Fisher's Formula for Index Numbers

PROFESSOR IRVING FISHER, in a paper read at last annual meeting of American Statistical Association,' proposed a formula for computation of index numbers of prices and of quantities which, he maintained, was the best for all purposes. 2 The formula which he recommended for indices of prices and quantities as ideal is mean between two ratios of aggregates. The aggregates depend upon a combination of prices and quantities of commodities in a given year with those in a base year.3 The data necessary for computation of Fisher's formula for a series of years consist of prices and quantities in every year of all commodities selected for index. For an exact comparison of average prices or quantities in two years, by Fisher's method, it is not sufficient to compute indices for those two years relative to a third year as a fixed base; it is necessary to use one of two years compared as base. Extensive data and laborious computations are required for construction of Fisher's indices. Professor Fisher has designated several types of averages as biased and hence unreliable. One of averages he condemns, because it will have a downward bias, is geometric with weights dependent on prices at or near base year. 4 Since this type of average was used by Professor E. E. Day in computing

Econometrics · Economics · Index (typography) · Statistics · Computer Science · Economics of Agriculture and Food Markets · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact

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