Evening star. [volume] (Washington, D.C.) 1854-1972, 1915-10-17

eOSe, the government Is attacking PROP
lens of almost every
Index Number kind in most fields OF
nI endeavor, and In addi-
1ooAene' ton to pushing for
ward into new fields now and then
strips the unintelligible husks from
some old problem that the average man
has given up as hopeless. and shows II
to be after all simple matter. A serv-
ice of this kind has just been performe ed
by the bureau of labor statistics of the
Department of Labor. which has ex-
planned the cryptic index number in
such language that few can fail to un-
derstand it.
Notwithstanding the fact that men,
tion OF index numbers Is encountered
many times a week by the general
reader. probably the number of per-
sons who understand just what they
are, how they are constructed and Just
what function they serve is fewer than
the number who understand the pre-
cession of the equinoxes. AS a matter
OF fact, the governments exposition
shows. index numbers are merely an
Intangible scale to measure intangible
price levels. as river gauges are tangi-
BILE scales to measure rising and falling
water levels; and the construction OF
the one, 1t is shown. is little more diff
cult to understand than that Of the
other.
To illustrate at once the purpose of
index numbers and simple form OF
volume. recalls how the great flow of
gold and silver to Europe after the dis
covery of America demoralized old
world prices. and how an Italian econo-
the effects had been on Italian high
cost of living" of the day, evolved the
first index number. Seeing that prices
Of different commodities had been at
a. g..
tility of citing special cases. He solved
the problem Of measuring more or less
general price rises by taking the prices
for 1850 of three staples-grain. wine
had risen over Its price in 1900. and
then merely adding the percentages and
dividing by three, thus averaging them.
The result. which showed the average
since the approximate discovery Of
America. was the first index number
Of which there is any record.
Since the discovery of the yard stick
Of prices" in 1850, the technique of in
dex numbers has been evolved with
broadening of markets. a growing ac-
curacy in social statistics and a more
intimate welding Of world interests,
and is now more complex than the sim
pie average Of Carli In final analyses,
however, his basic methods are still fol-
lowed in the construction Of most Of
the present indexes.
One Of the changes that has come
about Is the inclusion Of the prices of
many more than three commodities The
bureau OF labor indexes are built up
from series Of 252 and 297 items, while
other current index numbers are comput-
ed from series ranging in number from
% to 80, SO that there are samples
from practically all important classes.
Another modern method 10 to give the
commodities an influence in the series
that corresponds with their Importance
in use. SO that bread and spices, cot
ton goods and silk. brick and putty are
given different weights"
Since the invention of index numbers,
too. Carli's percentages have been su-
perseded by relatives" Under this
plan average prices at a given period
are taken for a base, and are called
100, price declines from the base for
subsequent years being shown by num-
bers less than 100, and rises by figures
greater than 100.
The best known index numbers are
Of this kind, but the bureau of labor
is Of the opinion that while other in
dexes may be best for special pur-
poses, the best. simplest and most easily
understood general purpose indexes are
merely the sums Of varying prices Of