So far there should be no room for difference of opinion. The error often made by careless adherents of the Quantity Theory, which may partly explain why it is not universally accepted, is as follows. Every one admits that the habits of the public in the use of money and of banking facilities and the practices of the banks in respect of their reserves change from time to time as the result of obvious developments. These habits and practices are a reflection of changes in economic and social organisation. But the Theory has often been expounded on the further assumption that a _mere_ change in the quantity of the currency cannot affect _k_, _r_, and _k´_,--that is to say, in mathematical parlance, that _n_ is an _independent variable_ in relation to these quantities. It would follow from this that an arbitrary doubling of _n_, since this in itself is assumed not to affect _k_, _r_, and _k´_, must have the effect of raising _p_ to double what it would have been otherwise. The Quantity Theory is often stated in this, or a similar, form. Now “in the long run” this is probably true. If, after the American Civil War, the American dollar had been stabilised and defined by law at 10 per cent below its present value, it would be safe to assume that _n_ and _p_ would now be just 10 per cent greater than they actually are and that the present values of _k_, _r_, and _k´_ would be entirely unaffected. But this _long run_ is a misleading guide to current affairs. _In the long run_ we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again. In actual experience, a change of n is liable to have a reaction both on _k_ and _k´_ and on _r_. It will be enough to give a few typical instances. Before the war (and indeed since) there was a considerable element of what was conventional and arbitrary in the reserve policy of the banks, but especially in the policy of the State Banks towards their gold reserves. These reserves were kept for show rather than for use, and their amount was not the result of close reasoning. There was a decided tendency on the part of these banks between 1900 and 1914 to bottle up gold when it flowed towards them and to part with it reluctantly when the tide was flowing the other way. Consequently, when gold became relatively abundant they tended to hoard what came their way and to raise the proportion of the reserves, with the result that the increased output of South African gold was absorbed with less effect on the price level than would have been the case if an increase of _n_ had been totally without reaction on the value of _r_.