Economic essays

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Monograph

Identifikator:: 1753623200

URN:: urn:nbn:de:zbw-retromon-136107

Document type:: Monograph

Title:: Economic essays

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1927

Scope:: viii, 368 S.; Ill., graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: A statistical method for measuring "marginal utility" and testing the justice of a progressive income tax / Irving Fisher

Collection:: Economics Books

A STATISTICAL METHOD FOR MEASURING ‘MARGINAL UTILITY” 173 Fy and F, as an average of prices. These concepts were make- shifts to simplify the statement. Index numbers properly are averages of price relatives.” The equation does not, of course, imply that, as between Cases 1 and 2, the families will find all food prices differing in the same ratio, nor that the family will have absolutely identical rations in the two Cases. It may find the two food markets different in many details. But, on the average, the food prices in Evenland are three-fourths the food prices in Oddland; and, since the family in Evenland also spent three- fourths as much for food as the corresponding family in Oddland, it must, in that sense, be considered as having substantially the same quantity and quality of food. If the assumed budget tables and price indexes are correct, the $1000 Oddland family and the $600 Evenland family certainly do have substantially the same food rations. If we wish some term more strictly appropriate than “pounds” of food we may say “index of food consumption.” Likewise, the $1440 Oddland family and the $600 Evenland family, although their dwellings may not be exactly alike in every detail, must, if the budget price tables be correct, have substantially the same sort of housing, since rents (of the same quality) are three times as high in Oddland as in Evenland and Case 3 in Oddland pays said three times as much for his rent as Case 2 pays for his in Evenland. In other words, while we cannot measure food by the pound nor housing by the square foot nor their prices in those terms, we can use index numbers and expenditures for food and housing in such a way as to enable us to substitute, for strict physical equality, an equality between the ratio of food expenditure to index number of food prices for Case 1 and the corresponding ratio for Case 2; as well as an equality between the ratio of hous- ing expenditure to index number of housing costs for Case 3 and the corresponding ratio for Case 2. For short, I shall call such equality “physical” equality, since it is the nearest approach to strict physical equality we can get and would be absolute equality if the price relatives which are averaged to make the index numbers, F’s and R’s, were all equal. In short, we have selected our two Oddland families so that, so far as is possible in the two different markets, they match the Evenland family Case 2 (Case 1 matching it as to food and Case 3, as to housing). *See my The Making of Index Numbers, Appendix III.

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