In 1973 $20 was worth $104.94

[The_Jeff]

Originally Posted By: Benzadmiral

Look at it this way. If in 1972 gas was .33 a gallon, the price of a gallon of fuel has gone up about 10 times. Has the average yearly income of the average worker gone up 10 times? I doubt it.


Yeah but a typical car back then would be a chevy impala with 327 and 2 speed powerglide that might have been good for 15 MPG. One can get the same interior room from a Camry, but with 2.5x the MPG. Maybe multiply a 1972 salary 3x and we can drive as far as we could back then for the same work put in.

 

[Cujet]

Originally Posted By: ueberooo

Rough rule of thumb; money devalues in half every 15 years (quarters in value every 3 decades). So, we're doing a little better thanks to the post 2008 slowdown, since $105 < 20*4*almosttwoish, where almosttwoish=exp(2/3 ln 2)~1.6.

The problem with the official inflation figures is that things are a little fudged. They are still roughly correct; distorted only enough to remain plausible. The main fudging is done with the hedonic quality adjustment, which adjust the value of modern products pretty much always... upwards. I don't think that should really be so.

Sure $500 laptop now is a few times faster than one you'd have bought 5 years ago; cars now have all sorts of new features over a car bought 10 years ago, and we didn't have "supercomputers" we could carry in our pockets 30 years ago. However the "hedonic quality adjustment" are completely overdone IMO and are completely 'hedonic' in the sense that they seem biased to only act to understate the inflation.

Yet, are there ever 'hedonic' quality adjustments made to reflect the lower quality of produce and goods? 15 years ago you didn't have to worry about your food being lousy GMO produce. 75 years ago you didn't have to worry about GMO nor massive toxic pesticides in your food. Only a few decades ago you wouldn't have to worry that, if you ate meat, whether it was produced by factory farms.

A more accurate method would be to compare 1920s food to organic 2010s food (Organic is generally almost twice the cost of conventional.

And did you have to worry in 1960 that a television or radio you (bought, was made in a sweatshop where people are paid approximately nothing per day, in conditions similar to where iPhones parts were produced by foxconn---suicide nets in the dormatories...)

I guess hedonic adjustments just assume the price of our health and conscience is practically zero.



Fantastic post!

Many people won't understand it though. The word "hedonism" is the basis for hedonic and in general, it means "those fancy features" you are currently paying for have been removed from the cost basis. As the products from years ago did not have those features.

Nearly zero effort is made to account for the ease of including such features today. Washing machines are, for example, used in the calculations. Problem! People don't purchase washing machines on a regular basis.

 

[Cujet]

Originally Posted By: eljefino
Originally Posted By: Benzadmiral

Look at it this way. If in 1972 gas was .33 a gallon, the price of a gallon of fuel has gone up about 10 times. Has the average yearly income of the average worker gone up 10 times? I doubt it.


Yeah but a typical car back then would be a chevy impala with 327 and 2 speed powerglide that might have been good for 15 MPG. One can get the same interior room from a Camry, but with 2.5x the MPG. Maybe multiply a 1972 salary 3x and we can drive as far as we could back then for the same work put in.


Possibly true when comparing 1970's cars. But when comparing 1950's cars, today's vehicles are half the size, and sometimes significantly less capable.

Consider towing the family boat across the country with a Camry, 4 kids and a motorcycle. Can't be done. Yet, this type of thing was exactly what we did growing up.

Many here are simply not old enough to remember. Today, we must purchase a much more expensive, capable SUV or Pickup truck to accomplish the same task.

Also consider Europe, where family driving vacations require 3 vehicles! Not because families are so large, but because they have tiny cars.

Today's average car is smaller than the average car from the 1950's and it's cost is equivalent to an average years take home pay. Something is amiss.

 

[xfactor9]

Originally Posted By: Cujet
Possibly true when comparing 1970's cars. But when comparing 1950's cars, today's vehicles are half the size, and sometimes significantly less capable.

Consider towing the family boat across the country with a Camry, 4 kids and a motorcycle. Can't be done. Yet, this type of thing was exactly what we did growing up.

Many here are simply not old enough to remember. Today, we must purchase a much more expensive, capable SUV or Pickup truck to accomplish the same task.
....


Cars from the 1950s were polluting deathtraps that would be lucky to last 100k miles. A car today wouldn't need its spark plugs replaced even once before that 1950s car rusted out. Cars today are more capable and better

 

[Benzadmiral]

But are modern cars -- taking it all in all, not just safety or just maintenance or just mpg -- are modern cars really enough better to justify a price 10X times higher? When the average buyer makes only about 7.5X what he would have in the earlier period? (Median household income in '66, $6900; in 2012, $51K.)

(10x? Yes. My father's nicely appointed '66 Impala SS was stickered at $3400 in late 1965. The modern Impala, optioned with about everything available, pushes $35K.)

 

[supton]

IMO, yes; the fact that cars back then lasted maybe 5ish years, vs an easy 10 today. That is worth a factor of 2 right there, on top of the factors you mentioned.

 

[Shannow]

Originally Posted By: Pop_Rivit
The U.S. median household income in 1950 was about $4,800/year. Using your calculator that translates into $46,000 in today's dollars. The 2012 household median income was $51,371, so median income has risen slightly faster than inflation. That doesn't account for the added tax burden, so disposable income may not be as much as it was in 1950.

Sounds like a good reason not to be average, doesn't it?


30 years of paying income taxes, and listening topoliticians talking "average incomes" etc. but never mentioning "average taxation"...bracket creep is insidious and evil.

 

[jcwit]

Originally Posted By: supton
IMO, yes; the fact that cars back then lasted maybe 5ish years, vs an easy 10 today. That is worth a factor of 2 right there, on top of the factors you mentioned.


My 1st car purchased in 1959 was a 1950 Studebaker Champ, 9 years old and ran like a champ other than it burned oil, but never failed to get me from point A to point B. My Dads car at the time was a 1949 Chev, it also was a good runner, and didn't burn oil.

Many cars lasted way longer than 5 years back then.

 

[Shannow]

True, in 1973, our family car was a 1949(ish) Humber Super Snipe

 

[HTSS_TR]

Originally Posted By: Benzadmiral
Look at it this way. If in 1972 gas was .33 a gallon, the price of a gallon of fuel has gone up about 10 times. Has the average yearly income of the average worker gone up 10 times? I doubt it.

How much was a barrel of oil back in 1972 ? I think it was less than $4 a barrel and current price is about $90-100+.

Cost of crude oil went up more than 20 times and gas only went up 10-12 time.

Currently we in California paid more than 70 cents Federal, State and Local tax. That is more than double the total cost of gas in 1972.

 

[4D-56]

Originally Posted By: Pop_Rivit
Originally Posted By: stro_cruiser
Its fiat currency. Its gonna crash at some point.


I've been hearing some people spewing that same garbage since the 1970's.


I too hope I'm wrong but I Cant help but think of being in Vietnam and asking why we were spending US$...'because the Vietnamese Dong became so devalued,its worth nothing' Could the same happen here if the bills keep on getting printed and the buying power of the dollar keep lowering? Maybe im missing something but it does not look good.

I suppose since its the mighty dollar, the primary world currency, it might hang on longer than the rest.

 

[Cujet]

Using the CPI, gas should be $1.25 today.
Heating oil should be 99c
A full sized car should be ummm the cost of a chevy spark... And good luck fitting a family of 6 in that "chevy spark", while towing a boat and carrying a dirt bike.

So, the list price of a 1973 Ford LTD four-door hardtop sedan was $3,833, equivalent to about $19,800 in 2012 dollars. And, before you disparage the LTD, it did not come with a 2 speed powerglide. It came with a mighty capable Ford C6 automatic, 8 thundering cylinders, a nice choice of engines and enough room for 8 "non fat" Americans or 6 adults.

AMC Javelin AMX: $3,191
Audi 100 Coupe: $3,695
Buick Luxus Hardtop Coupe: $3,718
Chevrolet Camaro Z/28: $3,470
Chevrolet Impala Custom Coupe: $3,836
Chevrolet Monte Carlo Landau: $3,806
Dodge Challenger with 340: $3,192
Dodge Charger Special Edition: $3,375
Dodge Polara Hardtop Coupe: $3,752
Fiat 124 Sport Coupe: $3,674
Ford Maverick Grabber: $2,541
Ford Mustang Mach 1: $3,088
Honda Civic Hatchback: $2,250
Mazda RX-2 Coupe: $3,495
Mercury (Ford) Capri V6: $3,261
Mercury Cougar XR-7: $3,679
Mercury Montego MX Wagon: $3,417
MGB: $3,925
Oldsmobile Cutlass Supreme Coupe: $3,323
Oldsmobile Vista Cruiser Wagon: $3,788
Opel Manta: $2,850
Plymouth ‘Cuda: $3,120
Plymouth Duster 340: $2,822
Plymouth Fury III Hardtop Coupe: $3,883
Plymouth Satellite Sebring: $3,109
Pontiac Catalina Hardtop Coupe: $3,869
Pontiac Firebird Formula: $3,276
Pontiac LeMans GTO: $3,494
Triumph TR6: $3,275
Saab 99L: $3,845