Measuring Causes: Episodes in the Quantitative Assessment of the Value of Money

Abstract

The causal and theoretical presuppositions of four episodes in which economists the 20th century attempted to measure changes in the value of money are examined. The episodes are: Smith’s “Digression Concerning the Variations in the Value of Silver,” the Bullion Report of 1810, Tooke’s History of Prices, and Jevon’s “A Serious Fall in the Value of Gold Ascertained.” The authors address a range concerns over different time horizons, including welfare analysis, banking and curency policy, and the validity of the quantity theory of money. While all the authors considered have different theoretical presuppositions and measurement practices, there is a core similarity as well: the value of money emerges indirectly as the residue of a measuring strategy that, one way or another, attempts to account for non-monetary causes. We conjecture that this indirect strategy emerges as the natural response to the conceptual ambiguity over the meaning of the value of money.