Page:Stabilizing the dollar, Fisher, 1920.djvu/204

150 the history of prices has repeatedly and clearly shown that wholesale prices respond the most promptly of all classes of commodity prices. They rise or fall before retail prices, just as retail prices do before wages, and wages before salaries.

Not only are wholesale prices a prompter and better index of the purchasing power of money but, if the level of wholesale prices is stabilized, the level of retail prices will be stabilized also. It is true that when the wholesale level changes the retail level lags behind. But the lag depends on the change; that is, other things equal the lag is most, absolutely at least, when the change in wholesale prices is most and least when that change is slowest. If the level of wholesale prices did not change at all the level of retail prices would likewise keep fairly stable; for there can be no lagging behind when there is no movement behind which to lag. When a fisherman moves his pole back and forth, the line and sinker follow, lagging behind. But if he ceases to move the pole, the line will hang more nearly plumb.

(4) What has just been said paves the way for the selection of the particular commodities to be included. Just as prices of commodities at wholesale are more sensitive or responsive than those at retail, so some wholesale prices are more responsive than others. In other words, for one reason or another, the prices of certain commodities, even at wholesale, are more or less resistive to change, i.e. they change only sluggishly and after the pressure to change them has accumulated. Steel rails, for instance, remained $28 a ton for many years.

With these requirements in mind, the next consideration is that the list of commodities be as general as possible. I would myself prefer a more general standard than food, although almost any standard based on a number of commodities would be superior to the gold standard based on one alone. If a very general standard were adopted, it is quite true that the