Prices – Then and Now
It is difficult to compare, for several reasons, the prices of consumer
goods in, say 2015, versus the 60s and 70s. First, inflation makes a
dollar-to-dollar comparison impossible. A dollar today is not the same as
a dollar in 1962. Generally speaking, in 2015 you needed $775 to buy what
$100 would buy in 1962.
Second, a “serving” then is not a serving now. A can of Coke in 1962 did not exist; a bottle did, but a bottle of Coke that cost ten cents contained six ounces. A standard can of Coke today contains 12 ounces.
Third, you may not care how much the price of a refrigerator has risen, since you buy one only every 15 years or so. But a gallon of gas? Now, that is much more important, even if you take the bus.
Fourth, many things that we use every day did not even exist in the 60s. Cell phones, iPads, garage door openers, MP3 players, heated socks, cable TV, cordless drills... oh, thousands of things.
Burger Chef menu, mid 60s.
Also, some prices now fluctuate greatly. How much did a gallon of gas cost in 2015, $2.25... $3.00....? How much does a plane ticket from New York to Miami cost? Well, throw a dart. (The overall cost of commercial air travel dropped enormously after the deregulation of the commercial airline industry in 1978. — http://en.wikipedia.org/wiki/Airline_Deregulation_Act Today most of us fly to our vacation destination. In the 60s, only travelling salesmen and the rich flew regularly.
Of course, prices vary considerably in different countries.
Nonetheless, we’re going to give it a try. The table below lists some common consumer goods, their U.S. prices in 1962, 1972, and 2015 in absolute dollars, and the inflation-adjusted prices:
Some prices are averages.
The columns marked with "***" are perhaps the most useful, for comparison purposes.
Woolworth’s luncheonette menu, circa 1955.
So what does that tell us? Let’s see:
The price of a movie ticket is way out of line. We all suspected that, but now we have the evidence.
The price of a basic office visit to a doctor is way out of line. I could provide several reasons for that, but there is not enough room on the Internet for my explanation.
The price of automobiles has risen much faster than the rate of inflation. Of course, automobiles have many more safety features and do-dads. (Did your 1965 Mustang have a DVD player in the back seat?) But still... we are willingly spending much more money on cars. And that does not even take into consideration the fact that a quarter of us lease our cars rather than buy them. Whew! Wanna’ talk about a ripoff!
The price of electronic gadgets has gone down. Can you imagine paying $314 for a small transistor radio with a 2-inch speaker? Well, in 1962, hundreds of thousands of us did.
We complain about the price of gas... perhaps because we buy so much of it. But compared to either 1962 or 1972, it has been a bargain in the last decade. Hmmmm, there’s some food for thought, huh?
But the item that stands out the most is the tax rate. In 1962, we paid about 20% of our income in taxes; today it is double that rate. If you do not like the price of a movie ticket, you can simply wait for the DVD/Netflix release. But no working, productive American can avoid the confiscatory tax rate.
What Costs are “Out of Control”?
This graph goes back only as far as 1978 and only up to 2008. It shows that the overall cost of living (that’s everything) has roughly tripled. But the cost of two items has gone “out of control.”
Medical costs are six times what they were in 1978! Of course we can now treat many conditions much better than we could then. But that only accounts for part of the increased cost. The dramatic increase has much more to do with the terrible way we mis-manage the delivery of health care. (And no, Obamacare will do little to solve this... other than through healthcare rationing.)
But pity you if you have to pay for a college education! The cost for that is 10 times what it was in 1978! And why is that? Well, I suggest that the primary reason is that the government (read: tax dollars – yours and mine) is now subsidizing college education. The colleges and universities have more room to increase costs since the government is picking up much of the tab.
If you had a lemonade stand, and you increased the price of a glass of lemonade from 10 cents to 20 cents... and you sold as much at 20 cents as you had sold at 10 cents... as a capitalist, what would you do? Increase the price to 25 cents, of course. (That’s what is called “price inelasticity.” The demand does not decrease proportionately, despite an increase in price.) And what if you still sold as much at 25 cents? Well, there you go.
And double-pity you if you do not get a golden “subsidy.”
The same thing is true at the primary and secondary school level... except that the government (read: tax dollars – yours and mine) is picking up the entire tab!
So, even if you do not have kids in school... you are paying the price. Little wonder that the tax rate has quadrupled from 10% to 40% since the 60s.
When I was a kid in the 60s, the PR folks in my school district bragged that they (read: we taxpayers) spent more money per student than any other public school system in the country: $800 ($5,600 in 2015). The average cost for a year in public primary and secondary schools is currently around $13,000. And, as for the quality of that education... oh, don’t get me started!
The Value of Choice
There is something very significant missing in this picture: choice. If you wanted a soft drink in 1962, you could buy a Coke or Pepsi or RC Cola at a fountain in the drug store, or in a small cup from a vending machine, or in bottles at the grocery store. Generally, the price was about the same.
Today you can buy a 12-ounce can, an 18-ounce bottle, a 30-ounce trough at a convenience store, or a 2-liter bottle. And the prices are all over the place. And there are about a billion different brands of soda. You can pay $1.00 for a 12-ounce can in a vending machine; or if you shop carefully where I live, you can buy 12-ounce cans in a 24-pack for 30 cents a can! Match that against anything in 1962! Today you can pay $15 for a pair of tennis shoes, or $150 for a pair of Air Jordans. Take your pick. You can buy a basic new car for about $20,000 (or easily up to $45,000), or you can pay as little as around $14,000. We tend to take for granted the huge range of choices we have for consumer goods. And our kids have no idea of what it is like to have limited choices over consumer goods.
Items that involve technology are generally less expensive; or at least, their prices have gone up more slowly than others. Items that involve manual labor have generally gone up considerably more than others. This may explain why U.S. companies have been forced to rely on non-USA labor to remain competitive. U.S. labor rates have skyrocketed over the past 40 years.
The prices for items that have increased the most are those in which the government (read: we taxpayers) has been heavily involved in regulation, subsidies, grants, or when the government controls the entire process: public education.
The numbers on this page come from the Bureau of Labor Statistics, the Department of Labor, DePaul University, Wikipedia, Boomberg news, newspaper archives, the Tax Foundation... and our own memories.
This is a work in progress; we’ll have more information as we dig up more numbers. What’s missing? What can you add to our price comparison? Use the “talk to us” link to help us complete this section at BBHQ.
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