Scholarly Comments on Academic Economics

Miscounting Money of Colonial America

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Abstract

Farley Grubb has developed an ambitious new money-stock time series for colonial Pennsylvania that uses the ingenious method of examining newspaper advertisements promising rewards (e.g., for help in catching runaway slaves) to estimate monies in circulation (Grubb 2004). Grubb asserts that promises of reward payments in “pounds” refer to bills of credit. We contest his interpretation, arguing that “pounds” denotes merely a unit of account. Similarly, ads promising “dollars” cannot be taken to refer to silver coins. Grubb mistakes the mention of a unit of account for the specification of a medium of exchange. We also show that Grubb’s methods are riddled with misinterpretations and inconsistencies, some of which arise from rather serious errors in basic scholarship. For example, Grubb denies that bills of credit readily passed current across the Middle Colonies, although it is a well-established fact. To concede it, however, would upset both his colony-level money supply estimates and his argument that the Constitutional ban on state-issued paper money had nothing to do with seigniorage. Grubb’s time series differs significantly from spot estimates of the money supply arrived at using methods that Grubb himself champions elsewhere, as well as estimates based on archival data.

Response to this article by Farley Grubb: Theory, Evidence, and Belief—The Colonial Money Puzzle Revisited: Reply to Michener and Wright (EJW, January 2006).