabEx TransferS with the support of the Casa de Velzquez. The
aim was to compare the consequences of the two main arrivals of precious metals in
history, during the 16
th
century and during the 19
th
century. The choice of Madrid was
linked to the role of Spain and Portugal in relation with the first arrival of gold and
silver.
Labex TransferS