# Inflation question. I was reading my grandfathers journal.. Mr. Gupton ran an embalm

ing school in Nashville Tenn. The point is that in his journal he speaks of how he purchased a “nice” home on thirty acres for his daughter in 1930 for \$1,000 just outside of Nashville Tenn! Assuming, and average rate of inflation of five percent that would translate into approximately \$18,000 in TODAY’s money. I did some checking an the AVERAGE home in the Nashville area TODAY goes for around 150 thousand (not including the thirty acres). What happened, are my average yearly inflation values way to low at 5% or has land gone up much faster (or perhaps did my grandfather get some sort of “Depression deal”.

Has anyone calculated what the Median income was at different points in our history in TODAYS dollars and then compared it to an inflation adjusted “basket of goods” from each year? It would be fascinating to know if the standard of living today is really much higher than say 1930 or 1950.

Your annual inflation estimate is probably too high, if anything, but you can check for yourself at http://www.bls.gov

The thing is, inflation is nothing but a weighted average of increases in the costs of various goods and services, and absolutely nothing more. Some goods and services increase rapidly in price, some stay pretty constant, and some decrease in price (compare the price a four function calculator today to one in 1975!). Land values, however, have probably increased at a significantly faster annual rate since 1930 in Nashville. The same is probably true for construction costs, and between the two you’ll see a far greater rate of increase in home values. This is a fairly uniform trend across the nation: the price of housing (rental or ownership) generally increases at a faster rate than the weighted average known as inflation. It’s also entirely possible that he just got a good deal, or bought a home that was a distressed sale for some reason, or any number of factors.

Whenever you calculate something in “today’s dollars” you’re comparing baskets of goods. If you’re asking has anybody ever compared standards of livings across time in the United States, yeah, there’s a whole group of people called “economists” that do that for a living. And yes, the standard of living in real terms (“real terms” means adjusted for inflation) is significantly higher today than it was in 1930 or 1950. I wouldn’t even know where to begin providing a cite for this, apart from every single academic paper ever written about standards of living in the United States. Now, does that mean our lives are any better? Not necessarily, but the fact remains that the median household in the United States can buy a lot more stuff today than it could in 1930 or 1950.

It’s easier to find the Department of Labor’s Inflation Calculator at this link instead of the one desdinova gave.

You could also try NASA’s.

And the one from this Morgan guy.

They seem to make slightly different assumptions since the answers I get from typing in the same values differ slightly.

And as desdinova said, much depends on the exact assumptions you make, what is included in the basket, how often it is revised, and the fact that many goods today are far better than they were many years ago even at the same price.

This is actually an extremely significant point that I neglected to mention. A “nice” home in 1930 is in absolutely no way comparable to a modern house. Central heat and air, indoor plumbing, construction material quality, insulation, stronger foundation, carpeting… I mean, the list goes on and on. In all likelihood, that house he bought for \$1,000 would be condemned if it were still around today if only for not meeting basic building and fire codes. On top of all of that, I can pretty much guarantee it was a significantly smaller home than the average modern home (average home sizes have been increasing steadily over the past few decades).

Think of it like cars… look at the features that came standard on a Model T, and then compare that to a Ford Focus. They aren’t even remotely in the same ball park… and that’s why the greater the distance between two time periods, the less relevant the standard measures of inflation are. You’re comparing apples to oranges.