chapter  56
6 Pages


Daily experience points the way to a more accurate scientific method of measuring the value of money which might be elaborated. Every traveller visiting a foreign country in which the market prices are different from those to which he has been accustomed at home soon notices the departure from his calculations in the new standard. Also he will have little difficulty in finding an expression for the difference of value in the foreign market and at home. He is likely to determine the general price level of the new market in so far as it affects him personally; but he will not stop there as the method of index numbers erroneously does. He will probably compare the observed price level with the amount of his income and he will reach the conclusion that the value of money is higher if he can purchase more natural values for his household with the prevailing income, and that it is lower if he has to content himself with a smaller quantity of natural values. The scientific method of ascertaining the value of money should start from precisely this basis; it must compare the sums of money that are necessary for a certain provision of natural values with the money income. It should do this for all strata of the people and for all local differences of the price level, thus relating a series of index numbers of prices with one of income.