BLS Consumers' Price Index and the AMS Index of Prices Paid by Farmers for Family Living. A Juxtaposition

Abstract

T IS only natural that in a desire to evaluate changes in the purchasing power of farmers and of wage and salaried workers, resort should be made to the two price-deflator series published respectively by the Agricultural Marketing Service and the Bureau of Labor Statistics. Not infrequently the two series are assumed by their users to be quasi-homogeneous and this in turn tends to provoke controversy when the movements of the two indexes digress. It is proposed in this paper to examine a few selected basic characteristics of the two indexes. It is hoped that by contrasting their frameworks of reference, the techniques used in their compilation and the approaches used by their compilers to measure price changes that a better understanding of the two series may be attained. It is also hoped that the insights obtained from such analysis will be of help in the evaluation of the two series. At the outset, note should be taken of the fact that in describing what each of the two series tends to measure, their compilers rely on substantially similar language. BLS speaks of its Consumers' Price Index as a measure of the "average change in retail prices of goods, rents, and services customarily purchased by city wage-earner and clerical worker families."' In a similar vein, AMS refers to its Index of Prices Paid by Farmers, Including Interest, Taxes and Farm Wage Rates (known, for short, as the Parity Index) as a measure of "changes in the prices of goods and services bought by farm families for use in living and production."2 The Index of Prices Paid by Farmers for Family Living is, of course, one of the five subindexes of the Parity Index. Specifically, the latter is defined as measuring "average changes in prices paid by farmers on a nation-wide basis for consumers' goods."3 These definitions thus make it appear as though BLS and AMS consumer price series seek to measure the same thing-the average changes in retail prices paid, although by two different segments of the American population. Even if the methodology and techniques used to measure price movements were identical in the case of the BLS and the AMS series, some