Economics

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.5 percent before seasonal adjustment.

Increases in the shelter and gasoline indexes were the main causes of the rise in the all items index. The gasoline index rose 5.8 percent in September and accounted for more than half of the all items increase. The shelter index increased 0.4 percent, its largest increase since May.

Since the end of World War II, the United States has experienced almost continuous inflation— the general rise in the price of goods and services. It would be difficult to find a similar period in American history before that war. Indeed, prior to World War II, the United States often experienced long periods of deflation. It is worth noting that the Consumer Price Index (CPI) in 1941 was virtually at the same level as in 1807.

IN CONTEXT

FOCUS

Markets and firms

KEY THINKER

Alfred Marshall (1842–1924)

BEFORE

1776 Adam Smith explains how large firms can lower unit costs through labor division.

1848 John Stuart Mill suggests that only large firms can adapt successfully to certain business changes, and that this can lead to the creation of natural monopolies.

IN CONTEXT:

FOCUS

Welfare economics

KEY THINKER

Vilfredo Pareto (1848–1923)

BEFORE

1776 Adam Smith’s The Wealth of Nations relates self-interest to social welfare.

1871 British economist William Jevons says that value depends entirely on utility.

1874 French economist Léon Walras uses equations to determine the overall equilibrium of an economy.

AFTER

1930–50 John Hicks, Paul Samuelson, and others use Pareto optimality as the basis of modern welfare economics.

1954 US economist Kenneth Arrow and French economist Gérard Debreu use mathematics to show a connection between free markets and Pareto optimality.

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