OH. 5 PLURALITY OF SECONDARY PRICE-LEVELS 73

there will generally be some correlation between largechanges in a country’s International Standard andchanges in its Consumption Standard. But there isno justification, even in the long run, for any precise,necessary or immediate relationship between changesin the rate of exchange of the currencies of two coun-tries and the changes in their Consumption Standardsrelatively to one another. To suppose that there isoverlooks the possibility of a change in the Terms ofTrade .

The prestige of the Purchasing Power ParityTheory , as being something more than a truism,has depended, not so much on the somewhat crudetheory underlying it, as on the supposed verificationswhich have followed from applying it to some of themost familiar national index-numbers . 1 But theseapparent verifications are explicable by the fact thatmany of the most old-established wholesale index-numbers are mainly composed of the staple commodi-ties of international trade, for the intelligible reasonthat it is precisely for these commodities that satis-factory price quotations are most easily obtainableover a long series of years. If they were entirelycomposed of such articles, and if the systems ofweighting were the same in each case , 2 the verifica-tions would be as nearly as possible perfect. For thePurchasing Power Parity Theory is true, not only ofan index of the articles which enter into internationaltrade, but also if it is applied to the price of each oneof these articles taken separately, provided allowancebe made for changes in the costs of transport, etc.Since, however, these index-numbers generally include

1 I have given some examples in my Tract on Monetary Reform, pp.99-106.

2 The amount of the error introduced by different systems of weighting,where local wholesale indexes are employed, has been discussed by ProfessorBowley in his International Comparison of Price Changes and his Com-parative Price Index-Numbers for Eleven Principal Countries (London andCambridge Economic Service, Special Memoranda, No. 19, July 1926,and No. 24, July 1927).