was worth 7,129,655 colones. The exportation of the principal
variety, musa sapientium, is about 11,000,000 bunches per annum.
In 1912 the foreign trade was $20,043,311. In 1917 the imports
were $5,595,240 and the exports $11,382,166. In 1917 the national
debt was $20,254,000. The national budget, approved by the President
Jan. 7 for the fiscal year 1920, estimated the expenditure at
12,866,553 colones and the revenues at 13,006,000 colones, leaving a
probable surplus of 139,447 colones. The estimated pop. in 1919 was
454,995; the area of the republic being about 23,000 sq. miles.
- (H. I. P.)
COST OF LIVING. Till recent years the phrase “Cost of Living” was only used loosely by economists when the balance between movements of wages and prices was in question, but from 1914 onwards during the World War the need of a measurement of the rise of prices gradually resulted in making the expression prominent in industrial and statistical discussions. In popular parlance it has since become a recognized economic problem. It has frequently been assumed that the term “Cost of Living” (or “High Cost of Living”—sometimes abbreviated to “H. C. L.”) has a unique and definite meaning, and that accurate measurements can be applied to it, but in fact the meaning is vague and the statistical methods appropriate to it are complex and lead to results whose precision is not of a high order.
The phrase may be regarded as an abbreviation for “the cost in a defined region to persons typical of a defined social or industrial class of goods of a kind usually purchased at frequent intervals, by the consumption of which a certain standard of economic welfare is reached.” We may usefully distinguish four cases: (a) where the standard is a physiological minimum; (b) where some conventional or average budget of expenditure is taken and the cost of the items in it is measured at different times or places; (c) where the items are varied but the whole contents of the budget result in an unchanged standard of welfare; (d) where both the contents of the budget are modified and the standard is raised or lowered. Case (b) is that which has in recent years been the subject of measurement, but case (c) is that which is in reality appropriate to the problem of measuring or adjusting real wages.
Case (a).—Prior to the World War attention was directed by Mr. Seebohm Rowntree (Poverty, A Study of Town Life, 2nd ed. 1902) to the cost of obtaining in York (England) and elsewhere food, clothing, heat, light and shelter sufficient for a family to maintain itself in health and efficiency for work, when all possible economy was practised, subject to the availability of commodities and the legal requirements for housing, decency, etc. The minimum of food was computed in relation to the quantity of calories, carbohydrates and protein calculated by Atwater and others as necessary for maintaining health and vigour under various conditions of life, and dietaries were drawn up which contained the necessary constituents at the minimum aggregate cost; to this cost was added the expenditure on clothing, fuel, cleansing materials, etc., and rent, which was found to be customary among persons in regular work at the lowest rates of wages of adult men. The most natural meaning of the cost of living is perhaps the cost of maintaining the minimum standard thus described. The standard is, however, not scientifically definite; apart from questions as to the validity and applicability of the measurement by calories, it is clear that there must be a great difference between the amount of food necessary for work of low and of high efficiency; the Indian, Chinese and Japanese peasants live on a sparser diet and produce a lower output than the English or Americans; definable points are where efficiency is a maximum (which needs a more liberal diet than that considered by Mr. Rowntree) and where the value of additional efficiency exactly equals the cost of the additional food, etc., necessary (for whose ascertainment there are no observations); and Atwater's standard is in fact conventional (see Bowley, Measurement of Social Phenomena, chap, viii., 1915). If we drop the word “minimum” and speak of Mr. Rowntree's conventional standard for demarcating poverty, we can properly measure the change in the cost of living at this standard (if the facts are ascertainable). The varying cost of the official civilian rations, computed in Germany circa 1919, gave a measurement similar to that described. The cost of Mr. Rowntree's standard, and one modified in the direction of ordinary purchasers by Bowley, was worked out for certain English towns in 1913 (Livelihood and Poverty, 1915). A legal minimum wage could be based on a standard thus defined, but in fact it is generally related to a higher conventional standard.
Case (b).—The usual method of measuring the change of the cost of living during and since the war has been as follows. Detailed statements of expenditure having been obtained from a number of working-class households (in most countries at some date prior to 1914), an average budget is formed showing so many pounds of meat, bread, etc., with the prices and expenditure in considerable detail. The average prices of the same foods are ascertained from time to time, and the expenditure necessary to purchase the former quantities at the new prices is computed. The cost of living (so far as food is concerned) is then taken as having increased or decreased in the same ratio as this standard budget. In many countries a standard of the same kind is established for clothing, fuel, light, rent, cleansing materials and some other articles, and the cost of the aggregate, including food, is computed from time to time. The result obtained (if the process were complete) would be the relative cost of maintaining a defined standard constant in every detail. It is generally expressed as a percentage; thus if the costs were 25s. and 30s. at the two dates, the ratio is 100: 120, the index number at the second date is 120 and the percentage increase 20.
This method cannot be carried out in its entirety for two reasons, namely, lack of information and change of quality of the commodities in the market. In most countries data of expenditure and prices are only obtained for principal commodities (meat, bread, etc.) and not for those on which little is spent (currants, pepper, etc.); unless owing to shortage of supplies there is a run on the articles not included, these omissions cannot affect the result significantly. In some countries expenditure is not known, but only prices, and then the resulting calculation is generally valueless; and in others currency is so variable that the computation is meaningless. In nearly all cases there is no sufficient knowledge of expenditure on clothing either in total or in detail, and it is often difficult to obtain adequate data for fuel and light or for miscellaneous items. The sums included in the calculations, in fact, account for only a part of ordinary household expenditure, but where most care has been given to the question the part is a large proportion of the whole. Classes of expenditure that are not strictly necessary, such as amusements, tobacco, alcohol, etc., are generally omitted, as are occasional expenses (doctors, purchase of furniture, etc.), but in some cases subscriptions to trade unions, etc., insurance payments and travelling to work are included. The miscellaneous expenses omitted become a large proportion of total expenditure as we go up the scale of incomes. The difficulty due to the change of quality of goods which has been so marked since 1914 is even more fundamental. Over any long period the actual constituents and quality of a pound of bread, a cut of meat, a pair of boots, change considerably, but from some points of view these gradual changes are not important. During the war, however, substitution of one commodity or ingredient for another was sudden and common, and the pre-war quality was unobtainable at any price, or if obtainable had a quite altered position in domestic economy. Consequently the prices included in the calculations were frequently not for the same things at different dates and the precision of the measurement was greatly diminished. After the Armistice there was some return to former qualities, but the change has been sufficient to undermine the foundation of the numbers, and a new basis is necessary, as discussed in the following sections.
It should be added that separate budgets ought to be formed (and in some countries have been formed) for different grades of income and for different classes of occupation, and also for single persons and for married persons with dependents.
The structure of the index numbers of the cost of living is shown most clearly by algebraic symbols. If Q₁, Q₂, Q₃ . . . are the number
