774 REPORT — 1895, 



exhibitinrc a fall in prices, though the degree of the fall showu in each case may 

 Tary.^ The economic theory of supply and demand may, then, be used to establish 

 the connection between cause and etiect ; for, if the supply of a commodity declines 

 while the demand for it increases, a rise in its value, and a fall in the value of 

 articles compared with it, become inevitable. Such has been the position of gold 

 during the last twenty years. 



It may be noticed that the possibility of a plurality of causes increases the 

 likelihood of the action of some common cause ; for, under the conditions, we can- 

 not expect the apparent effects of this cause to be immediate or universal. The 

 presence of countei-acting or modifying circumstance, of opposing or contributory 

 causes, will delay in some cases a process accelerated in others, will minimise here 

 an effect which is accentuated there. The apparent change due to the cause is 

 only likely to be general and not universal, to be gradual and not immediate. The 

 assertion that a fall in prices, if due to an alteration in the available supplies of 

 the standard metal, should be immediate and universal cannot be sustained when 

 economics, penetrating beneath superficial appearance, reveals the interaction of 

 different causes ; and, if the testimony of index-numbers points to a general change, 

 it is no sufficient answer to affirm that it is not universal. On grounds of eco- 

 nomic reasoning we should expect a slower movement of retail than of wholesale 

 prices, of the prices of articles of minor than of those of more general consumption, 

 of wages than of prices generally. 



The mention of wages suggests another point neglected in some current discus- 

 sions, but brought by economic reasoning from obscurity into prominence. It is 

 sometimes asserted that the fact that wages have not fallen is a proof that mone- 

 tary causes have not produced the fall of prices. But, apart from the known tend- 

 ency of wages to move more slowly than prices, such an assertion oveidooks the 

 possibility of a simultaneous change in distribution. Economic reasoning points 

 to the probability of such a change in favour of the wage-earner, and to the effect 

 that it would produce ; and statistical evidence corroborates that reasoning." If 

 such a change be proceeding, we should expect wages to rise, and the fact that they 

 are stationary tends to prove, not to disprove, the existence of a monetary cause of 

 the fall of prices. A failure to give explicit recognition to this possibility is due 

 to neglect of the plurality of causes, and is akin to another argument sometimes 

 advanced. This maintains that, if it can be shown that the country has pro- 

 gressed, or not receded, in wealth, in the development of trade and manufacture, 

 in the prosperity of the mass of the community, it is thereby proved that the fall 

 of pi'ices has wrougbr no iujurv. But it may be answered that the progress might 

 have been greater in the absence of the fall, and other forces may have prevented 

 the cause in question from producing its full effect. Here, again, economic reason 

 ing may aid in discerning what is invisible to the unassisted eye. 



Few truths, indeed, are slower to receive, and more likely to lose, popular 

 recognition than those which lay stress on the mutual action of diff"erent causes. 

 We are told, for instance, that the fall of prices is due to circumstances connected 

 with improvements in the production and transportation of commodities ; and it 

 must be admitted that such a common cause is not, like particular causes affecting 

 individual commodities, eliminated in tlie general average of the index-numbers. 

 But the one common cause — that of improvements in production — does not exclude 

 the operation of the other — that of a change in the available supplies of gold. 

 Taking a broad view of the whole century, it would certainly seem that the move- 

 ment of improvement has set steadily in one direction, but that the movement of 

 prices has first declined, and then advanced, and then declined again. It is pos- 

 sible that the movement of improvement may have been accelerated and retarded 

 at different times ; but the change in the movement of prices, which requires ex- 



' An index-number maj^ be briefi.y described as a mode of showing the average 

 change in prices by comprising in one grand total the percentages of rise or fall 

 shown in the recorded prices of certain selected typical commodities. 



- Cf. the investigations of Sir Robert Giffen in England, of M. Leroy-Beaulieu in 

 France, and of other inquirers in other countries. 



