Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-01-25
BY PROF. IRVING FISHER.
copyright. 1920, by The Washington STAR

N IA UGH puOllclty HAS peeh
MI given recently to signs
which suggest that the
rising tide of prices has at
last turned. A decline in
prices had been expected ever since
November IL. 1918. But, with only
trifiing recessions, there had oeeh'
instead, a continuous rise.
The price level. or the general
average of prices. is measured ov
a figure called an index NUMBER.
August marked the highest point.
which was reached again in Novem-
Der. The bureau of labor statistics
retail index number was 192 Ton
the basis of 100 per cent for 1873
as compared with 1873 for Novem-
Der. 1918, an increase since the
armistice of per cent.
AS consumers today we look
back with longing to the day when
we could get butter at two pounds
for 10 cents, instead of one pound;
when eggs were within reach of the
average consumer. when new
pair of shoes could be bought for
little more than it now costs TO re,
pair the old pair. when one could
ride for a nickel, and could rent an
apartment without having to be al
NEST a millionaire. Our dollar to-
day literally looks like so cents
that is. compared to our biggest
dollar. that Of 1896. the present dol
lar has only one-third the purchas-
ing power.
At the same time we see bust
ness fiourishing. August had the
lowest number of business failures
for years. Certainly there are some
classes of our population who are
coming money" and wonder if
it is at our expense.
In a word. high prices press I'M
evenly on different classes of our
population. The burden is most
heavy on those with fixed incomes
bondholders and the recipients OF
interest, insurance. annuities, etc.
and on the railroads. landlords and
others whose receipts are regulated
more or less by custom or law.
We come now to the question. if
prices should undergo a marked
fall. would that fall prove an I'M
mixed blessing? Would it compen-
tie for the injustice done by ris-
ing prices? Surely not, as any one
will appreciate who can remember
the evils of the falling prices cul-
in 1896. Falling prices do
not rectify the injustice done by
rising prices. Very soon the fixed
heavy relatively to the lower pro-
ceeds The result is business depres-
sion, with unemployment and other
evils more distressing than the
high cost of living.
A scientific remedy demands a
scientific study of the causes.
Prices do not rise Of themselves.
Much evidence can be adduced. SIM
liar to that given by President Will
son in his address on the high cost
OF living, on August 8. against the
sible for the general doubling
of prices. Moreover. profiteering.
blamed for price in
creases, is Except for certain few
fragrant cases) rather a result than
a cause of the general increase.
Rather is it true. to a degree, Of
this country what is conspicuously
true of Russia, that monetary
cause is, responsible. In this coun-
try. indeed, we did not run off bill
lions of printing-press dollars. But
we did, in. 1915 and 1916. import q
billion dollars of foreign gold in
payment for war supplies.
If for this country we plot the
curve of the amount of money in
in the country and. for
the curve of prices. we
shall find that they correspond very
This fact can be inter-
preted as follows: Gold and Uater)
credit money increased so in amount
their purchasing power over goods
Since war experience has shown
us the monetary cause of the prob
lem of the high cost of living and
of the corresponding problem of
falling prices and business depres-
sion. a monetary remedy must evil
IDENTIFY be sought. This is what is
aimed at in the remedy which |
shall now briefly describe. If it
appear to some people a radical
remedy, it must be remembered
that every separate feature of the
plan has at some time been tried
and, moreover, that the
greatest argument in favor of this
remedy is that it will forestall the
real and dangerous radicaliSm into
which the revolutionary spirit of
the times may otherwise crystal
lie.
Labor difficulties have been fire.
quently adjusted by the increase of
the wage scale in proportion to the
increase in prices as shown by the
Index number" of prices. In other
words. the depreciation in the pur-
chasing power of the dollar was
compensated for by the increase in
the number of dollars in the
wage payment Several writer's
have advocated the extension of
this plan to all time contracts.
Their aim is that the purchasing
power contemplated in the contract
shall be received by the creditor.
though it may take more Cor fewer)
dollars to secure this result. This
idea has made some progress. as is
evidenced bv the cases cited (Of
wage adjustments) in other articles
of mine and in those of Theo-
dore II. Price and by occasional re-
ports of rentals based on the Index
number" or the tabular standard"
But the difficulties in the way of
further use of the scheme can be
easily appreciated.
\ * \
The plan which ! am going to de-
scribe is similar in principle, but
instead of using the index number
to make an extraneous adjustment
CONGRESS- F