Nicholas Barbon
Encyclopedia
Nicholas If-Jesus-Christ-Had-Not-Died-For-Thee-Thou-Hadst-Been-Damned Barebon who traded as Nicholas Barbon ( 1640 – 1698) was an English
economist
, physician
and financial speculator
. He is counted among the critics of mercantilism
and was one of the first proponents of the free market
. In the aftermath of the Great Fire of London
, he also helped to pioneer fire insurance
and was a leading player in the reconstruction work—although his buildings were planned and erected primarily for his own financial gain. His unusual middle name, given to him by his strongly Puritan
father, is an example of a hortatory name: religious "slogan names" were often given in Puritan families in 17th-century England.
(or Barbon), after whom the Barebone's Parliament of 1653—the predecessor of Oliver Cromwell
's Protectorate
—was named. Praise-God's reputed Christian name was "Unless-Jesus-Christ-Had-Died-For-Thee-Thou-Hadst-Been-Damned", a variant of his son's middle name. He became a religious separatist with Millenarianist
beliefs, with fervent views in favour of infant baptism
in particular.
Nicholas was born in London in either 1637 or 1640. He studied medicine at the Universities of Leiden
and Utrecht
in the Netherlands
, and received his Doctor of Medicine
qualification from the latter in 1661. Three years later, he became an honorary fellow of the Royal College of Physicians
in London.
He soon turned from the medical profession to the building trade, which suddenly became important in 1666 when the Great Fire of London
devastated the City of London
—the commercial district of London which at the time was still separate from Westminster
, the seat of Britain's government. Within a few years he was "the most prominent London builder of his age". He worked on a large scale—building swathes of housing and commercial developments to the west of the City of London, where land was plentiful—and was ultimately responsible for connecting the City and Westminster for the first time as a result of his work in the districts which became The Strand
and Bloomsbury
. Barbon did this despite long-established restrictions on new buildings associated with various Acts of Parliament
and royal declarations in the late 16th century: he often simply disregarded legal and local objections, demolished existing buildings without permission and rebuilt speculatively in search of a quick profit.
On 11 June 1684, Barbon's continued aggressive expansionary speculation brought him and his workers into conflict with lawyers based at Gray's Inn
. Barbon started his largest project yet, the redevelopment of Red Lion Square
, without being authorised to do so. The Gray's Inn lawyers, whose Inns of Court
were adjacent, started and won a physical battle with Barbon and his colleagues, and arranged for warrants to be issued against him to stop the scheme proceeding. Another setback came when cheaply-built houses at Mincing Lane
collapsed because their foundations were inadequate. Nevertheless, by the time of his death, Barbon had built or financed developments to the value of £200,000 (£ as of ) according to Sir John Lowther, 1st Viscount Lonsdale
.
At the same time, Barbon took an interest in the development of insurance and the banking industry, and helped to pioneer both. In 1680–81, with 11 associates, he founded an "Insurance Office for Houses" which offered fire insurance for up to 5,000 households in London. Fires were a major danger in London at the time: the Great Fire destroyed more than 13,000 houses and displaced about 100,000 people, and another conflagration in 1678 damaged the Middle Temple
, one of the Inns of Court. In 1690, together with John Asgill
, he founded the National Land Bank. This was Britain's first land bank
—a financial institution which issued loans in the form of mortgages
against real estate
. These were popular with landowners because they could now raise money against the value of their main asset. The bank was moderately successful, and even threatened to usurp the Bank of England
in 1696. The government budget deficit had grown to an unsustainable level; Barbon merged the National Land Bank with another institution (founded by John Briscoe) to form Land Bank United, and offered the government a £2 million loan (£ as of ). The scheme foundered when Barbon and Briscoe could not raise enough money, and Land Bank United was demerged.
Barbon was also active in other fields during the 1690s. He was MP
for Bramber
in Sussex in 1690 and 1695, which allowed him to take advantage of Parliamentary privilege
(immunity from prosecution)—this helped him evade various court actions which were pending against him. Another project involved trying to pump drinking water from the River Thames
, to be piped to his new building developments. He patented a design in 1694, and tried to sell pumping rights alongside fire insurance contracts. He built a house for himself and his business interests in Fleet Street
, but later moved to Osterley House
, a 16th-century manor house
west of London. He died there in 1698 or 1699: his will was written in May 1698 and his executors received probate
on 6 February 1699.
. His pamphlets and books on political economy
are considered important because of their innovative views on money, trade (especially free trade
) and supply and demand
. His works, especially A Discourse of Trade (written in 1690), influenced and drew praise from 20th-century economists such as John Maynard Keynes
(in The General Theory of Employment, Interest and Money) and Joseph Schumpeter
. He was one of several late 17th-century economic, social and political theorists with a medical education background; contemporaries included Benjamin Worsley
, Hugh Chamberlen, William Petty
and John Locke
.
His early writings sought to explain and advertise his insurance and mortgage schemes and his building developments; for example, in his Apology for the Builder: or a Discourse showing the Cause and Effects of the Increase of Building of 1685—written in the aftermath of his fight with the lawyers of Gray's Inn—Barbon justified (anonymously) his expansionary building policy by describing the benefits it would bring to London and Britain as a whole. His A Discourse of Trade, written five years later, was much more significant, however. As a broad explanation of his economic and political views, it brought together all of his ideas and became the basis for his reputation as an economic theorist.
Barbon observed the power of fashion
and luxury goods to enhance trade. Fashion demanded the replacement of goods before they had worn out; he believed this directed people towards the continuous purchasing of goods, which therefore created constant demand. These views were contrary to standard moral values of the time, influenced by the government and the church
. He was one of the earliest writers to draw this distinction between the moral and economic aspects of purchasing.
His views on interest
were praised by Joseph Schumpeter
. Barbon described as a "mistake" the standard view that interest is a monetary value, arguing that because money is typically borrowed to buy assets (goods and stock), the interest that is charged on the loan is a type of rent
—"a payment for the use of goods". From this, Schumpeter extrapolated the argument that just as rent is the price paid for the use of what he called "unwrought stock, or the natural agents of [economic] production", interest is the price paid for "wrought stock—the produced means of production
".
One of the main arguments in A Discourse of Trade was that money did not have enough intrinsic value
to justify a government's hoarding of it; policies intended to help accumulate supposedly "valuable" commodities such as silver and gold were not appropriate, because the laws of supply and demand
were the main determiner of their value. Such criticism of mercantilism
—the view that a country's prosperity can be measured by its stock of bullion—helped to lay the foundation for classical economics
, and was unusual at the time. Along with John Locke, with whom he debated his theories, Barbon was one of the first theorists to argue that money's value was principally symbolic and that its main function was to assist trade. These views were expanded upon in his 1696 pamphlet, A Discourse Concerning Coining the New Money Lighter.
Barbon was influenced by populationism; he identified a country's wealth with its population. He also advocated the use of paper
and credit money
, and postulated the reduction of interest rates, which he thought impeded the growth in manufacturing
and trade
. He discussed these issues in his 1696 pamphlet, which also considered the effects of the Recoinage of that year
, in which the Royal Mint
recalled large quantities of silver coins, melted them down and reminted them, resulting in a temporary fall in the supply of money.
Despite the importance of some of his theories, Barbon's work (especially A Discourse of Trade) has been criticised for an excess of "definition and classification" instead of analysis and a disjointed style which lacked rigour. This has been attributed to the early period in which he wrote, when economic thought was not yet fully developed.
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
economist
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, physician
Physician
A physician is a health care provider who practices the profession of medicine, which is concerned with promoting, maintaining or restoring human health through the study, diagnosis, and treatment of disease, injury and other physical and mental impairments...
and financial speculator
Speculation
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...
. He is counted among the critics of mercantilism
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
and was one of the first proponents of the free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
. In the aftermath of the Great Fire of London
Great Fire of London
The Great Fire of London was a major conflagration that swept through the central parts of the English city of London, from Sunday, 2 September to Wednesday, 5 September 1666. The fire gutted the medieval City of London inside the old Roman City Wall...
, he also helped to pioneer fire insurance
Property insurance
Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance. Property is insured in two main...
and was a leading player in the reconstruction work—although his buildings were planned and erected primarily for his own financial gain. His unusual middle name, given to him by his strongly Puritan
Puritan
The Puritans were a significant grouping of English Protestants in the 16th and 17th centuries. Puritanism in this sense was founded by some Marian exiles from the clergy shortly after the accession of Elizabeth I of England in 1558, as an activist movement within the Church of England...
father, is an example of a hortatory name: religious "slogan names" were often given in Puritan families in 17th-century England.
Life
Nicholas Barbon was the eldest son of Praise-God BarebonePraise-God Barebone
Praise-God Barebone was an English leather-seller, preacher and Fifth Monarchist. He is best known for giving his name to the Barebone's Parliament of the English Commonwealth of 1653.-Early life:Barebone's place of birth is unknown...
(or Barbon), after whom the Barebone's Parliament of 1653—the predecessor of Oliver Cromwell
Oliver Cromwell
Oliver Cromwell was an English military and political leader who overthrew the English monarchy and temporarily turned England into a republican Commonwealth, and served as Lord Protector of England, Scotland, and Ireland....
's Protectorate
The Protectorate
In British history, the Protectorate was the period 1653–1659 during which the Commonwealth of England was governed by a Lord Protector.-Background:...
—was named. Praise-God's reputed Christian name was "Unless-Jesus-Christ-Had-Died-For-Thee-Thou-Hadst-Been-Damned", a variant of his son's middle name. He became a religious separatist with Millenarianist
Millenarianism
Millenarianism is the belief by a religious, social, or political group or movement in a coming major transformation of society, after which all things will be changed, based on a one-thousand-year cycle. The term is more generically used to refer to any belief centered around 1000 year intervals...
beliefs, with fervent views in favour of infant baptism
Infant baptism
Infant baptism is the practice of baptising infants or young children. In theological discussions, the practice is sometimes referred to as paedobaptism or pedobaptism from the Greek pais meaning "child." The practice is sometimes contrasted with what is called "believer's baptism", or...
in particular.
Nicholas was born in London in either 1637 or 1640. He studied medicine at the Universities of Leiden
Leiden University
Leiden University , located in the city of Leiden, is the oldest university in the Netherlands. The university was founded in 1575 by William, Prince of Orange, leader of the Dutch Revolt in the Eighty Years' War. The royal Dutch House of Orange-Nassau and Leiden University still have a close...
and Utrecht
Utrecht University
Utrecht University is a university in Utrecht, Netherlands. It is one of the oldest universities in the Netherlands and one of the largest in Europe. Established March 26, 1636, it had an enrollment of 29,082 students in 2008, and employed 8,614 faculty and staff, 570 of which are full professors....
in the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
, and received his Doctor of Medicine
Doctor of Medicine
Doctor of Medicine is a doctoral degree for physicians. The degree is granted by medical schools...
qualification from the latter in 1661. Three years later, he became an honorary fellow of the Royal College of Physicians
Royal College of Physicians
The Royal College of Physicians of London was founded in 1518 as the College of Physicians by royal charter of King Henry VIII in 1518 - the first medical institution in England to receive a royal charter...
in London.
He soon turned from the medical profession to the building trade, which suddenly became important in 1666 when the Great Fire of London
Great Fire of London
The Great Fire of London was a major conflagration that swept through the central parts of the English city of London, from Sunday, 2 September to Wednesday, 5 September 1666. The fire gutted the medieval City of London inside the old Roman City Wall...
devastated the City of London
City of London
The City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...
—the commercial district of London which at the time was still separate from Westminster
Westminster
Westminster is an area of central London, within the City of Westminster, England. It lies on the north bank of the River Thames, southwest of the City of London and southwest of Charing Cross...
, the seat of Britain's government. Within a few years he was "the most prominent London builder of his age". He worked on a large scale—building swathes of housing and commercial developments to the west of the City of London, where land was plentiful—and was ultimately responsible for connecting the City and Westminster for the first time as a result of his work in the districts which became The Strand
Strand, London
Strand is a street in the City of Westminster, London, England. The street is just over three-quarters of a mile long. It currently starts at Trafalgar Square and runs east to join Fleet Street at Temple Bar, which marks the boundary of the City of London at this point, though its historical length...
and Bloomsbury
Bloomsbury
-Places:* Bloomsbury is an area in central London.* Bloomsbury , related local government unit* Bloomsbury, New Jersey, New Jersey, USA* Bloomsbury , listed on the NRHP in Maryland...
. Barbon did this despite long-established restrictions on new buildings associated with various Acts of Parliament
Act of Parliament
An Act of Parliament is a statute enacted as primary legislation by a national or sub-national parliament. In the Republic of Ireland the term Act of the Oireachtas is used, and in the United States the term Act of Congress is used.In Commonwealth countries, the term is used both in a narrow...
and royal declarations in the late 16th century: he often simply disregarded legal and local objections, demolished existing buildings without permission and rebuilt speculatively in search of a quick profit.
On 11 June 1684, Barbon's continued aggressive expansionary speculation brought him and his workers into conflict with lawyers based at Gray's Inn
Gray's Inn
The Honourable Society of Gray's Inn, commonly known as Gray's Inn, is one of the four Inns of Court in London. To be called to the Bar and practise as a barrister in England and Wales, an individual must belong to one of these Inns...
. Barbon started his largest project yet, the redevelopment of Red Lion Square
Red Lion Square
Red Lion Square is a small square on the boundary of Bloomsbury and Holborn in London. The square was laid out in 1698 by Nicholas Barbon, taking its name from the Red Lion Inn. According to some sources the bodies of three regicides - Oliver Cromwell, John Bradshaw and Henry Ireton - were placed...
, without being authorised to do so. The Gray's Inn lawyers, whose Inns of Court
Inns of Court
The Inns of Court in London are the professional associations for barristers in England and Wales. All such barristers must belong to one such association. They have supervisory and disciplinary functions over their members. The Inns also provide libraries, dining facilities and professional...
were adjacent, started and won a physical battle with Barbon and his colleagues, and arranged for warrants to be issued against him to stop the scheme proceeding. Another setback came when cheaply-built houses at Mincing Lane
Mincing Lane
Mincing Lane is a one-way street in the City of London linking Fenchurch Street southward to Great Tower Street.Its name is a corruption of Mynchen Lane - so-called from the tenements held there by the Benedictine 'mynchens' or nuns of St Helen's Bishopsgate .It was for some years the world's...
collapsed because their foundations were inadequate. Nevertheless, by the time of his death, Barbon had built or financed developments to the value of £200,000 (£ as of ) according to Sir John Lowther, 1st Viscount Lonsdale
John Lowther, 1st Viscount Lonsdale
John Lowther, 1st Viscount Lonsdale, PC, FRS , known as Sir John Lowther, 2nd Baronet, from 1675 to 1696, was an English politician....
.
At the same time, Barbon took an interest in the development of insurance and the banking industry, and helped to pioneer both. In 1680–81, with 11 associates, he founded an "Insurance Office for Houses" which offered fire insurance for up to 5,000 households in London. Fires were a major danger in London at the time: the Great Fire destroyed more than 13,000 houses and displaced about 100,000 people, and another conflagration in 1678 damaged the Middle Temple
Middle Temple
The Honourable Society of the Middle Temple, commonly known as Middle Temple, is one of the four Inns of Court exclusively entitled to call their members to the English Bar as barristers; the others being the Inner Temple, Gray's Inn and Lincoln's Inn...
, one of the Inns of Court. In 1690, together with John Asgill
John Asgill
John Asgill was an eccentric English writer and politician.-Life:He studied law at the Middle Temple, 1686, and was called to the bar in 1692. He founded the first land bank in 1695 with Nicholas Barbon, which, after proving to be a profitable venture, merged with the land bank of John Briscoe in...
, he founded the National Land Bank. This was Britain's first land bank
Land Bank
A land bank is a bank that issues long-term loans on real estate in return for mortgages. This term could also apply to:*The Land Bank of Taiwan, a wholly state-owned bank of the Republic of China...
—a financial institution which issued loans in the form of mortgages
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
against real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
. These were popular with landowners because they could now raise money against the value of their main asset. The bank was moderately successful, and even threatened to usurp the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
in 1696. The government budget deficit had grown to an unsustainable level; Barbon merged the National Land Bank with another institution (founded by John Briscoe) to form Land Bank United, and offered the government a £2 million loan (£ as of ). The scheme foundered when Barbon and Briscoe could not raise enough money, and Land Bank United was demerged.
Barbon was also active in other fields during the 1690s. He was MP
Member of Parliament
A Member of Parliament is a representative of the voters to a :parliament. In many countries with bicameral parliaments, the term applies specifically to members of the lower house, as upper houses often have a different title, such as senate, and thus also have different titles for its members,...
for Bramber
Bramber (UK Parliament constituency)
Bramber was a parliamentary borough in Sussex, one of the most notorious of all the rotten boroughs. It elected two Members of Parliament to the House of Commons in 1295, and again from 1472 until 1832, when the constituency was abolished by the Great Reform Act.-History:The borough consisted of...
in Sussex in 1690 and 1695, which allowed him to take advantage of Parliamentary privilege
Parliamentary privilege
Parliamentary privilege is a legal immunity enjoyed by members of certain legislatures, in which legislators are granted protection against civil or criminal liability for actions done or statements made related to one's duties as a legislator. It is common in countries whose constitutions are...
(immunity from prosecution)—this helped him evade various court actions which were pending against him. Another project involved trying to pump drinking water from the River Thames
River Thames
The River Thames flows through southern England. It is the longest river entirely in England and the second longest in the United Kingdom. While it is best known because its lower reaches flow through central London, the river flows alongside several other towns and cities, including Oxford,...
, to be piped to his new building developments. He patented a design in 1694, and tried to sell pumping rights alongside fire insurance contracts. He built a house for himself and his business interests in Fleet Street
Fleet Street
Fleet Street is a street in central London, United Kingdom, named after the River Fleet, a stream that now flows underground. It was the home of the British press until the 1980s...
, but later moved to Osterley House
Osterley Park
Osterley Park is a mansion set in a large park of the same name. It is in the London Borough of Hounslow, part of the western suburbs of London. When the house was built it was surrounded by rural countryside. It was one of a group of large houses close to London which served as country retreats...
, a 16th-century manor house
Manor house
A manor house is a country house that historically formed the administrative centre of a manor, the lowest unit of territorial organisation in the feudal system in Europe. The term is applied to country houses that belonged to the gentry and other grand stately homes...
west of London. He died there in 1698 or 1699: his will was written in May 1698 and his executors received probate
Probate
Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will. A probate court decides the validity of a testator's will...
on 6 February 1699.
Economics
During the later part of his life, Nicholas Barbon wrote extensively on economic theoryEconomics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. His pamphlets and books on political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
are considered important because of their innovative views on money, trade (especially free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
) and supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
. His works, especially A Discourse of Trade (written in 1690), influenced and drew praise from 20th-century economists such as John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...
(in The General Theory of Employment, Interest and Money) and Joseph Schumpeter
Joseph Schumpeter
Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...
. He was one of several late 17th-century economic, social and political theorists with a medical education background; contemporaries included Benjamin Worsley
Benjamin Worsley
Benjamin Worsley was an English physician, Surveyor-General of Ireland, experimental scientist, civil servant and intellectual figure of Commonwealth England. He studied at Trinity College, Dublin, but may not have graduated....
, Hugh Chamberlen, William Petty
William Petty
Sir William Petty FRS was an English economist, scientist and philosopher. He first became prominent serving Oliver Cromwell and Commonwealth in Ireland. He developed efficient methods to survey the land that was to be confiscated and given to Cromwell's soldiers...
and John Locke
John Locke
John Locke FRS , widely known as the Father of Liberalism, was an English philosopher and physician regarded as one of the most influential of Enlightenment thinkers. Considered one of the first of the British empiricists, following the tradition of Francis Bacon, he is equally important to social...
.
His early writings sought to explain and advertise his insurance and mortgage schemes and his building developments; for example, in his Apology for the Builder: or a Discourse showing the Cause and Effects of the Increase of Building of 1685—written in the aftermath of his fight with the lawyers of Gray's Inn—Barbon justified (anonymously) his expansionary building policy by describing the benefits it would bring to London and Britain as a whole. His A Discourse of Trade, written five years later, was much more significant, however. As a broad explanation of his economic and political views, it brought together all of his ideas and became the basis for his reputation as an economic theorist.
Barbon observed the power of fashion
Fashion
Fashion, a general term for a currently popular style or practice, especially in clothing, foot wear, or accessories. Fashion references to anything that is the current trend in look and dress up of a person...
and luxury goods to enhance trade. Fashion demanded the replacement of goods before they had worn out; he believed this directed people towards the continuous purchasing of goods, which therefore created constant demand. These views were contrary to standard moral values of the time, influenced by the government and the church
Church of England
The Church of England is the officially established Christian church in England and the Mother Church of the worldwide Anglican Communion. The church considers itself within the tradition of Western Christianity and dates its formal establishment principally to the mission to England by St...
. He was one of the earliest writers to draw this distinction between the moral and economic aspects of purchasing.
His views on interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
were praised by Joseph Schumpeter
Joseph Schumpeter
Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...
. Barbon described as a "mistake" the standard view that interest is a monetary value, arguing that because money is typically borrowed to buy assets (goods and stock), the interest that is charged on the loan is a type of rent
Renting
Renting is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from landowners...
—"a payment for the use of goods". From this, Schumpeter extrapolated the argument that just as rent is the price paid for the use of what he called "unwrought stock, or the natural agents of [economic] production", interest is the price paid for "wrought stock—the produced means of production
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
".
One of the main arguments in A Discourse of Trade was that money did not have enough intrinsic value
Intrinsic theory of value
An intrinsic theory of value is any theory of value in economics which holds that the value of an object, good or service, is intrinsic or contained in the item itself...
to justify a government's hoarding of it; policies intended to help accumulate supposedly "valuable" commodities such as silver and gold were not appropriate, because the laws of supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
were the main determiner of their value. Such criticism of mercantilism
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
—the view that a country's prosperity can be measured by its stock of bullion—helped to lay the foundation for classical economics
Classical economics
Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....
, and was unusual at the time. Along with John Locke, with whom he debated his theories, Barbon was one of the first theorists to argue that money's value was principally symbolic and that its main function was to assist trade. These views were expanded upon in his 1696 pamphlet, A Discourse Concerning Coining the New Money Lighter.
Barbon was influenced by populationism; he identified a country's wealth with its population. He also advocated the use of paper
Paper Money
Paper Money is the second album by the band Montrose. It was released in 1974 and was the band's last album to feature Sammy Hagar as lead vocalist.-History:...
and credit money
Credit money
Credit money is any claim against a physical or legal person that can be used for the purchase of goods and services. Examples of credit money include personal IOUs, and in general any financial instrument or bank money market account certificate, which is not immediately repayable in specie, on...
, and postulated the reduction of interest rates, which he thought impeded the growth in manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
and trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
. He discussed these issues in his 1696 pamphlet, which also considered the effects of the Recoinage of that year
Great Recoinage of 1696
The Great Recoinage of 1696 was an attempt by the British Government to replace the hammered silver that made up most of the coinage in circulation, much of it being clipped and badly worn. -History:English currency was in disarray in the late 17th century...
, in which the Royal Mint
Royal Mint
The Royal Mint is the body permitted to manufacture, or mint, coins in the United Kingdom. The Mint originated over 1,100 years ago, but since 2009 it operates as Royal Mint Ltd, a company which has an exclusive contract with HM Treasury to supply all coinage for the UK...
recalled large quantities of silver coins, melted them down and reminted them, resulting in a temporary fall in the supply of money.
Despite the importance of some of his theories, Barbon's work (especially A Discourse of Trade) has been criticised for an excess of "definition and classification" instead of analysis and a disjointed style which lacked rigour. This has been attributed to the early period in which he wrote, when economic thought was not yet fully developed.
Works
- Apology for the Builder; or a Discourse showing the Cause and Effects of the Increase of Building (1685)
- A Discourse of Trade (1690)
- A Discourse Concerning Coining the New Money Lighter (1696)