From the 1880s until after the creation of the Federal Reserve System in 1913 the United States was a hotbed of monetary controversy. The secular price deflation that began in 1865 prompted a host of efforts to increase the money supply, in the belief that more money would check the decline of prices. The agitation for free coinage of silver that arose in the 1870s and carried into the 1880s and 1890s generated a maelstrom of arguments and counterarguments. Such theoretical support as the “cheap money advocates” provided was in the form of a crude application of the quantity theory of money. Not surprisingly, using the quantity theory in such a manner brought the theory itself under fire.

Controversies about capital, its role in the economy, and its claims for reward are still very much with us. Though the exchanges are often heated, all the contestants' are descended from either of two monumental works of about a century ago: Eugen von Bohm-Bawerk's Positive Theory of Capital (1889) and Irving Fisher's The Rate of Interest (1907). This essay inquires: in what respects are these two theories the same? In what respects do they differ? And why?

The Austrian School of Economics has long been branded as a sort of radical laissez-faire wing within the economics profession, even much more “right-wing,” in fact, than Milton Friedman, the profession;'s most recognized “preacher” of the free-market. The economic journalist Alfred Malabre, Jr., for example, in his recent critical book on modern economics, Lost Prophets, argues that “the monetarism that Friedman and his followers were preaching was not quite as conservative as advertised. In fact, the University of Chicago professor was treading not far from the middle of the economic road, flanked on the left by the likes of Galbraith and Leontief and on the right by Hayek, along with such other Austrian-school luminaries as Hans Sennholz, chairman of the economics department at Grove City College in western Pennsylvania, and Ludwig von Mises, transplanted from Austria and finishing out a distinguished academic and writing career at New York University” (Malabre 1994, p. 144).

This article is part of a wider historical research program in which I seek to examine the origins of past methodological debates. It is my opinion that economists ignore methodological and philosophical issues until either the doctrinal conclusions of the school to which they belong are challenged or they themselves contest the doctrinal conclusions of an alternative school. Once this occurs, economists select, reinterpret or construct methodological precepts in order to gain the maximum support for their position. Under this hypothesis the formation and articulation of methodological beliefs are largely endogenous to matters relating to economics; that is, the traditional causal process of methodology to theory to policy is turned on its head and becomes policy to theory to methodology. The aim of what follows is to illustrate this research program by examining the methodological framework expounded by T. E. Cliffe Leslie in the early stages of the English economic Methodenstreit or “battle of methods.”

Scope. Macroeconomic theory determines either an unemployment equilibrium or an inflation equilibrium. Consider an economy producing a single good. Unemployment theory determines the physical output of that good; inflation theory determines its price. Twice in the history of economic thought an unemployment equilibrium reversed itself into an inflation equilibrium. First, in the eighteenth century the unemployment equilibrium of William Petty (1662) and A. Yarranton (1677) reversed itself into the inflation equilibrium of David Hume (1752) and A. R. J. Turgot (1769–1770). Second, in our own century the unemployment equilibrium of J. M. Keynes (1936) reversed itself into the inflation equilibrium of Milton Friedman (1968).

The purpose of this paper is to recover Adam Smith's conception of the appropriate rules of argumentation for the political economist in public policy discussion. Our interest will be in Smith's attempt to model the advisory style which he thought appropriate for an economist writing on public policy issues, advising the legislature and debating constitutional problems. Inferences will be drawn from the scope and tone of Smith's work on some selected issues of economic policy reform discussed in The Wealth of Nations (hereafter WN). Extensive reference will be made to Smith's admission of the vital role of rhetoric in human affairs in his Lectures on Rhetoric and Belles Lettres, and to Smith's view of the legislator's perspective on policy as enunciated in the Theory of Moral Sentiments.

There is an on-going controversy on the interpretation of David Ricardo's wage theory, which has undoubtedly been fueled by the existence of contradictions and difficulties in Ricardo's own treatment of wages. The aim of this paper is to clarify the sources of these difficulties, and to trace their possible historical and analytical reasons. To this end, Ricardo's contribution is put in historical context, and compared with the received doctrine of his time, that is, with Adam Smith's wage theory. This comparison shows that there are many Smithian elements in Ricardo, and that the problems emerge when Ricardo departs from Smith. These problems are essentially the coexistence of Smithian and Ricardian notions of the natural wage in Ricardo's work and the difficulties in reconciling the latter with the distinction drawn by Ricardo between natural and market variables. The reason.for Ricardo's partial departure from Smith, it will be argued, may have been his wish to render more clear-cut his conclusions concerning the tendency of the profit rate to fall in consequence of a rising price of corn. The effort to clarify the difficulties in Ricardo's theory and the comparison with Smith also entail an interpretation that differs in important respects from those found on both the main sides of the controversy over his wage theory.

Among the most controversial of David Ricardo's contributions to policy debate was his scheme for the redemption of the public debt by means of a “capital levy,” a one-time tax on the property of the nation. Public debt policy had been the subject of sporadic debate throughout the eighteenth century, but faced increased scrutiny by the time Ricardo came to address the subject. While government revenues were suffering from the repeal of the temporary income tax which had been imposed during the Napoleonic Wars, revenue requirements remained high, as the savings in terms of military expenditures were being offset by the need to make interest payments on a debt which had grown during the latter years of the war. Ricardo's analysis of public debt was not novel; nor was the proposal for a capital levy to achieve its redemption.