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A TREATISE ON MONEY

BK. II

former relationships rapidly. This restoration of theprevious equilibrium can, it is thought, be assumedwith particular confidence when the initial impulsetowards change is obviously “ on the side of money ”,such as an inflation of the currency, whilst nothingnew has occurred “ on the side of things ” calculatedto affect relative real costs of production to anymaterial extent; for in such a case all individualprices tend to be affected equally —the initial price-'changes, that is to say, diffuse themselves equallyafter a certain time through all price-levels alike.Money, being a mere counter, cannot, it is argued,have any permanent influence on the relative valueof the things which are transiently related to it. Wemust allow for friction and an interval of time fordiffusion, as in all other processes of economic adjust-ment. But subject to this the theory of price diffusionin a perfect market is reasonably near to the facts.

This way of thinking has been reinforced by theinfluence of the unweighted Index-Numbers, whichwe have just discussed above. The Jevons-Edge-worth “ objective mean variation of general prices ”,or “ Indefinite ” Standard, has generally been identi-fied, by those who were not as alive as Edgeworth him-self was to the subtleties of the case, with the purchas-ing power of money—if only for the excellent reasonthat it was difficult to visualise it as anything else.And since any respectable Index-Number, howeverweighted, which covered a fairly large number of com-modities could, in accordance with the argument, beregarded as a fair approximation to the IndefiniteStandard, it seemed natural to regard any such Indexas a fair approximation to the Purchasing Power ofMoney also.

Finally, the conclusion that all the standards“ come to much the same thing in the end ” has beenreinforced “ inductively ” by the fact that rival index-numbers (all of them, however, of the wholesale type)