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> 10k was >250k in todays dollars Source? A basic inflation calculator tells me that 10k in 1970 is ~70k in 2021. Yes, that's more, but it's significantly les

> 10k was >250k in todays dollars Source? A basic inflation calculator tells me that 10k in 1970 is ~70k in 2021. Yes, that's more, but it's significantly less than 250k.

DataDaoDe 5y ago
This made me wonder if inflation is enough to account for price increases. For instance, it could be the case - I don't know since I'm not an acquainted with the field/data - that the costs of important goods such as homes, cars, education, health care, etc. has increased more or less that what that 10k approx. 70k figure tells you. For instance, maybe its the case that for a generic 10k its worth 70k distributed over all goods and services, but for those that matter most maybe its 250k or 20k, I don't know. Does anyone know more about this topic? I think they use a basket of goods to calculate inflation, but how has that basket changed / been updated over time? Can any economist weigh in here?
- JorgeGT 5y ago
  You are right. Inflation is usually computed by tracking the price of a "basket of goods". But this only makes sense in the short term and doesn't account for profound societal changes that technology, ideology, etc. brings to that basket. Consider this quote by Agatha Christie (1890-1976): I never thought I would be so poor as to not have live-in staff, or so Rich as to have a car.
- distortedsignal 5y ago
  I think you're referring to the CPI (https://en.wikipedia.org/wiki/Consumer_price_index https://en.wikipedia.org/wiki/Consumer_price_index), which, as I understand it, is a pretty hotly contested tool in econ/business circles today. If you want to check out the raw data for the CPI that the US Federal Reserve uses, check out https://fred.stlouisfed.org/ https://fred.stlouisfed.org/ - though I couldn't begin to recommend how to navigate that site.
- mandevil 5y ago
  Two points on the market basket mechanism for measuring inflation: One is that I think lots of people over-focus on specific sectors: sure houses and college education have gotten more expensive, but clothes, travel and computers have gotten much cheaper. Most of the complaints about "hidden inflation" that I've seen are basically ways of saying 'if you only look at the things that have grown much faster than the inflation average, then it looks like inflation is much greater than average.' Now the question of 'hedonic adjustments' (how do you account for the problem that no amount of 1970 money could buy you an iPhone, or a car as safe and reliable as any car made in 2021) is a tricky one. As I recall from my macro class <mumble mumble> years ago, economists basically introduce fudge factors to account for that. I recall some speculation that the fudge factors in the health care sector (of the US) were systematically wrong, because the population isn't actually getting healthy or living longer as those numbers would suggest.
  - ndbfjd 5y ago
    I over-focus on those sectors because the proportion of my budget that is spent on clothes, travel, computers, iPhones, etc. is a small fraction of that spent on housing, college education, and healthcare. I'm not interested in hearing the CPI tell me how many fewer televisions I can buy this year due to inflation when those other sectors dominate my spending.
    - pwinnski 5y ago
      It seems self-evident that the anything for which the cost has gone up will take up a greater proportion of your budget than anything for which the cost has gone down, no matter what the things are. I, for one, own a house and am not currently paying for anyone's college education, so the proportion of my budget going to food and clothing is more relevant to me. Should I say that I'm not interested in hearing people tell me how many fewer students I can send to college when I don't have any students to send? CPI items were picked precisely because they apply to everyone. Raises in housing cost renters more, but increase my net worth as an owner, so it's left out of the CPI. Health care costs in the US are ridiculous, but they're also widely disparate depending on more factors than can be accounted for in a simple measurement like CPI.
- lovecg 5y ago
  Cost of some these things you mentioned definitely went up by a lot and is not fully explained by inflation. A good blog post on the topic: https://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ https://slatestarcodex.com/2017/02/09/considerations-on-cost...
cat199 5y ago
Depends on what you are buying - relative prices of various goods change over time; many are critical of things like CPI as being a stand in for inflation for exactly this reason Example: 1970 corvette: $5,192.00 (Coupe), $4,849.00 (Convertible) 2021 corvette: $59,900 >>> int(10000 \* (59900 / 5192)) 115369 so, using 'a corvette' as the 'basket of goods' has a ~65% higher inflation rate than the inflation calculator, vs for the big mac: >>> int(10000 \* (5.66 / .65)) 87076 which is ~24% higher than the 70k you mention.
- nrmitchi 5y ago
  > which is ~24% higher than the 70k you mention. Which is still not 250k. Either way, I see the point you're trying to make, but when people discuss "how much was X in todays dollars" they don't mean "go find a 'basket of goods' to reflect whatever value they want". CPI is the go-to measure that is understood. Yes, some things are more expensive relative to CPI (housing, education, medical care), but using a non-standard measuring stick is not intellectually honest (unless you make it clear and disclose your reason for why you think it should be different).
- jjk166 5y ago
  I think it's important to note that a 2021 corvette is not a 1970 corvette. Think of all the additional safety features, the different materials of construction, the vastly better electronics, etc. If you could transport a 2021 corvette back to 1970, there's no way it would sell for only $5,192. This is actually a serious issue with many products, for example cleaning supplies that are sold for the same price but in different bottles with different internal volumes. Even for something as simple as bread, the average loaf on a modern shelf has many chemicals which would not have been present 50 years ago, and if you do go for a loaf comparable to what used to be available you're paying some markup for "organic" or "artisanal" labelling. Indeed virtually no where can you find a good whose price has not been affected by changes to technology, marketing, customer demographics, supply chains, etc. All of these obfuscate the change in the value of money. A reasonable basket-of-goods comparison requires looking at multiple goods and trying to normalize for all these changes. Also a Big Mac in 2021 is 3.99. A meal is 5.99, which would have been $1.11 in 1970. Although even here, McDonalds is a very different restaurant now, it's impossible to say how much is inflation and how much is the big mac no longer being one of 6 items on the menu.
wand3r 5y ago
Sorry, I am past the edit window. I was on mobile and used 1913 not 1970. The point still stands but obviously to a lesser extent. Thank you for correcting me

> 10k was >250k in todays dollars Source? A basic inflation calculator tells me that 10k in 1970 is ~70k in 2021. Yes, that's more, but it's significantly less than 250k.

DataDaoDe 5y ago

This made me wonder if inflation is enough to account for price increases. For instance, it could be the case - I don't know since I'm not an acquainted with the field/data - that the costs of important goods such as homes, cars, education, health care, etc. has increased more or less that what that 10k approx. 70k figure tells you. For instance, maybe its the case that for a generic 10k its worth 70k distributed over all goods and services, but for those that matter most maybe its 250k or 20k, I don't know. Does anyone know more about this topic? I think they use a basket of goods to calculate inflation, but how has that basket changed / been updated over time? Can any economist weigh in here?

JorgeGT 5y ago
You are right. Inflation is usually computed by tracking the price of a "basket of goods". But this only makes sense in the short term and doesn't account for profound societal changes that technology, ideology, etc. brings to that basket. Consider this quote by Agatha Christie (1890-1976): I never thought I would be so poor as to not have live-in staff, or so Rich as to have a car.
distortedsignal 5y ago
I think you're referring to the CPI (https://en.wikipedia.org/wiki/Consumer_price_index https://en.wikipedia.org/wiki/Consumer_price_index), which, as I understand it, is a pretty hotly contested tool in econ/business circles today. If you want to check out the raw data for the CPI that the US Federal Reserve uses, check out https://fred.stlouisfed.org/ https://fred.stlouisfed.org/ - though I couldn't begin to recommend how to navigate that site.
mandevil 5y ago
Two points on the market basket mechanism for measuring inflation: One is that I think lots of people over-focus on specific sectors: sure houses and college education have gotten more expensive, but clothes, travel and computers have gotten much cheaper. Most of the complaints about "hidden inflation" that I've seen are basically ways of saying 'if you only look at the things that have grown much faster than the inflation average, then it looks like inflation is much greater than average.' Now the question of 'hedonic adjustments' (how do you account for the problem that no amount of 1970 money could buy you an iPhone, or a car as safe and reliable as any car made in 2021) is a tricky one. As I recall from my macro class <mumble mumble> years ago, economists basically introduce fudge factors to account for that. I recall some speculation that the fudge factors in the health care sector (of the US) were systematically wrong, because the population isn't actually getting healthy or living longer as those numbers would suggest.
- ndbfjd 5y ago
  I over-focus on those sectors because the proportion of my budget that is spent on clothes, travel, computers, iPhones, etc. is a small fraction of that spent on housing, college education, and healthcare. I'm not interested in hearing the CPI tell me how many fewer televisions I can buy this year due to inflation when those other sectors dominate my spending.
  - pwinnski 5y ago
    It seems self-evident that the anything for which the cost has gone up will take up a greater proportion of your budget than anything for which the cost has gone down, no matter what the things are. I, for one, own a house and am not currently paying for anyone's college education, so the proportion of my budget going to food and clothing is more relevant to me. Should I say that I'm not interested in hearing people tell me how many fewer students I can send to college when I don't have any students to send? CPI items were picked precisely because they apply to everyone. Raises in housing cost renters more, but increase my net worth as an owner, so it's left out of the CPI. Health care costs in the US are ridiculous, but they're also widely disparate depending on more factors than can be accounted for in a simple measurement like CPI.
lovecg 5y ago
Cost of some these things you mentioned definitely went up by a lot and is not fully explained by inflation. A good blog post on the topic: https://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ https://slatestarcodex.com/2017/02/09/considerations-on-cost...

cat199 5y ago

Depends on what you are buying - relative prices of various goods change over time; many are critical of things like CPI as being a stand in for inflation for exactly this reason Example: 1970 corvette: $5,192.00 (Coupe), $4,849.00 (Convertible) 2021 corvette: $59,900 >>> int(10000 \* (59900 / 5192)) 115369 so, using 'a corvette' as the 'basket of goods' has a ~65% higher inflation rate than the inflation calculator, vs for the big mac: >>> int(10000 \* (5.66 / .65)) 87076 which is ~24% higher than the 70k you mention.

nrmitchi 5y ago
> which is ~24% higher than the 70k you mention. Which is still not 250k. Either way, I see the point you're trying to make, but when people discuss "how much was X in todays dollars" they don't mean "go find a 'basket of goods' to reflect whatever value they want". CPI is the go-to measure that is understood. Yes, some things are more expensive relative to CPI (housing, education, medical care), but using a non-standard measuring stick is not intellectually honest (unless you make it clear and disclose your reason for why you think it should be different).
jjk166 5y ago
I think it's important to note that a 2021 corvette is not a 1970 corvette. Think of all the additional safety features, the different materials of construction, the vastly better electronics, etc. If you could transport a 2021 corvette back to 1970, there's no way it would sell for only $5,192. This is actually a serious issue with many products, for example cleaning supplies that are sold for the same price but in different bottles with different internal volumes. Even for something as simple as bread, the average loaf on a modern shelf has many chemicals which would not have been present 50 years ago, and if you do go for a loaf comparable to what used to be available you're paying some markup for "organic" or "artisanal" labelling. Indeed virtually no where can you find a good whose price has not been affected by changes to technology, marketing, customer demographics, supply chains, etc. All of these obfuscate the change in the value of money. A reasonable basket-of-goods comparison requires looking at multiple goods and trying to normalize for all these changes. Also a Big Mac in 2021 is 3.99. A meal is 5.99, which would have been $1.11 in 1970. Although even here, McDonalds is a very different restaurant now, it's impossible to say how much is inflation and how much is the big mac no longer being one of 6 items on the menu.

wand3r 5y ago

Sorry, I am past the edit window. I was on mobile and used 1913 not 1970. The point still stands but obviously to a lesser extent. Thank you for correcting me