370 THE (QUESTIONS OF THE DAY. 



ascertain the c^uajitities used of each, and the prices paid, it is 

 possible to take a large number, and of many to determine the 

 approximate amounts used, and the current prices for a long 

 series of years; and this has been done. As the aggregate 

 sums each year, however, would be unwieldy and inconven- 

 ient, quite impossible to remember, and difficult to compare, 

 the aggregate of the first year is usually taken as one hundred, 

 and those for the succeeding years at the proper percentage 

 over or under one hundred, as the case may be.* These 

 numbers are called "index numbers," and are taken by 

 economists the world over as the standards by which to com- 

 pare money. No one pretends that they are perfect standards, 

 but only that they are the best we have. They are imperfect 

 as standards to measure money by, not only by reason of 

 imperfections in their construction, but because prices are 



* The method of constructing the index tables is very simple, the difficulty 

 lying in the selection of proper articles, giving each its due weight in the 

 table, and in the labor of ascertaining the current prices. Disregarding all 

 niceties of construction, and not attempting to quote actual prices, let us 

 suppose that we were constructing an index table, beginning with the year 

 1880, and that the average prices of five commodities for three years were as 

 follows, the same quantity of each commodity being taken in each year; — 



1880 1881 1882 



100 bushels wheat $90.00 $100.00 $75.00 



100 pounds beef. 8.00 6.00 5.00 



100 yards sheeting 12.00 9.00 10.00 



100 gals, olive-oil 100.00 125.00 115.00 



1 ton pig iron 30.00 20.00 25.00 



Total $240.00 $260.00 |230.00 



Average 48.00 52.00 46.00 



Index numbers 100.00 108.00 96.00 



It is evident in this case that the commodities which, in 1880, could be 

 bought for $240, would cost $260 in 1881, and $230 in 1882. If for conven- 

 ience we take 100 to represent the price in 1880, as an index number, com- 

 putation by the "rule of three " will give 108, and 96 as the index numbers for 

 the two following years. The (-peration is, disregarding fractions, 

 240 : 260 : : 100 : 108 



All index tables are compiled in a similar manner, a larger number of 

 articles being taken, with care to obtain correct prices. 



