The construction of an index number presents the following problems: (_a_) What are the commodities of which the prices are to be taken? (_b_) How are the prices to be ascertained? (_c_) How are the ratios between the prices of each article at the current and the standard dates to be combined? The answers to these questions vary according to the purpose in hand.... As appropriate to the first purpose, a standard of deferred payments, two methods present themselves, viz., to arrange that the debtor should pay, the creditor receive, either (1) the same quantity of goods and services, the same amount of utility, so to speak; or (2) the product of the same quantity of labour--or more exactly effort and sacrifice. Of these methods the former has been more generally accepted. It is adopted for instance by the British Association Committee already referred to, as _par excellence_ the measure of the change in the value of the monetary standard. The former method is indeed more intelligible. However, in favour of the latter there are some weighty considerations and authorities. It seems to be the nearest possible approach to Ricardo's conception of a commodity invariable in value, "which at all times requires the same sacrifice of toil and labour to produce it." (_Principles_, iii. ch. xx., "On Value and Riches," cp. Mill, bk. iii. ch. xv., "On a Measure of Value.") "A standard," says Mr. Leonard Courtney, "should be something which as far as possible involves the same labour and the same sacrifice in obtaining it" (_Nineteenth Century_, March, 1893). Prof. Marshall, in his evidence before the royal commission on gold and silver, says, speaking of appreciation of gold: "When it is used as denoting a rise in the real value of gold, I then regard it as measured by the diminution in the power which gold has of purchasing labour of all kinds--that is, not only manual labour, but the labour of business men and all others engaged in industry of any kind" (Question 9625). If the first method is adopted, the answers to the questions above set are as follows: (_a_) The commodities of which the prices are to be taken should be articles of consumption rather than materials and implements. Payments for personal services should be included, but not wages in general. (_b_) Retail prices should be used. (_c_) The proper combination of the ratios is an average of the kind technically called _weighted_.... The general principle according to which the weights are to be assigned is that they should represent the importance of each commodity to the consumer. But this idea may be embodied in different plans.