It is well to mark also, in passing, that the prices of some or many of
those articles which occupy a very important place in all calculations
of the cost of living of the wage earners--the articles of food and
clothing, and shelter--may change in a different measure, or even in a
different direction from the prices of the other commodities which
compose the general price level. This possibility is the most genuine as
regards food prices. Movements of food prices, and, indeed, of the
prices of all agricultural products, are apt over short periods to be
determined by weather conditions rather than by the industrial events
which govern the general price movement. Mr. W. C. Mitchell in his book
on business cycles studied the relation between the movements of retail
food prices (the figures ordinarily used in cost of living
investigations) and general business conditions during the 1890-1910
period in the United States. He writes in conclusion that "these figures
(i.e., of 30 retail food prices) indicate a certain correspondence
between retail prices and business conditions. In 1893, indeed, the
thirty foods rose slightly instead of falling, but they declined during
the dull years which followed the panic, and rose again when prosperity
returned. The rise was slow until 1900-02; it became slow again in
1902-04; but rapid in 1905-07. The panic of 1907 came too late in the
autumn to exercise much influence upon the average retail price level of
that year. On the whole, this series reflects the course of business
cycles better than might have been expected. For the supply of
vegetables and animal foods varies in an arbitrary fashion determined by
the weather, and the demand for staple foods is less affected by
prosperity and depression than that for the more dispensable
commodities."[39] Even over periods of some duration there may be a
marked difference between the movement of food prices and other prices.
3.--Changes in the general level of prices must have prior causes, but
they, themselves in turn cause economic disturbance. They give a tilt to
the whole industrial system which manifests itself in the outcome of
distribution. The effects upon the distribution of the product of an
upward movement of prices are ordinarily different from those produced
by a general decline in prices.
It is well to begin with the first case--a period of a rise in the
general price level. To give an accurate analysis of the successive
interactions by which an upward movement in the general price level,
once stimulated, asserts itself, is both a delicate and lengthy task. It
cannot be attempted here.[40] It suffices to note the ordinary
distributive results of the process; with the important reservation,
however, that they do not occur in the measure that the rise is
occasioned by a general reduction in the productivity of industry such
as might be caused by war.
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