

Have you ever heard your parents or grandparents talk about the good
old days? Do they tell you how much cheaper things used to be? "Why,
you could buy a soda for a dime and a gallon of gas cost 39.9 cents."
They're partly right. In absolute costs, things were cheaper years
ago. A soda now costs between five and ten times
what it did 30 years
ago, at least in actual cents. On the other hand, it's not as simple as
that. First, inflation has reduced the value of money over the years.
True, a soda cost a dime in 1970, but then the minimum wage was $1.35
(instead of today's $5plus). In addition, products improve. For
example, CDs are more expensive than records used to be. But CDs are
superior productsthey hold more music and they never wear out.
In this activity, you will learn how to figure out how much inflation
(and technological progress) affects the cost of products and services.
Except you won't go back 30 years to your parent's youth, but all the
way back to the days of your greatgreatgreat grandparents. You will
go back to New York City in the mid1800s.




First, consider the costs of products and services available in New York
City 150 years ago.
# 
Item 
Cost 
1 
A photographic portrait by Matthew Brady 
$5.00 
2 
A telegram to Boston 
$2.00 
3 
Daily Sun newspaper 
1 cent 
4 
A visit to Barnum's American Museum 
25 cents 
Now, let us consider how much these products are worth today. First,
however, we have to find equivalents:
# 
Item 
Cost 
1 
A role of film and development. 
? 
2 
An email to Boston 
? 
3 
Your local newspaper 
? 
4 
Visit to your local natural history museum. 
? 
To calculate the inflationadjusted value of the products and services
in old New York, you need to do several steps.
First, let us consider what a dollar was really worth in 1850. In that
year, the average unskilled worker made about $1 a day. Let us say,
that the average unskilled worker today earns the minimum wage:
$5.25/hour. That's $42 a day. But that's for an eighthour day. the
average worker in 1850 probably worked 12 hours for his/her $1.
Therefore to learn the value of a modern dollar in 1850, you have to
complete several calculations:
1) Divide 100 cents ($1) by 12 hours to get the earnings per hour in
1850 cents.
2) Divide the number you get into 525 cents ($5.25). This will give you
a figure that tells you how much more money is worth today. For
example, 10 cents goes into 525 cents 52.5 times.
3) Now it's time to figure how much these items cost today. To do that,
multiply the costs of the 1850 items listed above by the figure you
got in calculation #2 above.




To compare costs with today, estimate the costs today for the items listed above. You can learn these costs by checking prices. (For email:
divide your email service costs per month by the average number of
emails you (and others on the same email account) send each month. Now
subtract the figure of similar items (that is, a newspaper then and
now). Subtract the smaller from the larger to get the difference. Or
you can divide the costs of modern items into the 1850 items. This will
give you the ratio of costs then and now. (You can also do this
backward by dividing the costs of 1850 items into costs of modern
items.) Disgard the decimal and multiply by 100 to get the percentage.
Of course, there is an element that cannot be calculated: the quality
of the item. Which is really worth more: an email of any length that
you can send from your house to your friend's house or a telegram that
had to be kept short and had to be sent from a telegraph office?




