The term price, as currently used ( 1947), is defined in terms of a definite physical specification of a commodity at specified terms of trade to a specified type of purchaser. In general, quotations used for indexes are transaction prices and exclude insofar as possible factors such as changes in grade or quality or terms of sale or in the proportion of goods sold to different classes of purchasers which affect average prices.
Price comparisons from one period to another which are based on inadequate commodity specifications may be invalid. Unfortunately most of the earlier investigations in the field of prices lacked detailed commodity descriptions. Thus we find such quotations as "wheat, $1.00 per bushel," whereas a more complete commodity description might read "wheat, No. 2 red winter, bulk, carlots, f.o.b. Chicago, spot market price, average of high and low, per bushel."
The price of a commodity necessarily must refer to a specific point in time. Thus the Bureau of Labor Statistics' present monthly wholesale prices ( 1947) ordinarily are an average of 1-day-a-week prices and annual prices are averages of monthly prices; whereas retail prices are mid-month prices.
The term price relative is applied to a single price series, usually representing narrowly defined specifications, and relates the price for a given period to the price at some other fixed period as 100. A price index is a device for measuring average price changes for several commodities as a group with reference to a base period as 100.
L 1. General price index, 1791-1938. Base: 1913 = 100. Sources: For 1791-1932, see The Review of Economic Statistics, Harvard Economic Society, Inc., vol. XVI, No. 2, February 15, 1934, p. 25. For 1933-1938, see Federal Reserve Bank of New York, Monthly Review of Credit and Business Conditions. For discussion see Tucker, Rufus S., "Gold and the General Price Level", The Review of Economic Statistics, vol. XVI, No. 1, January 15, 1934, p. 8.
The general price index of Carl Snyder, 1860-1932 (see Business Cycles and Business Measurements, New York, 1927), was extended backward in time to 1791 by Rufus S. Tucker. Snyder's index was first presented in 1924 in an article, "A New Index of the General Price Level from 1875", published in the quarterly Journal of the American Statistical Association, June 1924. It was based on wholesale prices, cost of living, and rents, computed by the Bureau of Labor Statistics; and wages, computed by the Federal Reserve Bank of New York. In 1928, the Snyder index was revised back to 1913. Revised indexes and the method of computation were described in "The Measure of the General Price Level" by Carl Snyder in The Review of Economic Statistics, Harvard Economic Society, Inc., vol. X, No. 1, February 1928, pp. 40-52. Until the end of 1939 when its calculation was discontinued, the Snyder index was published regularly in the Monthly Review of Credit and Business Conditions, cited above.
The index of the general price level is designed to measure average prices of exchanges of goods, services, and property. It is obtained by combining available series into a broad composite to represent the general level of all kinds of prices. The original index was based on commodity prices at wholesale, wages, cost of living, and rents with weights of 20, 35, 35, and 10, respectively. The revised index includes 12 component series with weights determined empirically, as follows:
|1.||Industrial commodity prices at wholesale||10|
|2.||Farm prices at the farm||10|
|3.||Retail food prices||10|
|5.||Other cost of living items||10|
|9.||Equipment and machinery prices||10|
L 2-35. General note. Available wholesale price indexes shown in this chapter fall into 3 categories: The official wholesale price index of the Bureau of Labor Statistics, 1801 to date (series L 15), and indexes for 10 major product groups, 1890 to date (series L 16- 25); Warren and Pearson's extension of the Bureau of Labor Statistics' indexes back to varying years in the 18th century (series L 2 and L 4-14); and other indexes independent of the BLS series (series L 3, L 26-35). A number of other wholesale price indexes not included in this volume have been computed. Some of these are discussed in United States Bureau of Labor Statistics Bulletin No. 284, Index Numbers of Wholesale Prices in the United States and Foreign Countries, together with techniques of calculation. They include series computed by Bradstreet's beginning in 1890 on about 96 commodities; by Dun's Review beginning in January 1901 on about 300 quotations and gradually carried back to 1860; by Thomas Gibson beginning 1910 on 22 foods; by the New York Times Annalist in 1913 on 25 foods; and by the Federal Reserve Board in 1918 on the basis of BLS data. Both Dun's and Bradstreet's series were sums of actual prices rather than index numbers.
In 1935 a weighted index of general wholesale commodity prices, 1815-1845, was computed by Walter B. Smith and Arthur H. Cole on the basis of 35 commodities and published in Fluctuations in American Business, 1790-1860, Harvard Economic Study No. 50, Harvard University Press, table 45, p. 158. During 1929-1938 a comprehensive historical investigation of commodity prices was made under the auspices of the International Scientific Committee on Price History and the results published in Wholesale Commodity Prices in the United States, 1700-1861, by Arthur H. Cole, Harvard University Press, 1938.
As used here, the term wholesale does not refer to transactions between intermediate distributors and retailers. As currently used for price indexes ( 1947) the term wholesale refers to primary markets or those in which the first major commercial transaction occurs for a specified commodity or stage of production of a commodity. Thus wholesale prices in the Bureau of Labor Statistics' index are generally those charged by representative manufacturers, producers, or importers to distributors or industrial users of particular commodities, or are those prevailing on commodity exchanges.
L 2. Wholesale price index of all commodities, 1749-1932. Base: 1910-1914 = 100. Source: Warren, George F., and Pearson, Frank A. , Prices, New York, 1933, table 1. pp. 11-13. (Data shown here are reprinted by permission of the publishers, John Wiley and Sons, Inc.) See also Cornell University Agricultural Experiment Station, Wholesale Prices for 213 Years, 1720-1932, Memoir 142, 1932, part 1, pp. 7-10; and Bureau of Labor Statistics, Bulletin No. 572, Wholesale Prices, 1931, 1933, appendix, pp. 111-114. The latter shows the index on the base 1926 = 100.