<p>Consider a mining firm that uses its precious metal to make coins. The number of coins that one can make per kg of mined metal is fixed.</p>
<p>Now, consider a situation where there is inflation (due to economic activity). If production of the mining firm remains constant, then due to inflation, nominal costs will increase (e.g. wages). On the other hand, revenues (i.e. the number of coins mined) will not increase. This means that profits for the mining firm will decrease.</p>

CC BY-SA 4.0
2023-09-18T19:38:47.310Z
Ah, thanks. I think I was struggling with the impacts of inflation on the revenues of bullion producers. One of the oddities of being a producer of the universal commodity, I guess!
shea
CC BY-SA 4.0
2023-09-18T10:10:47.090Z
2023-09-18T10:10:47.090Z
tdm
<p>I am trying to understand the following argument from Earl J. Hamilton's &quot;The History of Prices Before 1750&quot;:</p>
<blockquote>
<p>Obviously the &quot;rise in prices&quot; usually resulting from &quot;economic activity which somehow comes about&quot; . . . would curb, not increase, mining of the precious metal through rising costs of production in conjunction with <em>fixed mint prices</em> of precious metals. Furthermore, the rise in prices would decrease, not increase, the coinage of existing bullion by relatively cheapening it for nonmonetary use.</p>
</blockquote>
<p>Why is it that Hamilton expects a rise in prices to curb mining of precious metals? I am less interested in the actual truth of the statement, as I am more intrigued by the logic that led him to it.</p>

<history-economic-thought><price-theory>
Precious Metal Mining During Periods of Increasing Prices
shea
# Precious Metal Mining During Periods of Increasing Prices

(Asked by: username_0 on 2023-09-17)

I am trying to understand the following argument from Earl J. Hamilton's "The History of Prices Before 1750":

> Obviously the "rise in prices" usually resulting from "economic activity which somehow comes about" . . . would curb, not increase, mining of the precious metal through rising costs of production in conjunction with *fixed mint prices* of precious metals. Furthermore, the rise in prices would decrease, not increase, the coinage of existing bullion by relatively cheapening it for nonmonetary use.

Why is it that Hamilton expects a rise in prices to curb mining of precious metals? I am less interested in the actual truth of the statement, as I am more intrigued by the logic that led him to it.

**Tags:** history-economic-thought, price-theory


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## 1 answers

### Answer by username_1 on 2023-09-18. Score: 0 | Accepted answer

Consider a mining firm that uses its precious metal to make coins. The number of coins that one can make per kg of mined metal is fixed.

Now, consider a situation where there is inflation (due to economic activity). If production of the mining firm remains constant, then due to inflation, nominal costs will increase (e.g. wages). On the other hand, revenues (i.e. the number of coins mined) will not increase. This means that profits for the mining firm will decrease.

> **Comments:**
> **username_0**: Ah, thanks. I think I was struggling with the impacts of inflation on the revenues of bullion producers. One of the oddities of being a producer of the universal commodity, I guess!  

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