Ricardo and Thornton on the Transfer Mechanism #Grubel

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Ricardo and Thornton on the Transfer Mechanism

Author(s): Herbert G. GrubelSource: The Quarterly Journal of Economics, Vol. 75, No. 2 (May, 1961), pp. 292-301Published by: Oxford University PressStable URL: http://www.jstor.org/stable/1884203Accessed: 24-06-2015 13:25 UTC

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RICARDO

AND

THORNTON

ON

THE

TRANSFER

MECHANISM*

By HERBERT

G.

GRUBEL

I.

Scope of paper, 292.

-

II.

Basic gold

standard

model

introduced

by

Hume, 293.

-

III. Extension

of

basic model

by Ricardo, 294.

-

IV. Thornton's

refinementsof theory, 297.

-

V. Working

of

models

under

paper standard, 298.

VI.

Analysis

of

subsidy

payments in

both

models, 300.

-

VII.

Conclusion,

301.

Gottfried Haberler's' assertion that

Ricardo

himself

had

already

considered

income

effects

in

the theory of

the

transfer

mechanism

was recently

challenged

by

Will E.

Mason,

who

stated that

implicit

income

effects may

be read

into some

of

Ricardo's

observations.

But,

Mason continued, the latter

may be

explained on other

grounds more consistent with

Ricardian

theory. 2 The main

aspect

of Ricardian theory, which Mason then uses to show that no income

effect

reasoning has

been

involved,

is

the long-run

static

nature of

Ricardo's

analysis.3

In

the

following

an

attempt

will

be made to

demonstrate that

if we

are

willing

to

accept

another

and

equally

typical aspect of Ricardian

theory,

namely that

he held the

quantity

theory

of

money

in

a

sense to

be

defined,

then

we

are led

to the

conclusion that Haberler's statement has

in

fact been

correct. This

approach

to an

interpretation

of

Ricardo's

writings on the

subject

has the added advantage of making many of Ricardo's seemingly

inconsistent

statements mutually

consistent. Also,

the superb qual-

ity of his deductive

reasoning

-

often

as it may have been built on

not so

universally valid premises like the

quantity

theory of money

will

once

more be

asserted.

*

I

wish to

thank

Mark

Blaug

and

Egon Sohmen for their helpful sugges-

tions. Responsibility

for

any

errors

remains,

of

course, entirely

with the

author.

1. Gottfried

Haberler,

Theory of International Trade (London: William

Hodge, 1936), p.

71

and

A

Survey of International Trade Theory published in the

Princeton Series

of

Special

Papers

in

International Economics, No. 1,

1955, p. 7.

2. Will

E.

Mason,

Ricardo's

Transfer

Mechanism Theory,

this Journal,

LXXI

(Feb. 1957), 107.

3. Ibid.,

p.

115.

292

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THE TRANSFER MECHANISM

293

While there has been

a

recognition

of income

effects

by

other

classical

economists

as Mason has shown in two

other

articles,4

it is

the

three names of Hume, Thornton and Ricardo,

which

are asso-

ciated

most

prominently

with the advancement of knowledge as to

how

the transfer mechanism

works. How the last

two men

have

built

upon

Hume's

work while

taking

sides in the famous

bullion

controversy

of the

early

nineteenth

century

and how

they

came

up

with contradictory

conclusions

will be analyzed below.

The

main problems

discussed in this great

debate had

to do with

the effects

on the

exchanges

of (1) England's

paper currency

and

credit creation, (2)

harvest failures,

and

(3)

the payment

of

foreign

subsidies. For the purposes of exposition the analysis at first pro-

ceeds on the

assumption

that a universal

gold

standard

exists. Later

on

the

effects of credit

creation

under an inconvertible

paper

standard

are

examined.

Similarly, disequilibrating

harvest

failures and

sub-

sidy payments

are treated

separately

and

in

succession.

II

David

Hume analyzed

the effects of

only one source

of inter-

national disequilibrium, namely changes in the quantity of money.5

He assumed

that after equilibrium

conditions

existed

money would

be annihilated

or created

and he

then

traced the

consequences:

An

increase

of money by

50 per cent would cause

wages and

prices to

rise

in

an

equal proportion.

As a

consequence imports would

increase

and exports

would decline until

the resultant

gold-flows would re-

establish

equal

levels of

money

in

all countries

and

the

balance of

trade would

return to

equilibrium.

In Hume's

words:

It does not

seem that money, any more than water, can be raised or lowered

anywhere

much

beyond

the

level it has

in

places

where

communica-

tion

is

open. 6

Hume's analysis of changes in

only the stock

of money is curious.

It

has to

be

explained

as his way of demonstrating

the

futility of

policies

advocated

by

the

mercantilists,

which were

mainly

aimed at

increasing the wealth

and

power

of nations by

increasing

their stocks

of

gold.

4. Will E. Mason, Some Neglected Contributions to the Theory of Inter-

national Transfers,

Journal of Political Economy, 1955, pp. 529-35

and Stereo-

types

of Classical Transfer

Theory,

Journal of Political Economy, LXIV (Dec.

1956), 492-506.

5. David

Hurne, Political Discourses (1752) in Essays, Moral,

Political and

Literary (London: Longmans, Green, 1875),

I, 330-45.

6. J.Y.T. Greig (ed.), The Letters of

David Hume

(Oxford: Clarendon,

1932),

Book XX, Chap.

XI, p. 12.







294

QUARTERLY JOURNAL OF

ECONOMICS

But Hume's state of the theory did not explain

what the results

of disturbances

in

the

markets

for goods and

services, such as caused

by wars and droughts, would be. Ricardo

and Thornton attempted

such

an

explanation.

III

Before presenting Ricardo's theory of the

transfer mechanism

it

will

be necessary to

define

clearly what is

meant by the quantity

theory

of

money

as it is

alleged

to have been

held

by

Ricardo. The

quantity theory

of

money

is best characterized

by the equation of

exchange

M

*

V

=

P

*

T

and the

following three postulates:

(1) V, the velocity of money, is an

institutional datum that

changes only slowly over time.

(2) Changes in M, the quantity of money,

affect only the price

level,

P.7

(3) Conversely,

P

itself is

directly

influenced

only by changes

in M.8

Did Ricardo hold the quantity theory of money? Schumpeter

writes:

I

maintain that Ricardo held ... the quantity theory ... It is true that he

introduced qualifications occasionally and that, here and there, he made state-

ments that were logically incompatible with his strict

quantity theory, exactly

as

he

did

in

matters

of

his labor

quantity

law of

value.

In

both

cases, however,

he mentioned them

only

in order to minimize their

importance.9

What

happens

in an

economy

characterized

by

these relation-

ships

when

bad harvests

occur? The

volume of

transactions

declines.

But according to postulate

three

nothing happens

to the

general

level

of

prices.

And

since

it

is

the

general

level of

prices

in its relation to

prices in the rest of the world which determines the quantities of

exports

and

imports, nothing

has

happened

that

would

cause

an

imbalance

of

trade, depreciation

of

the

exchanges

or outflow

of

gold.

But the

need for

increased

imports

of corn

remains

and the

question

arises

how to

pay

for

it

if

not with

gold?

The

following passage

from

Ricardo

shows how

he

believed that

it could

and would be

done:

7.

See Joseph

A. Schumpeter,

History of Economic

Analysis,

ed.

from ms.

by

Elizabeth

Boody

Schumpeter

(New

York:

Oxford

University Press,

1954),

p. 703.

8. See David Ricardo, in The Works and Correspondence of David Ricardo,

ed. P. Sraffa,

III,

106 and 53-54,

referred to

subsequently only

by

number of

volume.

9.

Schumpeter,

op. cit., p. 704.

In

a

footnote on the following

page the

author

comments:

It serves only to

blur

the

lines

of historical development

if

some historians

.

.

.

insist that

if

all of

Ricardo's asides

be collected

and

worked

out, practically

everything

might be attributed

to him

that we find in

any later

writings.








295

Under

these circumstances

. . .

every

other commodity

would become

compara-

tively

cheap

as

compared

with corn,

and would therefore be exported

in return

for the corn which would

be

in

demand

in this country. . . If before

the bad

har-

vest the pricesof commodities wereprecisely equal in any two countries,after it,

such

prices

must be lower

in the

country having

the

bad

harvest

than

in the other.,

Thus, while there

has been no

change in the general

level of prices,

the

relative

prices

of commodities

have been altered

and

with

it

the

composition

of

exports

and

imports.

How can such a change

in

relative prices take

place?

There is only one answer, via

some income

effects.

Farmers

are

surprised by

the bad harvest

and their smaller

production leaves

them with

reduced

income and

purchasing

power.

The manufacturers

of other goods, however, produce

quantities

which

would be bought

at current prices

if

the farmers had not

experienced

a reduction

in

incomes. But

with the lack of demand

from the agricultural

sector

of

the economy

there

will

be a

glut

and

downward

pressure

on the

prices

of manufactured

goods.

Corn,

on

the

other

hand,

will

be

relatively

scarce

and its

price

will

rise.2

These changes

in

relative prices

tend

to make corn the object

of

imports

and manufactures

the

object

of

exports

in

degrees

different

from those existing before equilibrium was disturbed.

Mr.

Thornton has

not

explained

to

us,

why

any unwillingness

should

exist

in

the

foreign

country

to

receive our

goods

in

exchange

for their

corn;

and it

would

be necessary

for

him

to

show,

that if such an

unwillingness

were

to

exist,

we

should

agree

to

indulge

it'so

far as to consent

to

part

with our

coin.3

But this

is

not

the

end

of Ricardo's analysis.

It

is

clear that the

reduction

in farmers'

incomes

will

lower the

over-all level of

trade

in

a country,

that

is,

in our

equation

of

exchange

M

-V

=

P*JT,

T

will be decreased. Of the other parameters V is a constant; P, the

general

price level,

remains

unchanged

according

to

postulate

three.

This leaves

only

M to

vary

when

T

changes

as the

equation shows.

In

other words,

the quantity

of

money

has to decrease

when

physical

trade

and

income

go

down.

England,

in

consequence

of a bad

harvest,

would

be

a

country having

been

deprived

of a

part

of its

commodities,

and

therefore

requiring

a diminished amount

of

circu-

lating medium

.

.. causing

the

currency

which was before at

its

just

1.

Op.

cit., VI,

37.

2. In the

absence

of international

trade

it

is

conceivable

that the

demand

elasticities

for

corn

would

be

such that

farmers

end up with

revenue

greater than

in the case

of a

normal harvest.

But with

international

trade

it is

more likely

that

the price

of corn

will

increase

less than

is

necessary

for

this to

happen.

3. Ricardo, op.

cit.,

III, 61.







296


ECONOMICS

level

to become redundant. 4 Redundancy of the currency

is, how-

ever, essentially

the situation analyzed

by Hume and should lead

to a loss of gold by the familiar mechanism of temporary increases

in the price

level. But

why

then did

Ricardo insist that

gold would

never

be

exported

under these

circumstances? Ricardo came to this

conclusion by

reasoning

the

following

way.

If

the

bad harvest is a

temporary phenomenon,

then income will return

to

its old level within

a short period

of time.

Any gold

that had been

relatively redundant

will

soon

be needed

again.

If

the

gold

were

exported

during the time

when

it

was

redundant,

it

would

have

to be imported again as soon

as conditions changed. Ricardo believed that people would know this

to be true

and would

therefore

save

themselves

the expense

of shipping

the

gold:

A

succession

of

bad harvests

might

drain a country of its money ... but in

exchange

for

what will it

return? The

answer

is

obvious

-

for

commodities.

The

ultimate result

then

of all

this

exportation

and importation of money is

that ...

the coin

and

bullion

will in

both

countries

have

regained

their natural

level.

Is it to be contended that these results would not be foreseen,

and

the

expense

and

trouble

of

attending

these

needless operations effectually prevented?'

This part of Ricardo's analysis is clearly wrong. People do not

have

the

foresight

he

postulates.

It

is also an example of

Ricardo's

typical analysis

in

long-run

static

concepts.

He

was interested

in

what

the

value

of

variables would

be

after

equilibrium

had

been

restored. But,

of

course,

such

reasoning neglects

the important

dynamic price-level changes

which

bring

about these

adjustments.

The conclusion

holds

in

the

long

run

but

only

due

to

the mechanism

suggested by postulate

three.

Nevertheless Ricardo has made a lasting contribution to the

theory

of

the

transfer

mechanism. It lies

in

his

rejection

of

the

price

level adjustments

and

consequent

recourse to

income and

demand

shift

explanations.

Even

though

he did not

develop

this

aspect

of

the

theory

of the

transfer

mechanism so

fully

and

explicitly

as would

have

been

desirable,

it

is

undoubtedly

true that

economists were

always challenged

by

his criticism

of current

thought,

so that

he

can

be considered

one

of the best known

originators

of what Haberler

calls the modern theory, which is associated with the names of

Iversen,

Wicksell

and

Ohlin.6

4. Ibid., III,

106.

5. Op. cit.,

III, 103.

6.

Haberler,

A

Survey of International

Trade

Theory,

op. cit., p.

7.








297

IV

Ricardo's

assertion that bad

harvests

would

never lead

to

a loss

of gold' was contrary to Thornton's findings, which in a study pub-

lished

before

Ricardo's

work on the subject

showed

that gold losses

could

be blamed upon

bad harvests.8 Some passages

of Thornton's

book suggest

that he

was aware

of the existence

of income

effects:

If

the

harvest fails,

and imports are necessary,

in order to supply the

deficiency,

payment

for

those

imports

is almost immediately required:

but the means

of

payment

are to

be supplied

more

gradually

through limitations

of

private

expend-

iture,

or the increase

of individual

industry.9

But the

most important

conclusions

of his analysis are

not based

on

the income

effect, mainly

because

he considered

it

to

be

a

long-run

adjustment.

As a banker

and

practical

man he was more

concerned

with short-run

phenomena,

which, however,

did

not

prevent

him

from writing

a

book that,

according

to

Professor

Hayek,

anticipated

in some

points the analytic

developments

of a century

to come.'

How then did

Thornton

use his preference

for short-run

analysis

to explain the

outflow

of

gold

from

the

country

after it

had

experi-

enced

a bad harvest?

Before answering

this question

it is

important

to establish that

in

contrast

with

Ricardo,

Thornton

did not

adhere

to

the

quantity theory

of money. Instead,

he

held a

surprisingly

modern monetary

theory

where all the

magnitudes

of the equation

of

exchange

are truly variable

and interdependent.

In a

world

built

7.

Op.

cit., III, 208,

seq.

8. Henry Thornton,

An

Inquiry

into the

Nature

and

Effects of

the

Paper

Credit

of

Great Britain, (1802)

with

von

Hayek's

brilliant

introduction

to the

1939

reprint

(London,

Allen & Unwin). Thornton cannot easily

be classified

as

a bullionist

or antibullionist

even

though

in the economic literature

he

sometimes

is

referred to

as one

or the other.

Jacob Viner,

on p. 120

of his Studies in the

Theory

of

International

Trade

(New

York:

Harper,

1937),

calls Thornton

a

bul-

lionist,

i.e.,

an opponent

of the Bank

of

England's credit

policies. Hollander

in

The

Development

of

the

Theory

of Money

from Adam

Smith to David

Ricardo

in this

Journal,

XXV

(May 1911),

451, labels him an antibullionist,

a defender

of

current banking

practices.

This

confusion

is a tribute

to

Thornton's

scholarly

analysis

of

the events,

which

made

him

come up with supporting

evidence

for

either side's

case.

Furthermore,

his

point of

emphasis shifted

as time

and

cir-

cumstances

changed.

Thus,

he attached

more

weight

to credit

extension

as

an

explanation

for England's

foreign

exchange

situation

in the testimony

given

before Parliament in 1811 than he had in the Paper Credit published in 1802.

Some

of

the

confusion

in

the literature

may

also

have been due to Henry

Thorn-

ton's mistaken

identification

with his

brother,

Samuel

Thornton

(1754-1839),

who was

a director,

and

from

1799-1801,

Governor

of the

Bank of

England.

9.

Op.

cit., p.

143.

1.

Hayek

in the introduction

to the

reprint

of

Thornton's

work

mentioned

above, p.

36.







298

QUARTERLY

JOURNAL OF

ECONOMICS

on

such economic

concepts

the

supply

of

money

influences

income

as

well

as the

price level,

while

the demand

for money itself

has to do

with the difference in the real rate of interest and the discount

rate.2

Furthermore, Thornton

explicitly makes it clear that the

velocity of

circulation of money is

a

variable.'

According to

Thornton then, when a bad harvest

occurs, the

immediate demand for corn

is very great and it is imported

in large

quantities. But

in

order

to

make

foreigners accept only

goods in

payment for it, the prices of these goods would have to fall

so low

and

so rapidly, that this process would endanger the

functioning of

the economy altogether:

At

the time

of

a very unfavorable

balance produced through a failure of the

harvest a country has

occasion for a large supply of corn from abroad

. . . but

goods which the country is able to furnish as means of cancelling its

debt are not

in

such

demand as

to

afford

the

prospect

of a

tempting

or

even

of a

tolerable

price...

In

order,

then to

induce the

country having the

favourable

balance

to

take

all its

payments

in

goods

and no

part

of it in

gold

it would be

requisite

. . . to

render

them excessively cheap.

It

would

be

necessary, therefore,

that

the

bank

should

not only

not

increase its

paper,

but that it

should, perhaps,

very greatly

diminish it. . . But the

bank in

the attempt

to

produce this very

low

price

may

so exceedingly distress trade and discourage manufacturesas to impair ... the

restoration of our balance

of

trade. For

this reason

it

may be the true

policy

and

duty

of

the

bank

to permit

the continuance

of

that

unfavorable

exchange.4

While Thornton

recognized

that

adequate price-level adjust-

ments can lead to

the

attainment of

balanced

trade he denies the

usefulness of

such

a

mechanism

in

the short

run

and thus

explains

the loss

of

gold.

He

added to Hume's

analysis by considering

the

effects of

disequilibrating

disturbances

in

the

sphere

of

production

rather than money. As a description of the contemporary scene and

as a basis for

policy

measures

his

analysis

was more relevant than

Ricardo's

long-run

considerations.

England's

economic

position

in

the

world at that

time was

so

strong

that

she

could afford

a

temporary

outflow of

gold

in

order to

maintain a

standard of

living

that

was

endangered by

a bad

harvest.

V

So

far the

analysis

has been in

terms

of

a

gold standard.

But

much of the controversy to which Ricardo and Thornton addressed

themselves

was

centered around

the issue

of

paper currency

and the

2.

Ibid.,

pp.

236-39.

3.

Ibid.,

pp. 96 seq.

4.

Ibid., pp.

151-52.







THE

TRANSFER

MECHANISM

299

inconvertibility

of

Bank of England

notes.

It

is

a

relatively

easy

task

to

extend

the preceding

analysis

to a paper

standard.

Whereas

in

the

case

of the gold

standard

the

symptom

of

disequilibrium

is

the

outflow

of gold,

in the case of the

paper

standard

the

symptom

is

the

discount

at which

Bank

of

England

notes

sell for

gold

or

other

cur-

rencies.

The

last

symptom

is

better

known

as

the

depreciation

of

the

exchange

rate.

Thornton's

analysis

in

terms

of the

paper

standard

briefly

goes

as follows.

Because

of the

bad harvest England

imports

more corn

than before.

Foreigners

receive

bills drawn

on

London

as

payment

for this corn. Since England's trading partners have not increased

their

imports,

they now

hold

more

bills drawn

on London

than

they

need

in

order

to pay for

their imports

at the old

equilibrium

level.

Under

the

paper

standard

bills

presented

for payment

in

London

can

only

be

exchanged

for Bank

of

England

notes.

But

foreigners

want

the

universally

acceptable

means of

payment,

gold.

For this

they

are

willing

to pay

a

premium.

Therefore,

Bank

of

England

notes

sell

at

a

discount

in terms

of

gold

as well

as foreign

currency,

that is, the exchange has become unfavorable. Now, if a foreign

merchant

can

get

more

English

?

notes for

his

own currency

than

before

the discount,

that means

that

he can purchase

English

goods

at

a

lower

cost than

before

in terms

of his own currency.

This

is

the

same

effect as

if the

domestic price

level

of

England

has fallen.

This

will

eventually

bring

about

equilibrium

just

as

gold

flows

do.

Ricardo's conception

of economic

relationships

did

not

allow for

a

discount

on Bank

of

England

notes

because

of

a

bad harvest.

As

shown above, disturbances of this kind would be confined to changes

in income

and

relative

prices

of goods.

The

quantity

of money

and

therefore

the

general

price

level

remain

undisturbed. But how

then

did

Ricardo

account

for

the

discount

that

in

fact existed?

He

blamed

it on

the

excessive

note

issue

by the

Bank of

England,

which

created

a redundancy

of

money.

While the

redundancy

caused by

a

bad

harvest does

not lead

to

a

gold

export

or discount

for

the

reasons

discussed

above,

such

an

excessive

note issue would.

And since

according to Ricardo the export of gold due to its redundancy is

always

the cause

and

never the

result of

an

import

surplus,

England's

import

surplus

and

depreciated

exchanges

of the

time were due

to the

excessive

note

issue

by

the Bank of

England.

Ricardo's analysis

was

one

of

the

strongest

arguments

available

to

the bullionists.







300


ECONOMICS

VI

There remains

now the need for the

extension of Ricardo's and

Thornton's arguments

to another kind of disturbance of international

equilibrium

discussed

at

that

time.

This disturbance was in the form

of subsidies,

which

England provided

for its continental allies fighting

Napoleon's France.

Such subsidies would

in

practice

typically

take the

following

form. Hamburg merchants

are

asked

by English agents to supply

an ally

with

goods.

As a

payment

for

these

goods

the

Hamburg

merchants would draw bills on London.

These bills would either

be

sold

in

Hamburg

to German

merchants

wanting

to

import

British

goods or they could

be

presented

for

payment

in London. Bills

arising from such subsidies have the

same

qualities

and

effects

as bills

arising from imports. Therefore,

if

before

the

subsidies were paid,

exports

and

imports were

in

equilibrium

and

if

the

subsidies

are not

matched by

either reduced imports or

increased exports, gold

will

flow out or Bank

of England notes

will sell

at a discount. This is the

way Thornton would

have argued.

Ricardo,

on the other hand, realized that bills drawn on

London

as the result of subsidy payments would lead to a depreciation of the

exchanges

and in

the case of convertibility,

an outflow of gold. But

he treated these events

as an exception to

the regular course of trade.

Furthermore, he

believed that the encouragement

to export, which

such a

discount represents, would lead to

its elimination.

In terms

of our

equation

of

exchange

and

under

a gold standard,

the grant

of

a

foreign subsidy

is

equivalent to

a

reduction

in M. Since

T

and

V

remain unchanged, the decrease in M causes

a fall in

P

according

to

postulate three. Unless the subsidy payments continue indefinitely,

the

lower

price

level

will

cause exports to

increase and tend

to restore

the old

level of

M. In

the

case of

an

inconvertible paper

standard

the

supply

of

money

is not

reduced. Instead, Bank of England

notes

sell at a

discount at the exchanges, which has the same effect

as

lowering the price

level and leads to

increased exports. These

increased exports

tend to wipe out the existing discount.

A

convulsed state

of

the

exchanges, such as would be caused by a subsidy

granted

to a foreign power, would not accurately measure the value of the currency,

because

a

demand

for bills arising from such a cause would not be

in con-

sequence

of the natural

commerce

of

the country.

Such a demand would there-

fore have

the effect

of forcing the exports of commodities by means of the

bounty

which

the exchange

would afford. After the subsidy was paid, the

exchange

would

again

accurately express the value

of

the currency.5

5.

Ricardo, op.

cit.,

VI, 39.







THE TRANSFER

MECHANISM

301

If ...

we agreedto pay

a

subsidy

to a

foreignpower,

money

would

not be

exported

whilst

there

were

any goods

which

could more

cheaply

discharge

he

p ayment.

The

interest

of

individuals

would

render

the

exportation

of

the

money

unnecessary.6

For

the

bullionist controversy

of

the

time

this

part

of

Ricardo's

analysis

meant

that

any persistent

depreciation

of

the

exchanges not

accompanied by foreign

subsidy payments

was due

to

excessive note

issues by the Bank of

England.

VII

As a general conclusion

it

may be said

that the beginning of

the

nineteenth century

marked a

great step

forward

in

the

understanding

of the mechanism involved in the transmission of disequilibrating

disturbances

in

the international markets for

goods

and

the

sphere

of

money.

Ricardo and Thornton have

contributed

greatly to this

understanding;

and

while

the

contributions

of

others

are

important

and should

not

be

forgotten,

it

is the

weight

of

their

authority

based

upon the

comprehensiveness

of their

work

as

economists

which

justifies

the

examination of

the

theories of

these

two men in

isolation.

Their contradictory conclusions

did much

in

later times to focus

the

attention of economists on the coexistence of price and income effects

as

essential

parts

of

the

theory

of the transfer

mechanism

and

helped

to

break

the

path

for the more

comprehensive

understanding which

we have

today

of the

forces involved.

YALE UNIVERSITY

6. Ibid.,

III,

63.

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