UPDATE: See corrected methodology and data here.
Over at what appears to be a personal finance type site, they have a list of various consumer goods and compare their nominal price changes between 1999 and 2009 (HT: Jeff Tucker). In line with my recent posts on US standards of living, one can point out the obvious shortcomings of this nominals-to-nominals comparison. To the economically illiterate, those changes look enormous and awful. But:
1. Certainly, this should be done in constant dollars. The change in the CPI over the period from Nov. 99 to Nov. 09 was a cumulative 28.54%. Right away that means about half that list got cheaper in real terms if we tack 28.54% on to the 99 prices (a rough guide).
2. But we also have to account for the growth in wages over that period. The private sector's average hourly wages increased 37.2% over that same period (note that was above the cumulative inflation rate, though not by a lot). If we compare the prices in 2009 dollars in terms of how many hours of work it would have taken to buy the same good in 1999 average private sector wages vs. 2009 wages, only 9 of 47 items cost more today than 10 years ago.
3. Finally, there is the issue of quality. I will leave it to our readers to decide what that means for each of the goods listed, but certainly a good number are "better" now than 10 years ago.
Below the fold I reprint the list from that site (minus the two interest rate comparisons and Tom Cruise's salary). Notes on sources are also there.
| Product | Nominal | Real | Work Hrs. |
| Observation deck, Empire State Building, adult | 400.00% | 288.98% | 183.54% |
| Gold, one ounce | 296.26% | 208.28% | 124.71% |
| New York Times daily edition | 166.66% | 107.46% | 51.22% |
| Slurpee, largest, 7-11 | 114.14% | 66.60% | 21.43% |
| Superman comic book | 100.50% | 55.98% | 13.70% |
| Toll (auto), Golden Gate Bridge | 100.00% | 55.59% | 13.42% |
| Gallon of gasoline | 96.92% | 53.20% | 11.67% |
| Apple (AAPL) stock, one share | 92.69% | 49.90% | 9.27% |
| Average ticket price, Boston Red Sox | 77.34% | 37.96% | 0.56% |
| Cost to raise newborn to age 18 | 76.04% | 36.95% | -0.17% |
| Disneyland, one day adult ticket | 75.61% | 36.62% | -0.42% |
| NYC YMCA summer membership | 60.00% | 24.47% | -9.27% |
| Average expanded basic cable (per month) | 59.03% | 23.72% | -9.82% |
| Average ticket, NFL Denver Broncos | 56.63% | 21.70% | -11.29% |
| ATM transaction cost | 55.26% | 20.79% | -11.95% |
| Babysitting per hour | 50.00% | 14.41% | -16.61% |
| Budweiser, six pack of cans | 49.38% | 16.21% | -15.29% |
| Home value, average | 44.73% | 12.60% | -17.93% |
| Electricity per 500 kwh | 43.70% | 11.79% | -18.51% |
| Movie ticket | 41.90% | 10.39% | -19.53% |
| Time magazine, newsstand | 41.43% | 10.03% | -19.80% |
| Aspirin, Bayer, 100-count | 38.62% | 7.84% | -21.39% |
| Sugar, 5 lb. | 36.15% | 5.92% | -22.79% |
| Cheerios, one box | 32.39% | 3.00% | -24.92% |
| Stamp, USPS, 1st class | 33.33% | 3.73% | -24.39% |
| Cigarettes, Marlboro, per pack, Calif. | 27.96% | -0.45% | -27.44% |
| Harley-Davidson 883 Sportster | 25.09% | -2.68% | -29.06% |
| Average cell phone bill | 23.19% | -4.17% | -30.14% |
| McDonald's Big Mac | 19.60% | -6.96% | -32.18% |
| Levi's, men's, 505 | 18.95% | -7.46% | -32.55% |
| Coca-Cola, one liter | 17.54% | -8.55% | -33.34% |
| Ty Warner penthouse, Four Seasons, NYC, per night | 13.33% | -11.83% | -35.73% |
| Car, Toyota Camry,base model | 10.71% | -13.87% | -37.22% |
| Wedding, average cost | 7.93% | -16.04% | -38.80% |
| Nike shoes Jordan vs. LeBron James | 6.67% | -17.02% | -39.51% |
| Gallon of milk | 5.90% | -17.61% | -39.94% |
| Top 100 Music CD | 2.42% | -20.32% | -41.92% |
| Bestseller novel, Grisham vs.Patterson | 0.14% | -22.09% | -43.21% |
| Windows 1998 vs Windows 7 | -4.31% | -25.56% | -45.74% |
| Coffee, Maxwell House, 34.5 oz. | -5.01% | -26.10% | -46.13% |
| Average domestic airfare | -8.51% | -28.82% | -48.12% |
| Batteries, AA, 4, Energizer | -12.53% | -31.95% | -50.40% |
| Wal-Mart stock | -23.61% | -40.57% | -56.68% |
| $100,000 mortgage, 30 year fixed, total cost | -30.40% | -45.85% | -60.53% |
| iMac desktop computer, Apple | -33.36% | -48.15% | -62.21% |
| Hummel "To Market" #49 figurine | -33.38% | -48.17% | -62.22% |
| Martini and Rossi Spumante, 375 ml | -36.18% | -50.35% | -63.81% |
Notes: Wage figures can be found here. Price index figures are here.
Allow me to cheat and post a comment on New Thinking for a New Decade.
Congratulations! Courage and vision was needed.
Question: What about the Review of AUSTRIAN economics?
Nice work Steve on cost of living comparisions. Great for teaching.
PL.
Posted by: Peter Lewin | January 01, 2010 at 04:32 PM
Time for the debut of the
_Journal of Economic Coordination_?
Here's a moniker:
Calculation, Catallaxy and Coordination.
Maybe for a text...
"Fall asleep in five minutes or your money back."
Posted by: Bill Stepp | January 01, 2010 at 05:38 PM
Allow me to "cheat" too, and to congratulate you for following my advice to stop calling yourselves the Austrian economists. It was high time. I hope that in the future Steve will not be so angry when somebody call him non-Austrian, because you are now "Coordination problemists". :)
I also urge you to rename the Review of Austrian Economics as soon as possible.
Posted by: Nikolaj | January 01, 2010 at 05:50 PM
Interesting analysis.
However, "average" income data is only useful as a comparison for those that actually earn the average. I would surmise that if you filtered out the windfall salaries earned in the FIRE industry, we'd get significantly different results for "the rest of us."
Posted by: Futronomics.blogspot.com | January 01, 2010 at 08:20 PM
That's average hourly wage data, it's not "average income." It doesn't include non-wage sources of income. It's the standard series used for these sorts of comparisons.
Posted by: Steve Horwitz | January 01, 2010 at 09:49 PM
The name change makes me kinda depressed.
I mean, just when Austrian economics is starting to get more press again... Even if the term does have some connotation issues, now is the time that you guys can really step up to define it and shape its perception. If you abandon it, then it most certainly WILL become what you don't want it to be.
Oh well, the new name is nice anyway. I just hope you guys don't totally disassociate with the
Austrian school.
Posted by: Mikeikon | January 01, 2010 at 11:43 PM
For the record, there already exists a Journal of Economic Interaction and Coordination, still pretty new.
Posted by: Barkley Rosser | January 02, 2010 at 01:13 AM
Neat list.
Btw why does the observation deck cost so incredibly much more?
P.S.:Now that we are all Minsky-esk-ians (or so it seems from reading about the collapse) and with the NIE people winning the Nobel, and such... it seems the Austrians-style is winning large parts of the public debate. Some parts of Austrian thought are becoming far more mainstream so its not necessary to call yourself "Austrians" any more.
Posted by: Doc Merlin | January 02, 2010 at 01:31 AM
@Doc: good question about the observation deck. One guess is that post 9/11, more people are visiting the Empire State Building with the WTC no longer an option. Remember that's 1999 data.
Posted by: Steve Horwitz | January 02, 2010 at 09:15 AM
I question the use of "constant" dollars. My work requires that I deflate (or inflate) costs into constant dollars using the CPI. It seems that deflating your basket of goods into constant dollars using an inflation rate that is based on another basket of goods defeats the purpose of what the table is trying to show.
Posted by: John | January 02, 2010 at 04:31 PM
Congratulation on the New Thinking for a New Decade change. A good move.
No many ideas on the inflation subject :).
A happy new year, by the way, even if it is a little late.
Posted by: Niko | January 03, 2010 at 10:14 AM
Goods, but not many services, and not much decline in those quoted. The declining cost of babysitting is presumably part of the generally increase in wage inequality since it's unlikely there has been much productivity growth. How about college education and health insurance?
Posted by: John Quiggin | January 05, 2010 at 01:24 AM
John,
As I've noted in previous posts on this topic, college, housing, and medical care have all gone up to one degree or another in terms of labor hours. The question in these cases is what the cost/quality relationship has been. If a college degree is sufficiently more valuable, those rising costs might be worth it. Certainly houses and medical care are of much higher quality than, say, 20 years ago. The average US house is much bigger and much better equipped. The advances in medical care have been tremendous as well.
Of course all of this puts aside the question of whether misguided policy has contributed to raising those costs higher than markets alone would have. I would argue that's true of all three cases to varying degrees.
Finally, the rising cost of services is the obverse of the rising value of human labor, which is, of course, a good thing.
Posted by: Steve Horwitz | January 05, 2010 at 08:41 AM