ESSAYS IN PERSUASION

PART

I96

nected, for example, with the discovery of newgold mines in foreign countries or a changeof banking policy abroad. But we submitted,partly because we did not dare trust ourselvesto a less automatic (though more reasoned)policy, and partly because the price fluctuationsexperienced were in fact moderate. Neverthe-less, there were powerful advocates of the otherchoice. In particular, the proposals of Pro-fessor Irving Fisher for a Compensated Dollar,amounted, unless all countries adopted the sameplan, to putting into practice a preference forstability of internal price level over stability ofexternal exchange.

The right choice is not necessarily the samefor all countries. It must partly depend on therelative importance of foreign trade in theeconomic life of the country. Nevertheless,there does seem to be in almost every case apresumption in favour of the stability of prices,if only it can be achieved. Stability of exchangeis in the nature of a convenience which adds tothe efficiency and prosperity of those who areengaged in foreign trade. Stability of prices,on the other hand, is profoundly important forthe avoidance of the various evils describedabove. Contracts and business expectations,which presume a stable exchange, must be farfewer, even in a trading country such as Eng-land, than those which presume a stable levelof internal prices. The main argument to thecontrary seems to be that exchange stability isan easier aim to attain, since it only requires