78

A TREATISE ON MONEY

BK. II

balances of the community than a similar movementin tbe price of other articles which give rise to anequal volume of cash-transactions.

I propose to call the first type of Currency Standard the Cash-Transactions Standard and the second typethe Cash-Balances Standard. The significance of thedistinction will be developed in Chapter 14, where weshall see that the “ Fisher ” Quantity Equation leadsup to the former, whilst the “ Cambridge ” QuantityEquation leads up to the latter.

Writers on the Currency Standard have generallymeant by it, I think, the Cash-Transactions Standardrather than the Cash -Balances Standard. The desig-nation Currency Standard, defined as a Cash-Trans-actions Standard, was in fact first introduced byProfessor Foxwell, who regarded it as “ par excellencethe measure of appreciation or depreciation ” in suchcontexts as discussions relating to Bimetallism, choice of standards, etc. The leading exposition of it, how-ever, is not by Professor Foxwell himself but by Pro-fessor Edgeworth, on the basis of conversations withthe former, in his Third Memorandum for the BritishAssociation, 1889 (reprinted op. cit. p. 261). Edge-worth’s concluding comment is as follows : “ Uponthe whole, it appears that the Currency Standard deserves more attention than it has received. Thestone unaccountably set aside by former builders ofindex-numbers may become the corner-stone of futureconstructions.” The Cash-Transactions Standard isalso important because—as mentioned above—it isthe price-level appropriate to Professor Irving Fisher ’swidely celebrated formula PT = MV . 1

It is the Cash -Balances Standard, on the otherhand, which is characterised par excellence by the

1 M. Divisia (“ L’lndice monetaire et la th6orie de la monnaie,” Revued'Economie politique, 1925, p. 1001) has defined the value of money byreference to the Cash-Transactions Standard calculated from year to yearby the Chain Method.