trinsic qualities of the goods which they consume. The study of the marketing of farm products, the teaching of home economics, and the Food Administration have contributed to our understanding of this third phase in recent years.

In II and III there is revealed a distinct rapprochement between the market-distribution and the production-adjustment concepts of normal price. We are well aware that readjustments in production react upon the distributing machinery, while every modification of the exchange process exerts a reciprocal influence upon the productive organization. Thus, defects in our marketing system may so depress the price of a given commodity at some points as to cause returns to fall below the cost-of-production normal, thus forcing certain of the less favored producers out of the field, at the same time that the normal equilibrium of existing supply and demand would set the price at a point high enough to continue them in the business on a prosperous basis. Or, on the other hand, an abnormal exchange situation might so inflate prices as to retain producing units whose withdrawal would be indicated, were the normalizing influence of profit-seeking adjustment on a cost-of-production basis not obscured by this abnormal market situation. Each change in production creates a new market problem; each readjustment of the exchange mechanism alters in some measure the terms of the producer's problem.

There should be no discontinuity in our concept of the normalizing process, from the most local and ephemeral adjustment of even one unit of supply to one unit of demand, up through the harmonizing of the single value estimate so struck with others elsewhere, so that the whole stock may be valued in exchange upon a consistent basis; from this to the yet remoter idea of mak

ing this level of values fit harmoniously into the whole scheme of market values by being made (through the checking or acceleration of the rate of supply) to correspond with the market prices of their component cost goods. So to complement the cost-of-production with the analagous market-distribution normal is not to present merely an engaging abstraction for the theorist to toy with but, on the contrary, to enunciate the value principles which must govern the practical endeavors of business men in adjusting our machinery of market production and exchange. It expresses the essential truth which, sometimes crudely and of course intuitively, the farmer has had in mind when demanding relief from the erratic fluctuations of the markets in which his products are sold. It has lain back of the efforts of the Food Administration and other agencies to "stabilize" values during the war period. Likewise, it must underlie whatever truly sound work shall be done in the future toward improving the conditions of our agricultural organization, through equalization of shipments, dissemination of complete market news, intelligent proportioning of producers' efforts and outlays, upon which a truly healthy development of the industry must depend.

It is a highly practical proposition because it is sound economic theory.

E. G. NOURSE.

IOWA STATE COLLEGE.

ON STABILIZING THE DOLLAR

SUMMARY

Inconveniences of an unstable value unit, 652. — Dr. Fisher's proposed remedy, 652.- Would his goods standard be stable ? 658. — Unstable relation between goods and labor, 660. — Value dependent on human estimation, 661.- This not stable as to goods or as to labor, 665. — Can present monetary units be stabilized ? 667. — Control of issues of paper money, 667. — Control of gold production, 668. — How would Fisher's plan affect the public debt? 670.

Most of us have learned from experience that a dollar will not buy so much as it used to buy, but many of us remember a time when our experience was just the reverse of this; for it is scarcely twenty-five years since a period of falling prices came to an end. Then debtors whose contracts ran for a number of years were at the disadvantage of having to pay back dollars of larger purchasing power than was possessed by the dollars they had received. Now creditors, under like circumstances, have reason to complain that the dollars repaid to them have a smaller purchasing power than had the dollars which they lent; and people whose earnings have remained stationary, or failed to increase as fast as the prices of commodities, have found it increasingly difficult to pay their bills.

Dr. Irving Fisher in a pamphlet issued as a precursor of his forthcoming book on Stabilizing the Dollar in Purchasing Power, has expounded his plan for putting an end to such unpleasant experiences by keeping the variations in the purchasing power of the dollar within very narrow limits. That he somewhat underestimates the direct effect of the world war in raising the cost of living and, as I think, correspondingly overestimates

its indirect effects through its expansions of currency and credit, is a secondary matter. So also is his inclination to throw upon our unstable dollar more than its just share of blame for the existence of social discontent. What I am here concerned with is the plan itself and, as it seems to me, a fundamental error which underlies it.

Dr. Fisher recognizes the fact that, to a greater or less extent, he has been anticipated by others. The various writers who have discussed a " tabular" or "multiple" standard of value seem to have assumed that, if so constituted as to be accurately representative of goods in general, it would afford a just standard for deferred payments; and this is the assumption which underlies Dr. Fisher's plan of stabilizing the dollar. From this point of view, he has a considerable advantage over earlier writers on the subject in the fullness of the price records now available and the elaborate systems of index numbers based thereon. Yet one may be permitted to doubt whether it is possible to construct, even with all these helps, a standard which shall measure the price movements of goods in general with a very high degree of accuracy, tho Dr. Fisher compares the results at which he aims with those attainable through the yardstick in measuring length.

"What is needed," he says, "is to standardize the dollar, just as we have already standardized the yardstick, the pound weight, the bushel basket, the pint cup, the horse power, the volt, and, indeed, all the units of commerce except the dollar."

And his plan for accomplishing this object is to take, at a suitable time, a dollar's worth of carefully selected goods, which shall thereafter serve as a measure of value for goods in general, including gold.

"A true standard of value," he says, "should not be dependent on one commodity merely, whether that

commodity be gold or silver, or wheat or what not. Two commodities would be better than one "; and “a composite of gold, silver, copper, platinum, and all the other metals would be somewhat more stable than an amalgam of two, just as a number of tipsy men can walk more steadily arm in arm than two only, it being wholly unlikely that all the men in the line would lurch in the same direction at the same instant."

Metals, however, are not the commodities to which Dr. Fisher would assign a leading place in constructing his standard. He says:

In order to secure a dollar constant in its purchasing power over goods in general, it should, in effect, be a composite of those very goods in general. For instance, we might imagine a composite commodity dollar consisting of 2 board feet of lumber (made up of various kinds); 1/20 of a bushel of wheat; 3/4 of a pound of steers; 1/2 of a pound of meat; 30 pounds of coal; 1/100 of a barrel of white flour; 1 pound of sugar; 1/2 of a pound of hogs; 1/3 of a pound of cotton; 1/3 of a gallon of petroleum; 1 egg; 1 pint of milk; 1 ounce of butter; 1/30 of a bushel of corn; 1/25 of a bushel of potatoes; 1/100 of a pair of shoes; 11/2 pounds of hay; 1 ounce of hides; 1 ounce of tobacco at the farm; 1/2 of an ounce of manufactured tobacco; 1 1/2 ounces of lard; 1/2 of an ounce of leather; 1/7 of an ounce of wool; 3/4 of a pound of steel; 1 ounce of copper; 1/10 of an ounce of rubber; 1/300 of a gallon of alcohol; 2 ounces of soap.

These happen to be the relative quantities of some of the three hundred commodities used by the United States Bureau of Labor Statistics in making up its index number of prices. The entire list, of which the articles specified are the more important, was actually worth one dollar in 1909.

If at that time we had established such a dollar as our unit — that is, a composite dollar consisting of a big basket containing those three hundred bits of goods—that composite basketful of commodities or "goods-dollar," let us call it would evidently have to be worth a dollar at all times; and the cost of living — at least the cost of the representative assortment in that basket — could not rise or fall. That assortment would always cost a dollar simply because a dollar is that assortment.

Accepting the "goods-dollar," or "composite basket of goods," as a thing of stable value, Dr. Fisher would