MEASURING THE VALUE OF MONEY
Index numbers are resorted to in order to measure the value of money and the variations of this value. Reduced to its essential elements this method of measurement consists in selecting a number of goods whose market prices are regarded as characteristic of the general price level, in aggregating the prices of all selected articles in the years which are being compared and in accepting the relationship of these sums as the expressions of the variations of the value of money from year to year. The value of money is considered to have fallen or risen by as great a per cent as the sum has increased or decreased. The earliest series of index numbers, that of 1850, contained the wholesale price of 23 articles, one of which was subsequently omitted. The series was confined to the most important food-stuffs and industrial War, which in the light of the experience of 1914-1918 may hardly be considered as modern warfare.