The Case for Laspeyres' Formula: An up-to-Date Appraisal

The logical basis for using Laspeyres' formula in cost-of-living and real-income measurement has been debated for years, leaving little room for further comment. However, the relevant discussion as yet consists of scattered and highly technical bits and pieces religiously ignored by textbook writers. It may therefore be timely to summarize the argument and its implications for the practitioner.