oh. i 4 ALTEENATIYE QUANTITY EQUATIONS 235

Trade. Hence the standard version of the formulaP 2 . T = M . V. 1

The great advantage of this formula is the fact thatone side of it, namely M . Y, fits in better than mostwith the actually available banking statistics. Forquantitative inquiries it is possible, therefore, to makemore progress with this formula than with any other.M . V corresponds, more or less, to the volume ofBank Clearings 2 and M to the volume of Deposits ;for both of which figures are available, so that thevalue of Y can be deduced.

Its weakness, on the other hand, is to be found inthe other side of it, namely P 2 . T. For neither P 2nor T corresponds to the quantities in which we arelikely to be interested for their own sakes. P 2 is notthe Purchasing Power of Money and T is not theVolume of Output. Professor Fisher has not, indeed,been oblivious to these defects, but he has not, Ithink, rated them as high as he should. Nor do theapproximations which he has employed for theirevaluation command confidence. For example hetried to arrive at P 2 by combining the WholesaleStandard, the Wages Standard, and an index offorty stocks, giving a weight of 30 to the first, of 1to the second and of 3 to the third. This, of course,

1 If we choose to distinguish between M the volume of cash in circulationand M' the volume of bank-deposits, V and V' being their respectivevelooities of circulation, we reach the formula

P 2 .T = M.V + M'. V'.

2 There is a slight ambiguity about the meaning of the expression BankClearings according to whether it includes internal clearings within a bankor only clearings, which pass through the clearing house, between differentbanks. For the purposes of this argument it is necessary that BankClearings should be interpreted in the wider sense. But in Great Britain our statistics have related hitherto only to the narrower sense, though theEnglish Clearing Banks have now agreed to publish the aggregate of theirdebits as well as of their clearings, beginning with January 1930. In theUnited States , where statistics have been available (in recent years) for thevolume of clearings in both senses, a separate terminology has been adopted,the expression Bank Clearings being used for the narrower sense only andthe expression Bank Debits for the wider sense.