158

WAR  BORROWING

The  preface  of  Pigou’s  book  is  dated  October,
1916.  In  December,  1916,  at  the  meeting  of  the
American  Economic  Association  held  in  Columbus,
Ohio,  an  eminent  American  economist,  Professor
O.  M.  W.  Sprague  of  Harvard  University,  presented ­
  a  paper  on  “  Loans  and  Taxes  in  War
Finance  ”  wherein  quite  independent  of  Pigou’s  exposition ­
  the  inflationist  argument  against  funding,
foreshadowed  in  certain  of  the  speaker’s  earlier
writings,  was  set  forth  in  detail.  Admitting  that
“  it  is  not  absolutely  inevitable  that  war  finance
based  on  borrowing  should  cause  a  general  rise  in
prices,”  Professor  Sprague  noted  that  “  it  is  significant, ­
  however,  that  whenever  governments  have  resorted ­
  to  this  policy  prices  generally  have  manifested
marked  and  continued  upward  tendency.”
Professor  Pigou’s  and  Professor  Sprague’s  views,
spoken  with  some  measure  of  scientific  restraint,
were  received  with  attention  if  not  assent  within
expert  circles.  They  were  given  circulation  and
vogue  by  the  lamentable  Minnesota  “  memorial  of
American  economists  to  Congress  regarding  war  finance,” ­
  an  ill-fated  attempt  to  determine  congressional ­
  action  upon  the  then  pending  war  revenue  bill
by  arraying  the  body  of  academic  economists  in
support  of  such  propositions  as:
“  It  may  be  necessary  for  a  month  or  two  at  the  outset
to  issue  a  limited  amount  of  bonds,  pending  the  collection
of  increased  taxes,  but  beyond  these,  which  might  well  be
made  repayable  within  a  year,  no  necessity  for  bonds
exists.”
Thus  far  the  inflationist  doctrine  had  circulated
as  an  academic  hypothesis.  In  April,  1917,  it  was