Tyler Cowen's Daily Miracle
By Arnold Kling
Any single year there has been inflation, from one year to the next.
From 1900 to 2008 there has been radical *deflation*, for instance in the Sears catalog. You’d rather spend 10K in the modern catalog than in the old catalog.
If you look at inflation year by year, the cost of living goes up very year. However, Tyler suggests, if you had $10,000 to spend you would rather spend it on today’s goods at today’s prices than on goods in 1900 at 1900 prices.
That may be a bit strong. With $10,000 in 1900, I believe you could have taken care of all of your food, clothing, and shelter needs for the year with plenty of money left over. Not so today. (Of course, in 1900 your food would be bland, your clothing would be uncomfortable, and your shelter would not have air conditioning–possibly not even indoor plumbing. So the comparison is awkward.)
In any event, I think that Tyler’s larger point holds. The upward drift in quality of goods and services is significant, and therefore so is the cumulative over-estimate of long-term inflation. This means that when people try to compare real incomes across generations, they are entering a fool’s realm.
The title for this post comes from my memories of Curt Flood, a centerfielder for the Cardinals. His striking defensive plays were so frequent that we referred to them as “Flood’s daily miracle.”