ABSTRACT
The ‘instruction’ that David Ricardo may have derived from James Steuart on money was twofold. It dealt at the domestic level with the effect of the debasement of the coin on the market price of gold bullion and at the international level with the notion of real par of exchange and the effect of money on the exchange rate. Steuart extended the critique of variability of metallic money to any currency linked to a standard, whether coin or paper money. In contrast, Ricardo advocated that in order to be a nearly perfect currency the paper money should be regulated by a standard. Steuart viewed seignorage as a way of sustaining the exchange of the pound against the French currency, and he advised to introduce it at a level as high as in France. Ricardo’s ambivalent position on seignorage was entirely determined by his analysis of the requirements of a good monetary system.
