Monetary Theory and Policy
Torrens is probably best known for his contributions to money and banking, and in particular as a major representative of the Currency School in the controversies of the 1830s and 1840s.
However, in the monetary debates of the Restriction period Torrens was essentially an anti-Bullionist. In his Essay on Money and Paper Currency (1812 [2000]) he started out as a staunch advocate of the banking principle, taking an extreme position by defending the system of inconvertible paper on the basis of the real bills doctrine. Torrens continued to argue along those lines in his Letters to Lauderdale (1816 [2000]) and A Comparative Estimate (1819 [2000]), but in the late 1820s or early 1830s he changed sides and became a Ricardian in respect of monetary theory and policy. This almost inexplicable U-turn has long puzzled students of Torrens. The most plausible explanation was provided by O’Brien (1965), based on a (previously unpublished) memorandum titled “On the means of establishing a cheap, secure, and uniform Currency”, which Torrens had drafted in 1826 and which contains a sort of “half-way house” between his early and his later views on monetary theory. Apart from political opportunism Torrens was apparently driven into the Bullionist camp by a fear of over-issue. Torrens’s new position is already visible in parliamentary speeches of 1833, and in the following years he became a leading proponent of the currency principle, together with Norman and Overstone. In his Letter to Lord Melbourne (1837 [2000]) he advocated the separation of the two departments of the Bank of England and their adherence to strict rules in order to avoid over-issue. Torrens’s recommendations of 1837 and his proposals in the ensuing controversies with Thomas Tooke in the early 1840s were largely responsible for the legislation that was adopted in Peel’s Bank of England Charter Act 1844. After the monetary crises of 1847 Torrens vigorously defended this legislation, first in On the Operation of the Bank Charter Act of 1844, as it Affects Commercial Credit (1847 [2000]), and then in The Principles and Practical Operation of Sir Robert Peel’s Bill of 1844 (1848 [2000]), in which he also provided a critical analysis of his opponents’ views, especially Tooke and Fullarton.