CH. 4

THE PURCHASING POWER OF MONEY

61

to the Wholesale Index than the above—is to befound in the inadequate weighting of manufacturedgoods, the price of which has tended to fall relativelyto services. The Snyder Index makes some allow-ance for such goods both in its Wholesale Indexcomponent and in its cost of living component.But it is questionable whether the allowance isadequate . 1

Taking the Snyder index, however, at its face valueif only for the sake of illustration, it appears that apolicy which had aimed at stabilising the wholesaleindex-number over the past fifty years would never-theless have caused the Snyder index to rise by 50per cent; whilst vice versa a policy aimed at stabilis-ing the Snyder index would have caused the wholesaleindex to fall by one-third. It is at least evident thatthe practice of employing the usual wholesale index-numbers as an approximate guide to the purchasingpower of money is not prima facie justifiable.

Mr. Snyder has suggested the compilation of asimilar index-number for Great Britain, the weightsand components proposed being as follows :

Board of Trade Wholesale Prices .

. 2

Ministry of Labour Cost of Living

. 3}

Bowley’s Wages Index

. 3*

Rent ......

• i

It is probable that this weighting could be improvedupon. But for the time being this composite probablyprovides as good a Consumption Index for GreatBritain as is practicable in the present state of ourstatistical knowledge. Carried back to 1913 thisindex works out as follows :

1 I believe that Marshall used to justify the use of the WholesaleStandard as a working substitute for a non-existent Consumption Standardon the ground that the omission of services tended to be balanced in itseffect by the omission of manufactured goods. But the assumption ofany exact balance between these two sources of error is, of course, highlyprecarious and unsatisfactory.