knowledge tends to prevent unnecessary misunderstanding between capital and labor. It also enables the public to form an intelligent opinion on living costs based upon facts.

The Commission therefore recommends that cost of living figures be compiled and published by a State Department from time to time.

The Commission has continued to collect, compute and publish each month cost of living index figures showing the trend of living costs in Massachusetts. This index, which has been prepared by the Commission for a period extending back to January, 1910, is based upon retail prices throughout the Commonwealth. The year 1913, the first entire year preceding the World War, is taken as par for this index. From the beginning of the war in August, 1914, and up to the present time there has been no period unaffected by abnormal conditions and which could be accepted for comparative purposes.

Because 1913 is used as a base by the Commission for the purpose of compiling its cost of living index it does not mean that the Commission considers that year as being representative of normal conditions with respect to retail prices. Retail prices are very closely allied with all factors of both economic and social natures, and are necessarily affected by the constantly shifting standards of living resulting from these changes. A new normal may be set up as a consequence of our different standards of living introduced during the war. It must be remembered that the allocations given the five elements composing the combined cost of living index figure are typical of an average family's expenditures in 1913. The relative importance of each element to the complete family budget would undoubtedly differ extensively if a later year were to be used as a base, but the allocation cannot be frequently changed to meet what may be temporary conditions, because the value of comparison would be lost.

An index of this kind is nothing more or less than a comparison with a given base, which, in this case, is the year 1913. The allocation of the five elements comprising the total budget. is as follows:

Although the Commission describes the monthly changes in the cost of living in terms of "index numbers," it is more easily understood if the changes are expressed in terms of "dollars and cents." This is accomplished by expressing the index number 100, the 1913 designation, as $100. Similarly the index number for December, 1922, -157.5, will equal $157.50. Therefore it is evident that the family spending $100 in 1913 for necessaries of life would have to expend $157.50 in December, 1922, for the same amount of these commodities. The monthly changes for the five elements and the combined cost of living from 1910 to December, 1922, are shown in Diagram VII, page 47, and in Table 6, Appendix I.

Appendix I of this report shows the method followed by the Commission in compiling the cost of living index figures, together with the monthly retail prices and relative of all articles included in the index. By carefully following the procedure as outlined in Appendix I, it is possible to compile a cost of living index having especial reference to local conditions.

As the cost of living rises the purchasing power of the consumer's dollar decreases. The purchasing power of the dollar since 1913, based on the Commission's index figures, is shown graphically in Diagram VIII, page 49. It is of interest to note that the value of the dollar during the year 1922 has remained practically unchanged.

The cost of living index figure in December, 1921, was 159.6. The December, 1922, figure was 157.5. This is a net reduction during the twelve months of 1.3 per cent. Since the peak in July, 1920, when the index reached 202.6, the reduction to December, 1922, was 22.3 per cent.

The downward tendency, which started in the summer of 1920, when the bubble of high prices burst, was retarded in 1922 by the so-called period of secondary inflation. We have not as

yet emerged from this period of secondary inflation, but it is the opinion of the Commission that this is only a temporary reaction in a long period of liquidating prices, which began in 1920. Some economists, however, believe that we have reached a new basic level, and they are of the opinion that prices will not go materially lower than in 1922. This is contrary to the opinion

DIAGRAM VIII.

PURCHASING POWER OF DOLLAR

BASED ON INDEX FIGURES
COMPILED BY

SPECIAL COMMISSION ON THE NECESSARIES OF LIFE

1913-100 JULY 1914 JULY 1915 JULY 1916

97.9*

98.3¢

91.0¢

JULY 1917 JULY 1918 JULY 1919 JULY 1920 77.3¢

64.5¢

58.3¢

49.4*

JULY 1921 JAN 1922 JULY 1922 DEC 1922

62.2

63.6¢

64.0*

63.5¢

of the Commission, which believes that prices for many years will seek lower levels with only temporary halts in the decline. An examination of the price trend in the United States since 1800 shows that during the War of 1812, the Civil War and the World War prices rose to exceedingly high levels, and that after the War of 1812 and the Civil War they declined to a point fully