[242] New York City can always use idle funds, "at a price."
[243] Kemmerer, as well as Fisher, allows physical production and consumption to dominate his "index" of trade variation. Loc. cit., pp. 130-131; Fisher, loc. cit., p. 479. Cf. our discussion of their statistics, infra.
[244] This confusion of volume of trade and volume of production is a companion of the confusion discussed on p. 307, infra, of quantity of money with volume of money-income. The two confusions, found in virtually all expositions of the quantity theory, give it most of its plausibility.
[245] Loc. cit., ch. 12, and appendix to ch. 12.
[246] Supra, ch. on "Equation of Exchange."
[247] In a letter to the writer, Professor Fisher states that the figures for the physical receipts at the cities, which dominate his index for T, have not been available for recent years, and that since they were discontinued, he has relied chiefly on the indirect calculation of T via the other factors in the equation. These figures were discontinued in 1912. In the American Economic Review for June, 1916 (p. 457, n.) Professor Fisher states that the indirect calculation of T has always had more weight in his figures than the direct calculation. This would serve in some degree to lessen the errors of his index of variation. The extent to which he has allowed his T as directly calculated on the basis of the index to be modified by the indirect calculation, is indicated on p. 302 of the Purchasing Power of Money, as follows: "The alterations in T, as shown in Figure 16, though still greater than the preceding, are nevertheless so small and uniform as to preserve an almost perfect parallelism between the original and the altered curve. The differences rarely exceed 10%." Even an indirect calculation of T, however, would not avoid the criticisms here urged, since the other factors, MV, M´V´, and P are all, as we shall see in the chapter on "Statistical Demonstrations of the Quantity Theory," calculated by methods which give very excessive weight to trade outside New York City and to non-speculative transactions.
[248] Loc. cit., p. 485.
[249] The Use of Credit Instruments in Payments, Senate Document No. 399, 61st Congress, 2nd Session.
[250] This brief account will be amplified for critical discussion in the statistical chapter below. Fisher in fact calculated MV and M´V´ separately. The account above given is strictly accurate only for that part of T, 353 billions, which is carried on by means of checks. The calculation of MV, however, is also based on Kinley's figures. My account here is adequate for the question at issue, which is, not as to the absolute magnitude of trade, but rather, as to the proportions of speculation and other elements in trade.
[251] The substance of the argument here presented first appeared in articles in the Annalist, to which I am indebted for permission to use it here. See the numbers of Feb. 7, March 6, and March 20, 1916. Professor Fisher's replies, directed wholly against the charge of double counting, appeared in the Annalist of Feb. 21 and March 13, 1916. Professor Fisher does not question my contention that speculation makes up the overwhelming bulk of trade, in these replies. He rather seeks to meet the charge of overcounting by holding that bank-transactions do not fully count speculation! This he thinks particularly true of stock exchange transactions. Cf. his article of Feb. 21, 1916.