MEASUREMENT OF THE COST OF LIVING INCLUDiNG THE PUBLIC SECTOR

Since 1948 the (P1. Con sunier Price Index, has become a less sat isf aclory indicator of 051 a) living. COL, as it relates to a limited and declining fraction of goterament product. This paper analyses the j,roh-lems in constructing a COL index that makes adequate allowance for changes in the quality and relaiiie importance of government services in the consumer's consumption patterns. A proposal jr attitudinal,neasures of COL is detelopd. In addition a strategy for using existing expenditure and government data is presented. I. JNTROI)UCTION Government activity constitutes a large and universally acknowledged fraction of the total national product. Accounting for government in a measure of the consumer's cost of living (COL) is clearly essential to understanding the changing welfare of individuals in the economy. Yet. at the present time, neither an official COL indicator for private commodities, nor a system for developing the COL index for public and private goods together exists. By default the consumer price index (CPL) is used as a measure of the change in real purchasing power of the consumer. Increasing reliance is placed on the CP