Not So Dull? Simon Gray and Giffen Behaviour.
If any episode in history has been coloured grey on grey, this is the one. Men and events appear as Schlemihls in reverse, as shadows that have lost their bodies. Karl Marx (1)
Writing to J. R. McCulloch in April 1819, David Ricardo mentioned that he had been introduced to J. C. L. Simonde de Sismondi, whose Nouveaux Principes d'Economie Politique (1819) 'endeavoured to shew the fallacies of my opinions'. As Sismondi had indicated in their brief conversation that 'he does not appear to agree with any of our known writers', Ricardo evinced 'a great curiosity to see his book'. McCulloch's response was dismissive--Sismondi was 'too much of a sentimentalist to make a good political economist'. Six weeks later, however, he asked whether Ricardo had 'yet taken a peep at Sismondi's book?--It is the most extraordinary production I have ever had in my hand--I think your townsman Dr Purves is the better economist of the two.' The reference here was probably to All Classes Productive of Wealth, published in 1817 under the name of George Purves L.L.D., which had been critically reviewed in The Scotsman, of which McCulloch was the editor and Ricardo a keen reader (Ricardo 1952b, 22, 28, 38; Purves 1817; Correspondent 1818).
In late June, Ricardo was still to read Sismondi's book, 'which I am prepared to find exactly of the description you give of it--viz. a work not less extraordinary than that of Dr. Purves, if there really be any such person in existence' (Ricardo 1952b, 40). Purves was actually Simon Gray, as he publicly acknowledged when second editions of All Classes and another Purves text, Gray versus Malthus (Purves 1818), were published in 1840 (Gray 1840a, 1840b). Gray noted that his authorship was known to friends in 1817-18 and that he had been identified as the author in another Scotsman article that referred to his work (Gray 1840a, xiii; B. 1818, 383). (2) Identifying Gray would not have been particularly difficult if only because, as Piero Sraffa noted, he used All Classes and Gray versus Malthus to 'puff his The Happiness of States, first published under his real name in 1815 with a second edition appearing four years later (Ricardo 1952b, 38n; Gray 1815, 1819).
If Ricardo and McCulloch were bemused by and dismissive of Gray, his general analytical abilities were subsequently given short shrift by historians of economics. The 1896 Dictionary of Political Economy, edited by R. H. I. Palgrave, described him as a 'writer... of great pretensions but of less success' (Powell 1896, 257). In that regard, little had changed by 1981 when the Happiness of States was characterized as 'a large cranky work'. Nevertheless, Gray's reputation had received some refurbishing in the twentieth century. In one respect at least, he was now deemed to be a 'genuine pioneer', for a chapter in the Happiness 'contains a remarkably detailed assessment of what in the wake of Marshall we have come to call Giffen goods' (Masuda and Newman 1981, 1011). That reading, reinforced by the entry for Gray in the New Palgrave (Newman 1987), links the Happiness with Alfred Marshall's references to Giffen behaviour in the third edition of his Principles of Economics published in 1895, the Memorandum on Fiscal Policy of International Trade, first written in 1903 and revised for publication in 1908, and the defence of the Memorandum in a 1909 exchange of letters with a sceptical F. Y. Edgeworth (Marshall 1961, 109-10, 1926 (1908), 380-5; Whitaker 1996, 220-4). In turn, Gray and Marshall are linked to the later neoclassical Giffen good. This is an explanation for an upward-sloping market demand curve (at least over part of its range), in terms of an inferior commodity, where a negative income effect dominates the substitution effect, the commodity accounting for a large proportion of expenditure by 'poor' consumers.
The category of a pioneer has essentially the same meaning as a precursor. Although it has been suggested that there will 'surely be a place for precursors' in an 'objective' history of economics (Whitaker 2001, 394), other historians have argued that the use of that category entails that texts are read in an anachronistic manner. (3) The principal problem is that in reconstructing (sections of) the precursor text in the image of a later analytical framework, so as to make the two essentially equivalent in some way, the questions posed by, the concepts used in, and the analytical framework of the precursor text are erased. The category of precursor is thus bound up with a type of whig history. There is, therefore, no analysis of the significance of a precursor text's 'context of refutation', which encompasses the theories criticised in that text, the arguments rebuffed, the assessments challenged and the conditions in which refutation was deemed pertinent (Collini 1979, 9).
The principal purpose of this article is to show how the precursor reading of Gray's Happiness of States produces a misleading account of the contents and significance of Gray's text within a teleological history of a Giffen good. The analysis is presented in three sections. After providing some new information for Gray's biography, the following section considers Gray's account in the relevant section of the Happiness, showing that he was one of the few nineteenth-century British political economists who argued that speculators did not necessarily play a beneficial role in food markets. The final section examines how Gray's text has been read to install him as a pioneer of the twentieth-century Giffen good.
1. Some Peculiar Views on Political Economy
The eldest son of a merchant from Dunse, a mercantile and administrative town in the Scottish borderlands, Simon Gray was born in 1767. (4) Having lived in Dunse until he was nearly thirty years of age, Gray went to London in 1796. He obtained a position at the War Office in 1810, retiring with a 'superannuation allowance' in 1828. Residing at Mornington Crescent, Camden, Gray died in April 1842.
The location of his London residence and the contents of his will suggest that Gray was quite wealthy. (5) His privately published bibliography contains a remarkably long list of works, quite apart from political economy, including tragedies, comedies and novels. That there were so many of these, and that most were unpublished, might also indicate that, at least before 1810, he was a man of 'independent means'. If so, it is not evident why Gray should have been appointed to a position at the War Office when he was over forty years of age. It might be suspected, however, that the preferment had something to do with his brother, the naval surgeon John Gray (1768-1826), for whom Admiral Horatio Nelson had been both patron and friend. Having served in the Mediterranean, John was appointed physician to the naval hospital at Haslar in 1810 (Gray 1827).
Simon Gray's employment at the War Office may not have been especially onerous as the publication of his large works in political economy began five years later with the Happiness of States, a tome of six hundred pages. The Ricardian response to his work (see above) was echoed in a later description of him as 'a man of eccentric habits, having some peculiar views on political economy'. (7) That he preferred the term statistics rather than political economy might have confirmed his peculiarity, if not eccentricity. That terminology is, however, quite explicable. Gray claimed a friendship with Sir John Sinclair, the politician and writer on finance and agriculture, to whom he dedicated a new introductory chapter in the second edition of the Happiness (Gray 1819, iii-xl). Sinclair has been credited with first using the word 'statistics' in English, by which he meant a study of the means to promote 'happiness' in a nation. Gray followed Sinclair in preferring the nomenclature of statistics for his work, noting of political economy that he did not 'approve of this title' (Gray 1820, 386; see also Gray 1819, iii). As a proponent of a sliding-scale Corn Law, Gray was also a vehement critic of prominent political economists. (8) These included: Ricardo on a labour theory of value and on monetary policy (along with other 'bullionists'); T. R. Malthus on population growth and the Poor Law; and J. B. Say for ignoring the dictum that 'demand regulates the amount of the supply'. (9) Perhaps the strongest criticism was levelled at Francois Quesnay and Adam Smith for arguing, in different ways, that some employments were unproductive. Smith was most to blame. His
wild, visionary, and pernicious system... sets up man against man, spreads discontent among all classes, and fosters the dangerous spirit of sedition among the lower... Its success can only be ascribed to its ... [according with] then prevalent prejudices against the ecclesiastical and military establishment. (Gray 1819, xxi).
It is a system, which I must pronounce detestable, as teaching men to believe, that nature... has constrained nearly the half of the human race to subsist by plundering and distressing the other; and mischievous and immoral, as fostering a spirit of discontent and malevolence among all, and of sedition among the lower ranks... The miseries of the French revolution may, in considerable degree, be ascribed to that hostile spirit towards the higher ranks, and to the government and church classes, which it fosters. And this malignant wild system, the reproach of the statisticians of Europe, is still universally operating in producing discontent, fomenting sedition, and urging our legislators to adopt measures which thwart the benevolent designs of nature. (Gray 1819, xxviii)
If Gray was unsparing in his invective against those he regarded as fomenting discontent, sedition and revolution, the spectres of which were never far from the pages of the Happiness, he was not unfamiliar with biting criticism of his own work. His bibliography recorded that, in 1787, he wrote his first (unpublished) collection of verse, The Rhymster; Or, Fragments, Scraps and so Forth, Grave and Gay, Found in the Lumber Chest of the Rhymster (Gray 1840c, 1). This was possibly the source of some verse that he sent to the poet and lyricist Robert Burns in the same year, asking for comments. The Baird of Ayrshire responded with a rhyming couplet:
Symon Gray, You're dull to-day. Gray was undeterred and sent more verse. Burns was, once again, unimpressed: Dulness with redoubled sway, Has seized the wits of Symon Gray.
Unfazed, Gray tried again, but Burns had tired of the game. His lengthier response concluded with the following:
So, Symon dear, your song I'll tear, And with it wipe my bum. (10)
2. Speculators and Irritable Mobs
When British economists discussed the role of speculation in non-financial markets from the early to mid-nineteenth century, they tended to focus on 'corn', a generic term for grain crops, where wheat was the most important. In general, the discussion drew similar conclusions to Adam Smith's discussion of fluctuations in a 'scarcity', where the production of grain fell below that for a normal or average year, with an increase in prices. Smith argued, in the Wealth of Nations, that speculators played a crucial role in such market periods by reducing the amplitude of prices and rationing the available supply before the next harvest. Government regulations restricting the role of speculators could, however, turn a scarcity into a famine. (11) It might be wondered if Smith's advocacy of a non-interventionist policy assumed relatively mild scarcities, such as those in mid- to late eighteenth-century Britain. If that was the case, a different situation prevailed in 1795-96 and in 1800-01 during the war with revolutionary France, with sharply rising prices and widespread food 'riots' (Wells 2011).
It has been argued that the figure of Smith was substantially reworked between the mid-1790s and the early nineteenth century. Initially remembered as 'one of the inspirations for the French Revolution', with his opposition to 'established religion... national prejudice and foreign military expenditure', Smith's work was seen, particularly in Scotland, as 'virtually seditious', providing support for 'opposition to war, and discontent with the English government'. By the turn of the century, however, he had become an economic 'conservative', 'the single-minded theorist' of freedom of commerce. In that reworking, a pivotal role was played by the 'discovery' in the mid-1790s of the discussion of scarcities in the Wealth of Nations, with Smith now read as providing universal principles for dealing with both scarcities and famines (Rothschild 1992, 74, 78, 91, 92). (12)
That reworking did not, of course, meet with universal acclaim. In October 1800, the English Cabinet debated the merits of setting price maxima in the context of food riots and more general unrest. The president of the Board of Trade, the Earl of Liverpool, predicted that failing to set maxima would result in insurrection and it was clear who was to blame:
If... Insurrections should unfortunately happen, it will indeed be very singular, that the French Philosophers, by their wild principles in favour of political Liberty should have destroyed the Government of their own Country; and that the French Oeconomists (from whom Dr. Adam Smith, has borrowed all his Doctrines) should, by Principles in favour of the Liberty of Trade, carried to as great an Extravagance, shake the Foundations of the Government of Great Britain, (cited in Wells 2011, 248)
Gray's Happiness of States, which was published shortly after Napoleon's escape from Elba, bears the hallmarks of being written during the Napoleonic wars. (13) As was indicated above, he reiterated the claims of the mid-1790s critics in depicting Smith as at least partly responsible for the French Revolution, while explaining the success of his seditious discussion of productive and unproductive employments as due to the 'then prevalent prejudices against the ecclesiastical and military establishment'. Nevertheless, Gray made no mention of Smith in Book 7 of the Happiness, which was devoted to the analysis of scarcities and also argued for a non-interventionist policy. While the reading of Gray as a Giffen pioneer is taken from chapter 5 of that Book (Gray 1815, 504-10), the analysis here will also refer to other chapters in Book 7 as they help in understanding a number of his arguments. The draft of Gray's analysis was first written in 1804, which helps to explain why he referred to the events of 1800-01, although some mention was also made of wheat price increases in later years.
One weakness in Smith's discussion was that he did not explain how, in decentralised markets, farmers and corn merchants/speculators would be able to accurately judge the aggregate stock of corn and hence form their expectations such that prices would only increase to the extent necessary to clear markets during a scarcity. If, however, prices were based on incorrect expectations, the initial increase in prices during a scarcity might be taken, not as a consequence of farmers and merchants withdrawing supplies in anticipation of future price rises, but rather as a further indication of the diminished state of the harvest. That could set off further and repeated withdrawals from markets, so that prices would increase well beyond the necessary market-clearing levels for the year (Rashid 1980, 495-7).
That criticism was well known by 1800 (14) and formed part of Gray's subsequent argument. But he also departed decisively from Smith in claiming that the initial price increases were the result of a conspiracy. Although he acknowledged scarcities could occur, Gray argued that those 'for the last twenty years have been uniformly fictitious ... I have seen no grounds from facts for admitting any years of scarcity at all'. If the scarcities were 'artificial, not real', the belief in them was due to 'interested men, and the artifices of speculators'. Indeed, '[njever, perhaps, was a more scandalous... [and] infamous outrage committed by speculators on humanity and justice' than in 1800-01. The problem was that there were no satisfactory statistics of the available stock after a harvest. Without an accurate inventory, the government could be convinced by influential speculators that there was a scarcity. With the government's subsequent announcement of a deficiency, 'the alarm is spread over the country'. Speculators would withdraw wheat from markets, confirming the impression of a scarcity. As the price rose, farmers would follow the speculators, driving the price higher. In that sense, the government 'can make a scarcity, when there is none' (Gray 1815, 547n, 516, 517, 518, 522, 503, 519-20). (15)
Gray argued that most of the demand for bread was due to two classes for whom bread (or bread and pudding) was a key component of expenditure. Specifically, the 'working classes' consumed 75% of wheat sold, while 'the inferior classes of tradesmen and manufacturers with large families' accounted for a further 15%. (16) If the increase in the price of bread was relatively small (for example, '2d in the quartern loaf), the 'great mass of the population' would either not change or, more likely, would reduce their consumption, switching to a substitute such as potatoes. A significant increase in the price of a loaf (reaching '20d or 2s' as in 1800-01 or 'fourteen pence' in a more recent year) would, however, 'increase the general consumption of that necessity' (505, 506, 508). While the 'poorer' in the population would continue to reduce their consumption because of the fall in their real income, that could be offset by the increased consumption of 'the middle ranks'. The increase in quantity demanded would be met by increased imports as prices rose (509, 521).
The role of bread as a necessity was explained by nutritional requirements: 'the labouring people... cannot perform their work, unless they have the usual quantity of victuals' (505). Given that, the reason why the mass of the population
lives so much on bread, is that... their incomes are not sufficient to enable them to buy meat, &c. even when bread is cheap. All the surplus after buying bread, and some necessary articles of clothing, is laid out, indeed, on these more desirable species of food. But in proportion as bread rises in price, their surplus decreases, till at length there is no surplus at all; and in many cases the whole of their earnings is not even sufficient to buy the quarter of bread and potatoes necessary, without the assistance of the parish. (506) (17)
With little wastage in the use of either flour or bread (540), real incomes would fall. Money wages were sticky, albeit not fixed, because of relative bargaining power, while the prices of the 'more desirable species of food' would also increase, though not to the same extent as wheat. And while the population could potentially substitute potatoes or rice for bread, any consequent increase in demand would only increase their prices, producing the same effects as those for bread (509, 508, 502-3).
At one point, Gray virtually accused farmers of having engaged in a conspiracy to raise prices in 1801 (549). However, he also offered a more complex explanation for their behaviour, based on the formation of expectations. With an initial increase in prices, farmers could convince themselves that there was a scarcity. Even in a good year, there would always be instances of particular crops, fields or even 'districts' where the produce was inferior in quantity or quality. Without aggregate statistics and with rising prices, even farmers who initially thought that they had 'fair crops' would conclude that they actually had had 'indifferent or scanty' crops or else that the crop
did not yield so well as usual on threshing; or though their own crop had been tolerable, their neighbours had not fared so well, and if the neighbourhood had been middling, other parts of the country, as appeared from the papers, and from private information, had entirely failed. They are all strongly disposed to carry on a delusion which is so profitable to them. (519)
Without suggesting in any way that Gray was a precursor of behavioural economics, his argument could be summarised as follows. Uncertain about the state of the aggregate harvest, farmers had bounded rationality and used the price of corn/wheat as an anchor for their decisions. They relied on an availability heuristic, where the likelihood of an event is based on how many examples of similar events are easily recalled. In this case, it was assumed that, as in the past, the price would provide an accurate indicator of a scarcity. Judgements are heavily weighted by more recent information, so that opinions were biased towards more recent news. (8) The availability heuristic was reinforced by a confirmatory bias, where further information that confirmed the pre-existing belief was uncritically accepted, while any contrary evidence was disregarded.
Although Gray did not say so, it is also consistent with his account that the insiders/conspirators 'ride the wave' of rising prices, aiming to sell before a significant price fall. Gray's discussion of how the price would eventually turn down might suggest, however, that at least some of the insiders could leave their run too late. At some point:
the alarm begins to subside... [due to the] government ceasing to interfere, the appearance of a fine coming crop, or from the price becoming so extravagantly high, that the probable further increase will not counterbalance to the speculator the hazard of buying any more, or of keeping back any longer the corn he has hoarded. The usual and even larger supplies now come into the market again, and as the sellers increase their quantity, the buyers decrease in theirs. If the harvest be near, the fear of a fall grows stronger every day. All are now sellers, and few will buy but from necessity: the market every where is glutted, and the fall becomes more rapid than the rise. (518)
Some speculators would then be caught out, as had happened in 1801 when 'various speculators, from the great importer down to the petty baker', had purchased 'a much larger amount... than was actually necessary' and were left with unsold stocks (521).
Gray treated the speculators, 'connected with government', who were responsible for triggering the panic as traitors. Their objective was to 'plunder the industrious, or to render the nation discontented'. The French Revolution provided a stark warning of the possible consequences: 'We have seen what the cry of scarcity accomplished in France; and all other states ought to tremble' (542, 547). He did concede that a 'real' scarcity could occur, although the worst possible case in Britain would 'scarcely justify a rise of four shillings in the quarter' of wheat. With such a 'considerable failure', the price increase would initially reduce consumption. As the price increased in the months immediately preceding the next harvest, however, consumption would increase, leaving less than the usual amount for the final months (502, 541). That was unavoidable and the policy recommendations were the same as in a 'pretended' scarcity. Gray rejected the use of public granaries to thwart the speculators as 'chimerical or dangerous' in a large nation. It was chimerical because the grain could only be stored at considerable cost and it was not possible to accurately predict when a scarcity would occur so that increased prices could offset the cost. It was dangerous because of an 'irritable population': 'The mob would insist upon being the judges, when this stored corn was to be brought to the market. On the least rise in prices, they would bawl for the opening of the public granaries.' Unrest would be inflamed by 'factious unprincipled demagogues', resulting in riots (544, 545). The food riots at the turn of the century presumably explain his exasperated comment, when subsequently contemplating the possibility that speculators were again ramping prices, that the government would be 'perfectly justified' in producing an inventory of corn stocks with the information obtained by imposing an excise, and then ordering 'a certain quantity to be sold every week at a fair average price'. His general policy position was, however, uncompromising: 'shall government sit calmly still, and see the nation starved? I say yes'. Any intervention, such as announcing a scarcity, would 'only increase the danger'. In any case, imports of grain would increase with rising prices and here again the government should not intervene (504, 541, 543).
Gray's discussion of how, following a downturn in wheat prices, the 'fall becomes more rapid than the rise', was not completely consistent with his statement that prices could increase for 'the whole or part of the year' (510). The same point applies to his statement that, in 1801, the price of bread 'was uncommonly high all the preceding year' (521). If there was some inconsistency, there was also a substantive problem with his story. Gray argued that rising prices were due to speculators and farmers withdrawing stocks from the market. At the same time, he claimed that most of the population would consume more than their usual amount of bread. This entailed that they consumed their usual amount plus imports. Even allowing for the exercise of some monopolistic power by corn merchants (Rashid 1980, 497-8; Wells 2011, ch. 14), it is difficult to see, given the magnitudes involved, how more than the usual amount could be sold without a dampening effect on prices. It is because of the contradiction between the conditions necessary for rising prices and the claim that the mass of the population increased their consumption due to a price rise, that Gray's argument was, in the final instance, analytically incoherent. It should be added, however, before Gray is dismissed with the 'condescension of posterity', that an analogous problem underpinned Paul Samuelson's claim that potatoes were a Giffen good during the Irish famine. Although that claim was widely replicated in economics textbooks, it was 20 years before a critique was published, using a conventional supply and demand diagram (Dwyer and Lindsay 1984).
3. The Pioneer
The change attributed to the significance of Gray's Happiness of States between the closing of the nineteenth and the twentieth centuries can be shown by considering the entry for Gray by Eleanor Powell in the Dictionary of Political Economy, edited by R. H. I. Palgrave and published in 1896. Dismissive of her subject, Powell remarked that one of the many 'radical fallacies' of the Happiness was Gray's claim that working-class consumption of bread increased with its price (Powell 1896, 257). The timing of that verdict might be regarded as unfortunate in that the third edition of Alfred Marshall's Principles, published the year before, had argued that such an event was possible in the case of 'poorer labouring families' (Marshall 1961, 109-10). (19) With the entry unchanged in the second edition of the Dictionary in 1926, however, it was left to Jacob Viner, who had referred to Marshall's Principles in a more detailed discussion of upward-sloping demand curves, to draw the attention of Henry Schultz and George Stigler to Powell's entry (Viner 1925, 378-82; Schultz 1938, 51-2; Stigler 1947, 154n). Gray now became 'the first to allege a positively-sloped demand curve for wheat' (Stigler 1947, 154). Following a suggestion that Henry Beeke, the first professor of political economy at Oxford, preceded Gray in providing the 'first clear statement' of what was now termed a Giffen good (Rashid 1979), Masuda and Newman sought to establish the analytical priority of Gray's text. Beeke's unpublished memorandum of 1800 could 'bear a Giffenesque interpretation. But it does not bear comparison with Gray's long and circumstantial analysis.' Gray was a 'genuine pioneer' in that the Happiness 'contains a remarkably detailed assessment of what in the wake of Marshall we have come to call Giffen goods'. This was because, in referring to the demand for wheat/bread, Gray, like Marshall, identified three characteristics of a Giffen good: the quantity demanded varies positively with the price, the commodity is an inferior good, and 'by implication it was a large item in the budgets of the poor'. The New Palgrave entry for Gray then reiterated that he was, in that respect at least, a quasi-modern theorist who should be awarded an honourable mention in a history of economics: 'perhaps we should call them not Giffen but Gray goods' (Masuda and Newman 1981, 1011-12; Newman 1987, 563).
The category of pioneer has essentially the same meaning as a precursor. The basic question posed--did Gray discuss the characteristics of a Giffen good in the same way as Marshall?--takes effect within a reading frame that assumes Gray's text can be read and evaluated as a contribution to a history of a particular type of (continuous) market demand curve. Gray is then depicted as travelling part of the way towards that objective. This is consistent with a precursor reading in that there is no discussion of the analytical context in which the statements of Gray referred to were made. The context is, instead, supplied by the assumption that both Gray and Marshall can be read and evaluated in terms of the explanation for a demand curve with a positive slope, the late twentieth-century Giffen good.
The importance of examining the context in which various arguments were actually made can be shown by considering the assumption made by Masuda and Newman that, in the texts they cite (the Principles, Memorandum and letters to Edgeworth), Marshall was principally concerned with the question of whether a market demand curve could be upward sloping. The assumption is, however, unfounded because, in the Principles, Marshall was not concerned with explaining an upward-sloping market demand curve. (20) The point of that analysis was to defend his concept of consumer surplus against the criticism that it was not possible to provide accurate estimates of aggregate consumer material welfare if there were marked differences in the distribution of income and thus the marginal utility of money between different transactors. Rejecting that criticism, Marshall argued that the extreme case of the 'labouring poor' increasing their consumption of bread as the price rose was atypical. Such behaviour did not threaten the estimation of consumer surplus with a downward-sloping market demand curve because 'such cases are rare; when they are met with, each must be treated on its own merits' (Marshall 1961, 110). Eight years later in the Memorandum, however, Marshall produced a different argument. The market demand curve for bread was now claimed to be upward sloping, at least over a range. According to the Principles, only the 'labouring poor' increased their consumption of bread; in the Memorandum, however, that was the case for 'nearly the whole of the English people' (Marshall 1926 (1908), 382). Marshall thus claimed that the market demand curve for bread was both downward and upward sloping.
An explanation for Marshall's different positions can be found in the contexts of refutation for which the two arguments were produced. In the Principles, he was attempting to confute critics of his consumer surplus analysis. In the Memorandum, however, he was attacking the proponents of the use of tariffs within a system of imperial preference. The upward-sloping demand curve supported the claim that domestic consumers, rather than foreign suppliers, could bear the full incidence of the tariff. The texts cited by Masuda and Newman thus do not provide a stable reference point with which to anchor a history of 'the' Giffen good, understood as a market demand curve explained by a marginal utility theory. Indeed, it took until the 1930s with the formulation of the income and substitution effects framework before a 'Giffen good' was declared to be the only possible explanation for an upward-sloping demand curve, with the figure of Marshall in the Principles depicted as the font of the analysis. The stabilization of that representation within the economics profession was a product of the second half of the twentieth century.
Gray (and the Marshall of the Memorandum) argued that Giffen behaviour was exhibited by most of the population, which is quite different from the contemporary Giffen good that can only apply to 'the poor'. Indeed, Gray's account was quite the opposite of the current analysis (and the Marshall of the Principles) in that he argued that the poor would reduce, not increase, their consumption of bread. At the same time, the reading of Gray as a pioneer assumes that the significance of his text can be assessed solely by reference to a market demand curve as it is represented today. With the texts of both Gray and Marshall read as if they were concerned with the same question, Gray is relegated to the role of a 'pioneer' because his account was incomplete. The incompleteness is alluded to in the last section of the Masuda and Newman paper, where they note, in effect, that, unlike in a Marshallian demand curve, Gray did not discuss bread in terms of a partial equilibrium analysis, if only because (as noted in Section 2) he referred to simultaneous changes in the prices of substitute commodities and a rise in nominal wage rates. I presume their elliptical comment, that Gray 'was not concerned to exhibit the possibility of the Fundamental Equation of Value Theory' (Masuda and Newman, 1981, 1013-14), means, in part, that Gray's analysis was not referring to a marginalist demand curve. Yet, other than noting his argument that there was a positive relationship between the price and quantity demanded of bread, there is no explanation of what he was 'concerned' with, so as to explain his general argument. Reading Gray as a 'pioneer' of the twentiethcentury Giffen good thus erases the focal point of his analysis, the analysis of speculation during scarcities, and thus the purpose of his discussion of Giffen behaviour.
Although the label 'Giffen behaviour' is somewhat misleading, (21) it can be taken to refer to the following proposition: the quantity demanded of a commodity may increase with its price if the commodity is (in today's terminology) an inferior good that accounts for a large proportion of expenditure by the relevant segment of the population. In the nineteenth and early twentieth centuries, a number of British economists produced arguments consistent with that proposition. (2) In that sense they can be regarded as discussing Giffen behaviour. However, the explanation and hence the meaning of the statements of that behaviour differed markedly, according to the analytical frameworks used and the purpose(s) of the analysis. Indeed, the same economist could, while using the same general analytical framework, produce contradictory accounts of Giffen behaviour, depending on the context of refutation.
Gray's context of refutation was given by the fractious debates over two matters regarding scarcities and government policy during the Napoleonic wars. The first was whether a scarcity actually existed, a matter that was particularly important in 1800-01. The second was whether speculators played a stabilising role in a scarcity. The role of Giffen behaviour in Gray's story was to provide an explanation for why the mass of the population would increase their bread consumption as prices rose, even though the scarcity was 'artificial'. Recovering that context can then explain how Gray argued that the poor would actually reduce their consumption and the role of speculators in altering market expectations which fed rising prices. Just as Marshall's different arguments can be explained by their contexts of refutation, recovering Gray's context of refutation can show why his analysis had nothing to do with subsequent discussion of the possible shapes of a marginalist demand curve.
From the early to the mid-nineteenth century, discussion of market-period prices in British political economy often included a defence of the role of speculators and corn prices during harvest scarcities which followed the general argument in the Wealth of Nations. It is in that context that Gray's discussion of speculation, the formation of market expectations and Giffen behaviour should be located, rather than attempting to force his analysis into the strait-jacket of a pioneer or precursor of the twentieth-century Giffen good.
The few contemporary reviews of the Happiness of States, while quite lengthy, made no mention of Gray's analysis of scarcities. (23) The otherwise fairly orthodox discussion of scarcities in John Stuart Mill's Principles of Political Economy, however, provided a detailed critique of the argument that 'the gains of speculators are often made by causing an artificial scarcity'. Mill derided this as 'fallacious', a claim that could only be made by 'persons who have not much considered the subject' (Mill 1848, 258). Although I know of no evidence that Mill had read the Happiness, the Principles enables a comparison to be made with Gray's analysis, more than 20 years after it was first published.
Mill first considered an individual 'corn-dealer [who] makes purchases on speculation' that increased the price. The speculator could only gain provided that he did not sell his stock. Even if he sold part of the stock 'by a gradual and cautious sale', gaining from some increase in price:
so also he will undoubtedly have had to pay a part of that price on some portion of his purchases. He runs considerable risk of incurring a still greater loss; for the temporary high price is very likely to have tempted others, who had no share in causing it, and who might otherwise not have found their way to his market at all, to bring their corn there, and intercept a part of the advantage. So that instead of profiting by a scarcity caused by himself, he is by no means unlikely, after buying in an average market, to be forced to sell in a superabundant one. [An] individual speculator cannot gain by a rise of price solely of his own creating... (Mill 1848, 257, 258)
Here, Mill had, in effect, identified the central problem with Gray's argument for why prices would begin and continue to increase. By the same token, there were two weaknesses in the analysis. Mill failed to clearly explain that, if the speculator was successful in 'a gradual and cautious sale', it was possible that, overall, he could still gain at the expense of the public. And where the speculator ran a 'considerable risk of incurring a still greater loss', Mill's conclusion depended on the unstated assumption that the expectations of other speculators and/or farmers would be unaffected by the initial price rise.
Mill then argued it was also impossible that
a number of speculators gain collectively by a rise which their operations have artificially produced. Some among a number of speculators may gain, by superior judgment or good fortune in selecting the time for realizing, but they make this gain at the expense, not of the consumer, but of the other speculators who are less judicious. They, in fact, convert to their own benefit the high price produced by the speculations of the others, leaving to these the loss resulting from the recoil. It is not to be denied, therefore, that speculators may enrich themselves by other people's loss. But it is by the losses of other speculators. As much must have been lost by one set of dealers as is gained by another set. (Mill 1848, 258)
Ironically, that discussion could, to a certain extent, be made compatible with Gray's account. Indeed, given Gray's claim of a conspiracy starting the price rise, it would not have been inconsistent for him to suggest, although he did not do so, that, given their knowledge, the 'insiders' might also be the first to sell their stocks. But Mill's conclusion was rather peculiar. The point of his general argument was that the interests of consumers and dealers were the same: 'The interest, in short, of the speculators as a body, coincides with the interest of the public' (Mill 1848, 259). But, as with the discussion of the individual speculator referred to above, here the consumers would be put on 'short rations' with high prices for a considerable part of the year. Some speculators would gain but it would clearly not only be at the expense of other speculators (cf. Sidgwick 1883, 187-9).
If Mill's analysis had a strong whiff of complacency ('In modern times... there is only dearth, where there formerly would have been famine' (Mill 1848, 256)), it simply ignored the possibility that market expectations could be affected by speculators' actions. Indeed, there was virtually no discussion of how expectations were formed. By contrast, the formation of expectations was at the core of Gray's analysis. In conditions of asymmetric information and of uncertainty for most farmers, Gray sought to explain how the declaration of a scarcity by the government would provide a focal point in changing farmers' expectations and how they would then rationalize their own harvest conditions with rising prices. His outline of Giffen behaviour was used to explain how much of the unchanged domestic corn output and increased imports could be sold at exorbitant prices. Gray was a conspiracy theorist whose explanation for how the quantity demanded of corn could increase with prices was analytically incoherent. Nevertheless, he also displayed some acuteness in explaining the formation of expectations in driving market behaviour, a matter of which his contemporaries appeared to be oblivious.
(1.) Marx (2002) , 40.
(2.) McCulloch edited the Scotsman between 1817 and 1821 (O'Brien 1970, 19, 23-5) and Gray noted that the author of the article identifying him was 'supposed to be a wellknown economist' (Gray 1840a, xiii). According to Piero Sraffa, McCulloch 'wrote all the political economy' at the newspaper (Ricardo 1952a, xxii, 1952b, 28). Neither article concerning Gray is listed in the bibliography of McCulloch's Scotsman publications (O'Brien 1970, 415-25).
(3.) See the discussion and references in White (2009). Similar problems arise with the cognate term 'discoverer' (Schaffer 1994).
(4.) This section draws on remarks in Gray's privately printed bibliography (Gray 1840c) and a number of contributions in the 1861 volume of Notes and Queries: 26 January, 77; 16 February, 139; 9 March, 191-2. A death notice appeared in The Gentleman's Magazine, July 1842, 165.
(5.) For Gray's will, 'Vice-Chancellor Knight Bruce's Court. Thompson v. Thompson.--Aug. 6 and 7', The Jurist... During the Year 1844. 1845. London: Sweet, 8 (1), 839-44.
(6.) Gray may have attended the University of Edinburgh, as his will left a significant part of the annual income from a trust to the Principal and to the professors of Agriculture, Moral Philosophy and Rhetoric and Belles Lettres at the University.
(7.) John Maclean, 'Mr. S. Gray', Notes and Queries, 26 January 1861, 77. Gray's use of the pseudonym 'George Purves L.L.D.' was possibly a Dunsian joke. Gray recorded that, in 1792, his cousin had been instrumental in having a case dismissed against the son of Robie Purvis, a Dunse tailor, who had been charged with burning a turnpike gate (Gray 1840c, 11).
(8.) See his summary in Gray (1819, iii-xl).
(9.) In that context, it should be noted that, by contrast with other historians of economics, Ronald Meek referred to the Happiness of States as 'an unduly neglected work... [which] gave a surprisingly "modern" account of the effects which "stagnations in the foreign market" might have on demand and employment at home, and the remedies which should be applied to meet the situation' (Meek 1963, 328, citing Gray 1815, 83-91). See also Meek's discussion of Sismondi as an under-consumptionist (Meek 1963, 329-32).
(10.) Burns Encyclopedia (n.d.); Burns (2014, 446, n.96). In the mid-nineteenth century, Robert Chambers's Life and Works of Robert Burns rendered the last three words as '--[Pro pudor !]'. Cited in Anonymous, 'Simon Gray', Notes and Queries, 30 March 1861, 257.
(11.) 'Digression concerning the Corn Trade and Corn Laws', Book IV, Chapter V of The Wealth of Nations (Smith 1976, 524-43). For examples of economists following Smith's general argument, see Torrens (1829, ch. 1); McCulloch (1830, Part II, ch. 3); Mill (1848, 255-61). It should be noted, however, that the discussion of mercantile speculation in other commodities could be quite different. J. R. McCulloch, for example, extended die usual discussion of scarcities by providing a more sceptical analysis of mercantile speculation based, in part, on Thomas Tooke's account of the 1825 speculative crisis. Nassau Senior also quoted Tooke on speculation in 1836 (Tooke 1996 , 20-4; McCulloch 1830, 326-32; Senior 1951 , 18-20).
(12.) Although Smith argued that governments could turn a scarcity into a famine, there was no clear indication in the Wealth of Nations of whether he thought the same policies should be applied in both situations.
(13.) Gray's bibliography recorded that he began work on the text in 1804 and that a 'fair copy' was completed in 1808. Although printing began in late 1810, it was not published until April 1815 (Gray 1840c, 28). Napoleon escaped from Elba in late February 1815 and was in Paris by March.
(14.) When Arthur Young, the Secretary for the Board of Agriculture, made a similar argument in 1800, he noted that a speculative excess would be facilitated by country banks lending to farmers (Rashid 1980, 497).
(15.) In what follows, citations with only page numbers given are from Gray (1815).
(16.) Gray also referred to the two classes as 'the middle and lower ranks' (Gray 1815, 503).
(17.) The 'more desirable species of food' included meat, milk, cheese, butter, poultry and vegetables (Gray 1815, 503, 507).
(18.) For discussion of the availability heuristic, see Kahneman (2011), chs 12-13.
(19.) Somewhat ironically, a note to Powell's entry cited Marshall to support the point that 'later economists have endorsed Gray's opinions' that Adam Smith's distinction between productive and unproductive labour was invalid. This was coupled with the claim that, had Gray 'been less critical and negative, his remarks might have found fuller acceptance in his own time' (Powell 1896, 257n).
(20.) The discussion in this and the following paragraph is based on White (2015).
(21.) This problem began with Marshall who attributed to the statistician Robert Giffen an idea or 'hint' on which Marshall had drawn in his various accounts. Whilst it is commonly accepted that there is no evidence that Giffen wrote or said anything more than that wheat was an inferior commodity, there is also some evidence Giffen would have either been indifferent to, or rejected, Marshall's arguments (White 2015, 32-7).
(22.) There were other explanations given for the argument that the quantity demanded of a commodity (other than wheat or bread) could increase with its price.
(23.) See the Monthly Review, Vol. 82, February 1817, 113-25; Vol. 96, September 1821, pp. 15-26; continued in November 1821, 249-60. Although the British Critic (Vol. IV, September 1815, 278-90) did refer to Gray's discussion of whether the government should intervene in corn markets (at page 289), there was no comment on the scarcities analysis.
Thanks to Greg Moore for helpful comments and suggestions.
Notes on contributor
Michael White is an independent scholar who has published widely on nineteenth-century political economy, especially the work of W. Stanley Jevons.
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