Economics (McConnell), 18th Edition

Chapter 24: Measuring Domestic Output and National Income

Origin of the Idea

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24.1 GDP Price Index

The GDP price index measures prices for all finished goods in the economy. One of the early contributors to the development of index numbers was William Stanley Jevons (1835-1882). Born in Liverpool, England, the ninth child of Thomas and Mary Ann, Jevons studied political economy at University College, London, worked as an assayer in Australia, and later became a Professor of Political Economy, Logic, and Philosophy first in Manchester, and then at University College, London. Because of his work with marginal analysis in economics, Jevons is considered to be one of the founding fathers of Neoclassical economics. Jevons also invented an ancestor of modern computers, which he called a logic machine, which could mechanically generate a conclusion from a given set of premises.

Wesley Clair Mitchell (1874-1948) furthered the development of index numbers as part of a broader effort to gather statistical data and improve economists' ability to assess economic well-being. Mitchell believed that improving the available data was necessary if economic science was to advance in a meaningful way. As Mitchell expressed it, "Economics will develop more fruitfully in the future upon the quantitative side.

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Born in Russville, Illinois, the son of Civil War Army doctor turned farmer, Mitchell earned his Ph.D. at the University of Chicago in 1899. While Mitchell had a distinguished career as a teacher and researcher at the University of Chicago, University of California, Columbia University, and The New School of Social Research, Mitchell's greatest contribution came when he founded the National Bureau of Economic Research (NBER) in 1920, where he served as the Director of Research from 1925 to 1945. The bureau still operates today, providing valuable data and studies for economists and policymakers.

Photograph courtesy of: Courtesy of National Bureau of Economic Research, http://www.nber.com