Isaac Newton is certainly one of the most important scientists in human history—mathematician, physicist, astronomer, philosopher, and theologian. In the second half of his life, he discovered the world of economic sciences, focusing on monetary economics. His story is not very different from the one of Copernicus. Newton put himself at the service of his country, studying coinage, to successfully solve the economic crisis which was afflicting it. Moreover, the way in which his scientific research influenced later philosophy is also a traceable aspect of many economists of the classical tradition.
The Royal Mint’s Master’s Degree
In 1699, Isaac Newton, who had become famous throughout Great Britain for his scientific studies, was appointed Master of the Royal Mint. This role had always been purely symbolic, but it was not so for Newton, who took it very seriously (unlike the bureaucrats who had preceded him). The United Kingdom was, in fact, in a serious monetary crisis due to the very frequent counterfeiting suffered by the currency: fraudsters filed the edges of the coins and put coins of lower intrinsic value into circulation, causing disastrous inflation throughout England.
Newton himself was responsible for finding and punishing fraudsters and developed new techniques to limit the possibility of counterfeiting, such as the knurling on the edge of coins that is still used today. But most important of all was the mathematical precision with which the coins had to be minted: hammer minting was abolished and replaced with machine minting. The amount of metal contained in the coins had to be meticulous and standardized.
On this last point, Newton had a great ally and friend: John Locke. Even the famous British liberal philosopher argued that the value of the coin should correspond to the metal contained, saying with irony: “One may as rationally hope to lengthen a foot by dividing it into fifteen parts instead of twelve, and calling them inches.” This axis between Locke and Newton did not go unnoticed by Rothbard, who in his An Austrian Perspective on the History of Economic Thought, wrote:
Fortunately, Locke’s view triumphed, and the recoinage was decided and carried out in 1696 on Lockean lines: the integrity of the weight of the silver denomination of currency was preserved…. The Lockean recoinage was assisted by Locke’s old friend, the great physicist Sir Isaac Newton (1642-1727) who, while still a professor of mathematics at Cambridge from 1669 on, also became warden of the Mint in 1696, and rose to master of the Mint three years later, continuing in that post until his death in 1727. Newton agreed with Locke’s hard-money views of recoinage.
The Invention of the Gold Standard
In Newton’s time, Britain was under a bimetallic regime where there were two types of coins: high-value gold coins and low-value silver coins. A gold coin was worth 20 silver shillings, but in 1717, Newton imposed the equation where one gold coin was equal to 21 silver coins. This was actually a miscalculation on the part of the scientist, who unwittingly triggered an interesting economic revolution for England and the whole world: people began to exchange gold coins for silver coins, putting more gold into circulation, while silver was exported. The price of gold remained stable while silver continued to fluctuate. This miscalculation favored gold and shifted the British currency to a standard based solely on gold, instead of both metals, thus giving rise to the gold standard.
The British realized the benefits brought by this new standard and it was maintained in the kingdom for several more centuries. It was successful because—being based on a clear relationship between value and quantity of metal (it is as if Newton had applied the law of gravity to the economy, reasoning like his famous constant of 9.81N/kg where a certain amount of mass corresponds to a quantity of force)—it was a system that was comprehensible and applicable globally.
Newton’s Influence on Classical Economic Philosophy
The turning point that Isaac Newton brought to the natural sciences has necessarily infected philosophy as well, which—being the “mother” of all erudition—has not left even subsequent economists-philosophers unscathed. In Frédéric Bastiat, for example, there are many references to Newtonian sciences and gravity. The focus of Bastiat’s thought was precisely to demonstrate the social harmony of the market economy as comparable to the harmony of the celestial bodies, hence the title of his work Economic Harmonies, in which he writes: “But the intelligence which has introduced harmony into the movements of the heavenly bodies, has implanted it also in the internal mechanism of society.”
An interesting reference to the celestial bodies and astronomy is immediately noticeable, but even more important is this “thought” or “intelligence”: Bastiat was profoundly Catholic and “thought” is a reference to the Logos of God, the supreme divine Intelligence. Newton in his Principia wrote: “This most beautiful system of the sun, planets and comets, could only proceed from the counsel and dominion of an intelligent and powerful Being.” There is a striking parallel between these two quotes from Bastiat and Newton that suggests that the French economist drew on the British physicist’s cultural background.
Even the most famous of the classical economist-philosophers, Adam Smith, was not exempt from the Newtonian revolution. His Wealth of Nations contains several references to Newton’s above-mentioned work. The link emerges in chapters V, VI and VII of his Principia. In Chapter V, entitled “Of the Real and Nominal Price of Commodities, or of Their Price in Labour and Money,” reference is made, though not explicitly, to the law of inertia. Chapter VI, “On the Components of the Price of Commodities,” can be related to the law of force. Finally, in Chapter VII, “On the Natural and Market Price of Commodities,” a connection is found with the law of action and reaction, as well as with the concept of gravity.
Isaac Newton—like other scientists and philosophers—successfully participated in writing the history of economic thought, solving problems of his time, and influencing later theorists. His scientific knowledge has also left its mark in this knowledge field and it is good to give him credit for it.
