Barbon, Nicholas, M.D., (1640?-1698), probably the son of Praisegod Barebone, was born in London, studied medicine at Leyden, graduated M.D. at Utrecht in 1661, and was admitted an honorary fellow of the College of Physicians in December 1664. After the great fire of 1666 he was instrumental in establishing the first fire insurance office in London (1681); he was one of the most considerable re-builders of the city. He was M.P. for Bramber in 1690 and 1695, founded a land bank, which was united with that of Briscoe in 1698 and is reported to have been successful, and was among the projectors of the short-lived National Land Bank. He died in 1698, having appointed John Askill, the economist, to be the executor of his will, and directed that none of his debts should be paid.
Barbon's works were numerous and deserve some extended notice, as his views were, though with some failings which we shall have to notice, remarkably in advance of his time, and even approaching to modern views on value, interest, rent, and foreign trade. He published in 1684 A Letter to a Gentleman in the Country giving an Account of the Two Insurance-Offices; the Fire-Office and Friendly Society, setting forth the advantages of his own insitution and the disadvantage of its rival. In 1685 appeared (anonymously) his Apology for the Builder; or a Discourse showing the Cause and Effects of the Increase of Building. He opposed the opinion then prevalent that London was growing too large, and that the building new houses there drained the inhabitants from the country. He discussed in this pamphlet the theory of "rent." Its origin he explains in the following passage: "When mankind is civilised, instructed with arts, and under good government... the rich are fed, clothed, and housed by the labours of other men, but the poor by their own, and the goods made by this labour are the rents of the rich men's land (for be well fed, well clothed, and well lodged without labour either of body or mind, is the true definition of a rich man)." (Reprinted in A Select Collection of Scarce and Valuable Economical Miscellaneous Tracts. Reprinted for Lord Overstone, 1859, pp. 1-26 of that volume; see M'Culloch, Literature, pp. 350, 351). In 1690 Barbon published a Discourse of Trade. By N.B., M.D., London, Printed by Tho. Milbourne, for the Author, 1690. In this treatise (92, pp. 12), which hitherto has been scarcely noticed by those who have written on the history of economics, he displays as much ingenuity as any one of his greatest contemporaries. In the preface he attributes the importance which is ascribed to trade to the invention of gun-powder, foreign trade being considered necessary on account of its furnishing the supplies required by the country. But he thinks that trade has been considered from a too narrow point of view, especially by merchants like Thos. Mun, who "apply their thoughts to particular parts of trade, wherein they are chiefly concerned in interest." The first chapter treats "of trade and the stock, or wares of trade." Trade, according to him (Barbon), consists in the "making and selling of goods for another;" its parts are handy-craft trade and merchandising. Its aim is to make a bargain; in every bargain the wares to be sold, their quantity and quality, their value or price, the money or credit by which they are bought, and "the interest that relates to the time of performing the bargain "are to be considered. "The Stock and Wares of all Trade are the Animals, Vegetables, and Minerals of the whole Universe, whatsoever the Land or Sea produceth." (p. 3). They are either natural or artificial wares. Both are called staple commodities of the countries where they abound, either native or foreign. The native staple of each country consists of its actual and unexhausted riches; this shows the error of Mr Mun, who thinks that nations can get rich by parsimony like individuals (p. 6). This native staple is the basis of foreign trade, which is an exchange of commodities (p. 7). Foreign staples, even if carried on by monopoly, are uncertain wealth; this he illustrates by the changes brought about by the possession of the East India trade. The second chapter deals with "the Quantity and Quality of Wares." The third chapter, "of the Value and Price of Wares" is one of the most remarkable in this work. "The Value of al Wares arises from their Use: Things of no Use have no Value, as the English Phrase is, they are good for nothing." Thus he approached more closely than any one of his contemporaries to modern views on value and price. "The Price of Wares," he says, "is the present Value; And ariseth by Computing the occasion or use of them, the Over-plus of Those Wares, which are more than can be used, become worth nothing; So that Plenty in respect of the occasion, makes things cheap, and Scarcity, dear" (p. 18). These elements being variable as well as the Wants of the Mind, and most things being useful through supplying the latter, "there is no fixt Price or Value of anything for the Wares of Trade" (p. 18). But, "There are two ways by which the value of things are a little guessed at; by the Price of the Merchant, and the Price of the Artificier; the Price that the Merchant sets upon his Wares is by reckoning Price Cost, Charges, and Interest, the Artificier's Price includes the Cost of his Materials and the time of working them. The Price of the Artificier is according to the Value of the Art" and his skill (p. 19). "But the Market is the best Judge of Value; for by the Concourse of Buyers and Sellers, the Quantity of Wares, and the Occasion for them, are best known" (p. 20). The next chapter, "of Money, Credit, and Interest," begins with the following definition; "Money is a Value made by a Law; and the Difference of its Value is known by the Stamp and Size of the Price" (p. 20). It has two principal uses: "It is the Measure of Value, By which the Value of all other things are reckoned," and "It is a Charge or Pawn for the Value of all other Things. For both reasons, "the value of money must be made certain by Law." Having "its sole Value from the Law," its Metal, whether Brass (like in Spain), or Copper (Sweden), or Tin (English farthings), is not material (p. 21). "6d. in Farthings will the same thing as 6d. in Silver." Foreign coins, upon which their country's law has no force, go therefore by weight and are of no certain value (p. 22). The chief advantage of gold and silver (p. 22). The chief advantage of gold and silver money is to prevent counterfeiting, besides its other uses for plate, etc., and its easy exportation, which the example of Spain shows it is impossible to prohibit (p. 23). It has no intrinsic value, but two values; one certain, because of the law, another variable like the value of gold and silver or other metals (p. 25) It is only time and place gives a difference to the value of all things, "Nothing in itself hath a certain Value." Credit is "a Value raised by Opinion" (p. 27); Barbon distinguishes two sorts of credit, the one grounded upon the ability of the buyer, a short credit mostly; the other upon his honesty, a long one. He defends the necessity of erecting a public bank in London (pp. 28-31). Interest is, according to him, "the Rent of Stock; the Latter, of the Unwrought or Natural Stock.... No Man takes up Mony at Interest to lay it by him, and lose the Interest by it" (pp. 31, 32). The clear exposition of this doctrine places Barbon, as an economist, above both Petty and Locke, and it was not till sixty years later that Joseph Massie (1750) and Hume rediscover the correct theory of interest. The uses of interest are to measure, 1st profit and loss in trade, 2nd, the value of the rent of land; the value of the last being reckoned "by adding three years' Interest more than is in the Principle (sic)." Therefore interest must be fixed. The praise which Barbon bestows on trade (foll. chapter "of the use and benefit of trade,") forecasts the celebrated passages on the consequences of the division of labour in the Wealth of Nations, especially his denying of the importance of Increasing money. "It is the Natural Stock that is the Real Value, and Rent of Land" (p. 37). In a very interesting digression Barbon describes the civilising influence of trade, and maintains the chief cause which promote trade to be "industry in the poor and liberality in the rich" (p. 61). Against the mercantilist views of "sparing for exportation" he maintains, that "by not consuming the Goods that are provided for Man's Use, there ariseth a dead Stock, called Plenty, and the value of those Goods fall... A Conspiracy of the Rich Men to be Covetous and not spend, would be as dangerous to a Trading State as a foreign War" (p. 63). Clothing and building employ a great variety of trades, and the luxury of town-life increases the revenues (p. 70). In the last chapter Barbon declares that "the Two Chief Causes of the Decay of Trade are the many Prohibitions and high Interest" (p. 71), his argument being "that the Prohibiting of any foreign Commodity doth hinder the Making and Exportation of so much of the Native as used to be Made and Exchanged for it... The Native Stock for want of such Exportation Falls in Value, and the Rent of the Land must fall with the Value of the Stock" (p. 72). This work of Barbon's contains the ablest refutation of the theory of the balance of trade previous to Hume and Adam Smith. Barbon refutes the common argument for prohibition that the consumption of foreign commodities hinders the production and consumption fo the native; for the consumption of foreign wares arising from the wants of the mind, the setting up of obstacles to it will not encourage the consumption of native wares. A general prohibition would be the ruin of all trading nations; if the rare case should occur that the use of foreign goods checked the consumption of native goods, duties may be imposed to differentiate their consumption (pp. 75-78). The rate of interest being higher in England than in Holland, is a second obstacle to trade, for through this the Dutch traders are enabled to undersell the English (pp. 78-87). Any injury to those persons who live upon the interest derived from Money would be remedied through the rise of land, the interests derived from which would be hereby better secured. "For the Land is the Fund that must support and preserve the Government; and the Taxes will be lesser and easier payd" (p. 91). Its support is the more important "because it doth not Disturb, Lessen, nor Alter the Value of any Thing else" (p. 92). The Discourse of Trade was attacked by an anonymous author E.H., Reasons against Reducing against Reducing Interest to Four per Cent, 1694. Barbon answered in An Answer to Paper Entituled Reasons against Reducing Interest to Four per Cent, without, however, giving any further proof for his proposal. In 1695, it seems, was written An Account of the Land Bank. Brit. Mus. 816 m. 10; with John Askill he drafted the rules of the National Land Bank; The Settlement of the Lank Bank (Lord Somer's Tracts, vol. xi), 10th August 1695. The last work of Barbon is A Discourse Concerning Coining the New Money Lighter. In Answer to Mr Lock's Considerations about Raising the Value of Money. By Nicholas Barbon, Esq., 1696. Referring to the definition of money in his former work he advocates the well-known project of W. Lowndes of "raising the coin." He thinks that a recoinage according to the old standard would effect a want of specie, and that the steady rise of bullion made a proportional raising of the vaue of coin necessary. For the "Balance of Trade (if there be one) is not the cause of sending away the Money out of a Nation; but that proceeds from the difference of Value of Bullion in several Countries, and from the Profit that the Merchant makes by sending it away, more than by the Bills of Exchange" (p. 59). This passage, it has been remarked by M'Culloch, anticipates the "currency principle" as expounded by Ricardo in his pamphlet on the High Price of Bullion, 1811 (Works, 1886, pp. 267-8). In order to prove the expediency of his proposal, Barbon repeats his doctrine of money as given in the Discourse of Trade (p. 20), laying stress upon the maxim, that its value is not given by the quantity of government. He supports this opinion by most incredible sophisms. he ascribes the affluence of gold to inadequate rating of the value of silver money (p. 77), and he advocates his position by the history of English and foreign monetary policy and legislation (pp. 74-94). Though in this point the opinions of Barbon are erroneous he, however, attacks very ably Locke's theory that the value of money was the result of common assent (p. 9). Barbon distinguishes, with great ingenuity, between the value and the "vertue" of a thing, the latter being the same at all places, the former varying according to its plenty or scarcity (p. 7). His refutation, in the work, of the doctrine of the balance of trade, his remarks on the preference given to gold and silver, which he compares with the fable of Midas, on the restraint on consumption, and in consequence on prohibition of foreign goods (pp. 35-49), are developments of opinions expressed in his former writings. There is, according to him, but one infallible symptom to know when Trading Nations grow rich; by the increase of population manifesting itself by the enlargement of towns and also of the naval strength (p. 52).
[The Discourse of Trade is quoted by E.H., Reasons for the Abatement of Interest to four in the Hundred, 1692, p. 6 -- E.H. wrote: Decus et Tutamen; or our New Money as now coined in full Weight proved to be for the Honour, Safety, and Advantage of England -- written by Way of Answer to Sir Richard Temple and Dr. Barbon, 1696. On the latter, cp. M'Culloch, Literature, p. 157, -- M'Leod, Dictionary of Political Economy, pp. 232, 232. -- K. Marx, Capital, vol. i, pp. 2-4, -- Cunningham, The Growth of English Industry and Commerce, p. 351, 363, ed. 1882. -- C. Walford, Insurance Cyclopaedia, vol. i., p. 251, vol. iii. p. 459, and the present writer on Nicholas Barbon, in "Ein Beitrag zur Vorgeschichte der Klassichen Oekonomik," Conrad's Jarhbücher für Nationalökonomie und Statistik, xxi. Bd. N.F., p. 561-590 (1890).]