THE COST OF LIVING IN THE 
UNITED STATES IN 1926 
' N MEASURING changes in the cost of living we are, of 
1 course, measuring changesin prices of a group of commod- 
ities and services which here represents the budget of the 
average wage-earner’s family in pre-war years. These prices 
are collected and combined in such a way as tosecure an index 
of the change in the cost of living as a whole. Any change 
in the cost of living which is registered by the index number 
is consequently a reflection of diverse changes in the prices of 
the various items of which it is composed. Likewise, com- 
parative stability in the index number of the cost of living 
during any period may be deceptive in the sense that it may 
conceivably be the result of significant but opposite move- 
ments in the prices of important items or groups of items. 
In studying the changes in the cost of living it is also 
important to bear in mind the way in which changes in price 
levels generally affect the cost of living, in the sense in which 
that term is here used. * There are all kinds of prices—prices 
of labor, which we call wages and salaries; the prices of such 
other services as the use of money, which we call interest; 
prices of such services as transportation, telephone and 
telegraph communication, electric light and power, which are 
measured in terms of rates; and prices of such services or 
satisfactions as housing, which we call rents. All of these 
prices, and many others, besides the prices of physical com- 
modities, enter into and affect the cost of living directly or 
indirectly. The relation of the wholesale prices of com- 
modities to the cost of living is, therefore, not so close as it 
would be if man “lived by bread alone,” or if the cost of 
living merely represented the cost of tangible goods. Since 
wages and other kinds of prices enter more or less directly 
into the cost of living, and since these prices are not so 
flexible in relation to fluctuations of supply and demand as