(7) In this system the unit of account (UOA)--the unit in terms of which prices are quoted in most transactions--is based on a commodity bundle
defined quite broadly so that movements in the cost of one such composite-commodity bundle closely represent movements in the "general price level." Stabilization of an index number representing the cost of a standard bundle will then amount to general price level stability, and movements in UOA prices of individual commodities will represent movements in the real prices of the respective goods; thus fluctuations in output and employment will not be generated by "monetary disequilibria." A second crucial ingredient is the specification of indirect redeemability of money--that is, note and deposit claims to standard bundles.
We aggregate relative bases across the commodity bundle
to get the expected inflation rate for commodities.
Even if a person who is disabled or ill or depressed happens to have the same demand function as another who is not disadvantaged in this way, it would be quite absurd to assume that she is having exactly the same utility or well-being from a given commodity bundle
as the other can get from it.
These poverty lines are based on per capita consumption levels associated with a commodity bundle
that yielded a specified level of caloric intake believed in 1973-74 to be appropriate for rural and urban areas (2,400 and 2,100 kilocalories per capita per day for the rural and urban areas, respectively).
The Panel's minimally adequate standard of living would include a basic needs commodity bundle
(food, clothing, shelter, and utilities), plus a small additional amount to allow for other needs (such as household supplies, personal care, and nonwork-related transportation).
(The latter term is Niehans's; it means the commodity or commodity bundle
of which some specified quantity defines the unit of account [16, 1].) Money is redeemable, instead, in some redemption medium--some other commodity or even some security--in amounts equal in value to the quantity of medium of account defining the unit.
Thus the first point to be made is an obvious one - the findings one gets on long-run trends depend crucially on the time period selected and the commodity bundle
In the space of functionings (which is compatible with variability in the space of resources), not in the space of real incomes or of commodity bundles