This post relates to the following Keystone Economic Principles:
4. Economic systems influence choices.
8. Quantity and quality of available resources impact living standards.
9. Prices are determined by the market forces of supply and demand…and are constantly changing.
This post is about something I read last week, but I haven't gotten to for a number of reasons. Luckily, the information and the story aren't time sensitive.
Mark Perry at Carpe Diem has an interesting post on real prices. He had one of his graduate students at University of Michigan-Flint convert and compare prices for basic goods to work-time equivalents using prices from a Sears catalog in 1950 and prices at Sears in 2009, and average manufacturing wage. Basically, he was asking how long does it take to earn money to buy ...?
This is reminiscent of the 1997 Annual Report from the Federal Reserve Bank of Dallas. Using a similar method, the report compared prices in 1897 to 1997, again in work-time equivalents. In each case, the argument can be made that the wage factor chosen doesn't represent the majority of works - but it provides a basis for comparison. The reality is that most people don't have to work as hard to purchase comparable goods. And in most cases, we aren't working as hard to purchase better goods. It's an interesting observation to share with your students, and generally leads to a lot of "ah-ha" moments, especially given the “gloom and doom” we hear about in the media, generally.
I welcome your comments.