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By Root 1289 0

are induced by the commodity transactions; that they constitute an auxiliary movement, which proceeds only so far as is necessary to permit the completion of the principal movement. But the international movement of commodities, Wieser declares, is even nowadays noticeably small in comparison with domestic trade. The transmitted national equilibrium of prices is broken through for relatively few commodities whose prices are world prices. Consequently, the transmitted value of money is still for the most part as significant as ever. It will not be otherwise until, in place of the national organization of production and labor which still prevails today, a complete world organization has been established; but it will be a long while before this happens. At present the chief factor of production, labor, is still subject to national limitations everywhere; a nation adopts foreign advances in technique and organization only to the degree permitted by its national characteristics, and, in general, does not very easily avail itself of opportunities of work abroad, whereas within the nation entrepreneurs and wage laborers move about to a considerable extent. Consequently, wages everywhere retain the national level at which they have been historically determined, and thus the most important element in costs remains nationally determined at this historical level; and the same is true of most other cost elements. On the whole, the transmitted value of money forms the basis of further social calculations of costs and values. Meanwhile, the international contacts are not yet strong enough to raise national methods of production on to a single world level and to efface the differences in the transmitted national exchange values of money. [3]

It is hardly possible to agree with these arguments, which smack a little too much of the cost-of-production theory of value and are certainly not to be reconciled with the principles of the subjective theory. Nobody would wish to dispute the fact that costs of production differ greatly from one another in different localities. But it must be denied that this exercises an influence on the price of commodities and on the purchasing power of money. The contrary follows too clearly from the principles of the theory of prices, and is too clearly demonstrated day by day in the market, to need any special proof in addition. The consumer who seeks the cheapest supply and the producer who seeks the most paying sale concur in the endeavor to liberate prices from the limitations of the local market. Intending buyers do not bother much about the national costs of production when those abroad are lower (And because this is so, the producer working with higher costs of production calls for protective duties.) That differences in the wages of labor in different countries are unable to influence the price levels of commodities is best shown by the circumstance that even the countries with high levels of wages are able to supply the markets of the countries with low levels of wages. Local differences in the prices of commodities whose natures are technologically identical are to be explained on the one hand by differences in the cost of preparing them for consumption (expenses of transport, cost of retailing, etc.) and on the other hand by the physical and legal obstacles that restrict the mobility of commodities and human beings.

3 Alleged Local Differences in the Cost of Living

There is a certain connection between the assertion of local differences in the purchasing power of money and the widespread belief in local differences in the cost of living. It is supposed to be possible "to live" more cheaply in some places than in others. It might be supposed that both statements come to the same thing, and that it makes no difference whether we say that the Austrian crown was "worth" less in 1913 than the eighty-five pfennigs which corresponded to its gold value, or that "living" was dearer in Austria than in Germany. But this is not correct. The two propositions are by no means identical. The opinion that living