Chapter

The True Index

S. N. Afriat

in Logic of Choice and Economic Theory

Published in print November 1987 | ISBN: 9780198284611
Published online November 2003 | e-ISBN: 9780191595844 | DOI: http://dx.doi.org/10.1093/0198284616.003.0014
 The True Index

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This is the second of five chapters about the cost of living problem and price indices, a typical area for what is understood as choice theory. It discusses the price index, which is associated with a narrow concept of the cost of living problem, is important for both theory and practice, has a long history and large literature, and is now quite an elaborate theory. An outline of the main ideas is given, touching upon history only where points are encountered directly, and bringing in theorems discursively and without proof; William Fleetwood, Irving Fisher, and S. S. Byushgens stand out from the past in the account, with the writings of J. R. Hicks, R. G. D. Allen and Paul Samuelson forming a background. The ‘true index’ of the chapter title is an early vague term that later acquired the meaning dealt with here. The nine sections are: the cost of living; the price index; formulae, and Fisher's Tests (and Ideal Index); the Paasche–Laspeyres interval; existence test; theory and practice; many periods; price levels; and Fisher's formula.

Keywords: R. G. D. Allen; S. S. Byushgens; choice; choice theory; cost of living; economic theory; Irving Fisher; Fisher's Ideal Index; William Fleetwood; J. R. Hicks; Paasche–Laspeyres interval; price index; price theory; Paul Samuelson

Chapter.  7336 words.  Illustrated.

Subjects: Microeconomics

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