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Henry Dunning Macleod

Henry Dunning Macleod

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Henry Dunning Macleod was born in Edinburgh
Edinburgh is the capital city of Scotland, the second largest city in Scotland, and the eighth most populous in the United Kingdom. The City of Edinburgh Council governs one of Scotland's 32 local government council areas. The council area includes urban Edinburgh and a rural area...

, and educated at Eton
Eton College
Eton College, often referred to simply as Eton, is a British independent school for boys aged 13 to 18. It was founded in 1440 by King Henry VI as "The King's College of Our Lady of Eton besides Wyndsor"....

, Edinburgh University, and Trinity College, Cambridge
Trinity College, Cambridge
Trinity College is a constituent college of the University of Cambridge. Trinity has more members than any other college in Cambridge or Oxford, with around 700 undergraduates, 430 graduates, and over 170 Fellows...

, where he graduated in 1843. Macleod traveled in Europe, and in 1849 was called to the English bar. He was employed in Scotland on the work of poor-law reform, and devoted himself to the study of economics. In 1856 he published his Theory and Practice of Banking, in 1858 Elements of Political Economy, and in 1859 A Dictionary of Political Economy. In 1873 his Principles of Economist Philosophy appeared, and in 1889 his The Theory of Credit. Between 1868 and 1870 he was employed by the government in digesting and codifying the law of bills of exchange.

Macleod's principal contribution to the study of economics consists in his work on the theory of credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...

, to which he was the first to give due prominence. A major feature of his work was to create a theory of money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...

 starting from a theory of credit instead of the usual reverse path. In The Theory of Credit he says: "Money and Credit are essentially of the same nature: Money being only the highest and most general form of Credit" (p. 82). Macleod's Credit Theory of Money influenced Alfred Mitchell-Innes
Alfred Mitchell-Innes
Alfred Mitchell-Innes was a British diplomat, economist and author. He had the Grand Cross of the Medjidieh conferred upon him by Abbas II, Khedive of Egypt.-Family:...

 and later work of the modern Chartalists. John R. Commons
John R. Commons
John Rogers Commons was an American institutional economist and labor historian at the University of Wisconsin–Madison.-Biography:Born in Hollansburg, Ohio, John R. Commons had a religious upbringing which led him to be an advocate for social justice early in life...

 considered Macleod's work to be the foundation of Institutional economics
Institutional economics
Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behaviour. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the one side and the "ceremonial" sphere of society on the...


In his magnum opus, History of Economic Analysis, 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:...

 tells us: "The English leaders from Thornton to Mill did explore the credit structure, and in doing so made discoveries that constitute their chief contributions to monetary analysis but could not be adequately stated in terms of the monetary theory of credit. But they failed to go through with the theoretical implications of these discoveries, that is, to build up a systematic credit theory of money..." Then, he adds a footnote: "We might see the outlines of such a theory in the works of Macleod. But they remained so completely outside of the pale of recognized economics..." (Page 718). Then, in page 1,115 Schumpeter concludes: "Henry Dunning Macleod [...] was an economist of many merits who somehow failed to achieve recognition, or even to be taken quite seriously, owing to his inability to put his many good ideas in a professionally acceptable form."

According to George Selgin
George Selgin
George A. Selgin is a professor of economics in the Terry College of Business at the University of Georgia, a senior fellow at the Cato Institute in Washington DC, and an associate editor of Econ Journal Watch...

, it was Macleod who coined in 1858 the term "Gresham's Law
Gresham's Law
Gresham's law is an economic principle that states: "When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation." It is commonly...


For a judicious discussion of the value of Macleod's writings, see an article on "The Revolt against Orthodox Economics" in the Quarterly Review for October 1901 (no. 388).

See also

  • List of multiple discoveries
  • A History of Banking in all the Leading Nations
    A History of Banking in all the Leading Nations
    A History of Banking in all the Leading Nations, first published in 1896 by The Journal of Commerce, is a four-volume history of banking in North America, Europe, China and Japan. At the time of publication it was described as "the largest and most expensive treatise on banking yet published"...

    (1896), to which Macleod contributed the chapters in vol. 2 on the history of banking in Great Britain.

External links