Maria Pia Paganelli (Reference Paganelli2025) draws upon Adam Smith’s comment in his Lectures on Jurisprudence (LJ hereinafter) that David Hume “seems … to have gone a little into the notion that public opulence consists in money" (Smith [Reference Smith, Meek, Raphael and Stein1762–63; 1766] 1978, 253, p. 507; italics added) to make her claim that Smith considered Hume to have been a mercantilist. She ignores the comment by the editors of LJ that Smith there refers “probably to those places in [Hume’s] essays where Hume argues against paper money … [in] ‘Of Money’ and … ‘Of the Balance of Trade’” (1978, p. 507n28). She also misses the editorial summary in the Wealth of Nations (hereinafter WN) of Smith’s subsequent discussion in LJ of the mercantilist writers who confused wealth with money, giving “occasion to the systems of Mun and Gee; of Mandeville who built upon them; and of Mr. Hume who endeavoured to refute them” (WN IV.i, 8, n.12, p. 432; see LJ, p. 576; italics added). She instead invokes John Maynard Keynes’s (1936, p. 343n3) reference to Hume as “enough of a mercantilist” to support her interpretation of Smith’s earlier comment.

We should note that Keynes did not regard the label “mercantilist” a pejorative as Smith did. Rather, Keynes believed mercantilism to have “scientific truth” ([1936] 1974, p. 335) while “[t]he extraordinary achievement of the classical theory was to overcome the beliefs of the ‘ordinary man’ and, at the same time, to be wrong” (p. 350). Keynes ([1936] 1974, pp. 333–371) was looking for respectable names in economics as allies for his embrace of mercantilism. Seeing Hume argue in “Of Money” that the increased quantity of money increases output and employment in the short run led to his remark that “Hume … had a foot and a half in the classical world. For Hume began the practice among economists of stressing the importance of the equilibrium [long run] position as compared with the ever-shifting transition towards it, though he was still enough of a mercantilist not to overlook the fact that it is in the transition that we actually have our being” ([1936] 1974, p. 343n3). Contrast with Paganelli’s claim that “Keynes did not give us any explanations for regarding Hume ‘still enough of a mercantilist’” (2025, p. 2).

But acknowledging the short-run positive effect of the increased quantity of money on output and employment or the short-run non-neutrality of money is not a fundamental tenet of mercantilism. The non-neutrality of money in the short run is a part of the classical “forced-saving doctrine” but whose validity Keynes did not recognize; see James Ahiakpor (Reference Ahiakpor2009b). Rather, according to Smith, promoting exports and discouraging imports to accumulate money (gold and silver) were the fundamental features of mercantilism (WN IV.viii, 1, p. 642). Hume feared the economy’s loss of money because of paper money causing the rise of prices and endangering the nation’s ability to wage foreign wars ([1752] 1987, p. 285). Smith’s criticisms of Hume were to correct both fears. Thus, Keynes does not appear to be a reliable source for ascertaining whether Smith considered Hume to have had mercantilist tendencies.

Paganelli also employs her interpretation of Smith’s comment in LJ as the reason for her belief that Smith “did not replicate … Hume’s exposition of the quantity theory of money” (2025, p. 1), “omits Hume’s monetary ideas” (p. 2), or “cannot use the quantity theory of money as Hume uses it” (p. 9). This is her response to Jacob Viner’s (Reference Viner1937, p. 87) claim of a “mystery” in Smith’s failure to employ Hume’s price-specie-flow mechanism (PSFM), which she declares “may not be a mystery after all” (Paganelli Reference Paganelli2025, p. 9). But Viner bases his puzzlement on Smith’s description in WN in a hypothetical illustration of banks having created paper money worth 100% the value of existing circulating specie money, keeping 20% of the metals (gold and silver) as reserves, and 80% of the money going abroad but without the level of prices having risen (WN [1776] 1981, II.ii, 30, p. 293).

Paganelli’s response to Viner rather regrettably supports the persistent misinterpretations of Smith as having rejected Hume’s quantity theory of money (QTM) and the PSFM. That, in spite of affirmations of Smith as having followed both theories with respect to specie money by Robert Eagly (Reference Eagly1970) and Samuel Hollander (Reference Hollander1973, p. 205). But Smith’s employment of Hume’s QTM include: “Gold and silver, like every other commodity, vary in their value, are sometimes cheaper and sometimes dearer. … The discovery of the abundant mines of America reduced … the value of gold and silver in Europe to about a third of what it had been before” (WN I.v, 7, p. 49); and “So far … as the increase of the quantity of the precious metals in any country arises from the increased abundance of the mines, it is necessarily connected with some diminution of their value” (WN I.xi.e, 32, p. 207). An example of Smith’s employment of the PSFM is: “Gold and silver, like all other commodities, naturally seek the market where the best price is given for them” (WN I.xi.e, 34, p. 208; see also II.iii, 23, pp. 339–340, and IV.i., 11–14, pp. 435–437). What Smith disputed was Hume’s attribution of rising prices to paper money even though he also argued that banks are enabled to issue paper money by the deposits of money they receive from the public ([1752] 1987, p. 319); see WN (II.ii, 96, p. 324). A fuller account of Hume’s monetary analysis in both “Of Money” and “Of the Balance of Trade” by Paganelli would have shown that Smith was rather correcting Hume’s self-contradictory or inconsistent arguments, not his having “mercantilist tendencies” (Paganelli Reference Paganelli2025, p. 2).

Another example of Hume’s self-contradictions is his assigning to the “magistrate” (sovereign; [1752] 1987, p. 312) the “good policy … of keeping [money], if possible, still encreasing because, by that means, he keeps alive a spirit of industry in the nation, and encreases the stock of labour in which consists all real power and riches” ([1752] 1987, p. 288). Now if paper money causes the level of prices to rise, as Hume claims earlier in the essay and in “Of the Balance of Trade,” it rather should be easy for the sovereign or the banks to print enough of it to prevent the level of prices from falling. Yet Hume continues to argue, “A nation, whose money decreases, is actually, at that time, weaker and more miserable than another which possesses no more money, but is on the encreasing hand” (p. 288).

Further to explain the negative consequences of insufficient money, Hume argues:

The negative output and employment consequences are dire in Hume’s account: “The workman has not the same employment from the manufacturer and merchant; though he pays the same price for every thing in the market. The farmer cannot dispose of his corn and cattle, though he must pay the same rent to his landlord. The poverty, and beggary, and sloth, which must ensue, are easily foreseen [imaginable]” ([1752] 1987, pp. 288–289).

But Paganelli’s account of Hume’s monetary analysis leaves out the above explanations. Instead, she claims Hume’s reason for recommending the increasing quantity of money is “because this is the way to increase industry and thus the quantity of money. But the only way to keep money still increasing is to take it out of circulation” (2025, p. 5). Subsequent economists who have followed Hume’s explanation of the short-run negative output and employment effects of falling level of prices until nominal wage rates fall include Henry Thornton, David Ricardo, Thomas Malthus, John Stuart Mill, Alfred and Mary Marshall, Ralph G. Hawtrey, Frank Taussig, and Irving Fisher; see James Ahiakpor (Reference Ahiakpor2009b). Yet Paganelli repeats the same omission of Hume’s explanation of the negative consequences of insufficient money as in her 2007 article that prompted Ahiakpor’s (Reference Ahiakpor2009a) comment.

Another of Hume’s self-contradictions is his arguing in “Of Money” that “no bank could be more advantageous, than such as one as locked up all the money it received, and never augmented the circulating coin, as is usual, by returning part of its treasure into commerce” ([1752] 1987, pp. 284–285). Hume repeats a similar argument in “Of the Balance of Trade,” prescribing “the gathering of large sums of [gold and silver] into a public treasure, locking them up, and absolutely preventing their circulation” ([1752] 1987, p. 320). This, even as Hume notes that hoarding money amounts to its annihilation ([1752] 1987, p. 290).

Paganelli could have noted the self-contradiction or inconsistency in Hume’s proposal rather than to cite it as a legitimate method Hume proposed for “lowering prices, which incentivizes industry” (2025, p. 5; italics added). She instead bases her inference on Hume’s claim that the absence of paper money in France kept prices lower than in other countries and “The advantages of this situation, in point of trade as well as in great public emergencies, are too evident to be disputed” ([1752] 1987, p. 317). But she must be aware that Smith disputed Hume’s claim: “The proportion between the prices of provisions in Scotland and that in England, is the same now as before the great multiplication of banking companies in Scotland. Corn is, upon most occasions, fully as cheap in England as in France” (WN II.ii, 96, pp. 324–325; italics added). Smith’s statement is located within the same paragraph as Paganelli’s (Reference Paganelli2025, p. 8) quotation.

Hume also acknowledges the increased production in Scotland that followed the introduction of bank credit and paper money (]1752] 1987, pp. 318–319), but which Paganelli leaves out of her account of his analysis. In a footnote, Hume also states, “We observed in Essay III [“Of Money”] that money, when encreasing, gives encouragement to industry, during the interval between the encrease of money and the rise of prices. A good effect of this nature may follow too from paper-credit” ([1752] 1987, p. 317n; italics added). The QTM and PSFM should have led Hume to recognize that the increased output effect of paper money would lead to lower prices, increased exports, and the inflow of money. Instead, he feared a rising level of prices because of paper money and the outflow of specie money.

Paganelli also could have noted another self-contradiction in Hume’s “Of the Balance of Trade” in his prescription of locking up gold and silver. Hume considers it an error, early in the essay, for mercantilists to fear the loss of money to foreigners because of imports as “a groundless apprehension; and I should as soon dread, that all our springs and rivers should be exhausted, as that money should abandon a kingdom where there are people and industry” ([1752] 1987, p. 309). Hume subsequently argues the automatic adjustment of the quantity of money among trading nations were price-level differences to occur: “The same causes, which would correct [any] exorbitant inequalities [in the distribution of money], were they to happen miraculously, must prevent their happening in the common course of nature, and must for ever, in all neighbouring nations, preserve money nearly proportionable to the art and industry of each nation” ([1752] 1987, p. 312; italics added). In the concluding paragraph, Hume declares: “a government has great reason to preserve with care its people and its manufactures. Its money, it may safely trust to the course of human affairs, without fear or jealousy” (p. 326). Smith endorses Hume’s argument: “Upon every account … the attention of government never was so unnecessarily employed, as when directed to watch over the preservation or increase of money in any country” (WN IV.i, 15, p. 437). But for Hume’s groundless fear of paper money raising the level of prices, he might not have prescribed locking up gold and silver.

Mercantilist thought also included the belief that the accumulation of money (gold and silver) led to lower interest rates permanently; Keynes ([1936] 1974, pp. xxxiv, 341–344) adopts the view. Hume debunks that argument in “Of Interest,” which Smith (WN II.iv, 9, p. 354) cites approvingly. Keynes is silent on Hume’s “Of Interest.”

Lastly, Paganelli claims a difference in the end-goals of Hume and Smith, with Hume aiming for “the accumulation of precious metals” (2025, p. 4) while Smith presumably aimed at explaining the path to promoting the wealth of nations. But Hume’s declaration in “Of Money” that the “public wealth and prosperity. … are the end of all our wishes” ([1752] 1987, p. 282) suggests a greater similarity in their end-goals. Hume just incorrectly entertained “a doubt concerning the benefits of banks and paper-credit which are so generally esteemed advantageous to every nation” (p. 282; italics original) because he thought they caused the level of prices to rise, resulting in the export of specie money.

Hume’s self-contradictory or inconsistent arguments do not make him a mercantilist. Smith acknowledged Hume to have refuted mercantilism and yet considered him a mercantilist? A misinterpretation of Smith.