MEASURING THE COST OF LIVING 25 
cause any serious discrepancy regarding their respective 
standings. 
It should be remembered, however, that there is a great 
difference between an index such as this which is based on 
expenditures and one which might conceivably be constructed 
on the basis of properly weighted prices. Although in each 
instance representing local living conditions and costs among 
wage earners, an index based on expenditures necessarily 
reflects differences in standards as well as differences in 
prices. On the other hand, an index based on a comparison 
of the prices of a fixed list of goods and services, collected in 
each locality, necessarily has a considerable margin of unreal- 
ity, due to the fact that such a list could not be of general 
application and that conceivably items consumed with regu- 
larity in one place could not be purchased in another at all. 
Regardless of the method which is used, however, a clear 
definition of units and consistent adherence to comparability 
of both method and units will result in a sufficiently accurate 
answer to a frequently asked question regarding the rela- 
tive cost of living in one community as compared with 
another. 
Purchasing Value of the Dollar 
The purchasing value of the dollar is the reciprocal of an 
index number of prices. That is to say, if goods which cost 
one dollar in the base period, for example, July, 1914, cost 
$2.045 six years later, one dollar on the latter date would 
purchase goods worth only 48.9 cents, judged by the earlier 
purchasing power. In other words, one dollar in July, 1920, 
was only 48.99, of the dollar in July, 1914. The complete 
series of figures showing relative costs and relative purchasing 
values based on National Industrial Conference Board index 
numbers of the cost of living are shown in Table 11% of this 
volume and clearly indicate the method. 
_ 1 What can be done for the budget as a whole can be done for certain other items 
in the budget, notably food and housing. For the latter, the relative rent per room 
may be computed. The accommodations available will differ, of course, from city to 
city, but in each instance those most usually occupied by the wage-earning popula- 
tion will be covered, thus giving a fairly adequate index of working class rents from 
place to place. 
% See p. 156.