Page:Stabilizing the dollar, Fisher, 1920.djvu/253

9, H] The influence being as indicated, the adjustment should evidently be 1% per 1% deviation.

It will be seen then, that (1) the tendency is beyond our control; (2) the lag measured in months is under control only to a small extent as we may choose the index number but, measured relatively to the adjustment period, is fully under control; and (3) the influence may be assumed to be 1% per 1% of adjustment, provided we have a proper reserve system for the certificates and a proper banking system for deposits (as explained in Appendix I, § 7).

Practically, therefore, these three factors (influence, absolute lag, and tendency) must be taken as we find them and we can merely choose the best brassage, adjustment, and frequency of adjustment.

These we find to be, in round numbers, substantially those of the standard case.

In the following subsection we shall see what the results would be as applied to the historical facts since 1900, taking the brassage as 1% and the frequency of adjustment as bi-monthly, both somewhat more conservatively than the ideal.

''H. The Stabilization Process Applied to the Actual Course of Prices. ''

(a) The assumptions suitable for practical conditions.

We pass now from the highly theoretical calculations just given to the practical question of how close to par the actual index number would keep under stabilization. The best answer can probably be reached by applying the same sort of calculations as those above to the actual price movements experienced since, say, 1900, the year from which the monthly index number of the United States Bureau of Labor Statistics dates.

We shall assume, as the best adjustment period, two months. This, as has been observed, is more than the length of probable lag between any adjustment and its influence on the price level, as explained in Appendix I, §3. To be still more conservative,