96

A TEEATISE ON MONEY

BK. H

objects is the most economical means of attainingthe purpose. The first of these reasons we mayclassify as a change in tastes, the second as a changein environment, and the third as a change in relativeprices. For these reasons every change in the dis-tribution of real incomes or in habits and education,every change in climate and national customs, andevery change in relative prices and in the characterand qualities of the goods offering for purchase, willaffect in some degree the character of average ex-penditure.

The problem of how we are to compare purchasingpowers when the character of consumption has changedis one of great difficulty. It has proved a stumbling-block in the way of a clear treatment of the wholesubject of Purchasing Power. But the confusionwhich has enveloped its discussion hitherto has beenmainly due, I think, to a failure to be clear as to exactlywhat we mean by a comparison of the PurchasingPower of Money for communities differently situatedin time or place, the character of whose expenditureis not identical.

In the first place, we do not mean by PurchasingPower the command of money over quantities ofutility. If two men both spend their incomes onbread and both pay the same price for it, the purchas-ing power of money is not greater to the one than tothe other merely because the former is hungrier orpoorer than the latter. The purchasing power ofmoney is not different to two individuals with equalincomes because one has greater powers of enjoymentthan the other. A redistribution of money-incomeswhich has the effect of increasing the aggregate ofutility does not in itself affect the purchasing powerof money. In short, comparisons of Purchasing Powermean comparisons of the command of money over twocollections of commodities which are in some sense“ equivalent ” to one another, and not over quantities