Prices and Economic Growth
I T is difficult to understand the origins of the notion that the period between 1850 and 1873 was one of generally rising prices. Two leading contemporary economists and statisticians, Robert Giffen and W. S. Jevons, stressed the discontinuity in trend produced by the sharp price rise between 1853 and 1857. Both viewed the period from 1850 to 1873 as one of price stability, or possibly mild inflation [73:77–91; 87:146]. Why, then, has it since become customary to describe these years as a time of rising prices? Like contemporaries we are dependent in our discussion of price trends upon wholesale price data relating mainly to leading articles, raw materials and provisions. The exclusion of retail prices from the analysis is unfortunate, because the number and value of transactions in articles after they leave the manufacturers’ hands and on their way to the consumer probably exceeds the number and value of similar transactions in the raw-material stage. The prices of manufactured articles are almost wholly excluded from the overall price indices available for the period, and as the tendency within industry in our period was towards the diminution in the real costs of manufacturing and distribution, their exclusion from the price index, admittedly due to the paucity of data, distorts the weighting of the index in favour of more volatile wholesale commodity prices.
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