A Closer Look at the 1954–79 UK Labour Productivity Record
Appendix B: Measurement of the intertemporal output indices
INTRODUCTION The object of this appendix is to discuss a number of questions related to the construction of output index numbers for individual three-digit-level industries. No fundamental conceptual questions will be touched upon and it will be assumed that the measurement (in the form of index numbers) of ‘complex magnitudes for which no common physical unit exists’1 is both meaningful and useful. I also take it for granted that the ofﬁcial data I have relied upon are 100 per cent credible. This is not always true. Oscar Morgenstern has long ago deﬂated specious overconﬁdence in ofﬁcial raw data, even those coming from the most respectable bodies.2 Index numbers, useful as they may be, are sensitive to the methodological choices made in the process of their construction. Many of those choices have no a priori legitimacy over others that could have, conceivably, been made. Some of them depend on data availability, expediency and the purpose for which the index numbers are being constructed. Yet, the divergence between two indices measuring the same industry over the same period but estimated by different methods can be large. Such divergencies are due to a multiplicity of factors; most of them related to the practical rather than the theoretical choices involved in the construction of the indices. It is difﬁcult to assess the magnitude of the overall ‘error’ involved or identify the inﬂuence of the sources of ‘error’. The best that index compilers can do is to state explicitly...
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