Ricardo’s Bullionism

Ricardo shared Boyd’s and Wheatley’s conclusions: excess issues of unconvertible banknotes are the sole cause of the high price of bullion. However, he did not share the vague idea that the price of bullion increases with the prices of other goods and of foreign currencies. Ricardo presented an innovative argumentation, criticized Smith’s real bill doctrine, referred to Hume and gave an explanation of the high price of bullion in terms of arbitrage which resembled that of Thornton on some points, and opposed it on others. The way he justified bullionism laid the foundations of the British monetary orthodoxy that would prevail from 1844 until the First World War and, more generally, provided quantity theory with durable foundations.