were due to a relatively large number of unfavourable seasons, coupled with the obstructions to trade which were created by the war; while the lower range of prices in the subsequent years was attributable to a series of more prolific seasons, the removal of the adverse influences arising out of a state of war, and the consequent improvement in the processes of manufacture and industry.
The ‘History of Prices’ was completed in six volumes; the third, dealing with the years 1838–9, was published in 1840, the fourth in 1848, and the fifth and sixth, in the compilation of which he was assisted by William Newmarch [q. v.], in 1857, the year before Tooke's death.
The whole work is an admirable analysis of the financial and commercial history of the period which it covers; and the subject was one with which Tooke was peculiarly well fitted to deal, possessing as he did the rather rare combination of a wide practical knowledge of mercantile affairs with considerable powers of reflection and reasoning. Whatever may be thought of his conclusions, the value of his methods of investigation is beyond dispute.
The chief interest of the later volumes lies in their record of the steps by which he gradually severed himself from the supporters of the ‘currency theory,’ who may be regarded as the direct heirs of the bullionists of 1810 and 1819.
The act passed in the latter year was a practical recognition of the evils inseparable from an inconvertible paper currency. But it did not take long to convince the wiser heads in the commercial world that the measure was incomplete. The experience of the great crisis of 1825, followed by those of 1836–9, showed that it was not enough to impose on the Bank of England the liability of payment in gold unless there was also security that the bank had the means of discharging the liability. Both in 1825 and in 1839 the danger of another suspension of cash payments was imminent. But while all were agreed that the management of the currency, so far as it rested with the bank, was unsatisfactory, there was great difference of opinion as to the remedy which should be applied.
Out of the controversy emerged the act of 1844, the main object of which was to prevent the over-issue of notes, and so to regulate their quantity that the volume of the currency should at all times conform in amount to what it would have been under a purely metallic system.
Tooke was resolutely opposed to the provisions of the act, holding them to be either superfluous or mischievous. He did not dispute that the affairs of the bank had been gravely mismanaged; but he attributed this less to the system than to want of prudence in administering it. He thought that by some changes in the management of the bank, coupled with the compulsory maintenance of a much larger reserve of bullion, more satisfactory results would be achieved than under the inelastic system prescribed by the act.
The supporters of the ‘currency theory,’ whose principles were adopted by Peel and embodied in the act, were represented by Samuel Jones Loyd, baron Overstone [q. v.], Robert Torrens [q. v.], and George Warde Norman [q. v.] They contended that banks of issue, by the arbitrary extension of their circulation, could produce a direct effect upon prices, and thus stimulate speculation, with the consequent fluctuations and revulsions of credit; that the mere enactment of convertibility on demand was not a sufficient safeguard against these evils; and that the only adequate remedy was to separate the business of issue from that of banking in such a way that the former should regulate itself automatically, and that the discretion of the directors should be confined to the latter alone.
Tooke, on the other hand, reinforced later on by Fullerton and James Wilson (1805–1860) [q. v.], maintained that a paper currency which was readily convertible on demand must necessarily conform, so far as its permanent value was concerned, to the value of a purely metallic currency; that for this purpose no other regulation was required beyond ready and immediate convertibility; that under these conditions banks had no power of arbitrarily increasing their issues; and that the level of prices was not directly affected by such issues. Before the committee of 1832 Tooke went so far as to state that, according to his experience, a rise or fall of prices had invariably preceded, and could not therefore be caused by, an enlargement or contraction of the circulation.
This brief summary of Tooke's views represents his matured opinions as they took shape between 1840 and 1844, and were defined in his ‘Enquiry into the Currency Principle’ (1844), and as they remained to the end of his life. But in his earlier writings there are many passages inconsistent with his later opinions; and the process of development was very gradual (see Fullerton, Regulation of Currencies, 2nd edit. p. 18). Overstone also observed before the committee of 1857 that ‘Mr. Tooke is upon
