A note of dissent on the 'index number' interpretation of Adam Smith's 'real measure'

Abstract

This paper offers a critical comment on the interpretation that Adam Smith's ‘real measure of exchangeable value’ was addressed, at least in part, to the index number problem of estimating intertemporal changes in general purchasing power. It is argued that the ‘real measure’ is incapable of performing such a role, that Smith was aware of its limitations in this respect, and that commentators have been misled by his (legitimate) use of the measure in more restrictive contexts.