How do they calculate money from long ago to today’s value?
I ask because reading a lot of books you will come across an amount of money, and have no clue how much money it is in today’s terms other than “a lot”.
In Colleen McCullough’s First Man in Rome series, Julius Caesar get’s ransomed by pirates and he has them ask for a ransom of 100 talents.
In Pride and Prejudice, Mr Darcy has an income of £10,000 a year. Some have calculated his income to be equivalent to $300,000/year, but he seems wealthier than the 300K would indicate.
Most of it is guesswork. It has to be, because once you get back before the Industrial Revolution, “buying power” changes radically. You are dealing with a completely different economy, and money is thought of quite differently. Besides, in the 1800’s there weren’t any Hondas or iPods to buy, so there really is nothing to compare things to.
If Mr. Darcy’s ten thousand pounds equates to $300,000 of today’s money, keep in mind that he already owns the house and land, that none of that goes into savings, and that the average maid would get about fifteen pounds of salary a year (sorry, no actual cite, only calculating backward and taking into account seniority, from Jane Eyre’s thirty pounds a year).
Having the average yearly salary puts it into better perspective.
Mr. Darcy makes 333.333 times someone who make 30 pounds a year. If we say that $30,000 is a low average salary now, 333 times that is $10million. Which seems to be closer to how rich he seems.
I concur. What people needed to buy even as recently as 1960 is quite different from today. Telecommunication costs and needs are radically different. If you go further back, there is a lot of stuff you had to buy that you wouldn’t get know and vice versa.
This doesn’t even take into account regional differences or changes in tax laws. Remember that in the 19th Century (except for a brief period during the Civil War) people weren’t paying income tax in the U.S.
For the recent past, the Consumer Price Index or CPI, is often used. However, it’s not perfect. For one, it’s set up to measure the change in prices of a “representative basket of goods” for urban consumers. Because of historic trends towards urbanization, the further one goes back in time, the less applicable such a measurement is for the average person.
In addition, technological and social change in goods and buying patterns make it almost impossible to directly compare goods across long periods of time. For example: Housing expenses now make up a much larger portion of costs than they have at most times in the past, while many other costs have gone down. Do you consider someone who lives in a small Manhattan apartment but has money for many modern conveniences to be poorer than someone who lives in a large rural home but has to pump water and chop wood for heat? Personal servants were much more affordable in the past, but have mostly been supplanted by appliances. Is someone in the past who hires a chauffeur and a housemaid substantially more wealthy than someone who has a car and a dishwasher?
It can be tempting to measure his income against the average, but you’ll get a skewed result, simply because, on average, people are much wealthier now than in the past. Mr. Darcy may have made a huge amount more than the average person, but he couldn’t buy an iPod, get takeout Thai, take antibiotics, go skydiving, rent a movie, etc. simply because such things weren’t available at any cost. Someone making an average salary today can do all of those things without great financial hardship.
In 1990, a Macintosh IIfx would have cost me $10,000; a new quad-processor G5 is less than half that. If we compare based on “a top-of-the-line Mac = a top-of-the-line Mac”, a dollar obviously buys twice as much as it did in 1990. If we extrapolate as “a megahertz is a megahertz and a megabyte is a megabyte”, a dollar appears to buy several hundred times more than it did in 1990.
When I was in elementary school, postage on a 1st class letter was 5¢. Seems pretty obvious that a dollar is worth only about 1/8 as much as it was back then.
Small hotel rooms with a double bed were available for $4 in 1966. Looks like a dollar will go about a 50th or less of what it did back then.
When I was in high school, the cost of a local phone call on a pay phone was 25¢. Same as it is now. As you can see, a dollar is worth just as much now as it was in 1977.
Oh, all right, we can create an “average price of stuff” and compare average in one year to average in another year. Never mind that someone else could come up with a different average just by comparing different things (wanna toss health care costs into the mix?). But any index you pick is going to sound “wrong” to someone because by golly a Thingumabob cost $XX and a salary of $XXX per week wouldn’t buy you enough Thingumabobs to get by, which proves the index is all shot to hell, right?
IMHO, the best simple method is to use percentiles. So if Mr Darcy was in the top 0.54% of income earners in his day and the top 0.54% today earned $300K, then that is his equivilant income. In psychological terms, relative wealth matters far more than absolute wealth.
It’s not just that if you’re comparing the prices of goods, you have to begin making big assumptions about which goods to compare. It’s also that you have to make big assumptions about what the prices of those goods were.
Prices vary not just over time but at any point in time. To find the ‘average’ price of a loaf of bread today, you can’t just pop into the nearest shop to see what they’re selling them for. Even for modern economists compiling contemporary price indices, finding ‘average’ prices is a far from trivial problem.
But those problems are compounded once you try to construct historical price indices. You can’t just find lots of examples of people saying, ‘The price of bread is X’ or ‘I paid X for bread’. That’s the equivalent of popping into your local shop. In Jane Austen’s day there were at least some contemporaries who were trying to compile reasonable statistics on such matters, not least because commodity prices were already being printed in newspapers. But for earlier centuries the problems become even greater. For historians of inflation the great prize is any archive, usually that of an institution, that records in detail similar types of purchases over very long periods. That way they can at least get a sense of how prices changed over time in that particular locality. But even then there can be arguments over how representative those findings are.
Of course, today people don’t need to have exact figures to hand to have a fair idea whether someone is ‘rich’, ‘very rich’ or ‘obscenely rich’ and it wouldn’t have been any different in the past. When we’re talking about someone in 2006 reading about the past, whether in novels, history books or original records, that sort of sense is a bit more difficult to acquire, but, once acquired, it is actually likely to be rather more reliable than the crude statistics.
Here’s something I’ve always wondered: In Les Miserables (the book), it’s said that Marius rents his hovel for 30 francs per year. Jean Valjean bought Cosette from Thernardier for 1500 francs. Ergo, he bought her for 50 times the rent on a Paris hovel in 1832.
I did some searching and the best deal I could find (admittedly I didn’t look very hard) for an apartment in Paris proper was 1200 Euros per month. I’ll assume that an apartment in the Paris ghetto goes for half that (probably not a safe assumption, but what the hell), so that’s 600 euros per month. 600 x 12 = 7,200 euros per year. 7,200 x 50 = 360,000. 360,000 Euros at an exchange rate of one Euro to $1.28 = $460,800. Ergo, Jan Valjean bought Cosette for $460,800.
I have seen the comparison that one ounce of gold is roughly equivalent to the cost of a good quality mens dress suit, and that this was true in the days of George Washington, and is still true today.
I’m not sure if that is accurate, but it seems to indicate something that you can compare to – clothes. Even despite many changes in style. But it would probably only work back to about the 1300’s, when mechanical cloth-making looms & other machinery came into use.
This was in the context of an explanation of gold as not an investment which appreciates in value, but as a hedge against inflation. Over the past several hundred years, they claimed the purchasing power of gold had held steady thru inflation, deflation, and other economic times.
A few months ago, I bought a very nice three-piece suit at the Men’s Warehouse for about $300. Then again, I don’t live in a state that’s known for its obscenely high cost of living.