North, Dudley

bibliography

Sir Dudley North (1641-1691), British merchant, civil servant, and economist, was the third of five sons of the fourth Baron Guilford. He owes his place in the history of economic thought to his essay Discourses Upon Trade, published in 1691. The author’s reputation as an economist was not firmly established until 1824, when the essay was rediscovered and accorded favorable notice in John McCulloch’s A Discourse on the Rise, Progress, Peculiar Objects, and Importance of Political Economy (1824). However, the main ideas of the work were earlier available in summary form in the biography of Sir Dudley published by his brother Roger (North 1744). The biography throws light on the possible extent of the collaboration between Sir Dudley and Roger in the composition of the Discourses, and there is good reason to believe that the preface to the Discourses, the concluding paragraph of the second discourse, and also the final paragraph of the postscript are, in fact, the work of Roger.

Sir Dudley’s business experience in the Levant merchant trades and his later appointments as commissioner of the customs and commissioner of the treasury afforded him an insight into the functioning of the economic system and formed the basis of his relatively advanced economic analysis. His well-known argument for free trade principles is to be seen as only a part of the analytical apparatus of the Discourses. North was able to escape from the restrictive, regulatory assumptions of the earlier mercantilism because he was not concerned in quite the same way as other authors of the time with the problems of international money and bullion movements. Instead, his primary aim was to exhibit something of the structure of the flow of trade and money in the economic system, both national and international. He argued that it was unnecessary and fruitless for the government to concern itself directly with the availability of bullion and metallic money. There was an “ebbing and flowing of money,” North argued, an alternation between coining, melting, and recoining of bullion (“the buckets work alternately”) in terms of which a freely functioning monetary economic system would always be assured of a money supply adequate to the needs of trade, and in terms of which redundant money supplies would be melted and reabsorbed into hoards or exported. This significant empirical and analytical assumption enabled North to concentrate on the nature and significance of monetary circulation in the economy, rather than solely on money as such. In this lay his primary analytical contribution. But although he emphasized the importance of circulation, he failed to push his analysis to the point of showing the full effects of the balancing process on variations in commodity prices and income levels.

With John Locke, North argued against the proposals, recently advanced by Sir Thomas Culpeper and Sir Josiah Child, for a compulsory lowering of the legal maximum rate of interest. Such an act would lead to various kinds of legal avoidance, to the hoarding rather than the lending of funds, and to an artificially high black market rate of interest. A low interest rate was, for North, an effect rather than a cause of prosperous economic conditions. The interest rate would be low, he argued, when incomes and merchants’ savings out of incomes were high. Thus his interest analysis was largely directed toward explaining the supply side of the loan markets, focusing on the supply of savings or “stock.” The demand side of the loan markets was composed mainly of persons wishing to borrow for consumption expenditure. Interest rates on loans would differ, depending on the degree of risk in the loan.

North’s insistence on the significance of monetary circulation led him to a relatively advanced understanding of the importance of monetary demand. For healthy business activity it was not enough that the nation should possess money. It was necessary also that the nation should spend money. In discussing the state of the currency he argued that clipped money should be recoined at the expense of the holder, and that taxes should be payable only in full-valued money or the intrinsic equivalent thereof. But while North intended that this policy force the general acceptance and circulation of intrinsically full-valued coins, he recognized that clipped money would continue to circulate at its face value so long as it was universally acceptable, a notion that, together with other references to the use of money substitutes, pointed in the direction of the eighteenth-century antimetallists. In the course of the recoinage argument North drew attention to what became known subsequently as the velocity of circulation of money. In their methodological perspective and the breadth of their monetary analysis, Sir Dudley’s Discourses are an important anticipation of the best work in related areas in the following hundred years.

Douglas Vickers

[See alsoEconomic Thought, article onMercantilist Thought; Money.]

bibliography

Letwin, William 1951 The Authorship of Sir Dudley North’s “Discourses on Trade.” Economica New Series 18:35-56.

Mcculloch, John R. 1824 A Discourse on the Rise, Progress, Peculiar Objects, and Importance of Political Economy: Containing an Outline of a Course of Lectures on the Principles and Doctrines of That Science. Edinburgh: Constable. → A corrected and enlarged edition was published in 1825.

North, Dudley 1691 Discourses Upon Trade; Principally Directed to the Cases of the Interest, Coynage, Clipping, Increase of Money. London: Thomas Basset. → Reprinted in John R. McCulloch, Early English Tracts on Commerce, 1954, pages 505-540.

North, Roger 1744 The Life of the Honourable Sir Dudley North... and of Dr. John North, Master of Trinity College. Edited by Montagu North. London: Whiston.

Vickers, Douglas 1959 Studies in the Theory of Money, 1690-1776. Philadelphia: Chilton.