1,161 Quotes About Economics

Local differences in the prices of commodities whose natures are technologically identical are to be explained on the one hand by differences in the cost of preparing them for consumption (expenses of transport, cost of retailing etc.) and on the other hand by the physical and legal obstacles that restrict the mobility of commodities and human beings.

Hence, the statement that the cost of living is different in different localities only means that the same individual cannot secure the same degree of satisfaction from the same stock of goods in different places.

To recapitulate: the exchange-ratio subsisting between commodities and money is everywhere the same. But men and their wants are not everywhere the same, and neither are commodities. Only if these distinctions are ignored is it possible to speak of local differences in the purchasing power of money or to say that living is dearer in one place than in another.

No individual and no nation need fear at any time to have less money than it needs. Government measures designed to regulate the international movement of money in order to ensure that the community shall have the amount it needs, are just as unnecessary and inappropriate as, say, intervention to ensure a sufficiency or corn or iron or the like. This argument dealt the Mercantilist Theory its death-blow.

Nevertheless statesmen are still greatly exercised by the problem of the international distribution of money. For hundreds of years, the Midas Theory, systematized by Mercantilism, has been the rule followed by governments in taking measures of commercial policy. In spite of Hume, Smith, and Ricardo, it still dominates men's minds more than would be expected. Phoenix-like, it rises again and again from its own ashes.

He who cares to go to the trouble of demonstrating the uselessness of index numbers for monetary theory and the concrete tasks of monetary policy will be able to select a good proportion of his weapons from the writings of the very men who invented them.

To measure is to determine the ratio of one quantity to another which is invariable or assumed to be invariable. Invariability in respect of the property to be measured, or at least the legitimacy of assuming such invariability, is a sine qua non of all measurement. Only when this assumption is admissible is it possible to determine the variations that are to be measured.

Determinants of prices have their effect only through the medium of the subjective estimates of individuals; and the extent to which any given factor influences these subjective estimates can never be predicted.

Under certain conditions, index numbers may do very useful service as an aid to investigation into the history and statistics of prices; for the extension of the theory of the nature and value of money they are unfortunately not very important.