Nicholson is correct, however, in looking to the standard of value for part of the explanation of changes in prices. And, _since it so happens_ that a considerable part of the value of the standard of value comes from its employment as medium of exchange and reserve, he is correct in looking to its use as money as part of the explanation of its value. His error comes, however, in failing to see that independent changes in the values of goods may also change the price-level, and that variations in the demand for gold as a commodity may also change the value of gold, and so change the price-level. Further, in so far as Nicholson clings to the notion of prices as depending on a mechanical equilibration of physical quantities, he is subject to the criticisms given before of the general quantity theory, and in so far as he clings to the identity of the value of gold with the reciprocal of the price-level,--the relative conception of value--he is subject to the criticisms already urged. Again, even for a single country, the connection between volume of reserves and volume of credit is very loose and shifting. A thousand factors besides volume of standard money in a country determine the expansions and contractions of credit, and the long run average of credit. For the whole world, this connection is even looser. To assume a fixed ratio between them for the whole world, one would have to assume that all the world was simultaneously, and normally, straining its possibility of credit expansion to the utmost, so that the minimum ratio--a notion which is far from precise[371]--should also be the normal maximum, and so that no country, in expanding its credit, could draw in new reserves from other countries which had more quiescent business conditions. Nicholson's notion of the world price-level, moreover, is subject to the criticisms I have made in the chapter on "The Quantity Theory and International Gold Movements." How can the world level have a close connection with the volume of gold, if different elements in the world price-level, the price-levels of different countries, can vary so widely and divergently as compared with one another? Even granting--which I do not grant, and which I maintain I have disproved--that the price-level in one country has a close connection with its stock of gold, would it not be true that the average price-level for the world would vary greatly, with the same world stock of gold, depending on which countries had the gold? There is nothing in Nicholson's doctrine which seems to me to justify in any degree the doctrine that prices, in a single country, or in the world at large, show any tendency to _proportional_ variation with the quantity of money, or with the world's stock of gold.