We have standardized every other unit in commerce except the most important and universal unit of all, the unit of purchasing power. What business man would consent for a moment to make a contract in terms of yards of cloth or tons of coal, and leave the size of the yard or the ton to chance? … We have standardized even our new units of electricity, the ohm, the kilowatt, the ampere, and the volt. But the dollar is still left to the chances of gold mining [Fisher, 1913].

There is probably no defect in the world’s economic organization today more serious than the fact that we use as our unit of value, not a thing with a fixed value, but a fixed weight of gold with a wildly varying value. In a little less than a half century here in the United States, we have seen our yard-stick of value, namely, the value of a gold dollar, exhibit the following gyrations: from 1879 to 1896 it rose 27%. From 1896 to 1920 it fell 70%. From 1920 to September, 1927, it rose 56%. If, figuratively speaking, we say that the yard-stick of value was thirty-six inches long in 1879 when the United States returned to the gold standard, then it was forty-six inches long in 1896, thirteen and a half inches long in 1920 and is twenty-one inches long today (Professor E. W. Kemmerer at a meeting of the Stable Money Association, December, 1927, quoted in Fisher [1928).

[From Shafir, Diamond, and Tversky’s “Money Illusion” in the May 1997 Quarterly Journal of Economics]