The United States will be confronted for many years by competition resulting from the obligations that have been imposed upon the people in Europe. This will mean lower wages, lower production costs, and lower prices for goods in Europe—prices lower than even before the war. We shall face this with an impairment in our own position tending in the same direction. On the other hand Europe's poverty will contract the outlet for our export goods. To meet Europe’s competition and maintain our scale of living at even the pre-war scale the United States must improve its industrial organization, advance its processes, eliminate wastes, and above all other things must work harder. Two years ago, the opinion among economists that wages and prices would decline somewhat but would remain permanently at a higher level than before the war was rather general. Only a few foresaw that prices and wages would probably fall not only to pre-war levels, but perhaps to lower. Subsequent events have effectively discredited the former view and upheld the latter. The hypothesis that prices and wages would remain upon a permanently higher level that was entertained so generally during 1919 and the first half of 1920, which has now been dismissed by all except the ingrained theoreticians, was founded in scientific analysis upon the quantity theory of money. For the economist who believed in the quantity theory the high prices were fully explained by the outstanding volume of money and credit and there was no need to study conditions any further. Therefore scientific investigation was checked. There are many things wrong with the quantity theory, but it was an idea that appealed to many business men and financiers,
