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Inflation Doesn’t Tell The Entire Story
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Here’s an interesting question – would you rather have $70,000 in 1900 or $70,000 now?
Those who are familiar with the idea of inflation are probably aware that $70,000 in 1900 is worth a lot more than $70,000 today. In fact, according to the BLS, $70,000 in 1913 (as far back as their calculator goes) is worth over $1.5 million today.
The bigger question, and the point of Tim Harford’s post, is that while you might have $1.5 million a year back in 1900, your quality of life wouldn’t be as good as it is now. With the advances in a variety of fields, there are things that exist today that people couldn’t dream of in 1900. For example, the life expectancy of a male born between 1900-1902 was a mere 47.9 years (women could expect to live to 50.7). In 2003, that rose to 74.8 years for men and 80.1 years for women. As a man, you might make $1.5 million a year but you could enjoy that for 26.9 fewer years without air conditioning, a car (Ford would manufacture its first Model T in 1908), planes, or the Internet.
So while you might have more money, you wouldn’t have enough to buy many of the comforts we’re used to today. Personally, I’d rather have $70,000 today, sit in my nice warm house with my beagle Tobey, and typing away on my computer reading thought provoking articles written by the world’s smartest minds.
As an aside, I was first introduced to the work of Tim Harford after discovering his book, The Undercover Economist, a few years back. If you are a fan of “real life” economics (not necessarily of interpreting supply and demand charts), his book is a very entertaining read. His second book, The Logic of Life is pretty good too.
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Great question! I’d rather have the 70k today. As far as I’m concerned, that is still a lot of money and it would still go a long way today.
Ignorance is bliss.
Happened to me with a smartphone… never understood why people “had to have it” until I had my own. The ability to stay connected is something I “can’t” go without anymore. Thankfully, I purchased it on my own and it’s not a company-provided leash. =D
If there was nothing else beetwen the choice of $70k today and $70k in 1900 then I’d probably take the $70k today. Yes $70k in 1900 would make you stinking rich in that era but I don’t think that life would be more comfortable for me than $70k can buy you today.
However I might be interested in the $70k in 1900 because that is enough to live off of forever. $70k today is spent rather quickly and then what? I might take life long financial security over modern gizmos.
I would have to agree with Jim as well. I just can’t imagine living without all of the technologies and medical advancements we now have. I would probably guess that the wealthy during the time had a slightly higher life expectancy, but that is just a guess.
$1.5 million today isn’t even that much, if you’re talking about total net worth. But since it sounds like you’re talking about $70k per year income, I think I’d rather have that in 1900.
I’m thinking the 1900 would be more fulfilling. My wife & I talk about “simplifying” to have a better quality life. Maybe 1900 lifestyle could give you that.
Today, I feel like being stuck to the hip of work some days; budgeting & paying bills.
I would love to spend more time able to cultivate my own food, making my own furniture, enjoying nature that hasn’t been touched by every Tom, Dick & Harry.
Uhh…since I was born in 1982, I think “I” would rather have it in 1900 and invest it…it’d be a nice chunk of change by the time I was born
Also those life expectancy stats are a little misleading, since the difference is almost certainly due to infant mortality rates. I bet the difference in life expectancy once you’re a year old or something is much closer, like 5-10 years.
No internet?!?! Gasps…yeah I think I would pick the present too.
I think I’ll take the $70,000 in 2042. It’s the future!
If the money supply is kept stable prices naturally fall.
Definitely better living conditions today than in 1900. I would say I’d rather have the modern advances that the money can buy now.
Ya know, I just thought of a way to take it one step further…
Would you rather have $70,000 today or $70,000 in the year 2100? Who knows what technologies will be available then, BUT how much will that $70K really be worth at that point???
Huh ?
The real question posed is NOT about inflation or money — it’s whether one would prefer the actual ‘living-conditions’ of 1900 versus today.
The choice is obvious to most people… with or without money considerations.
Think ‘dentistry & medical-care’ when dreaming about the “Good Old Days”.
In 1900, life expectancy at birth was about 47 years. Most people died of infectious diseases… long before having to worry much about cancer or heart disease.
Lots a stuff can’t be bought with money.
A lot of things can’t be bought with money. My grandfather once said, if your problem can be solved with money, it’s not that bad of a problem.
sound words of advice. while i don’t believe that money can buy you happiness i do believe it is a major component to remaining happy once you achieve it
I would choose to take it today because I really enjoy today’s lifestyle. There are too many things that I would not be willing to give up.
yeah, once you experience the extravagance and sheer unnecessary excess you never want to go back even if you feel dirty. $70,000 today. right now. cold hard cash, unmarked bills. thank you