In my opinion the best measure of inflation is the wages paid the minimal wage (or lowest paid) worker. I have read two books in the last week that give what I think is an absurdly small inflation coefficient in England since the beginning of the 17th and end of 18th centuries. (The books were, respectively, God’s Secretaries and The Lunar Men and both highly recommended.) Since monetary amounts figure significantly in both books, the question is interesting. Does anyone know a web site that gives typical workmen’s wages over the centuries. In the case of the Lunar Men, it is mentioned in passing that there were so few minor coins in circulation that some manufacturers had to give a poind note to be shared among 4 or 5 workers. This suggests that that a typical wage was between 4 and 5 shillings per week or maybe 11 or 12 pounds a year, which in turn suggests an inflation factor of 1000. This puts Dorothea Brook’s 700 pounds per year in Middlemarch in a different light from what I had understood (even granted that that was already 19th century).
Since the minimal possible wage is zero regardless of the year, I think you’ll find that measure of inflation a bit untrustworthy! 
Here’s an British inflation calculator based on a rather more representative sample of prices:
To give you a different perspective of what happened in the United States (before we went off the gold standard), they sold candy “2” for a penny. In the United States, we had virtually no net inflation from 1790 until the 1940’s. The US dollar was pretty much a constant for almost 150 years.
I dont think your theory of " the best measure of inflation is the wages paid the minimal wage " is valid since most of US history has no net inflation, and since minimum wage laws(laws that outlaw low paying jobs) came into popularity.
We also had pennys made of real copper the size of half dollars until the late 1800’s.
As far as the denominations of money, it is interesting that in the US we had $500, $1000, $5000, and $10,000 bills in circulation during a period of no inflation, and when we outlawed gold, we stopped issuing and using the larger denominations( I dont know why this happened- doesnt make sense).
Those large denominated bills ($500, $1000, $5000, and $10,000) are no longer issued because of lack of use. They stopped printing them in the 1940’s.
But, I heard (no cite) they were considering reissuing $500 bills.
I guess a $500 bill would buy what a hundred did not so long ago.
Well, colour copiers are really neat for making $10,000 bills.
Honestly, if someone wants to move or pay $1 million dollars for something do you really think they wander down to first national and ask for 100 $10,000 bills? They electronically wire the amount. Same goes for the $750 dollar TV. You break out the debit or credit card. There is no longer a need for physical representations of those denominations.
I’d also like to point out that Spain underwent massive inflationary pressure and they were most definitely on the gold standard. OK, maybe silver.
Hari Seldon an excellent book that I’m working through is The Cash Nexus by Niall Ferguson. It does go into the idea of imperial “under-stretch” but it gives a valuable overview of inflation and government financing of war/welfare between 1700 and 2000.
I believe that there were deflationary periods during this time frame that would even out the average rate of inflationary.
Here are some estimates of the Consumer Price Index in Great Britain since 1750.
Hari, the minimum wage makes a very poor proxy for the overall level of inflation in an economy. Government-mandated minimum wages didn’t exist until the Twentieth Century, and they are driven by politics more than prices. The overall level of inflation should be estimated by measuring the price of a “basket” of goods that are as representative as possible of what a typical consumer would buy.
When government is on a consistent specie standard (that is, when it doesn’t debase or devalue its coinage), the change in prices will depend on the change in specie relative to the change in overall production of goods and services. In general, in modern times at least, production has risen faster, so that the trend in prices in most years during the 1750-1900 period was down. Under wartime pressure governments would often go off of the gold standard, and inflation would follow—on the site to which I’ve linked, note the rapid runup in prices during the period of the French Revolutionary and Napoleonic (1792-1815) Wars.
To echo what jklann said: What is the rate of inflation if 90% of the population makes $10,000 and %10 makes 100,000 a year in year 0 and 70% of the population makes $10,000 and %30 makes $100,000 in year X?
It’s actually a trick question since I gave no indication of how much a person could buy with $1 in either year.
Wages, adjusted to the relative purchasing power of your base year, are perhaps a better measure of standard of living, not inflation.
First off, let me just say that the reason the US govt stopped printing high denomination bills was part of the “war on drugs”. It was much easier to carry $1,000,000 as 1000 bills of $1000 than 10,000 bills of $100. Of course, the existence of credit cards does simplify things.
Now let me defend my feeling that true inflation is best measured by a laborer’s wage. In 1600, a person basically needed food, shelter, and clothing. Wealthy people bought much more, but they basically bought the labor (or time) of workmen. Nowadays, those three items make up well under half of what I spend, or even what a common laborer spends. So what I want to know is what a pound felt like to a worker in 1600 and 1780 and so on. And what it feels like is essentially the length of time he has to work to earn it. Apparently, he had to work a month to earn in 1780 and what, 20 minutes, today. That gives a ratio of at least 500.
BTW, although someone said that the lowest wage was 0, that is not a living wage. Even slaves cost something, unless you consider them throwaway, which, unfortunately, has happened. The trouble with cost of living is that today it includes SUVs and then it didn’t. And the trouble with the price of bread is that it is so much less important today.
Maybe I should rephrase my question. Is there any web site that tracks the cost of labor over the centuries? Never mind that I consider that as tracking inflation.
But why measure it by a laborers wage? It doesn’t take into account the distribution of wealth. The best way to get the information you are looking for is to use a CPI (ie inflation) to convert 1600 guys wages to 2003 wages. If you like, take a range of wages and chart how the distribution of wealth has changed over the years.
It will tell you 1600 Guys pound felt like x dollars feel today. He would be in the y% income bracket which is equivalent to someone in such and such profession.