History of Economic Analysis part 108 ppsx

It must suffice to mention the most important of the problems that are as yet unsolved within the range of this theory of choice: so far, indifference curves are satisfactorily defined f

on with Allen and Hicks—indifference curves were the starting points of the analysis; they were not, as with Edgeworth, derived from a utility surface

However, the indifference curves are part of index functions and can also be derived from these This is what Pareto did But they are just as independent of the particular index function chosen as they are of the particular form of the cardinal utility function, being uniquely determined by the scale of preferences This suggests the idea of doing also without index functions, especially because they give rise to difficulties similar to those that Professor Fisher met in the case of utility functions.13 But it took until 1934 to give full effect to it and to develop a theory that is nothing but a logic of choice: the theory of Allen and Hicks that was published in that year was, so far as I know, the first

to be completely independent of the existence of an index function and completely free

from any lingering shadows of even marginal utility, which is replaced in their system by

the marginal rate of substitution.14 In consequence, elasticities of substitution and complementarity are defined exclusively from the scales of preference and likewise divorced from utility Beyond this we cannot go It must suffice to mention the most important of the problems that are as yet unsolved within the range of this theory of choice: so far, indifference curves are satisfactorily defined for individual households only; the question remains what meaning is to be attached to collective indifference curves—for example, indifference curves of a country—which have been used in some of the most brilliant theoretical work of our time.15

[The first six sections of the Note on the Theory of Utility had been substantially completed and had been typed The next few paragraphs were found in manuscript, incomplete, with shorthand notes to indicate the argument contemplated See editor’s note at end of this section.]

7 THE CONSISTENCY POSTULATE

As the reader knows, indifference-curve analysis has at long last become part of current teaching The profession has got used to it, and even the controversy concerning its suitability for a sophomore course has died out But it should have been clear from the first that things would not stop at indifference varieties and that they are after all but a midway house They are more elegant and methodologically safer than was the old utility analysis but they

13

Though we can always proceed from given index functions to indifference curves, we cannot always proceed from given indifference curves to index functions For the latter to be possible, i.e for an index function to ‘exist,’ it is necessary that the differential equation of the indifference curves be integrable In the case of only two variables (two commodities), there is always an integrating factor; in the case of three or more there need not be one This question of integrability was very serious for Pareto’s approach Later developments have deprived it of its importance 14

It may be well to point out explicitly that this involves discarding Gossen’s law of satiable wants 15

See, e.g., Professor Leontief’s paper on ‘The Use of Indifference Curves in the Analysis of

Foreign Trade,’ Quarterly Journal of Economics, May 1933

have not helped us to results that the latter could not have reached; and no result of the latter has been proved definitely wrong by them Moreover, if they ‘assume less’ than does the utility analysis, they still assume more than, for purposes of equilibrium theory,

it is necessary and comfortable to assume And if they use nothing that is not observable

in principle, they do use ‘potential’ observations which so far nobody has been able to make in fact: from a practical standpoint we are not much better off when drawing purely

imaginary indifference curves than we are when speaking of purely imaginary utility functions.1 Accordingly, it has been pointed out, as early as 1902, by Boninsegni, and a few years later by Barone,2 that for the purposes of writing the equations of equilibrium theory we do not need either.3 What then do we need for this purpose if we leave every other out of account? A little reflection shows that even the early utility theory of value never actually used any other postulate than this: faced with a given set of prices and a given ‘income,’ everybody chooses to buy (or sell) in a uniquely determined way Everything else is idle decoration and justified, if at all, by such interest as may attach to

it from the standpoint of other purposes Barone had seen this but he had failed both to formulate this postulate exactly and to prove its sufficiency This has been done by Samuelson,4 who formulated the consistency postulate: if

1

On the possibilities of ‘The Empirical Derivation of Indifference Functions,’ see the paper with

this title, by W.Allen Wallis and Milton Friedman, in Lange et al editors, Studies in Mathematical Economics and Econometrics, 1942 (Henry Schultz memorial volume)—though here again we

must never say never; see, e.g., Professor Wald’s important paper, ‘The Approximate

Determination of Indifference Surfaces by Means of Engel Curves,’ Econometrica, April 1940 Of

course, this must not be allowed to obliterate the logical difference: it does make a difference whether or not a certain construct has, to use the phrase of Immanuel Kant, a ‘relation to possible

experience’ (Relation auf mögliche Erfahrung) Also, it can of course be shown just as in the case

of the utility analysis that indifference-variety analysis is not open to any indictment on the score of circularity or emptiness

2

P.Boninsegni, ‘I Fondamenti dell’ economia pura,’ Giornale degli Economisti, February 1902;

and E.Barone, ‘Il Ministro della produzione,’ ibid September and October 1908 (see above, sec 5) 3

They realized, of course, the necessity of restrictive assumptions about consumers’ behavior from which the properties of demand functions would follow This distinguishes their views from G.Cassel’s, who simply advocated the scrapping of everything behind demand functions to make

these the ultimate data See his ‘Grundriss einer elementaren Preislehre,’ Zeitschrift für die gesamte Staatswissenschaft (1899), which deserves to be mentioned because it was the first

uncompromisingly radical attack upon the whole structure of the utility theory of value made by an

economist trained in mathematics In his Theory of Social Economy, Cassel substantially repeated

the argument

4

In his ‘A Note on the Pure Theory of Consumer’s Behavior,’ Economica, February 1938; see also

‘The Empirical Implications of Utility Analysis,’ Econometrica,

and proved brilliantly that this gives all the restrictions we need for our

5

[Editor’s note: The plan for the remainder of this Appendix to Chapter 7 (Note on the Theory of Utility) is not quite clear There is no doubt that J.A.S intended to make his treatment of welfare economics a part of this Appendix, which is described as a digression or note on utility (see the first paragraph of section 5 of this chapter, The Theory of Planning and of the Socialist Economy) and there is some evidence that it was

to be sub 8 (section 8) The section on Welfare Economics which follows was a preliminary treatment probably written in 1946 or 1947 The first six sections of the Note

on the Theory of Utility were apparently written at the end of 1948 This material had been typed and read by J.A.S Sometime later he sketched out section 7 (The Consistency Postulate) and put down notes for a section 8 (The Corpse Shows Signs of Life) It is conceivable that welfare economics would have been discussed here ‘The Corpse’ is so fragmentary, however, that I have simply presented it in the next two paragraphs as part

of this note and have made Welfare Economics section 8 of the Appendix to Chapter 7

‘8 The Corpse Shows Signs of Life We have surveyed what in spite of backslidings

and detours looks like a very definite line of development to a goal that seems to have been definitely reached by Samuelson However, the picture would be incomplete if we failed to notice a number of symptoms which seem to be at variance with that line and to point in another direction If these symptoms could all be interpreted as survivals of old views, they would not be worth while mentioning It is but natural that a concept like utility, so deeply rooted both in century-old tradition and in the habits of everyday thought and parlance, should not give way easily But there is more to it than this It is true that it has by now been cogently proved that the concept of utility is superfluous in the theory of equilibrium values—which is in fact not only the strongest but the only needful argument against it But it has not been proved—and cannot be proved in the nature of things—that the concept can never be useful for any other purpose However

we may feel about it, we cannot deny the heuristic service it has rendered in the past— historically it was the discovery of the very theory which now can do without it—and there is no saying whether its fertility is exhausted for all time In this connection it

becomes relevant to note that some arguments against it have no weight and others have

gone too far It is even possible that the argument against measurability is among the latter Of course, as far as this goes, if we ever come to devise methods of measurement,

it would not be the old psychic reality: there is the possibility that we might wish for a potential; there is even a possibility that we might measure without subjective reality [shorthand notes]

‘And in this connection [shorthand notes] whatever objections against them [shorthand notes]’

[J.A.S then jotted down the following references, which he obviously intended to discuss.]

‘1 Irving Fisher, Mathematical Investigations in the Theory of Value and Prices (1925), his doctor’s thesis first published in the Transactions of the Connecticut Academy

of Arts and Sciences, 1892

October 1938 Cf N.Georgescu-Roegen, ‘The Pure Theory of Consumer’s Behavior,’ Quarterly Journal of Economics, August 1936

5

[J.A.S did not finish this section or fill out the mathematical symbols for the Samuelson

postulate; the mathematical formulation above was supplied by R.M.G.]

2 Aupetit [not certain, writing illegible]

3 Irving Fisher, ‘A Statistical Method for Measuring “Marginal Utility” and Testing

the Justice of a Progressive Income Tax,’ in Economic Essays Contributed in Honor of John Bates Clark (1927)

4 Ragnar Frisch, ‘Sur un Problème d’économie pure,’ Norsk Matematisk Forenings Skriften, 1926

5 Ragnar Frisch, New Methods of Measuring Marginal Utility (1932)

6 Paul A.Samuelson, ‘A Note on Measurement of Utility,’ Review of Economic Studies, February 1937

…is not true [shorthand notes] welfare economics [shorthand notes] consistency

[shorthand notes] parameter, features [shorthand notes] Potential, [shorthand notes]

Engel Curves.’

8 WELFARE ECONOMICS* The reader is presumably familiar with the distinction made in current teaching between

‘positive’ and ‘welfare’ economics Little beyond convenience of exposition can be adduced for this distinction so far as it means not more than that positive economics is to explain and welfare economics is to prescribe For all propositions of welfare economics can be formulated in the indicative mood just as well as any propositions of positive economics can, by the insertion of the appropriate axiological postulates, be turned into

an imperative Since, however, modern welfare economics has, as a matter of fact, acquired a distinct status of its own, it is convenient to notice its development separately

We have also an additional motive for doing so since the subject bears an obvious relation to the subject of interpersonal comparison of satisfactions that has not yet been touched upon

We know the hallowed antiquity of welfare economics: a large part of the work of

Carafa and his successors as well as of the work of the scholastic doctors and their

successors was welfare economics We also know that the welfare point of view was

much in evidence in the eighteenth century and that, in Italy, the phrase felicità pubblica

appeared very frequently on title pages For Bentham and the English utilitarians generally this point of view was, of course, an essential element of their creed Hence, the positive spirit of Ricardian economics notwithstanding, we find it also in the English

‘classics,’ particularly in J.S.Mill So far as this goes, modern welfare economists merely revive the Benthamite tradition

The temporary victory of the utility theory naturally gave a new impulse We can see this already with the forerunners, such as Dupuit and Gossen But current work in welfare economics harks back to Marshall’s teaching, as developed by Pigou, and to Edgeworth and Pareto Marshall made two contributions, besides offering many of those general considerations that were so con-

[There were two treatments of welfare economics (one typed and one in manuscript), which had many points in common The manuscript version is presented here Both treatments were

preliminary and were written earlier than the preceding seven sections of this Appendix on the Theory of Utility.]

genial to his propensity to preach First, as has been mentioned above, he rediscovered Dupuit’s consumers’ surplus or rent, and thus presented welfare economics with an analytic tool that is, or was thought to be, particularly adapted to application in this field Second, he formulated several propositions of the kind that is typical of modern welfare economics The most famous one is noticed in the footnote below.1 Its importance consists not so much in the proposition per se, but in the fact that it spelled a new departure: the virtues of the perfectly competitive equilibrium state—what Marshall

called the doctrine of maximum satisfaction—had indeed been questioned many times

before from a variety of standpoints; but this was the first time that this was done within

the range of the pure theory of that state, the first time that, on the theoretical plane, the

possibility was considered of turning individual actions into channels more conducive to general welfare than those of laissez-faire Edgeworth’s many contributions are perhaps best exemplified by that part of his theory of taxation which is concerned with justice

The treatment is in the spirit of his New and Old Methods of Ethics (1877), that is, in the

spirit of hedonism or utilitarianism The main points are the distinction between, and the rigorous definition and quantification of, the concepts of equal, proportionate, and minimum sacrifice, the equalitarian implication of the last-mentioned idea coming duly into view.2 Mainly, Edgeworth’s efforts were directed against popular errors of reasoning such as are implied, for instance, in the widespread belief that decreasing marginal utility

of income is all that need be assumed in order to make progressiveness of taxation follow from the postulate of equal sacrifice.3

All this is simply revived Benthamism—or rather, Benthamism in the armor of a better technique—and implies not only a quantitative conception of utility or satisfaction

or welfare but also the further idea that satisfactions of differ-

1

Marshall (Principles, pp 533 et seq.) averred that the sum total of satisfaction in a society might

be increased beyond the maximum attainable under laissez-faire in a state of perfect equilibrium in perfect competition by taxing the production of commodities subject to decreasing returns and using the proceeds in order to subsidize the production of commodities subject to increasing returns This proposition, which we cannot discuss here, has been much amplified by Professor Pigou and especially by Mr R.F.Kahn, the chief authority on the subject See the latter’s paper

‘Some Notes on Ideal Output,’ Economic Journal, March 1935

2

The decisive proposition was that, in order to minimize the total sacrifice involved in raising a given sum, taxation should, to the requisite amount, wholly absorb, first, the excess of the highest income over the second highest one, then the excess of these two over the third highest one, and so

on

3

This error can be found, as a witness to our loose habits of thinking, in the writings of quite reputable economists, though it should be obvious that, given the intention to take away from taxpayers equal ‘amounts’ of satisfaction, nothing follows from the ‘law’ of decreasing marginal utility of income except that higher incomes should pay higher absolute sums than smaller incomes: whether a tax devised to give effect to that intention is to be progressive, proportional, or regressive depends on the particular form we choose to adopt for that law of decrease

ent people can be compared and, in particular, summed up into the General Welfare of society as a whole—the idea of ‘interpersonal comparability of utility.’ This idea, which few economists will care to defend nowadays4 although many use arguments that presuppose it, has had a chequered career It has been challenged almost from the first, for example, by Jevons, and then again and again both by writers who raised no difficulty about measurability and by writers who did But it kept on intruding, the chief reason being, of course, that it seemed so useful in welfare economics Marshall himself evidently did not object to it,5 and Wicksell actually went to the length of saying that parliamentary discussions on questions of taxation would be meaningless if it were impossible to compare the utilities of different persons.6 This is going rather far, but on the other hand it is also going rather far to state unconditionally that interpersonal comparison of utility7 is meaningless in every sense and for all purposes

However, from the standpoint of those economists who are steadfast opponents both

of interpersonal comparison and of measurement of individual utilities, any attempt at

either is of course no better than walking on clouds Nevertheless, they were in no mind

to give up welfare economics It is here that Pareto enters again to save the situation, at least in part He and, following him, Barone pointed out that objection to interpersonal comparisons (or measurability) does not invalidate those propositions of welfare economics which refer to events that benefit or injure some members of society without injuring or benefiting others.8 This principle will also enable us, in a more restricted sense, to speak of an event’s being ‘socially beneficial’ when some people are injured (lose something), but when those who are can be fully indemnified (so that they no longer prefer their old situation to the new one)

4

See L.Robbins, ‘Interpersonal Comparison of Utility,’ Economic Journal, December 1938

5

It is true that he wrote (Principles, Book I, ch 5, p 76): ‘We cannot directly compare the

pleasures which two persons derive from smoking; nor even those which the same person derives from it at different times.’ But the emphasis is upon the word ‘directly’; and the sentence means not more than that, exactly as measurement of the desires of a given person is always an indirect one in the sense explained above, so interpersonal comparison must resort to indirect methods Marshall’s reasoning in fact repeatedly implies the possibility of interpersonal comparison

6

See, e.g., his article on Cassel’s system, republished as Appendix I to the English edition of the

Lectures, vol I, p 221

7

Perhaps I should explain, as I have explained before with respect to measurability and

integrability, that this need not amount to more than saying that it may be possible to frame

hypotheses concerning the relation between the significance of a dollar to the poor man, A, and the significance of a dollar to the rich man, B, that yield none but reasonable results

8

This means, of course, that such events, rearrangements, or measures can be called ‘beneficial’ or

‘injurious’ irrespective of any interpersonal comparison and irrespective of the question by how

much the beneficiaries or victims are benefited or injured The case where all individuals are

benefited or injured is evidently covered by our formulation

at the expense of those who have been benefited and when, after this has been done, the latter are still better off than they were before.9

The standard work from which the new Anglo-American welfare economics stems,

Professor Pigou’s Economics of Welfare (1920; 3rd rev ed 1929),10 though it does take some account of the point of view just referred to, goes much beyond the limits drawn by the Paretian suggestion, especially as regards transfers of wealth from the relatively rich

to the relatively poor But the new Anglo-American welfare economics itself tries to respect those limits, though trespass on forbidden ground is still frequent That is to say,

it tries to confine itself, on principle, to propositions that can be established without the aid of either interpersonal comparison or measurement of utility Such self-restraint might seem surprising in view of the fact that its main result is to deprive of their scientific or pseudoscientific foundations many equalitarian articles of faith to which most modern economists are emotionally attached But not much self-restraint is actually needed, for a device has been discovered that enables welfare economists to elude those restrictions It

is called Social Valuation and consists in replacing the conception of social welfare defined as the sum of individual satisfactions by the dictate of some agent who decides what relative weights are to be attached to the (unmeasurable) desires of the members of society.11 That this agent is nothing but the volonté générale of the eighteenth century

should be clear; so should the danger that this agent become but a name for the interests and ideals of the analyzing individual

Under these circumstances, the question arises once more in what way modern welfare economics differs from that of the English ‘classics.’12 It dif-

9

The reader will realize on reflection that this is more than what it seems to be at first sight, viz a very artificial definition of what is meant by making ‘society’ better off

10

Originally Wealth and Welfare (1912)

11

This may be illustrated by the parliamentary discussions on questions of taxation envisaged by Wicksell According to the modern view, neither parliaments nor anyone else can compare the utilities of the persons who are to pay the taxes and the utilities of the persons who are to receive the proceeds or to benefit in other ways by the corresponding public expenditure But this does not really matter: the parliamentary majority itself simply puts a comparative (ordinal) value upon the sacrifices and benefits involved And similarly, the reader will no doubt put the value he pleases both on the comparative and on the absolute merits of the two procedures

12

Since it is impossible for us to enter into the methods and results of modern welfare economics, readers may welcome a few references: A.Burk (Bergson), ‘A Reformulation of Certain Aspects of

Welfare Economics,’ Quarterly Journal of Eco-nomics, February 1938; H.Hotelling, ‘The General Welfare in Relation to Problems of Taxation and of Railway and Utility Rates,’ Econometrica, July

1938; N.Kaldor, ‘Welfare Propositions in Economics and Interpersonal Comparisons of Utility,’

Economic Journal, September 1939; J.R.Hicks, ‘The Foundations of Welfare Economics,’

Economic Journal, December 1939; T.de Scitovszky, ‘A Note on Welfare Propositions in

Economics,’ Review of Economic Studies, November 1941; O.Lange, ‘The Foundations of Welfare Economics,’ Econometrica, July–October 1942; G.Tintner, ‘A Note on Welfare Economics,’ Econometrica, January 1946 Professor Hotelling’s paper is of particular interest because it

contains what is perhaps the most famous

fers, first, by a better technique Second, partly because this better technique yields better results but much more because the preconceptions and affiliations of the modern radical differ from the preconceptions and affiliations of the old radical, it also differs by its attitude toward business and laissez-faire But third it also differs by a circumstance that

is not to its credit Classic welfare propositions—including those of Jeremy Bentham— display a remarkable awareness of the qualifications to which considerations of instantaneous welfare maxima become subject as soon as we take account of the future Not less remarkably, such considerations are almost completely absent from the writings

of modern welfare economists Practically their only topic is the administration of the means afforded by an existing industrial structure This is no objection so long as welfare propositions remain exercises in pure theory and are frankly described as such It is a fatal objection as soon as the welfare economist, repeating a long-exploded methodological error, proceeds to ‘prescribe.’ The chief objection to the most popular of all welfare precepts—equality of incomes—is not that it has no rigorously defensible

foundations; the chief objection is that, even so far as tenable, it is completely

uninteresting by comparison with the question of its effects upon cultural and economic evolution

‘practical’ proposition of modern welfare economics, namely, that maximizing general welfare (in

a particular sense) requires that all goods and services should be produced and consumed in

quantities such as to equalize marginal costs and prices even where, owing to the presence of decreasing average costs, this involves losses to the producing industry—a proposition that is of great theoretical interest Another excellent example for ‘modern welfare economics at work’ is

Professor Samuelson’s ‘Welfare Economics and International Trade,’ American Economic Review, June 1938, supplemented by ‘Gains from International Trade,’ Canadian Journal of Economics and Political Science, May 1939, and Foundations (1947), ch 8

[When originally written, the latest reference in this section was to Tintner’s article in

Econometrica, January 1946 The reference to Samuelson’s Foundations (1947) was added later in

pencil.]

CHAPTER 8 Money, Credit, and Cycles

1 PRACTICAL PROBLEMS ONCE MORE the bulk of the vast literature on money and related subjects, which the period under survey produced, grew out of the discussions of current problems It contained, as the literature on money always did and does, a large quantity of completely worthless publications and a still larger quantity of publications which, though more or less meritorious within their range, are uninteresting from the standpoint of a history of analysis It is nevertheless necessary, recalling what has been said in Chapter 2, section 3,

to restate a few of those practical problems that induced discussions of some importance

(a) The Gold Standard

The literary reflex of the tendency that dominated the monetary policy of the period, the maintenance or adoption of the gold standard, merits more careful analysis than it is possible for us to offer There were in all countries, among those who discussed actualities of national monetary policy in a practical spirit, very many unconditional

‘pro’s.’ They included, as does every party to every practical controversy, narrow-minded fanatics without a trace of intelligence, but on its higher levels this was a respectable group I shall mention, by way of example, Bamberger, Giffen, de Parieu, though a dozen other such trios would do just as well.1

In view of the superficial sentence that some of us are in the habit of passing on the monetary thought of that time, it should be noticed, first, that the opinions and recommendations of the unconditional ‘pro’s’ were incessantly under fire—so that nothing could be farther from the truth than the idea that the economists of that period as

a body worshipped the golden calf—and, second, that these opinions received but

qualified support from those leaders of scientific economics who actually worked in the field As we shall see, neither Jevons, nor Walras, nor Marshall, nor Wicksell, nor

Wieser, nor Fisher can, without qualification, be called either theoretical or practical gold monometallists Later on, moreover, the depressions of the eighties and nineties raised the question of gold’s responsibility either for falling or for cyclically fluctuating prices And the emergence of the gold-exchange standard raised the

1

Ludwig Bamberger (1823–99) was a typical doctrinaire liberal of the German type—a

revolutionary in 1848, a staunch enemy of socialism, protection, and even social insurance ever after As a member of the Reichstag he established himself as its authority on money, and his great aim was to get Germany on the gold standard and to keep her there He was a violent

anti-bimetallist (see subsec b), disposing of the anti-bimetallist argument by pointing to the silver interests

behind it But the particular task he manfully strove to accomplish and the particular historical conditions in which this task posited itself to him must be taken into account before we condemn his views on the score of theoretical inadequacy The more important of his speeches and articles

(Ausgewählte Reden und Aufsätze über Geld- und Bankwesen) have been edited by K Helfferich

(1900)

Sir Robert Giffen (1837–1910), an economic journalist and civil servant, belongs to that category

of meritorious or even eminent economists to whom this book cannot do justice His Progress of the Working Classes in the Last Half Century (1884) and his Growth of Capital (1889) are

landmarks in the history of economic statistics Here we have to notice his valiant defense of the

gold standard (Case against Bimetallism, 1892; Evidence before the Royal Commission on Gold and Silver, 1886–8) and his almost ferocious hatred of Fancy (i.e non-gold) Monetary Standards

F.E.de Parieu (1815–93) was by far the most important of the three A public man—half politician, half civil servant—he specialized in the fields of taxation (income tax and related matters) and monetary policy From 1857 on, perceiving the ineluctable drift of things, he advocated the gold standard—but with due respect to the French silver problems—and international monetary co-operation (see subsec c below) His work on money is in his various reports His works on public finance have been noticed already [J.A.S intended to but did not do this in the unfinished sec 6 of

ch 6.]

question of the merits of actual gold circulation to which, as we know, Ricardo had already returned a negative answer.2

(b) Bimetallism

This was, throughout that period, the most fertile source of ‘practical’ controversy The popular and political literature of the silver men—justice to silver; dollar of our fathers; You shall not crucify mankind upon a cross of gold—contains many arguments that kept

on a much lower level than anything that can be found in the writings of the sponsors of gold In particular, it is infested by products of a semi-pathological nature, for at that time bimetallism was the chief hunting grounds of monetary monomaniacs Nevertheless, it is the fact—a fact that these semi-pathological products and also the victory of the gold party tend to obliterate—that, on its highest level, the bimetallist argument really had the better of the controversy, even apart from the support that a number of men of scientific standing extended to the cause of bimetallism.3

(c) International Monetary Co-operation

The various international monetary unions and conventions, such as the Latin Union, the Scandinavian Union, the German Union (before the foundation of the empire), naturally suggested more comprehensive schemes On the initiative of France, an international currency conference was held in Paris, 1867, that under the leadership of de Parieu succeeded to a surprising extent in keeping clear of the bimetallist hornets’ nest, considered the question of a uniform world coinage of gold, and adopted what were so far the boldest proposals ever made for a world-wide monetary union But at the subsequent international conferences of 1878, 1881, and 1892, pressure by the United States diverted discussion and proposals to bimetallism and thereby killed the original idea.4 However, at the conference of 1892, the German economist, Julius Wolf, proffered a new idea, namely,