Various proposals have been made from time to time to correct fluctuations in the price level and so to preserve a just relationship between debtors and creditors.1 In an earlier chapter we have referred to the now widely discredited scheme of bimetallism. Perhaps the most plausible proposal to remedy the effects of falling and rising prices on debtors and creditors is the so-called multiple or tabular standard. The idea back of this plan is that when a man lends money he parts with a certain quantity of purchasing power, and that when the debt is repaid he should receive as principal the same quantity of purchasing power. It proposes that an official commission shall keep accurate records of the prices of a great many commodities and compute index numbers showing the changes in the price level from time to time. On the basis of these calculations the borrower shall repay in such a way that the lender shall receive the same quantity of goods as he parted with. Thus, for example, if in a given period prices rise, as shown by the official index numbers, from 100 to 110, the debtor who has borrowed $100 should repay $110, for $110 is worth in goods only what $100 was worth before. If the index number falls from 100 to 90 the debtor should pay back $90 for the $100 borrowed. Thus, in theory at least, the debtor would return the same income in goods as he received and the creditor would receive in payment an amount of consumable goods equivalent in quantity to what he had loaned.

1 Taussig: Principles of Economics, Vol. I, p. 297.

This plan, however, is open to various objections.2 In the first place it is based upon the use of index numbers, which, as we have seen, cannot be depended upon to record with certainty the actual changes in prices. Again, by returning the same amount of goods, the benefit of a rise in prices would accrue wholly to the creditor and those of a fall in prices to the debtor. Furthermore, in the usual plan suggested no account is taken of the relative importance of wages and rents to other expenditures. But the purchasing power of money over human services and goods cannot be correctly stated if compared only with goods. From a practical viewpoint, the tabular standard is defective in that for short-time debts it is not needed, and for long-time obligations it offers no assurance of greater justice between debtor and creditor than where the money standard is used. It is not proposed that the tabular standard should entirely displace the metallic standard, but rather that it should supplement the latter. The multiple standard as the sole standard would reduce exchanges to the general condition of barter, which under modern conditions would be impossible. Such a standard would necessarily include a list of goods with prices quoted in terms of the money standard. It would be necessary, therefore, for the business man to keep his accounts partly in tabular standard units and partly in money units. Under such a system an exact balancing of receipts and expenditures would be difficult if not impossible. Finally, the multiple standard would introduce into all transactions involving deferred payments, an element of uncertainty that would be most confusing. As stated by Professor Taussig: "No man would know when contracting a debt what he would be called on to repay when it became due. He would have to watch each monthly or quarterly report of the index number bureau, and guess in the meanwhile how his affairs would have to be adjusted. It is true that, as things now are, changes in the prices of the particular things which each person buys and sells cause uncertainty. But everyone in business necessarily watches these changes and adapts his doings from day to day to the shifting conditions; indeed, so to watch them is a main part of business. To add to this inevitable cause of uncertainty an other from unpredictable changes in index numbers would make all industrial operations irregular and halting." 1

1 For a full treatment of these proposals, see Laughlin: Principles of Money, Ch. III; also. Kinley: Money, Ch. XIII..

2 Fisher: Purchasing Power of Money, pp. 335-336; see also, "Objections to a Monetary Standard," American Economic Review, March, 1913, pp, 1.19.

Many other standards of deferred payments have been proposed, for example, the wheat, labor, and utility stand ards, but none of these offers any hope of supplying an ideal standard. Indeed, an invariable standard is neither possible nor desirable. As pointed out by Professor Kin-ley, the demand for any standard commodity to be used in making payments is one of the causes of its value, and this demand is constantly changing. Moreover, even if an invariable standard could be found by means of which changes in the general price level could be measured and adjusted, it could not do the same for changes in the prices of particular goods, for one article may rise in price and another fall or remain stationary while the general price level is declining, and it is in the prices of particular articles that debtors and creditors are interested. Furthermore, an invariable standard is not desirable because "it would throw the benefits of industrial progress into the hands of the owners and producers of goods-, whereas a perfect standard should distribute these benefits among the different classes of society."1

1 Taussig: Principles of Economics, Vol. I, p. 302.

It is now generally agreed that a perfectly just standard of deferred payments is not possible of attainment. All that can be expected is the nearest practicable approach to justice between debtor and creditor classes. Despite its defects the gold standard which has been adopted by all the great commercial nations of the world seems to involve the least injustice to both. The disadvantages of the gold standard are far outweighed by its advantages, and though its advantages sometimes inure to the benefit of debtors and sometimes to the benefit of creditors, yet it brings comparative stability to prices and a large measure of justice to all classes. It is not likely soon to be superseded by any other standard.