A Case of 'No Man's Land' in Economics : The Theory of Index Numbers and its Applications

Even though price indexes are one of the great inventions of Economics, the theory of index numbers and its applications are ignored by the average economist. In contrast, the theory of economic index numbers has attracted some of the best minds in economics over the years. Therefore, it seems that in Economics, theory of index numbers and its applications constitute a case of “No man's land”. This paper has the following purposes. The first one is to shortly display the theory of index numbers. The second one is to show the relevance of the economic approach using as a case the debate about the appropriate conceptual framework for the CPI. The third one is to show some alternatives to the plutocratic aggregate method, and to illustrate its relevance using as paradoxical example the measurement of poverty. In short, the concern about price indexes has, evidently, theoretical implications, but also has tremendous social and policy repercussions. As long as the theory of index numbers and its applications continue to be ignored by the average economist, relevant issues won't be analyzed