ABSTRACT
Adam Smith, author of The Wealth of Nations (1776), wrote concerning American gold and silver and the rise in prices in the sixteenth and seventeenth centuries: ‘The discovery of the abundant mines of America seems to have been the sole cause of this diminution in the value of silver in proportion to that of corn. It is accounted for accordingly in the same manner by everybody; and there has never been any dispute either about the fact itself or about the cause of it.’ 1 Fifty years earlier, Richard Cantillon, another economist, an Irishman of French origin, had expressed the same opinion: ‘Everybody agrees that an abundance of money or an increase in the exchange of money, raises the price of everything. The quantity of money brought from America to Europe in the last two centuries bears out the truth of this statement.’ 2 These two quotations do not constitute the foundation of the famous quantity theory of money—this was put forward as early as the sixteenth century by Jean Bodin at the time of his famous controversy with Malestroit in 1568—but they do mark its eventual triumph. Since that time there has been nothing much worth mentioning on the subject. Recently, studies by Earl J. Hamilton on Spain and by Fernand Braudel on the entire Mediterranean area in the sixteenth century have given the old theory statistical and historical confirmation, though there was no real need for this. But there are limits to all theories and they all have their opponents. Did the sixteenth century obey the quantitative laws, as has commonly been thought, or not?
