Hacker News Reader

Comment by CydeWeys | Hacker News Reader

It does make you wonder what the inflation-adjusted figures are purported to mean even, given that they result in completely ridiculous results.

By contrast, an inflation calculator tells me that $100 one hundred years ago is worth around $2,500 now (so 25X). And according to this article https://www.jstor.org/stable/1820827?seq=1#metadata_info_tab... , a pretty typical wage back then was $0.50 per hour. 25X that is $12.50, which sounds about right as a typical median wage nowadays (perhaps a bit low; there is a real increase in standard of living over this time period too). So the inflation figures going back at least a hundred years do make sense. What causes them to break down when you try to go back much farther, then? Are the inflation figures simply wrong? Are there compounding errors that, over enough time, make the result completely ridiculous?

View on HN

Inflation is usually measured as the change over time in the prices of a "representative" basket of goods (and which goods in which proportion is a pretty subjective choice). Over time, the costs of particular goods diverge a lot, especially with respect to wages, and how important those goods are to the economy also varies a lot.

The purchasing power of a typical weekly wage in 1800 or 1637 looks very different depending on whether you express it in terms of bread rolls, non-leather settees or bluetooth speakers (all of which are constituent parts of the modern UK CPI index)

Excellent point. So it sounds like the basket of goods wasn't chosen correctly, or not changed often enough to be representative across each time line, or something? Because it simply cannot be a valid result that a typical wage way back then (when standards of living were much lower) is worth millions of dollars today.

Inflation is a geometric process, so any errors will greatly compound over long periods of time.

One aspect to it is that today a smartphone costs a few hundred dollars. Back in the day, no amount of money would allow you to buy one. Maybe to compare East India to current top companies, you'd need to compare the percentage of global GDP to estimate how big they are (and how large they'd most likely be if they continued to exist.)

The base/average salary comparison also makes a lot of sense.

This is great analysis. If you think about the amount of global trade that was controlled by the Dutch East India Co, there is no modern company even close. Apple isn't even close, the have a small sliver of a small part of the global economy. Even Exxon, is only one small part of the economy.

Reply on news.ycombinator.com