Thomas Joplin and Classical Macroeconomics.

Rashid, Salim

A thorough review of this exciting new book would require a reworking of all the major controversies in British monetary thought between 1800-1850. All that can be attempted here is some statement of the issues involved and to indicate what might be required for their satisfactory resolution. The book brings to life one of the economic "exiles"--an economist whose brilliance was not enough to gain him recognition. All of us have personality defects and with Joplin, as with the rest of us, they only became exaggerated through repeated failure. So Joplin died--poor, bitter but not broken. Despite the almost spiteful neglect of his contemporaries, Joplin tried to help others to the end of his life, making the reform of prostitutes his last good deed.

Joplin's case was so interesting that I dug up the three pieces available here and read them [1; 2; 3]. Joplin is generally clear and interesting. Much like his hero, Henry Thornton, Joplin writes with the assurance of someone who has direct personal knowledge of his subject matter. While Joplin is generally clear on individual issues, making his 50 pamphlets read consistently is another matter and O'Brien is to be congratulated for having made the aggregate so comprehensible.

What is singularly important about Joplin is that he had the facts right. Not necessarily in details but in the orders of magnitude. And this is extremely important because it determines the agenda for good theories. Firstly, that the country bank issues were the most volatile and the important part of the money supply. Secondly, that country bank issues were essentially independent of Bank of England notes, and thirdly, that country bank issues determined movements of the price level and hence, given time, of the balance of payments. Joplin's careful insistence of these issues makes his contribution of first-rate importance. O'Brien not only tests these statements with the data Joplin so carefully collected, but also with more modern series, and Joplin comes out very creditably.

The notable features of Joplin's monetary thought are the following: the existence of two circulations, an "abstract" one that dealt with savings and investment and a "consumptive" circulation which served for the transactions of current income; country banks, which issued the primary currency, kept the rate of interest fixed and reacted to the state of demand by varying the quantity of notes issued; this behavior of country bank notes reflected a more general proneness on the part of the country banks towards confusion over the actual state of the money market. If these points would be adequately sustained, Joplin would have not only uncovered the reality of English banking but also provided satisfactory theoretical grounding for the facts. However, for someone who was very clear about profit maximization and arbitrage, Joplin (in O'Brien's presentation) does not quite make out his case. For example, if a dual circulation between the London and the country banks exists, what determines the exchange between the two? If higher rates of interest in London led to a higher demand for country notes--country interest rates being fixed--why did arbitrage not force equality? Joplin tells us that the country banks were not in a position to engage in long-term lending. Yet we find him pointing out that during a scarcity, when gold is flowing out to pay for imported food, country banks are actually extending credit. Why would they do so if they did not have some idea of "permanent" income? Writers like Joplin (or Tooke) distinguished the demand for capital from the demand for currency without telling us how a banker was supposed to actually distinguish between the two. What we need is a more detailed specification of the behavior of banks.

The persistent failure of Joplin lies in his unflinching adherence to the principle of metallic fluctuation, i.e., a paper currency should fluctuate exactly as a metallic one would (this is given in both absolute and difference form). Why? O'Brien does not make clear that this "principle" is normative, not analytical. Ricardo's narrow logicism did not permit him to see more widely. Joplin has less excuse. He was concerned about macroeconomic stability and about protection to agriculture. As such, he should have been worried about the quantity of money (liquidity) necessary for these larger objectives.

There are some curious lapses in O'Brien's presentation. Why was Joplin so physiocratic, he asks? The most likely explanation is that Joplin relied on Malthus. In 1798 and even in 1803 it would be hard to miss Malthus's careful adaptation of Physiocracy, a fact Bernard Semmel was the first to emphasize. O'Brien does not draw out the similarity between Joplin's dual circulation and that of Keynes. Is it entirely coincidental? Keynes was very well read in the earlier literature, and was not particularly conscious about who he borrowed from. O'Brien is confident that Joplin had nothing to do with free banking. Yet a casual reading suggests similarities between Joplin's plans for a national money supply and the practice of free banking in states like Illinois.

The final chapter, with a formal, mathematical model, added nothing and perhaps detracts from the book. The jewel of the volume is the empirical demonstration of Joplin's claims about the nature of the British monetary system. Perhaps the book would have been better served if the empirical chapters preceded the theory. Nonetheless, for all my cavils, this is an excellent contribution.

References

1. Joplin, T. An Analysis and History of the Currency Question, London: James Ridgway, Piccadilly, 1832.

2. Joplin, T. An Examination of the Report of the Joint Stock Bank Committee, London: James Ridgway and Sons, Piccadilly, 1836.

3. Joplin, T. An Essay on the General Principles and Present Practice of Banking in England & Scotland, London: James Ridgway, Piccadilly, 1827.

Salim Rashid University of Illinois at Urbana-Champaign