Reconstruction of Henry George -- The Sequel

Teaching Economics as a Science

Harry Pollard

PART ONE: INTRODUCTION

International, 1973

In 1973, at the International Conference of the International Union for Land Value Taxation and Free Trade on the Isle of Man, I reported on the Inter-Student High School Program, pointing out that the courses that we had used for decades for adult instruction showed weaknesses which made them unsuitable for use with young minds. This made necessary heavy revision of 'the School course', both in teaching style and in content. During this reappraisal, we found ourselves in conflict with some of the arguments of Henry George. In most instances, the differences were minor and were essentially extensions, not pursued by him, of George's arguments. Some other disagreements were not so minor yet they in no way rebutted, or changed, Henry George's thesis that our advance must always be toward his twin goals of liberty and justice for all.

Some Georgists did not welcome these points of view. Perhaps most contentious was the assertion that all taxes come out of Rent. Some friends thought this was anti-Georgist, yet over the years the storm has died, and the heresy appears now to be accepted.

We found George read very well in the modern setting. Little that he had said a century ago needed amendment; His analysis remained as cogent and contemporary as anything offered by the latest crop of economic writers. In fact, seldom does one nowadays meet the profundity one encounters constantly in the works of Henry George.

The new adult course was based on the improved secondary course, but contains further revisions and extensions. Some of them are presented in this paper. As we developed our thinking, we did not confine ourselves to a particular book. All of George's books and his total philosophy became the raw material from which we built the successful adult courses we present under the name of 'The Classical Analysis'.

What follows in this paper is a discussion of some of the changes and extensions to our basic teachings.

PART TWO: THE STUDY

The Subject

Political economy is a behavioral study of social Man. The term political refers to 'social' and the term economy means 'organization', which makes Political Economy 'the science of social organization'. It has been called the 'science of the natural social order' and has been described very specifically as the 'art and science which deals with the production and distribution of wealth'.

Art and science are not the same. Art is synonymous with 'skill'; science is another name for 'knowledge'. While science is the search for knowledge, art is the process of using scientific findings effectively. Scientific analysis may expose a market problem in the allocation of natural resources, but using a 'land value-tax' to solve the problem is skillful, or artful -- not necessarily scientific.

Political economy is a science of production, not of consumption. This science stops when production reaches the consumer -- where, in fact, production is finished. Also, not part of the study are those who service the consumer, or his products. Such people may satisfy desires and maintain existing production, but they don't produce wealth.

This removal of the service economy from examination is not a cavalier gesture. It is made necessary by th9 natural boundaries of the science.

The Path of Inquiry

The objective of scientific inquiry is the confirmation of consequences and particularly to uncover 'invariable consequences' (consequences that repeat). 'Consequences' is one of a connected set of concepts which make facilitate analysis. Henry George discussed the first three. We can extend his arguments.

• A sequence is a name given to two happenings that occur one after another.
• consequence is the second of two happenings when it is the result of the first.

• A Natural Law is the name given to a consequence that is seen always to repeat -- the 'invariable consequence'. Perhaps the best description of Natural Law is that it is a recognition of experience.
• A rule is a homely guide to sensible action based on Natural Law. 'Slow down when driving around a corner' is a useful rule even if the Natural Law on which it is based isn't known.
• A law is a formal statement of a rule, with a penalty added for non-compliance. Individuals within a community accept contractually laws and their penalties -- because they make sense. Laws help to reduce the impact of poor choice and temporary irrationality. A good law will be both sensible and just (apply equally to everyone). A law which is perceived as silly or inappropriate is simply avoided or ignored by the populace.
• A privilege is a private law (privi-lege). Its purpose is to benefit one at the expense of another. It is coercive, but is usually not identified by those who are disadvantaged. When privilege is recognised, it is resented (except by the recipient). Unfortunately, people see little distinction between law and privilege and a proper resentment of privilege develops into opposition to all legislation. Then laws -- useful lubricants to smooth the advance of civilization -- become suspect, unwelcome and ineffective.

Law and Privilege

This set of related concepts deserves comment. Societal 'rules' may be called 'implicit contracts', or 'understandings'. You do not expect a person walking toward you on the sidewalk to beat you up. Implicit contract is the real social contract. It's enforcement exists only in the minds of those who practise it.

"Laws' are explicit and contractual -- the result of voluntary agreement. One hopes that their formality might reduce the ambiguity that may attend social understandings. The intent of law should be to provide the stability that helps a civilization to endure.

Not so 'privilege' which implies a coercive obligation.

George introduced the concept of obligation and noted that values can be derived from obligation. He erred not in this, but in his treatment of obligation.

There are two similar conditions of value creation. One -- value from obligation -- is created by a credit situation. If I owe you a week's work, but you don't want it yet, I might well give you a receipt entitling the possessor to one week of my work. The receipt will be valuable (I think) and could be sold to another. This is a market credit transaction. "I'lI pay you later". In similar fashion, a mortgage imposes an obligation to pay -- which may be bought and sold. Yet it is a simple market contract.

A 'value from privilege' is NOT a market transaction. It is a coercive law which transfers wealth at the barrel of a gun. Analogous to Zen's 'one-handed clap' -- a privilege is a "one-way exchange'. The ability to take without payment is valuable to the possessor, but should not be linked to non-coercive 'values from obligation'. Unfortunately, the overwhelming majority of modern legisation is privilege.

PART THREE: THE BASICS

Basic Assumptions

This study of Man begins with two assumptions of human behavior. The first assumption points to Man's direction; the second describes how he got there.

The first is simply that:

People's desires are unlimited.

The second is:

People seek to satisfy their desires with the least exertion.

This antipathy to exertion confirms the conclusion that the consumer is not important to our study. A producer will not exert if his production is not desired. Thus, the fact of production indicates desire for it. A consumer is a 'given'.

The desires of Mankind take a multitude of forms. We may easily pick 'survival' as the most reasonable primary desire. This thought can be extended to suggest that Man has a general desire for personal advantage along with an equivalent aversion to disadvantage.

We should also note the effectiveness of Man's reasoning ability. Man may choose -- something denied other animals. This ability to deny his instinctual conditioning leads to the conclusion that his choices must have been pretty good -- or he would not have survived.

PART FOUR: TURNING CONCEPTS INTO USEFUL TERMS

Concepts

It should be noted that a word is never defined. Rather, the concept is defined -- which means putting a fence around it. Within the fence is the concept, outside is everything else. The defined concept is then given a name.

The strength of George's analysis springs from a brilliantly conceived set of defined concepts. They were not new with George -- but he swept aside ambiguities and created a superb foundation for thinking. It seems almost sacrilegious to meddle with them, but that had to be done. Very simply, we have used everyday words to name the broad concepts and specific terms to name the essence of the concepts.

To accomplish his desires Man does things. To aid analysis of this behavior it is necessary to cut the universe into chewable bite-sized chunks. The classical direction was to place everything into three natural concept classifications.

We arrive at the three by using our imagination to remove people and their products from the universe. When we and ours are gone, left will be something we can call 'Natural Resources'.

Then, we can bring humanity back and call this huge agglomeration of characteristics and behaviors 'People'.

... Who, brimful with desire, satisfy them by getting to work on Natural Resources. The material result -- the products of exertion -- but neither natural resources, nor people -- we'll call 'Product'.

So we have:

PEOPLE - the complete 'package' called human beings;

NATURAL RESOURCES - everything except People and their products;

PRODUCTS - the material result of People acting on Natural Resources.

These three broad classifications cover everything in the universe -- even God. Further, the classes are mutually exclusive. Something in one class cannot be in another -- a vital requirement for proper classification.

Removing the Less Essential

Broad concepts are interesting, but not too useful.

People come in an assortment of sizes, shapes an colors -- and at least two sexes. Natural Resources run the gamut -- from the bald eagle to the electric-magnetic spectrum. And Products are anything that can be invented by the creative human imagination.

This is too much to grasp, so we must seek ways t reduce our groupings to manageable proportions. This we can do in several ways without lessening the integrity of the classifications.

• This is a social science. Anything not a part of the market process may be omitted. An apple picked and eaten by the same person is not part of a social science. Food produced for home consumption by a farm family, paintings by an amateur for his own wall are not part of the science. Anything not exchanged may be stricken from our agenda.
• Non-essentials may be removed. These are items that fit into the concepts, but which aren't significant to our analysis. Mud pies and sand castles may be the 'material products' of people, but they are hardly significant. We walk across a meadow and produce crushed grass, but who cares about that product? To avoid the less consequential we'll simply dismiss a products without market exchange-value. If it has no market value, we'll exclude it from our analysis. We can also remove from the study work that goes into products worth nothing.
• Production will not take place without consumer. People will not work without reward. Ergo, if there is production, there must be a consumer (either another person, or the producer himself). The consumer is a 'given' and may conveniently be remove from our study of production. This is not to say he isn't important, but merely that he isn't needed for our analysis.

Consumer-related services can be removed from the study along with the consumer.

Not, however, pseudo-services -- the statistical 'services' which are actually part of the productive process. The supermarket cashier is part of production -- as is the trucker and the factory nurse. Sony can put together a VCR, but most of the production -- and value increase -- takes place between the factory and if consumer. Most of the income goes to people who carry, sell and deliver the VCR to the consumer. All of them are producers -- but NOT the man who services the machine at a later date.

PART FIVE: EXERTION, TIME, AND A PLACE TO STAND

Abstracting the Essence

We can further simplify the defined concepts. We began with People, Natural Resources and Products -- broad classes with an infinite variety of members. We can reduce the complexity by seeking and using a characteristic common to every member of a class.

People

The skills, qualities, abilities, deficiencies, and hidden desires that make the human package, manifest themselves in external action. How a person exerts and to what end, is a reflection of his mental and physical make-up. We need no profound examination of psychological condition, or mental and physical abilities. Instead, conclusions may be inferred from what a person does and why he is rewarded. Immediately, we see that rewards are linked to his exertion in production.

The characteristic common to all people is exertion and we'll give to this defined concept, human exertion, the name LABOR.

Natural Resources

The characteristic common to all natural resources is location. Indeed, the first thing we add to any practical treatment of natural resources is an address. To make useful a natural resource, we must locate it. In fact, the more precisely we locate a natural resource, the more valuable it is to us.

Natural Resources is a defined concept for everything in the universe except humans and their product, which is interesting, but not too useful. More pertinent and practical are the natural resource addresses, Times Square, the ozone layer, Piccadilly Circus, Yosemite, 1024 Acacia Avenue, Channel 2 -- and even 4pm, Wednesday (think about 4pm, Wednesday).

The Classical Analysts -- the group of 18th and 19th century philosopher/economists who put together the science of political economy -- used the term LAND for Natural Resources. We shall use the term LAND for location -- the characteristic common to all natural resources.

Products

When exertion (LABOR) applied at a location (LAND) produces a material result which is satisfying a consumer desire, it is called WEALTH. If the product (concept) has market value and is in the hands of the consumer (definition) it is given the name WEALTH.

Capital

Some products are not in the hands of the consumer They are still in the process of production. A product not in the hands of the consumer is not Wealth. Neither is it Land, nor Labor. We need a fourth defined concept to cover products not yet Wealth.

When an apple is picked and eaten, producer and consumer are the same person. When appleseeds are planted there will be no consumption until the trees grow and apples are harvested. The growing orchard is certainly a product -- but it doesn't directly satisfy a desire.

Between the investment of exertion and the satisfying of desire is an interval of time. Yet, people like to satisfy their desires quickly. In fact, they will demand compensation if they must await satisfaction.

Products left in production are infinitely diverse ranging from a hammer to a racehorse stud, from a farm cow to a word processor, from a supermarket cart to a 747 jet. The characteristic common to all products left in production (rather than directly satisfying desires) is time.

All these products represent a delay of satisfaction -- a time delay. Between investment of exertion and return of product, there is a period of time. If we are to postpone receiving the result of exertion, we will demand compensation for the time we go without.

Products in production are called CAPITAL and the characteristic common to them all is Time.

In summary, the names and defined concepts we shall use (called the Factors of Production) are:

LABOR -- human exertion engaged in the production of Wealth;

LAND -- the location of production;

CAPITAL -- material products during the time they are kept from the consumer;

… and their result:

WEALTH -- material products possessing exchange value which have reached the consumer.

Returns and Rewards

The market decides the value of production. This value returns to the Factors of Production as reward for their participation. The part of production that returns to Labor for exertion is called WAGES; the part that returns to Capital for time is called INTEREST; the part that returns to Land for location is called RENT. These three rewards make up the final product, WEALTH.

So, the picture is that the three factors produce WEALTH which returns to the factors as rewards --which is why they are involved with production.

E.C. Harwood described these three returns as 'form-value', 'time-value', and 'space-value'.

Rent and Land-Value

At this point an important caveat. George did not make clear that the return to land in modern conditions is not Rent. Wages, Interest and Rent are market determined returns. Present land return is not Rent, but (Rent + premium). The action of the present land market does not parallel those of Labor and Capital.

The process of the market the 'price-mechanism' does not work with Land. Necessary to the price mechanism's proper action is unrestricted production and unrestricted mobility. Response to a price rise is a rush of new goods, or people, to market. Land cannot rush to market. The market for a location is at the location and there it is unique. Thus, the value of land is not the result of price-mechanism pressure.

Arranging for Land to obey the pressure of the price-mechanism is a simple matter. We simply collect Rent -- perhaps the only reason for doing so! Without Rent collection, land is sheltered from market pressure, which requires a separate name for its value.

So, in the present economy, the annual return Land is not Rent, but Land-Value which capitalizes into 'sale-price'.

We must devote much effort to describing this basic language, because it is the most important part of the study. Once these defined concepts are named, understood and used, many problems of modern society swim comfortably into focus and may be addressed.

PART SIX: VALUE -- OBJECTIVE AND SUBJECTIVE

Two Kinds of Value

Value is the same as worth. Something that is worth more to you is more valuable to you. As you wish to increase your desire satisfactions, anything which al-lows you to do this is 'valuable'. You prefer to have something of higher value, rather than something of lower value. Apreference indicates you value one thing more than another.

Note, however, that value and price are not the same. Price is value in terms of a standard (such as money).

We can view the world only subjectively. So any emphasis of the subjective aspect of value is unnecessary. However, when several of us see the same value, we may regard this as an 'objective' value. This objective value is seen in the market and is the market clearing price. This is the price in the market that 'clears the shelves' -- the highest price that will optimize throughput. This defined concept seems little taught these days, which is a pity as it so excellently describes a market process.

George called subjective value 'personal value' and so shall we. Personal values are difficult, or impossible, to ascertain. We can be unreliably told a personal value, or we can more reliably find a clue to personal value through behavior. When an exchange takes place, we have evidence that both traders preferred (valued) the thing they got to the thing they gave. Bu we know no more than that.

One of the more famous and continuing debates in political economy concerned 'use value' and 'market value'. Use value is simply 'usefulness to you', or 'personal value'.

Market Value

Market value arises from the confluence of subjective valuations and can be considered objective. As Marx saw, market value and exertion are related. But he missed the point. Exertion is a consequence of market value, rather than the reverse. If a product can expect a worthwhile market value, exertion may be invested in its manufacture.

Things that take much skill and ability to produce will not be manufactured unless their market value is likely to be high. Products in the market take station, with their positions in the hierarchy directly related to their difficulty of production.

I Once products have taken station in the market, the price mechanism acts normally to maintain their position relative to other products in their stations.

The combination of high prices and production difficulty means such goods are not plentiful. Thus, a third condition, rarity, becomes the natural companion of production difficulty and high prices.

We should not use the term 'scarcity' in political economy. (They can -- and will -- in economics.) There is no such thing as scarcity in a market economy. Goods adopt prices that make them always available. There may be a 'scarcity' of Rolls-Royces at $5. There will be no scarcity at $300,000.

In the market, the Rolls will assume a market-clearing price which balances supply and demand. In a non-market situation, scarcity is always a friendly neighbor, for science is abandoned in favor of coercive whimsicality.

Price Mechanism

When demand increases, prices rise which draws supplies to market, and prices drop. This is price mechanism action. Essential to its effectiveness is an available supply of goods which, in response to rising prices, can get to market.

Should production be restricted, or goods kept from market, the price mechanism cannot work. When goods fall to respond to the urgencies of the price rise, the price mechanism tries harder by sending prices still higher. This phenomenon of rising market price for difficult to produce goods has led to a pseudo-market for 'collectibles'.

Collectibles

When a production run is finished, no more can easily be made. This is true of a properly unique production, such as the Mona Lisa (although there are 6 authenticated original Mona Lisas), and of a contrived uniqueness, such as a limited edition, or first cover. It even applies to a simple product that has little value other than uniqueness, such as a Rosalie Beer can -- worth more than $10,000.

Such things are not merely difficult to produce, they are impossible. (To make one Rosalie Beer can would be tremendously expensive, to produce 10,000 would make production pointless.)

When market demand for one of these items is felt, the price mechanism increases its price. But, no more are forthcoming, so the price rises further. The items have become 'collectibles' -- things which are coveted not because they satisfy desires directly, but because one may become wealthy merely by holding them.

Anticipated Future Value

As was mentioned, an exchange is made when each trader believes market value exceeds the personal value of his product.

In contrary fashion, if either trader considers personal value of his product to be greater than market, he will not trade.

A person with a collectible thinks not of its present market value, but of its future value, which he expects to be higher. This 'anticipated future value' is his personal value. As this 'anticipated future value' is a personal value greater than present market value, it will not be traded.

Collectibles need not be unique. I may possess a rare coin which is one of several hundred in existence. The relationship of 'present market' to 'future anticipated' will still hold, even though other collectors may regularly trade their coins.

If present market value rises to my personal value it is likely that instead of selling at market, I will adjust my personal value to another higher anticipated future value -- and not sell.

Last To Sel1

It is clearly Evident to a holder of collectibles that the one who is last to sell gets the highest price. This is not the action of the normal market. When the widget maker sees a price rise he rushes his widgets to market. The race is to the swift, for the result of his action is to diminish demand. The unfortunate who is late getting to market will get a lower price. When people extoll the virtues of the free market, they are applauding this quick reaction to price change.

Collectibles reverse this process. Collectors gain most by acting last, and their continuing reluctance to trade still further tightens the market. A market where everyone is trying to be last to sell is a peculiar aberration in the smooth flow of the exchange process.

Land-Value

Collectibles don't get in anyone's way, to paraphrase Churchill and it is true that the collectible market is of little interest to non-collectors. Yet, one collectible does pose a problem. This collectible is Land, without which nothing is possible.

In every way Land acts like a collectible. Location is always unique. It cannot be transported elsewhere -- where land-hunger is extreme. More locations cannot be created -- each is unique.

Land is not subject to price mechanism discipline. The market doesn't work with Land.

Land-value rises with the normal growth of activity among an increasing population. A site next year is likely to be worth more than this year. Thus, the personal value of Land you hold will always be brightly painted 'anticipated future value'.

Yet, Land is vital to all production. Unlike the contrived desirability of the beer can, Land is desirable because it is essential to life. Demand, fed by the reluctance of collectors to sell, will continue even to desperation. And the consequential price increases further strengthen each landholder's decision to stay away from the market. So, personal anticipated values increase, the land market noose tightens, prices soar, and paralysis develops.

The annual value that attaches to a site in this situation can hardly be called Rent. It is Rent plus a premium and deserves a name of its own - which will be Land-Value. In current society, this is the value that will be capitalized into a sale-price.

Rent, like Wages and Interest, is a return determined by the price mechanism operating in a free market. In this present unfree market, the cost that attaches to a site is land-value. Assessors and appraisers do not measure Rent -- they measure land-value.

Needless to say, land-values are turned quickly into Rents by use of community rent charges, the effect of which is to make the collecting of land unprofitable. Where 100% of the Rent is collected, the market value of unused land (zero) becomes greater than its negative personal value (cost with no return) and the site changes hands. If the holder can profitably use the site, personal value (use-value) becomes greater than market and it is developed.

PART SEVEN: MONEY AND PURCHASING MEDIA

Chalk and Cheese

Arguments about money usually erupt out of a discussion of value. And immediately, it's clear that precise concept definition is mostly absent. The difficulty is that the term 'Money' tries to stuff within its meaning two different (and conflicting) concepts. One concept is 'measure of value' -- a standard against which other things are measured; the other is 'medium of exchange' -- something used as a convenient buying agent.

That one commodity may, at times, act in both capacities tends to confound attempts to analyze. One struggles to find things that may be used for both functions. This inevitably leads to definition by accounting category, a course that simplifies the work of the statistician, even as it makes all but impossible the task of the political economist.

Properly to tackle the subject of 'Money' demands separation by function of the two entities that are so easily and confusingly combined. So, any standard entity that measures value we shall call Money. Anything that serves as a trading convenience we shall call PM, the short form for Purchasing Medium (PM).

Gold As Money

The history of Money is fascinating in its exposure of man's inventiveness. Most of man's product been used as the measure of value. For one reason or another they have all failed to survive the test market place -- except one. From time to time products have competed for the position, notably but always the market has returned to its first love -- gold.

The choice of gold did not spring from the wild of monetary theorists, nor was it born in the superstitions of ignorant peasants. It was a market decision proven over thousands of years of experience.

The metal is easily recognized. Its value remains somewhat constant, and its uniformity and portability made buying convenient. Gold was a good measure of value and not a had medium for purchasing though its softness made it subject to wear.

Gold earned its position not just as good Money, but as best Money. Therefore, we shall use 'Money' and 'gold' as synonymous terms.

Purchasing Media (PM)

Adam Smith described the butcher with an excess of meat who could not sell it to the brewer or baker for they had nothing he wanted at the moment. Smith underestimated people. The butcher would not let the meat rot. Rather would he give the meat to his customers in return for a promise to pay at a future date.

This promise to pay would certainly be transferable. If the butcher required some work from the black-smith, he might use the 'promise to pay' to purchase the work.

In their modern dress of paper, plastic, or metal, these promises (or PM) have become an indispensable part of commerce. The most obvious peculiarity of PM is that its value is extrinsic. It merely indicates that a promise has been made by someone. Unlike gold, which carries its value with it, the value of PM relies on the validity of the promise. Any contract that may be written or stamped on the 'Medium' will be no better than the word of the issuer.

Advanced Purchasing Media

One would expect that as civilization progresses, means of purchase would simplify, become more effective and cost less. We might expect that the simplest Purchasing Medium would be:

(a) a printed contract form -- 'I promise to pay..';

(b) written in terms of a standard payment unit, so that calculation of a transaction would be easy;

(c) in such a form that quick and easy recognition and certification of authenticity is possible;

(d) portable, stable during the period it is held, easily accepted by traders, and protected against loss;

(e) inexpensive to produce and service.

The implication of the above is that a Purchasing Medium is a material thing that passes from hand to hand in exchange for other material things. A piece of paper in more or less standard form, duly authenticated, would appear to be best Purchasing Medium. This kind of PM is so easy to issue, it is likely that its life will tend to be short, and new PM will be issued as needed.

The issuer of a generally acceptable 'promise to pay' would probably like to keep track of them. Counterfeit promises might be a problem. To keep insurance premiums low, loss protection ought to be as effective as possible.

These conditions have mostly been realized by travellers' checks. These provide an insured medium at very low cost. In fact, many U.S. banks offer them to their customers as a free service.

Inflation

Inflation isn't an economic term at all, rather is it a physical term meaning an increase in volume. The volume of purchasing media (PM) may change in response to the amount of trade with no effect on the economy except to improve it. Banks increase PM as the market needs it. This is how they 'create money', which is highly desirable for it facilitates exchange.

The methods of providing the PM (cash, coins, certified check, money order, charge card slip, or deposit into an account book) do not matter at all -- although these are matters pawed endlessly by monetary theorists. All that's important is traders have been provided with pledges, which conveniently facilitate the market process.

Inflation of PM merely shows that trade is brisk. In advanced societies, where PM accounts for virtually all transactions, total PM changes hourly.

PM As a Measure of Value

Inflation of Money is a different matter entirely.

The stability of a 'measure of value' rests on its quantity relationship with other goods. This is why gold is such an attractive candidate. Much exertion and time must enter into every ounce that reaches the market. Its quantity suffers natural restriction. The problem with gold is that it imposes tight discipline which is unwelcome to governmental money managers. They prefer a more malleable money.

Governments issue PM as a convenience to their peoples. Usually, they are rather ornately printed standard documents. Familiarity and apparent authority leads to their acceptance as Wealth. Thus, normal desire for Wealth is transferred to the common representations of Wealth. In the words of the semanticists, the map has become the territory.

PM is at first wedded to real wealth, but all too soon this marriage of convenience ends in divorce. The PM which is regarded as wealth -- the measure of value-soon becomes a 'money' resting on the bubble integrity of whimsical national policy.

PM is poor money. Printed paper is easy to produce and governments find irresistible the pressure to produce instant 'Wealth' at little cost. Little physical restraint limits the production of official PM. Its volume is likely to increase considerably in relation to other goods. Plentiful official PM drops its market value and more is required to buy the same Wealth.

This general price increase receives a popular name -- inflation. Thus, the term which describes an increase in volume of the 'measure of value' is transferred to an effect of the increase.

PART EIGHT: POSTSCRIPT

Quantity Theory and Velocity

Quantity theory is nowadays referred to as crude, and is mentioned often in somewhat disparaging terms. with the above defined concepts it would seem that Quantity Theory assumes the aspect of a Law.

However, if money is assumed to be a strange mixture including volatile PM, then Quantity Theory has a hard time finding the quantity.

Velocity of Circulation seems also a contrivance of poor defined concepts. A measure of value is something referred to, rather than actively used. If sales increase at Christmas, more PM is created as needed. Extra money isn't needed or created any more than inches are created when construction increases during the summer.

Yet, apparently learned people point out that gold cannot be used as money because there is not enough to support enormous and increasing world trade.

I've not traced any statement from them to the effect that we must stop building roads because we've run out of miles.