The Quality Problem

The index number problem concerns the link between qualitatively different commodity groups. It is handled on the assumption that each group is qualitatively homogeneous within itself, but this is by no means true. In order to arrive at homogeneity the quality problem must be solved first. We touch on an area in which the measurement of value problem is most concrete in that the transactions recorded in the national accounts are gauged to certain goods and services. In this chapter the price observation routines that have become standard in national statistical systems will be investigated in order to analyse the concept of product group homogeneity implied by them. The conclusion is that quality is value. They are the same concept in theory, and are measured by a market equilibrium price in practice. The fundamental notion of a ‘pure price change’, upon which price statistics rely, is interpreted and contrasted with the price concept in microeconomic value theory. The concept of general price change (developed in the previous chapter) as a monetary phenomenon of value and the reference point against which to study relative price changes of products is reinforced.