An Index of the Physical Volume of Production

Abstract

pHYSICAL productlon, economically considered, assumes three major forms: agriculture, mining, manufacture. The present study of the physical volume of production recognizes this basic differentiation of industry. In Part I, appearing in the September issue of the REvIEw, an analysis was made of the course of agricultural production in the United States from I879 to I920. In the present part, a parallel study is undertaken of the physical volume of production in mining from I879 to I919. A subsequent installment will deal with the volume of production in manufacture. The methods followed in the analysis of mineral production are those devised and explained in the study of the physical volume of production in agriculture. It will be recalled that two distinct indices of agricultural production were developed: an and an index. Similar unadjusted and adjusted indices of the physical volume of production in mining are calculated in the present part of the study. A recapitulation of the methods of computing these indices seems desirable. The unadjusted index is of the fixed-base type. It is arrived at by a few comparatively simple steps. The original items of each series are first reduced to percentages of a base for the series, this base being the arithmetic average of the items of the five-year pre-war period, I909-I3. The several commodities are next assigned weights equal to their respective average annual aggregate values during the same base period, I909-I3. Finally a weighted geometric mean of the relatives of each year is computed. These weighted geometric means for the years of the period of study constitute the unadjusted index. The adjusted index is calculated by entirely different methods. The normal or secular trend of each series is first determined. The original items of each series are then expressed as percentages of the corresponding ordinates of the series' line of secular trend. Finally a weighted arithmetic mean of the relatives of each year is calculated, the same weights being used as in the computation of the unadjusted index. The adjusted index consists of these weighted arithmetic means. These methods are made to yield in Part II not only the two indices of mining but, in addition, corresponding indices of the total production of agricultural and mineral raw materials. The unadjusted raw-material index combines the separate unadjusted agricultural and mineral indices as a weighted geometric mean; the adjusted raw-material index combines the separate adjusted indices as a weighted arithmetic mean. In both raw-material indices, the weights assigned to agriculture and mining are proportionate to the aggregate values of agricultural and mineral production in the United States in the last pre-war census year, I909. The raw-material indices are thus only a logical extension of the methods adopted in the construction of the indices for agriculture and mimmng.