Carl Menger, “Zur Goldfrage” (1873)

Carl Menger’s review article, signed “M.,” examines J. C. Cairnes’s Essays in Political Economy theoretical and applied, concentrating on the effects of Californian and Australian gold discoveries on wealth and world trade. Its argument proceeds from a criticism of Cairnes’s monetary premises to an appreciative account of his explanation of silver flows toward Asia, before briefly surveying the book’s remaining essays and statistical appendix. Menger’s central distinction is between gold’s service as money and its usefulness as a material: increased supply cannot be judged solely by its effect on circulation.

Menger presents Cairnes as an adherent of Currency Theory who regards the gold discoveries as bringing virtually no benefit to humanity. On this account, depreciation offsets the increased quantity of money; countries outside the producing regions even suffer losses because they must export goods to replenish the value of their monetary stocks. Menger grants the narrow point that a larger quantity of depreciated gold performs its monetary function scarcely better than the smaller, more valuable stock it replaces. He rejects the inference that this exhausts the economic significance of greater abundance.

Es ist hiedurch eines der schönsten und nützlichsten Metalle den Menschen in größerer Quantität verfügbar und dadurch ihr Leben — in welchem Sinn für schönen Stoff, wohl auch Eitelkeit und Prunksucht eine so große Rolle spielen — nicht unwesentlich verschönert worden.

English translation: By this means one of the most beautiful and most useful of metals has been made available to men in greater quantity, and their life, in which a sense for beautiful material, and doubtless also vanity and a love of display, play so great a part, has thereby been beautified in no insignificant degree.

The passage grounds wealth in access to useful things, including objects valued for beauty, ornament, and display. Menger invokes gold jewellery and utensils reaching social groups that previously lacked them, extending even to better-situated workers. His refusal to assess such satisfactions from an ascetic standpoint is essential: vanity and ostentation do not cancel the benefits people derive from material goods. Gold’s monetary employment is therefore only one use, not an adequate measure of its contribution to welfare.

The criticism does not prevent Menger from endorsing Cairnes’s analysis of international monetary movements.

Sieht man indeß von dieser Einseitigkeit ab und begnügt man sich mit einer Analyse jener Rückwirkungen, welche die australischen und californischen Goldfunde auf den Weltverkehr in der jüngsten Zeit ausgeübt haben, so wird man die Essays des Mr. Cairnes sicherlich nicht ohne Befriedigung aus der Hand legen.

English translation: If, however, one disregards this one-sidedness and contents oneself with an analysis of those repercussions which the Australian and Californian gold discoveries have exerted upon world commerce in the most recent period, one will certainly not lay Mr. Cairnes's essays out of one's hand without satisfaction.

This transition separates an objection to the book’s governing conception of wealth from an assessment of its particular explanations. Menger especially praises Cairnes’s solution to the persistent outflow of silver toward India and East Asia. Earlier interpretations attributed the movement chiefly to hoarding under insecure legal conditions. Without excluding private hoards or the influence of Asian gold–silver valuations, Menger relocates the principal cause:

Der Hauptgrund der seltsamen Silberströmung liegt indeß offenbar in dem gesteigerten Bedarf der indischen und ostasiatischen Ländergebiete.

English translation: The chief cause of the strange flow of silver lies, however, evidently in the increased demand of the Indian and East Asian territories.

The explanation turns an apparent disappearance of wealth into a response to expanding monetary demand. Much of the region is moving from an economy in kind toward monetary exchange, while depreciation of precious metals also increases the quantity of circulating money required. Menger compares this absorption of silver with Germany’s demand for gold during its transition to a gold currency. Industrial uses probably contribute as well. The conceptual move parallels his earlier criticism: movements of precious metals become intelligible through their changing uses and the demands those uses generate.

The closing survey praises Cairnes’s studies of depreciation since the discovery of America and the later gold discoveries, including both original contributions and his synthesis of other scholars’ findings, particularly those of M. Chevalier. Menger briefly registers essays on laissez faire, English and Irish land questions, Comte, and Bastiat. He reports Cairnes’s contrast between the inductive pursuit of economic laws attributed to Smith and his successors and Bastiat’s tendency to justify the economic order, without developing a separate assessment. The statistical appendix receives approval as a resource for explanation and further research.

The review’s significance lies in its selective critical method: Menger disputes the reduction of wealth to monetary purchasing power while retaining Cairnes’s strongest empirical arguments. More plentiful gold can enrich life without improving circulation, and an outward flow of silver can indicate growing exchange rather than mere withdrawal into hidden treasure.