Measuring Worth: Relative Value of US DollarsCourtesy of MeaasuringWorth.com:George Washington... George Washington was paid a salary of $25,000 a year from 1789 to 1797 as the first president of the United States. The current salary of the president has recently been doubled to $400,000, to go with a $50,000 expense account, a generous pension and several other benefits. Has the remuneration improved? Making a comparison using the CPI for 1790 shows that $25,000 corresponds to over $585,000 today, so the recent raise means current presidents have an equal command over consumer goods as the Father of the Country. When comparing Washington's salary to an unskilled worker, or the measure of average income, GDP per capita, then the comparable numbers are $11 and $24 million. Granted that would not put him in the ranks of the top 25 executives today that make over $200 million. It would, however, be many times more than any elected official in this country is paid today. Finally, to show the "economic power" of his wage, we see that his salary as a share of GDP would rank him equivalent to $1.8 billion. The Erie Canal... The Erie Canal was built between 1817 and 1825, for a price of $7 million. This waterway is regarded as one of the most important investments in the nineteenth century as it opened the Midwest to trade and migration. How does its cost compare to what its cost would be today? Using the GDP deflator for 1825 shows that it would be $170 million, not more than the cost today of a few miles of Interstate highway. Using the unskilled wage measure the cost is $1.7 billion. From a historical point of view, this may be the best measure as most of the cost of building the canal was probably unskilled labor. Using the manufacturing workers index gives us a much higher cost of 3.8 billion. Using the GDP per capita, the cost is close to $4.4 billion and as a fraction of GDP it comes in close to $120 billion. As a comparison the current budget of the U.S. Department of transportation is $70 billion. Because of the volatility of prices in that period, if we had chosen 1817 instead of 1825, the GDP deflator computations would have been about 25% less and the other measures are different by similar magnitudes as well. This is a good example of how "approximate" these comparisons are. The Ford Model T... The Model T Ford cost $850 in 1908; however by 1925 the price had fallen to $290. How do we compare these values? If you wanted to compare the two years you would see that by using the CPI, the GDP deflator or the consumer bundle, $850 in 1908 is equivalent to between $1,485 and $1,670 in 1925. Using the wage indicator we see that the labor cost (of the 1908 car in 1925 wages) was $2,094 and by using the GDP per capita indicator it was $1,957. Thus in 1925 the $290 was less than 20% of its cost in 1908 using the price indexes and only 11 to 14% using the wage indicators and 15% using the GDP per capita. If we wanted to consider the costs of the Model T using today's prices we would find that the $850 cost in 1908 is $20,400 in today's prices using the CPI, $15,200 using the GDP deflator, about $44,000 using the consumer bundle, $89,000 using the unskilled wage, $136,000 using the manufacturing compensation, and $116,000 when comparing using the GDP per capita. At this point the ford was a luxury for most everyone. The $290 in 1925, on the other hand, would be only $3,500 in today's prices using the CPI, $3,000 using the GDP deflator, $7,500 using the consumer bundle, $12,300 using the unskilled wage, $15,000 using the manufacturing compensation, and $17,000 when comparing using the GDP per capita. By now, the ford was an automobile affordable by all. Babe Ruth... Babe Ruth signed a contract on March 10, 1930 with the American League Base Ball Club of New York (The Yankees) to play baseball for the next two years at an annual salary for $80,000. In 2009 the CPI was 14 times larger than it was in 1931 and the GDP deflator 12 times larger. This means that if we are interested in Ruth's purchasing power of housing or meals, then he was "earning" the equivalence of about $1,000,000 today. In 2009, the average consumer unit spends about 32 times in dollars more than it spent 76 years earlier. Thus, if we want to compare Ruth's earnings using the index of what the average household buys, it would be over $2,500,000 today. The relative cost of labor is 42 times (unskilled) and 50 time (manufacturing production workers) higher in 2009 than in 1932. So if we wanted to compare his wage to what someone selling hot dogs would earn, we could say his "relative wage" is three and a half to four million. GDP per capita and GDP are 75 and 186 times larger in 2009 than they were in 1931. Thus Ruth's earnings relative to the average output would be $6,000,000 today. Finally, as a share of GDP, Ruth "output" that year would be $15,000,000 in today's money. Putting a man on the moon... During March (1966): NASA told Congress the "run-out cost" of the Apollo program (to put men on the moon) would be an estimated $22.718 billion for the 13 year program that accomplished six successful missions of putting astronauts on the moon between July 1969 and December 1972. According the Steve Garber, NASA History Web Curator, the final cost was between $20 and $25 billion. How much would that be today? If we used the CPI, it would be $150 billion, but this would not be a very good measure since the CPI does not reflect the cost of rockets and launch pads. Using the consumer bundle would not be relevant either. Using the broader based GDP deflator gives a present cost of $122 billion. An alternative would be to use the production worker indicator as a rough measure of the labor cost in current terms and it would be $190 billion. By using the GDP per capita, we are measuring the cost in terms of average product and would get a number of $263 billion. Finally, a way to consider the "opportunity cost" to society, the best measure might be the cost as a percent of GDP, and that number would be $410 billion. This amount over thirteen years would be $30 billion per year. As a comparison, the NASA budget for the current fiscal year is approximately $19 billion. The "real" price of gasoline... Gasoline cost 27 cents a gallon in 1949 compared to around $3.50 today.* How has the relative cost of buying gas changed over the last 61 years? Presented here are two tables computing the annual "real" cost using our seven indicators, one in 2009 dollars, and the other in 1949 dollars. While the two tables show the same trends, they do give a different perspective. Using the 2009 table and the CPI and the GDP deflator, we see that gasoline was quite expensive in 1980 and 1981 and the cheapest in 1998 and 1999. Today, the real price using these two measures is higher than the period at the beginning of the 1980s. By looking at the share of the Consumer Bundle and GDP per capita, the story is a bit different. In 1981, a gallon of gas took as much out of what the average consumer spent as $3.90 does in 2009. And as a share of GDP per capita, gas was even more expensive in those earlier days with it at over $4.60 in 1980 and more expensive in the earlier years. Both wage indexes show the prices then and now are similar. The other table tells the story in a different way. Let us look at relative cost to a worker to fill up using 1949 dollars. That year the 27 cents it cost for a gallon of gas, took a certain share of the worker's wage. The interesting question is, has the cost as a share or percent of the worker's wage increased or decreased over time? The table shows that for the two wage rates and price of gasoline in other years, this cost has fallen. Since wages have increased faster than the price of gasoline, by 2009 an unskilled worker spends less than two-thirds as much, as a percent of wage, for a gallon of gasoline than the 1949 worker. For a production worker it is only half. The table shows that the $2.36 a worker paid in 2009 would be comparable to only 13 to 16 cents (in 1949 prices "share" of the wage. When we use the GDP per capita, the cost has fallen faster. Looking at the table shows that a gallon of gasoline costs around 11 cents a gallon (in 1949 prices) if measured as a "share" of the GDP per capita. This is because in 1949, 27 cents was .015% of per capita GDP, while in 2007, $2.36 was .006%. Finally, comparing its cost as a share of GDP, we see that in 1949 prices, it is about 4 cents. This means that a gallon gasoline was six times larger as a share of output in 1949 than it is today.Original SiteSome more... Relative Value of a Chinese Yuan Amount, 1952 - 2007:Price of rice: For many centuries rice has been the most common foodstuff of the Chinese people. Until the late 1980s the price of rice was set by the government. In 1954, in Guangzhou (formerly Canton), the price of rice was 0.25 yuan per kilo (2.2 pounds). Rice is a standardized commodity of considerable importance in household expenditure. Therefore the CPI is the logical indicator. Using the CPI, the relative value of a kilo of rice was 1.48 yuan in 2007. Teacher's wage: The average monthly wage of a teacher in senior high school, again in Guangzhou, was 101.80 yuan in 1956. For relative value in 2007, there are two alternative indicators that make sense: CPI and per-capita GDP. If the concern is with the purchasing power of the teacher's wage, then the appropriate indicator is the CPI and the relative value in 2007 is 600 yuan. If the objective is to assess the status of the teacher's wage, then the indicator is per-capita GDP and the comparable amount (relative value) in 2007 is 11,400 yuan. China's first nuclear bomb: In 1964, somewhat earlier than expected by Western experts, China exploded a nuclear bomb, thus becoming the fifth nuclear power and the first Asian nuclear country. The nuclear project had begun in 1958. The year-by-year cost of the nuclear-bomb project is presumably a state secret. Even the total cost is not readily available. There do exist two estimates of the total expense of producing the bomb over 1958-1964 and we believe the number 12.86 billion yuan in 1981 prices is the more reliable one. The nuclear program was a government project of substantial magnitude. Therefore the only logical indicator is the GDP level. The year-2007 relative-value of the seven-year nuclear program is 633.19 billion yuan. SourceAnd, of course...Gold:What Was the Price of Gold Then? Importance, Measurement, and History What Was the Price of Gold Then? A Data Study.
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