The Essays: Is Money “Oil” or “Blood”?
While nobody questions the place of David Hume in the history of philosophy, opinions about David Hume as an economist are far more divided. Hume’s economic writings occupy a minor place in his ωuvre.
They are mainly to be found in the essays initially published, along with other political essays, under the title of Political Discourses in 1752. One final essay in this field, “Of the Jealousy of Trade”, was published in 1760.R. Lucas Jr (Lucas 1996) praised him in his Nobel Lecture “David Hume’s marvellous essays of 1752, Of Money and Of Interest”, but others, including J.A. Schumpeter, were more reluctant to appreciate his thesis on the neutrality of money. In the History of Economic Analysis, for example, Schumpeter wrote: “the genuine quantity theorem that, sometimes in the crudest possible form, became a commonplace for many of the leaders.
It is taken for granted by Genovesi, Galiani, Beccaria and Justi, and Hume reasserted it with an emphasis that was hardly necessary” (Schumpeter 1954: 314-15).
This ambivalent judgement underlines a standard difficulty in Hume’s text. On the one hand, Hume shares with Montesquieu and many others the idea of the existence of historical progress. Now this progress is a consequence of the development of commerce. For example, in one of the Essays Moral, Political and Literary, “Of the Rise and Progress of the Arts and Sciences”, Hume explains “that it is impossible for the arts and sciences to arise, at first, among any people unless that people enjoy the blessing of a free government” (Hume 1742 [1987] I, xiv: 14). He adds: “that nothing is more favourable to the rise of politeness and learning, than a number of neighbouring and independent states, connected together by commerce and policy” (Hume 1742 [1987] I, xiv: 16). It is evident for Hume that international trade implies monetary exchange and is somehow associated with money. In other words, an economy in which the circulation of money is scarce is necessarily a poor economy. In that sense, money seems to be the blood of the social organism. On the other hand, Hume seeks to affirm the neutrality of money, which is only the “oil in the wheels” of the economic mechanism. How to explain this contradiction between the two propositions?