Monday, January 19, 2015


by Arthur Kitson
(Originally published by Arena Publishing Company, 1895)

Introductory Note: Arthur Kitson's great work presented here appeared 60 years before the works of E. C. Riegel. A few of the ideas contained in Riegel mirror those found in Kitson. In this version of Kitson's work, most of the footnotes are retained and appear in parentheses within the text. Matters that agree with Riegel or this blog are underlined. As was the case with our #18 series of papers that treated Ayn Rand's John Galt Speech to critical inspection, the text of Kitson's book will appear in blue. Additional editorial comments appear in black.

This presentation shall attempt to settle some issues including just what is and what is not “science,” and how the general area of study understood as either “political-economics,” or as simply “economics,” is to be accepted for the purposes set forth in this blog. Definition of terms as usual is essential.

For instance, we determined that “selfishness” was in all cases the wilful acts of one intent on deliberately taking advantage of others. “Idealism” is likewise understood as an irrational and unreal view of the world, regardless of how wonderful the ideal on which it may be based may be, that all genuine idealism, so defined, is the basis for ideology, and is castigated as among the most evil factors operating in the world today, or for that matter, at any time in human history. “Virtue” is simply anything that cannot help but be good and “Labour” is anything that any human being does, any action that can perhaps be considered productive, not necessarily in terms of creating anything new, but of performing useful tasks. “Wealth,” despite what anyone may claim to the contrary, including Kitson, must produce income to someone, or it is not strictly speaking wealth. An “idiot” is likewise someone who is as yet either uninformed or misinformed, wilfully or not, as opposed to a “moron,” who in any case is someone who may be incapable of ever knowing anything. As always, the clear and consistent use of terms and the agreement among reasonable people that words mean things, is always foremost.

Arthur Kitson (6 April 1859 – 2 October 1937) was a British monetary theorist and inventor. He was the managing director of the Kitson Empire Lighting Company of Stamford, Lincolnshire (England) and held many patents. In 1901, he invented the vaporised oil burner. The fuel was vaporised at high pressure and burned to heat the mantle, giving an output of over six times the luminosity of traditional oil lights. This device was later improved by David Hood at Trinity House. He was declared bankrupt in 1925.

This work was copyrighted, 1894, by Arthur Kitson, now in the public domain. It's dedication reads as follows:


As usual, we make no pronouncements that we shall agree with anything or everything Kison wrote, but we assure all that our readers will come away from this series with a better education on the subjects it covers, particularly money. This is a reasonably large work that shall necessitate a great many parts which are identified with the book's contents below.

David Burton

"If this so-called science, Political Economy, did not busy itself with that with which all juridical sciences are concerned, — with furnishing an apology for violence, — it could not fail to overlook the strange phenomenon that the distribution of wealth and the exploitation of some men by others are dependent upon money, and that only by means of money do some people command the labour of others nowadays, — that is, to enslave them.

"In antiquity, with its frequent conquest of nations and the absence of human equality, personal slavery was the most wide-spread method of subjugating men.

"In the Middle Ages the feudal system, — that is, landed property and the accompanying serfdom,— partially supplants personal slavery, and the centre of gravity of subjugation is transferred from the person to the land.

"In modern times, since the discovery of America and the development of commerce, with the overflow of gold made the universal money token, the money-tribute has become, with the strengthening of governmental authority, the chief means of the subjugation of men, and by it are determined all the economic relations of men."  Count Leo Tolstoi



#25.2 & #25.3 Chapter I. Economics and Ethics
#25.4 Chapter II. The Factors of Production
#25.5 Chapter III. Wealth
#25.6 Chapter IV. Exchange-Barter &
Chapter V. Value
#25.7 Chapter VI. Standard of Value
#25.8 Chapter VII. Purchasing Power
#25.9 & #25.10 Chapter VIII. Money
#25.11 Chapter IX. Gresham*s Law
#25.12 Chapter X. The Material Existence of Money
#25.13 Chapter XI. Price
#25.14 Chapter XII. Cause of General Rise and Pall in Prices and its
Remedy. Development of Value and Price from Barter.
Chapter XIII. Money Supply and Demand
#25.15 Chapter XIV. Currency. — Circulating Medium
#25.16 Chapter XV. Credit. — The Cause of and Necessity FOR Financial Panics
#25.17 Chapter XVI. On the Issuance of Money
#25.18 & #25.19 Chapter XVII. Usury
#25.20 Chapter XVIII. The Solution

#25.21 Appendix. Monometallism vs. Bimetallism. Criticism of Henry Dunning Macleod's 1821-1902 recent work on Bimetallism


It is almost a quarter of a century since Professor William Stanley Jevons 1835-1882 launched upon the world his now celebrated work, "The Theory of Political Economy," in which he demonstrated the possibility of treating economics as a purely mathematical science. He showed how all the terms with which it deals involve the consideration of quantities - are, in fact, strictly quantitative terms — such as utility, value, capital, interest, supply, demand and so on.

His treatment of the very ambiguous and hitherto mysterious subject of value, was the beginning of — what might be termed — a new era in economic science, so far as the theory of value is concerned, a theory which has held the attention of economists more exclusively during the past twenty years than any other branch of the science. It is to Professor Jevons that we are indebted for having rescued this most important subject from what seemed to be utter chaos, and for having brought the two terms, utility and value, into some sort of coherency. Notwithstanding, however, the importance of his contributions to theory, his labours do not appear to have conferred any practical benefit upon the social affairs to which they relate, — to money, trade and industry ; to those things which it is or should be the aim of the science to both elucidate and facilitate. Nor do I believe any better showing can be made — anything of what Lord Bacon called ' fruit ' will be found — from all the labours of economists in the science of exchanges, during the past twenty years.

And yet there is nothing of more importance to the human race, nothing that stands in greater need of the light of science, than the subject of exchanges. Society is as much divided, and the opinions of the learned are as contradictory upon commercial and financial questions, as they were when Jevons commenced his famous work.

In spite of the able and voluminous contributions to the theory of Value, the Money Question — which is indissolubly associated with it, and depends almost wholly for its solution upon a correct interpretation of this word — remains in the same unsettled, unsatisfactory condition as it did prior to the rise of the modern English and Austrian Schools.

The question arises, then, is this science of economics incapable of solving the all-important social problems with which it deals?

Is the science to begin with and end in mere theories — theories which apart from the mental exercise they afford, have no practical bearing upon the affairs of life? I think not. I believe that a true science of economics can and must answer satisfactorily and conclusively all the riddles that have been for ages propounded by the social sphinx. I believe such a science will enable mankind eventually to abolish want and the fear of it ; to create such an abundance of wealth that all will have enough and to spare ; a condition where over-production will mean a profusion of wealth, and its antidote will be found in satiety instead of starvation. I see no reason why economics should not do for trade and industry what in the science of mechanics has done for the mechanical arts, or medicine and surgery for human life.

In the following pages I have attempted to sketch the direction in which a true science of wealth must inevitably lead, as well as the foundation upon which it must be built.

Although dealing mainly with what I believe to be the greatest and most stupendous problem of this or any age, — the Money Question, — I have digressed somewhat in the opening chapters, in order to enunciate a few leading principles to which the science must of necessity conform. I have also pointed out where, in my judgement, economists have invariably gone astray — a fact which explains the cause of the barrenness of the science, and its failure to bear tangible fruit. One error — probably the most serious of all economic errors — and one which prevented Jevons from developing his theory of value into a practical reform of the hi ghest importance, — I may be allowed to touch upon in this preface.

After defining value as the " ratio of exchange," and showing that it can be expressed only in terms of the ideal — numbers — he commits an almost unpardonable solecism in writing of "a standard unit of value " as "a fixed quantity of some concrete substance defined by reference to the units of weight or space." Murray Rothbard and others have made the same error and hence their work is worthless! What "a fixed quantity of some concrete substance " has to do with a " ratio," and how a substance can become a standard "ratio," are questions that Professor Jevons failed to answer. The truth is that in spite of the clear definitions with which he set out, he afterwards confused his subject by employing the word "value " in a double sense: first, as the ratio of exchange; second, as purchasing power. Thus when speaking of a standard unit of value, he evidently means purchasing or exchange power, i. e., the power conferred upon a commodity whereby it can be exchanged for a certain quantity of some other article of utility.

Again, how can "a fixed quantity of some concrete substance " represent a power not possessed by, nor residing in, any substance, but merely conferred upon certain objects by human desires — a power that varies and fluctuates, that appears and disappears with those desires? To my mind there is only one way in which a commodity can be rationally considered to represent a unit of “value," i. e., purchasing power. We may select a given quantity of a certain commodity, 25 8-10 grains of gold, for example (the then exchange value of $1), and say that whatever the purchasing power of this amount of gold happens to be upon a certain day, or at a given time, shall represent the unit of purchasing power. But this is a very different thing from selecting 25 8-10 grains of gold as a permanent unit of value. No fixed quantity of any substance — not even gold — represents a fixed quantity of purchasing power for any length of time. It is only at any given instant that we may consider a commodity to have a certain amount of exchange power. If then, we follow the variations in the exchange relations of commodities from any given instant, having first prized them all at that time in terms of the commodity selected as a standard, we have an absolutely correct and scientific system by which fluctuations in values may be registered with mathematical exactness, and which will be independent of the fluctuations in gold or any other single commodity.

(The following analogy will make this subject clearer. Imagine a number of balloons, A, B, C, and D, at different altitudes, and suppose we wish to trace the variations in their relative positions from time to time. All that we know of their positions is that the distance between A and B is twice that between A and the earth, and that A to C is equal to three times A to B, whilst C to D is twice B to C. How are we to determine their positions ? The problem is a very simple one and is analogous to tracing changes in values of commodities. Suppose A to the earth represented by x and is unknown. Then A to B = 2x; A to C = 6x; therefore, B to C = 4x, and C to D = 8x. By following the variations in the altitudes of each balloon, in terms of x, expressed as a certain percentage or power of x, we can always determine their relative positions. It is not necessary to know what x is; solong as we can express distance in powers of x, these relations can always be determined, x may be said to correspond to our ideal unit of purchasing power, and it is not necessary to know the dimensions of this unit in absolute terms. All we desire is to be able to trace the fluctuations in the purchasing powers of commodities in terms of x, either as multiples or fractions.) Riegel's analogies were far more clear.

The mistake of Jevons and other economists was in omitting the element of time from their definition of a standard unit; an error similar to that in disregarding the degree of temperature at which the metallic bar that serves as the standard of length is to be taken. Of course the introduction of time destroys all hope of our ever possessing a material unit of value or purchasing power — a thing to which altogether too much importance has hitherto been given (and henceforth, anyone who fails to understand this is by definition an idiot!). Values are ideal creations and can only be properly expressed in terms of the ideal — numbers. In chapters V to VIII, as well as XI and XII, I have dealt fully with this question of the ideal, and have shown how an absolutely invariable ideal unit of purchasing power may be obtained, and how impossible and unnecessary it is to employ "a fixed quantity of some concrete substance" as a unit.

The difficulty that the monometallists and bimetallists are vainly contending against, but which they are unable to perceive, is, attempting to do with the material what can, from the very nature of things, only be performed by the ideal^ viz., express and register fluctuations in values.

To those who may think the conclusions arrived at in this work visionary or impracticable, I would say that so far as the use of an ideal monetary unit is concerned, we already possess one, and fully 999 out of every 1000 persons use money to-day in this ideal sense. Probably less than five per cent of the population could tell what the dollar or the pound sterling represents in bullion. What everybody does know, however, is that a dollar and a sovereign represent just so much purchasing power, and that this is not due to the bullion behind them, nor the quantity they represent, but solely on account of the credit of the issuer, and of the fact that the exchange relations of all goods are expressed in pounds, shillings and

pence, dollars and cents, or some similar ideal units.

The universal employment of token coins, paper money, etc., is an unanswerable argument to those who believe an ideal monetary system impracticable.

It may be thought by some that I have explained certain points with unnecessary prolixity, and the criticism of repetition may likewise be urged with a certain amount of justice. My defence to this is, that as far as I know, my treatment of this question is in the main entirely novel, and the subject one of an exceedingly abstract nature; and in striving to make the subject absolutely clear and intelligent to the average reader, I have preferred incurring the charge of repetition than of ambiguity. The reiteration of a truth will harm no one. The evil to be avoided, especially in a subject of this nature, is obscurity.

(So far as I am aware the invariable ideal unit of purchasing power, suggested in chapter XII, and the entire treatment and development of this subject, is new as it is original.)

The title of the book may seem somewhat pretentious. I do not wish it to be inferred that I am vain enough to believe this work to contain anything more than an indication or suggestion of the direction in which we must necessarily look for the final solution of this problem, which has been the great social riddle for centuries. Before concluding, I desire to acknowledge my deep indebtedness to my friend, Mr. William A. Whittick, of Philadelphia, for the many suggestions and valuable aid he has given me in the preparation of this book. I may say that, in an indirect way, Mr. Whittick is largely responsible for its appearance. It was from numerous discussions and considerable correspondence with him that I was induced to undertake the task. Further, it was originally through reading Mr.

Whittick's pamphlet on the "Money Question," that I first saw the natural and inevitable conflict between money and specie, a subject that I have treated at length in chapter IX on the Gresham Law.

In conclusion I wish to say that in my judgement the Money Question is the key to all the various other social questions which are now subjects of so much agitation and political discussion. Much as I favor the agitation now in progress towards an improvement in our tariff policy, in our land-tenure system, and in the attempts to adjust the differences between labour and capital, to my mind it is evident that these questions are of secondary importance so long as money remains upon the present inequitable, unscientific basis. ( which we of course agree, which is why “politics as a solution” as Riegel understood it too, is a dead end and a waste of time.)

In this discussion I have endeavoured to show the necessity for dealing with the question wholly from a scientific standpoint. As a general rule its discussion has heretofore been confined to those who may be regarded merely as representatives of private interests — advocates of certain schemes, monometallists, bimetallists, free-silverites, green-backers, etc.— whose labours consist in vain attempts to create a science that shall harmonize with pre-organized, prearranged institutions. My aim has been simply to arrive at the truth, irrespective of any interests which it may favour or condemn.

If this work should in any way lead to a reconsideration of the laws by which the greatest and most dangerous monopoly of the age is maintained, and by which millions of men are doomed to suffer inevitable failure — if it should assist in freeing money — that most useful and ingenious of all human inventions for facilitating commerce, — and thereby emancipate industry from the restraints with which legislators, either ignorantly or wickedly, have surrounded it, the object for which this book was written will have been fully accomplished.

Arthur Kitson
Philadelphia, August 15, 1894

Of course, nearly 60 years later, Riegel saw his mission in a very similar light.


"For my part, I have sworn fidelity to my work of demolition, and I will not cease to pursue the truth through the ruins and rubbish." — Pierre-Joseph Proudhon (1809-1865)

The period commencing with the year 1890 and extending to the present time will long be remembered as one of almost unparalleled business disaster throughout the civilized world. No nation has escaped the wave of industrial depression which, commencing with the failure of a London banking house, a few years ago, has swept over the entire globe. And nowhere have the effects been more severe than in the United States.  Reference to the Panic of 1890, the bank in question being Barings and relates directly to our firm and unswerving conviction that the model proposed by this blog forever separates the exchange and bookkeeping functions from the finance functions of banks.

"No other country'' says a magazine writer, (David A, Wells, in "Forum”) "has ever incurred in so short a time such an amount of financial and industrial disturbance and disaster." Mills, factories and workshops have closed, banks have suspended, and thousands have been suddenly reduced from affluence to poverty, whilst hundreds of thousands of wage-earnershave been cast adrift to beg, starve, or join the ranks of those numerous bands of malcontents who, from almost every State in the Union, are now marching towards Washington. This period has been marked by no extraordinary natural calamities, such as famines, fires or floods, which

occasionally precipitate whole communities into destitution. The factors in the production of wealth have been as prolific and as responsive as during any previous years of industrial prosperity. Men have been none the less eager to labour, machinery none the less efficient, and nature has not failed to respond as readily to the call of labour with bountiful harvests of wealth. There probably never was a period in the world's history when the factors of production were, as a whole, more efficient, when so much wealth could be created in so short a space of time and with so little expenditure of human energy, as now. Notwithstanding all this, we are today experiencing calamities greater in degree and more extensive than any that nature has ever produced. Millions of the world's inhabitants have been reduced to a condition as bad as though the fruits of their labour had been suddenly swept out of existence, or pestilence and famine had held undisputed sway. Nor is this period of depression without numerous precedents. Although in some respects severer and more universal in its ravages, the present panic belongs to the same order as those of previous years.

Appeal to those whose business it should be to investigate and interpret this class of phenomena, discloses a rather mournful and humiliating state of things, for the opinions of statesmen, financiers and economists are as divided regarding the cause of business panics as it is possible to imagine. Be the cause, however, what it may, the fact remains that after more than a century's experience, during which there have been not less than ten severe panics, no scientific explanation has yet been offered by either statesmen or economists for these decennial commercial crises, nor has a satisfactory remedy for their recurrence been suggested.

Since the trouble does not evidently arise, as we have seen, in the production of wealth, we may reasonably expect to find it somewhere in the mechanism of distribution. Complicated as is the machinery of modern commerce, it requires but the least reflection to perceive that the money question is the mainspring of the industrial world. That panics are known as financial panics is indicative of the fact that these troubles originate from disorganization of the mechanism of exchange. Panics never arise in the industrial world unless precipitated by financial disorder. In other words, instead of finance being, as it should be, the servant of industry, industry is the tool of finance, and the entire production and exchange of wealth is now controlled by those who control the money of the world. Startling as it may seem, it is nevertheless true that the power to paralyse industry is in the hands of a  comparatively few individuals, amongst whom concerted action can be effected at any time. This is a serious and menacing condition of things, and so long as it exists the lives and fortunes of almost the entire human race are virtually at the mercy of these men. The manner in which this condition of things has been brought about is entirely due to two or three gigantic fallacies underlying the world's monetary systems, which have become strongly entrenched by law, fallacies upon which the present science of economics has been reared.

To fully perceive these errors we must examine them in both root and branches. I shall therefore briefly discuss in the first two chapters a few of the premises and assumptions of the present system of political economy.

To write a book upon a subject which has occupied the careful attention of many minds for generations, and to condemn theories and teachings that have received the endorsement of economists of all nations, ever since the science began, may seem at first sight the height of presumption. Nevertheless, I hold that so long as a problem remains unsolved, suggestions are in order.

Moreover, we are taught by the greatest of modern philosophers that "our thoughts are as children born to us, which we may not carelessly let die." (Herbert Spencer in “First Principles")

The thoughts expressed in this work are those which have arisen from a careful and impartial study of the money question from every available source. The conclusion to which I have been irresistibly drawn, is that the whole science of political economy is founded upon the most glaring errors, errors to which are attributable nearly all the social evils with which we are confronted.

In the opening chapter I have taken a brief survey of the field occupied by the present so-called science, and have sought to establish a necessary relationship between ethics and economics, a relationship which, strange to say, economists have striven to ignore (or in the case of Ayn Rand and her backers, have sought to twist to their own liking!). In the second chapter I have striven to point out the necessity for an ideal economic standard of distribution corresponding to the ideals recognized by the science of ethics. From the practical standpoint the chief problem that to-day confronts civilization is how to establish a monetary system that will serve as the natural tool of industry, without becoming, as now, its master ; a system that will fulfil all the functions of a medium of exchange without the possibility of abuse or monopolization. In other words, the problem is how to place commerce upon its own base and restore it to the natural condition which it has been prevented from occupying by law, by governmental-controlled systems of currency, by monopoly and privilege.

The creation of such a system would be the greatest blessing that any human mind could bestow upon humanity, — a gift that would do more to rid society of want, wretchedness and crime than all the measures of relief that were ever devised. Such a system would, I believe, be immediately called into existence were all restrictive legislation regarding money and exchange abolished.  Notwithstanding the prodigious feats performed by man's inventive genius in the manner and means for producing wealth, the mechanism of exchange and system of distribution, under the fatal ban of legislation, remain as inefficient and inequitable as before the age of modern labour-saving inventions. In this field the human mind has not been allowed the advantages of experiment, and laws have completely blocked the path of social progress and turned men's activities into unnatural channels. In demonstrating these assertions I ask a careful, impartial consideration of the ideas herein advanced. For the usual hap-hazard expressions of opinion from those who believe that what ought to be, is, and of those whose judgements are based upon the opinions of their favourite newspapers, or the sentiments of their political leaders, I am prepared. It is not from such that reforms come or receive encouragement; it is not from these that the conditions of life are made better or brighter; it is to the thoughtful men and women whose lives are passed, often painfully, in industrial pursuits, and who feel the friction and grinding of the machinery when it goes wrong, to whom I appeal. To such — in fact to nine-tenths of the civilized world — this money question is the supreme problem of the hour. Bravo! We agree and the money question was then and remains now, THE question.

The conclusions arrived at will be found to be utterly at variance with those held by the financial world, and by nearly all who have written or taught anything regarding this subject. Nevertheless, I claim that these results are scientific and the inevitable conclusions of sound reasoning, and on these grounds I do not hesitate to challenge criticism.

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