Pre-War Changes in Commodity Prices
THE flow of physical goods must for many purposes be viewed as a stream of pecuniary values. In this form it is amenable to the operations of business, for only as a pecuniary flow can the stream be divided, apportioned and regulated as the interests of business require. But this value stream is not an exact counterpart of the stream of physical quantities. It has variations, sinkings and risings of its own. Changes in the fortunes of producers and consumers cannot be understood without a knowledge of the movements of both streams -- of commodities and of values. Prices are the link between goods and values, and shifting prices may constitute elements of economic change as important as are alterations in physical volume.
In tracing price movements over a period those general changes which reflect alterations in the purchasing power of monetary units are of obvious interest. But the story of price movements should go beyond these. Perhaps of greater immediate importance are the inequalities of price movements which alter the terms of exchange among different industrial groups. The general dispersion of prices resulting from such unequal changes may be studied as a problem in itself. In more concrete form, these shifts may be examined with reference to the fortunes of specific economic groups. A pronounced rise in the prices of one class of commodities, such as manufactured goods or agricultural products, a rise not shared by other groups, will materially affect economic processes. Such an alteration in the terms of exchange among economic groups may occur as a result of a sharp price movement or as a result of persistent secular tendencies. In either case the effect may endure for years. These shifting relations, measured in the abstract by index numbers of dispersion and manifest in concrete form in the varying movements of commodity prices in different groups, are matters of concern in a survey of price movements during a given economic era.