Seminar:  David Hume

 

David Hume is recognized as the greatest British philosopher of the 18th century.  During his lifetime, he was known more for his historical writings.  Although he did not write a great deal on economics, what he wrote was insightful.  In this seminar, we will examine two of Hume’s economic essays, “Of Money” and “Of the Balance of Trade.” 

Of Money

 

Q      What does Hume compare money to?

 

 

Q      Upon what does the general level of prices depend?

 

 

Q      Does this imply that plenty of gold and silver of no use to a country?

 

 

Q      In his third paragraph, Hume argues that it is very difficult for a country that leads in trade and riches to maintain that lead.  What is his argument? 

 

Q      What is Hume’s attitude toward banks and “paper credit”?

 

 

Q      “Money is nothing but the representation of labour and commodities, and serves only as a method of rating or estimating them.”  Translate this into plain English.

 

 

Q  Why is the "greater or less plenty of money of no consequence" if we consider any one kingdom by itself?

 

 

Q      Right after he draws this conclusion, Hume states:  “since the discovery of the mines in AMERICA, industry has encreased in all the nations of EUROPE, except in the possessors of those mines; and this may justly be ascribed, amongst other reasons, to the encrease of gold and silver.”  What is Hume’s argument?

 

Q      What does Hume propose as an appropriate government monetary policy?

Q      What is the general argument of Part II of this essay?

 

 

Of the Balance of Trade

 

Hume begins the essay by arguing that prohibiting exports of particular goods, or of money, only harms the nation itself.  He notes that trade statistics are so poor that one cannot trust them to provide an adequate estimate of the true balance of trade.  Therefore, he seeks to demonstrate by means of a logical argument the impossibility of a nation losing its money so long as it preserves its people and industry.

 

Q      What proposition does Hume produce on the basis of his thought experiment concerning the annihilation or multiplication, overnight, of Britain’s money supply?

 

 

Q      Explain Hume’s analogy of the level of water in a lake.

 

 

Q      Does this always happen?

 

 

Q      What is Hume’s argument in favor of removing British trade barriers against French goods?

 

 

Q      Does Hume argue that convertible paper money (i.e., bank notes that can be converted into gold or silver coin on demand) raise a country’s price level?  If yes, how?  If not, then what’s the problem?

 

 

Q      Is Hume’s attitude toward paper credit uniformly negative?

 

 

Q      So Hume isn’t wholly negative toward bank credit, though he adopts a cautious position.  What is his attitude toward the “hoarding of treasure” by the government?

 

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