articles, partly by adjustments and suppositions such as have been referred to, 68.6 per cent. of expenditure was accounted for, and a weighted average of prices was calculated, resting on the importance of the various commodities in this part of the expenditure in the families of moderate means. Two sets of general index numbers were made out on this weighted method. In one, the index numbers were calculated by applying the figures of prices only to this 68 per cent. of specifically apportioned family expenditure. In the other, the same apportionment or weighting was used, but it was assumed that the rent and other items of expenditure, whose prices were not ascertainable, remained equal in amount. This second set of index numbers seems to be of very doubtful value; and in the comparison of the results of the weighted and the simple average, it will be neglected, and attention will be confined to the first set, in which the greater part of the family expenditure is itemized and is used to give importance to the different commodities.

If these two methods, then, of simple arithmetical average on the one hand, and average weighted by family budget importance on the other hand, yielded greatly different results, we might be perplexed which to use as significant of the general course of prices. The arithmetical average is simple and straightforward, and brings little liability of unnoticed error. It is obviously faulty in principle, since it gives all commodities equal weight; but, by taking a very large number of commodities, the mistakes of emphasis may be expected to balance each other. The budget-weighted method is sounder in principle; but the budgets may not be fairly representative, while the ascertainment of proportional expenditure is difficult, and necessitates artificial allowances and assumptions. Fortunately, in the present investigation, the two methods lead to results so surprisingly in agreement that we may be sure neither is greatly in error. Between the two, we have an indication of the general movement of prices as accurate as is likely to be secured by any method.

A glance at chart I will show that from 1861 to 1891 the lines indicating the movement of prices, one drawn by

the simple arithmetical average, the other by the budgetweighted average, run together with remarkable closeness.'

During the years from 1840 to 1860, it is true, they diverge, the weighted average being lower than the simple average. But this difference is probably due largely to the fact that a much smaller number of commodities was taken in account in forming the averages before 1860; and further to the greater difficulty of securing quotations of prices before 1860, which it was possible to fit to the items of family expenditure. There is, indeed, another not improbable explanation of the divergence. Prices of food of various sorts were lower before 1860 than since; food is given a large weight in the budgets; hence a low price of food before 1860 would perhaps lower the general index number as ascertained by

1 This chart also has a line indicating the course of the premium on gold from January to January of each year, to which reference will be made at the close of the paper. For the present, the lines indicating the movement of prices, as ascertained by the two methods, alone need attention.

the budget-weighted method, more than by the simple average method. It is unfortunate that the less complete material at our disposal before 1860 makes it uncertain. whether we have here a case of really important differences in result, due to difference in method.

But, to repeat, in the thirty years since 1860, for which we have ample material, the results are in remarkably close correspondence. During the civil war, the lines move together with an evenness which is extraordinary, in view of the anomalous conditions of that period of inflation and confusion. The prices from which the averages are reduced, it must be remembered, are January prices. During 1863, 1864, and 1865, January prices might differ widely from December or February prices; and either the weighted or the simple average might be seriously affected by the accident of a month's variations. Bearing this in mind, we must be surprised to find that both methods agree as closely as they do in their evidence on the rise of prices due to the great paper issues. They agree, too, and even more closely, in showing the gradual decline in prices after the high water mark had been reached in 1865. A check to the downward movement came in the speculative period which preceded. the crisis of 1873. The rapid decline was resumed after 1873, and reached its end with the period when the resumption of specie payments was effected, in 1879. It is clear that the effects of the paper money issues of the war did not exhaust themselves until that year, when prices were finally at the point from which they had started before the inflation began. The wrongs, the injustice, the chaos in the relations of debtor and creditor, the instability of all industrial enterprise, the occasions for unearned fortunes and undeserved calamities, which must result from sudden changes in the volume of the currency, could not be more vividly illustrated than by the soaring line of 1862-65 and its sinking successor in 1865-79.

That the fall in prices to the specie point coincided with the date fixed for the resumption of specie payments, can not be regarded otherwise than as a lucky accident. The fall was due in but slight degree to legislative action in contract

ing the quantity of the paper money. The decline after 1873 was caused directly, in the main, by the lessening volume of credit substitutes for money after the crash of 1873; it was aided by the growing transactions of the growing population, or by the process then described as "growing up to the currency"; it was made inevitable by the altered conditions of foreign trade after 1873. As it happened, prices were fortunately on a specie basis when resumption was undertaken, and to this mainly is due the ease and success with which a solid specie basis was again secured. Since 1879, the movement of prices illustrates the more normal ups and downs of modern industry and trade. The years 1880-84 bring an upward movement, partly of a speculative character; the depression of 1885-86 causes a decline; then there is an even movement, with an upward tendency due to the unusually favorable conditions of 1890; finally a decline in 1891, which it is safe to say would be farther continued for 1892 and 1893, if the investigation were carried to these years.

While noticing the general range of prices in the United States, it will be of interest to make a comparison with the movement of prices in Europe. For this, we may use the late Professor Soetbeer's statistics on Hamburg prices since 1850. These statistics were related to a large number of articles, and are averaged by the simple arithmetical method; their index numbers may be compared with the index numbers got by the same method for the American prices. They have been reduced to a basis of 100 for 1860, and their movement, with that of the American prices, is indicated on chart II. For the period of the inflated currency and specie premium, this comparison is of little value. It is true that American prices can be reduced to a specie basis by making allowance for the specie premium for the time being. But the effect of the paper money inflation can not be eliminated in this simple way, as will presently be explained. Rather for the satisfaction of curiosity than for any other reason, I have corrected the American prices for the specie premium during 1862–1879, and indicated the corrected movement by the unbroken line

on the chart. But the working of the paper money presents problems not capable of solution by this simple method, and no safe comparison with European prices can be made for the period of suspended payments. For the period before 1862, and after 1879, the results are more useful. The lines.

on the chart indicate of course not relative prices, but the relative movement of prices. They seem to show that, as compared with the period before the Civil War, the movement of prices in the United States has been downward more distinctly than it has been in Europe, and that the difference between the range of prices is less than it was a generation ago. This result is in accord with what we should expect on grounds of general reasoning. As the United States progresses, and reaches more nearly the conditions of a fully-settled and occupied country, we should expect the difference in economic conditions from those of older countries to become less marked, and prices, among other things, to show a range less above that of European