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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, pre-
sented a paper on “ Loans and Taxes in War
Finance ” wherein quite independent of Pigou’s ex-
position 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 signifi-
cant, however, that whenever governments have re-
sorted 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 fin-
ance,” an ill-fated attempt to determine congres-
sional 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