# Stabilizing the Dollar

STABILIZING THE
DOLLAR
A PLAN TO STABILIZE THE GENERAL PRICE LEVEL WITHOUT FIXING INDIVIDUAL PRICES
BY
IRVING FISHER
PROFESSOR OF POLITICAL ECONOMY IN YALE UNIVERSITY EX-PRESIDENT OF THE AMERICAN ECONOMIC ASSOCIATION
New York
THE MACMILLAN COMPANY
1920
All rights reserved
Copyright, 1920.
By the MACMILLAN COMPANY.
Set up and electrotyped. Published January, 1920.
Norwood Press J. S. Cushing Co.—Berwick & Smith Co. Norwood, Mass., U.S.A.
To
JOHN ROOKE
SIMON NEWCOMB
ALFRED RUSSEL WALLACE
AND ALL OTHERS
WHO HAVE ANTICIPATED ME
IN PROPOSING PLANS
FOR STABILIZING MONETARY UNITS
PREFACE
The fundamental fact on which the proposal of this book is based is that the purchasing power of the dollar is uncertain and variable, that is, that the price level is unstable.
The war has caused the greatest upheaval of prices the world has ever seen. Inseparably connected with this upheaval is grave and world-wide industrial discontent. Because of this and because of the perplexity of business men as to future movement of prices, there has been much discussion going on of the question whether the level of war prices will drop or whether it can be stabilized.
To show that permanent stability can be secured is the chief aim of this book; and a specific and detailed plan for this purpose is presented.
The first sketch of this plan was published in 1911 (in my Purchasing Power of Money). It was later presented before the International Congress of Chambers of Commerce at Boston, September, 1912, and again before the American Economic Association, December, 1912. The plan was elaborated in the Quarterly Journal of Economics, February, 1913.
In October, 1917, I gave the Hitchcock lectures at the University of California, using much of the material published now, for the first time, in this book. In the spring of 1918 a Committee of the American Economic Association, on the Purchasing Power of ​Money in relation to the War, indorsed the principle of stabilization and commended the subject to the earnest attention of statesmen and economists.
By this time academic economists had been largely won over to the idea, it having run the gantlet of their criticism for several years. The general support of economists marks the first milestone in the progress of the idea.
Latterly a beginning has also been made toward arresting the attention of the business and industrial world, the interests of which are most at stake. Their general approval, if obtained, will mark the second milestone.
Until recently it has seemed premature to ask men in political life to press for the actual adoption of the plan. Their action, if taken, will mark the third and final milestone.
Appendix IV, §3, gives the names and comments of prominent leaders in all three fields—economics, business, politics—who have approved the idea.
When I first propounded the plan for stabilizing the dollar I supposed that I was the first to do so. It soon appeared, however, that the same thought had occurred independently to a number of others.
The bibliography in Appendix VI gives references to the published writings in which substantially the very plan here presented has been outlined by others.
There are a few anticipators who have never published their views but have kindly sent me copies of manuscripts or letters describing them. The following is a complete list in chronological order of anticipators, so far as known to me: John Rooke, 1824; the late Simon Newcomb, astronomer and economist, 1879; ​Professor Alfred Marshall, Cambridge, 1887; Aneurin Williams, M.P., 1892; Professor J. Allen Smith, now Dean, University of Washington, 1896; D.J. Tinnes, Hunter, North Dakota, 1896; William C. Foster, Boston, Mass., 1909; Professor Harry G. Brown, University of Missouri, 1911; Henry Heaton, Atlantic, Iowa, 1911.
This list could be lengthened considerably if the authors of plans radically different, but having the same purpose in view, were to be included. Among these authors is the late Alfred Russel Wallace, the naturalist.
The only essential feature of the plan in which, apparently, I have not been anticipated is the provision (mentioned at the end of Chapter IV and described, in detail, in Appendix I, §2) regarding speculation in gold.
The fact that the plan has been worked out independently in so many cases and by men so able and clear-headed is, I venture to think, strong evidence of the soundness of the proposal. It also affords me the opportunity to promote the plan the more impersonally and, I hope, with more chance of success than if it were merely one man's idea.
My thanks are due to the large number of persons who, through many years, by criticisms and suggestions, have helped me gradually develop the present formulation of the plan. I wish especially to express my thanks to Prof. Wm. H. Taft and Mr. Morison R. Waite, who supplied important legal data bearing on the problems of Appendix I, §6; to Dr. Royal Meeker, Prof. Wesley Clair Mitchell, Dr. B. M. Anderson, Jr., and Prof. Percy W. Bidwell, who supplied ​valuable criticism of portions of the appendix; to Mr. Philip P. Wells, formerly legal counsel of the National Conservation Association, who has helped frame the tentative draft of an act to stabilize the dollar given in Appendix I, §9; to my brother Herbert W. Fisher, whose criticisms have assisted me in improving the form of presentation; and to Miss Clara Eliot, formerly instructor in sociology in Mills College, who has helped at every stage of the work.
Every objection or difficulty which has been raised has been, I believe, frankly faced and discussed. Such discussion has been relegated to the appendix, in order that the text might be confined to stating the plan which, as will be seen, is so simple that any one can readily grasp it. It has been my ambition to reach and convince every available reader.
If the particular plan here proposed is not the best to accomplish its purpose, I hope a better one will be proposed.
It is also my hope that readers will spread the idea of stabilization by whatever methods seem to them most effective for promoting legislative action, national or international. I should be glad to be kept informed of such activities as well as to receive suggestions and criticisms.
As a movement for stabilization, in some form, seems inevitable in the immediate future, I shall be glad to make the best use I can of the return postal card inserted here for the convenience of the reader should he desire to stamp, sign, and mail it.
Irving Fisher.
November, 1919.
SUGGESTIONS TO READERS
* The general reader will be chiefly interested in the five chapters of the text, of which Chapter IV is the chief.
* Those who find any difficulty in accepting the argument in the text are referred to Appendix II, of which §1 and §3 will probably be found of most general use.
* The General Summary is designed for those who think they have not time to read the book.
* The Summary by Sections will supply the starting point for reading any special part of the text desired.
* The analytical table of contents, the index, and the running page headings have been constructed to facilitate the use of the book as one of reference.
* Chapter II may help those who do not yet believe that the so-called "high cost of living" is, at bottom, a shrunken dollar.
* Chapter III is commended especially to those who imagine that there is little wrong with our present monetary system.
* Appendix IV, §3, is for those craving good company in espousing new ideas.
* Appendices I and III and Appendix II, §2, are intended chiefly for technical economists.
* Appendix VI gives references for further study and verification.
* General Summary
* Summary by Sections
SHORT TABLE OF CONTENTS
PAGE :
| Chapter | I. | The Facts | 1 |
| Chapter | II. | The Causes | 10 |
| Chapter | III. | The Evils | 53 |
| Chapter | IV. | A Remedy | 79 |
| Chapter | V. | Conclusion | 104 |
| Appendix | I. | Technical Details | 125 |
| Appendix | II. | Disapproval of the Plan | 214 |
| Appendix | III. | Alternative Plans | 252 |
| Appendix | IV. | Public Interest | 263 |
| Appendix | V. | Precedents | 279 |
| Appendix | VI. | Bibliography | 286 |
ANALYTICAL TABLE OF CONTENTS
CHAPTER I
THE FACTS
CHAPTER II
THE CAUSES
CHAPTER III
THE EVILS
CHAPTER IV
A REMEDY
CHAPTER V
CONCLUSION
APPENDIX I
TECHNICAL DETAILS
APPENDIX II
DISAPPROVAL OF THE PLAN
APPENDIX III
ALTERNATIVE PLANS
APPENDIX IV
PUBLIC INTEREST
APPENDIX V
PRECEDENTS
APPENDIX VI
BIBLIOGRAPHY
LIST OF DIAGRAMS
(In all cases the diagrams are plotted on the "ratio chart" in which the vertical scale is so arranged that the same slope always represents the same percentage rise. For a full description of the advantages of this method the reader is referred to "The Ratio Chart," Irving Fisher, Quarterly Publications of the American Statistical Association, June, 1917.)
This work is in the public domain in the United States because it was published before January 1, 1929.
The longest-living author of this work died in 1947, so this work is in the public domain in countries and areas where the copyright term is the author's life plus 76 years or less. This work may be in the public domain in countries and areas with longer native copyright terms that apply the rule of the shorter term to foreign works.
Public domainPublic domainfalsefalse