280 REPORTS ON THE STATE OF SCIENCE, ETC. 
‘Further, if other countries have a currency whose value is stable in terms 
of gold there is a strong argument for our doing the same, in order to 
facilitate international business. The U.S.A. have such a currency at present, 
and it is perhaps more likely that the European countries and the Dominions 
will eventually return to such a system than that they will make a good 
job of any other. 
“There seems no reason why a paper currency, which is convertible into 
gold only for the purpose of making payments abroad, should not serve as 
a satisfactory medium of exchange within the country.’ 
Dr. Dalton agrees with Mr. Robertson’s views, though he thinks the last 
sentence, ‘an understatement.’ He adds: ‘To me it seems obvious that a 
paper currency is a satisfactory medium of domestic exchange, though it 
may be a bad standard of value.’ 
“Mr. Shaw, with more scepticism, replies: ‘It can, if it is honestly con- 
trolled, but it never is.’ Mr. Lawrence agrees. Sir J. C. Stamp, Sir Drummond 
Fraser, Mr. Sykes, and Mr. Mason answer ‘ No,’ Sir Josiah adding: ‘ Not 
as at present controlled. Not if we are thinking of the long run.’ Mr, Sykes 
and Mr. Allen believe that the standard of value should be, as far as 
possible, independent of Government or other human contro]. Mr. Sykes adds: 
‘IT am firmly convinced that, in spite of the admitted defects of gold as a 
standard, the balance of advantages in its favour, as compared with any 
standard dependent on Government control, is very great indeed. The ques- 
tion of the medium of exchange is of minor importance.’ 
Sir Drummond Fraser says that a paper currency should be issued by 
the Bank of England on a gold basis, as our Committee suggested in its 
1915 Report. He adds: ‘I believe in the cast-iron principles of the Bank 
Act. The mistake in issuing the currency notes was that the amount at 
first was unlimited. This enabled the Bank of England to manufacture bank 
credit ad lib. and without restraint.’ 
Qurstion 9 (1).—Do we want our price-level to remain stationary? or to 
be continually falling (as in 1873-96), or to be continually rising slightly (as 
in 1896-1914) ? 
It is assumed in this question that prices in general may be raised or 
lowered by an increase or decrease of currency, and either by natural causes, 
such as the discovery of new or exhaustion of old goldfields, or by the 
action of the Government in expanding or contracting a paper currency. This 
is a commonplace of economics, and does not contradict the opinions given 
in the replies to Sub-questions ‘1,’ ‘2,’ and ‘3.’ 
With so much experience of the troubles caused by rising prices between 
1914 and 1921, our members and correspondents agree in noé wanting the 
price-level to rise. There is some difference of opinion as to whether it is 
desirable that the price-level should fall further. Dr. Cannan replies: ‘ Keep 
it steady’; Mr. Lawrence says: ‘ Stationary or slightly falling’; Mr. Mason 
says : ‘ As stationary as possible’; Sir J. C. Stamp prefers it to be ‘ continually 
falling, not to a pre-War level, but to a level where the superstructure of 
credit has a reasonable relation to a metallic basis.” Dr. Dalton thinks that 
‘if future price-movements were perfectly foreseen by all parties it would 
not matter what those movements were. But perfect, or even tolerably good, 
all-round foresight being unattainable, I think that, on the whole, a price- 
level slowly and steadily falling is most to be desired.’ Mr. Hoare, placing 
more trust in Government control of paper money than the rest of us, wants 
the level to ‘ tend constantly downwards, paper money being always so increased 
as to make the drop in prices very slow, i.e. the drop should be due to 
increased output, and the drop should be so hindered by increased currency 
as to prevent that drop from being so pronounced as to check output.’ 
Mr. Ellinger also answers ‘Stationary,’ but he adds: ‘I should like to 
see prices on the level corresponding to the average level which existed at 
the time the War Debt was created, and in so far as the general level of prices 
may be higher than such level I should like to see prices falling gradually 
as public debt is paid off, or converted to a lower rate of interest. It must 
be borne in mind, particularly as regards the three following clauses (‘‘ 2,” ‘* 3,” 
and ‘‘4”’) that the level of prices in this country depends very largely on the 
general level of world prices, and I should be sorry to see the general level 
