144 REPORT — 1889. 



method is of the same general character as that proposed by the Com- 

 mittee, but more partial and imperfect, as concerned only with a fraction 

 of the national consumption, and that fraction often very indirectly 

 represented. 



A slightly diflFerent conception of the method may be distinguished 

 by an exhaustive casuistry. The measure of the variation in the value 

 of money, which is afforded by the statistics of foreign trade, may be 

 of the species which was defined in the third section of the former 

 Memorandum. This is a standard, adapted indeed to deferred payments, 

 yet for which the items entering into the Index-number ' are not copied 

 from the statistics of national expenditure, but are selected on some other 

 principle.' It is presumed in virtue of the general sympathetic move- 

 ment of prices that the change in value of the articles of national con- 

 sumption is adequately represented by the change of value in certain 

 other articles selected on what may be called a random principle from 

 the whole mass of trade. Whichever of these two slightly distinct views 

 we take, we may perhaps describe the principle of measurement as a qimsi- 

 consumption standard. 



Again, as suggested at the end of the last section, the Index-number 

 based on foreign trade may be regarded as an imperfect Currency 

 Standard of the sort described at the end of last section. It may be, 

 and indeed it has been, asked, What is the use of thus drawing out to an 

 additional degree of tenuity distinctions already somewhat fine-spun ? 

 Referring to the first report of the Committee for a general indication of 

 the bearing which the theory of our subject has on its practice, the writer 

 would observe, with especial reference to the first and second sections of 

 this Memorandum, that the principle connected with the name of Professor 

 Foxwell affords a rationale for an Index-number, which is admitted to be 

 of great practical importance — that based on foreign trade. An equally 

 intelligible explanation of received practice is not afforded by all the first 

 principles which different theorists have proposed. The Capital Standard, 

 for instance, could hardly be regarded as the theoretical basis on which 

 Mr. Giffen's work, or Mr. Bourne's, may be rested. This reference to first 

 principles is by no means otiose. It assists in deciding what differences 

 of method are fundamental, how far our choice may be governed by 

 regard for mere elegance and ease, and we may say of rival methods — 



* Whate'er is best administered is right.' 



Thus it will be maintained that Mr. Bourne's dissent from Mr. Giffen's 

 practice is not justified by first principles. On the other hand, reasons 

 will be given for differing from the opinion which Mr. Giffen seems to 

 entertain, that his second method, set forth in the fourth table of his 

 earlier Reports, is less serviceable than the method to which his first three 

 tables refer.' 



The discussion of the questions raised maybe facilitated by the use of 

 symbols. Let a, b, c, &c., denote the commodities of which we are given 

 the quantities and prices for a series of n years. Let the successive years 

 be designated by the numerals 1, 2, 3, &c. Let g„, be the quantity (im- 

 ported or exported) of the commodity a in the year 1 ; q,,^ the quantity 

 of commodity b in the same year, and so on. And let q^2j q,^,,, &c., 

 represent the quantities in the year 2, and so on. The absolute magni- 



» Pari. Papers, 1878-9, C. 2247, p. 4, par. 4. 



