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From: "John Steele Gordon" <>
Subject: Translating the Value of Money over Time (was Forbes-Smith . . .)
Date: Sat, 02 Jun 2001 18:22:48 GMT
References: <200106020554_MC3-D40C-32AE@compuserve.com>, <eBpQE736AHA.268@cpmsnbbsa07>



"MRGIFFORD" <> wrote in message
news:...
> >However, I would be interested to know why a conversion of 1:114 had been
> used for the first figure, but 1:73 for the >second?
>
> Dunno, but it's what I get when I use
>
> http://www.eh.net/ehresources/howmuch/poundq.php

This device might be useful for comparing money over short time spans, and
in recent times, but it is useless for comparing money from the
pre-industrial era to today's money.

The reason is simple enough. Some things have greatly risen in price (the
cost of a house maid, for instance) and others have greatly fallen in price
(the cost of a suit of clothes). Many things are now commonplace that were
then unobtainable (transatlantic telephone calls, gall bladder operations,
frozen dinners, etc.). Many things that were then ordinary, at least for the
middle and upper classes, are now super luxuries, such as linen bedsheets.
More, the price of necessities could vary tremendously from one year to
another. Wheat, for instance, might be plentiful one year with a good
harvest, and very dear the next due to bad weather. The price of bread could
rise suddenly by a factor of ten in those days because it was hard to import
wheat in large quantities quickly. That doesn't happen any more. More,
technology changes. How do you compare a horse and buggy and an automobile,
a laundress and a washing machine, wash-and-wear clothes and homespun?

The fact of the matter is that the economic universe of, say, 1750, and that
of today, are completely different and therefore the money cannot be
meaningfully compared with any precision. You have to compare sums with the
prices of that day. With capital sums, where would the income that could be
prudently earned have put a family on the social scale? With smaller sums,
how does it compare with, say, a skilled workman's average annual income?
This won't give you precise answers, but precise answers are, inevitably,
wrong answers. The precision is spurious.

With characteristic modesty, I would suggest reading, "The Problem of Money
and Time" (American Heritage, June 1989) by John Steele Gordon. It's
non-technical, intended for non-economists.

JSG


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