Page:Stabilizing the dollar, Fisher, 1920.djvu/75

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Sec. 6]
THE CAUSES
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United States in 1918 were 16% more than in 1913 and 2% more than in 1917. The physical volume of trade in 1918 is estimated variously by my own fragmentary studies, published and unpublished, and by the studies of others to be from 22% to 41% above that in 1913 and 8% above that in 1917.[1]

President Wilson, in his address to Congress, August 8, 1919, on the High Cost of Living gave other impressive examples as to foods, especially eggs, frozen fowls, creamery butter, salt beef, and canned corn, showing that there is no scarcity to account for high prices.

Aside from this argument as to the abundance of goods in belligerent countries, there is the additional

  1. The mistake has sometimes been made of thinking that the stream of goods absorbed by the war should be deducted from the total volume of trade and that only the remainder, used for civil consumption, should be considered for comparison with pre-war times. They say that this volume of goods was greatly reduced and so naturally bears a scarcity price.

    But, granted that the scarcity of goods for civil consumption enhanced these goods, as estimated subjectively, it must not be overlooked that it tended just as much to enhance money, as estimated subjectively. There is no need therefore of any change in price.

    Thus, suppose that, for whatever reason, the same price level were kept in the war as before it, but that the people were suffering from lack of food and clothing. These starving people might subjectively esteem bread and clothes ten times as highly as before, but, if they did, they would certainly esteem the money to buy these with also ten times as highly as before.

    Professor J. S. Nicholson in his War Finance writes: "The late Robertson Smith used to say that in the East great famines were often accompanied by no particular rise in prices. The people died of hunger, but their demand was not effective. They had no more money than usual."

    Prices do express the intensity of wants for goods, but only relatively not absolutely.