The second difficulty--the treatment of purchasing power over articles which do not enter into international trade--is still more serious. For, if we restrict ourselves to articles entering into international trade and make exact allowance for transport and tariff costs, we should find that the theory is always in accordance with the facts, with perhaps a short time-lag, the purchasing power parity being never very far from the market rate of exchange. Indeed, it is the whole business of the international merchant to see that this is so; for whenever the rates are temporarily out of parity he is in a position to make a profit by moving goods. The prices of cotton in New York, Liverpool, Havre, Hamburg, Genoa, and Prague, expressed in dollars, sterling, francs, marks, lire, and krone respectively, are never for any length of time much divergent from one another on the basis of the exchange rates actually obtaining in the market, due allowance being made for tariffs and the cost of moving cotton from one centre to another; and the same is true of other articles of international trade, though with an increasing time-lag as we pass to articles which are not standardised or are not handled in organised markets. In fact, the theory, stated thus, is a truism, and as nearly as possible jejune. For this reason practical applications of the theory are not thus restricted. The standard set of commodities selected is not confined to goods which are exported from and imported into the countries under comparison, but is the same set, generally speaking, as is used for compiling index numbers of general purchasing power or of the working-class cost of living. Yet applied in this way--namely, in a comparison of movements of the _general_ index numbers of home prices in two countries with movements in the rates of exchange between their currencies--the theory requires a further assumption for its validity, namely, that in the long run the home prices of the goods and services which do not enter into international trade, move in more or less the same proportions as those which do.[27] [27] “Our calculation of the purchasing power parity rests strictly on the proviso that the rise in prices in the countries concerned has affected all commodities in a like degree. If that proviso is not fulfilled, then the actual exchange rate may deviate from the calculated purchasing power parity.” Cassel, _Money and Foreign Exchange after 1914_, p. 154.