Construction of James Steuart’s Monetary Theory

Yutaka Furuya

A chapter in Research in the History of Economic Thought and Methodology: Including a Symposium on Sir James Steuart: The Political Economy of Money and Trade, 2020, vol. 38C, pp 35-48 from Emerald Group Publishing Limited

Abstract: It is deservedly recognized that James Steuart advanced a monetary theory in which paper money played an important role. The successful establishment of Scottish banknote circulation and theoretical influences from his fellow countrymen such as John Law can be pointed out as backgrounds for his monetary theory. Little attention has been given however to the point that Steuart deduced theory on banks and banknotes quite differently from his predecessors. It is of great significance that Steuart’s theory on banks and banknotes in his first draft ofThe Principles of Political Oeconomywas, in the following years, drastically expanded and reconstructed. The theory in his first draft written in 1764 was based on the opinion that banknotes should be issued only on landed securities, in consideration of ideas from the Scottish banking system. He then expanded the theory into a dynamic three-stage banking theory where he concluded that as economies and credit grew, banks should issue notes not only on the basis of landed securities but also by discounting bills and giving public credit. By this expansion, banknotes gained a broad and central role in his monetary theory, and the expansion gave his monetary theory more ingenious evolutionary aspects.

Keywords: James Steuart; John Law; monetary theory; banking theory; Scottish banking system; mercantilism (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rhetzz:s0743-41542020000038c005

DOI: 10.1108/S0743-41542020000038C005

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