Whatever the objections levied at CPI measures from the Bitcoiner camp (some of which are reasonable, #1330894), comparing money numbers across centuries was never a good idea. Any serious economist or economic historian will tell you... but then influencorz and politicians and your stuck-up uncle go and do it anyway.
If I may teach you just a single, minor thing EVER it's this:
You just CANNOT use CPI adjustments over long time periodsYou just CANNOT use CPI adjustments over long time periods
#1264166
Especially when there has been massive, all-purpose technology or standard of living changes in-between (think electricity, internet, internal combustion engines), or crazy-ass inflationary episodes (the '40s, the '70s). Any high school or freshman econ student can do the calculations -- we have price indices going back centuries -- and produce a number, but whether that number means anything is the critical question.
Like we saw in my MONEY CLASS takedown of BTChick you can't treat nominal fiat values as if they mean the same thing in 1968 as in 2025.
Here's Chelsea Follett, one of my editors at HumanProgress (which I can't stand writing for anymore, honestly #1420917), out swinging at Christmas grinches in WSJ:
There has been substantial progress in living conditions since the 1840s. We’re much better off than the Cratchits were. In fact, most people today enjoy far greater material comfort than did even Dickens’s rich miser Ebenezer Scrooge. [...] The Cratchits didn’t out-earn a modern American earning the minimum wage. Mr. Cratchit’s weekly salary of 15 shillings in 1843, the year “A Christmas Carol” was published, is equivalent to almost £122 in 2025. Converted to U.S. dollars, that’s about $160 a week, for an annual salary of $8,320.
First of all, what Chelsea did was plop those £122 into a modern currency calculator, which spit out $160 (this was a month or so ago, before the ongoing dollar+bitcoin debasement debacle, #1422828). 15 shillings, that is three-quarters of a British pound, in gold-standard 1843, would have equated $3.576, or about 0.2oz of gold.
- The most direct comparison would be, um the dollar gold price of ...checks volatile notes... $4,950... so about $950.
- if I plopped 3.576 into a standard CPI adjustment series e.g. at Minneapolis Fed I'd get $120.
- If I asked e.g., MeasuringWorth to give me "compensation" equivalent, I would get $2,415
There's no way to "translate" a monetary value of the past into a monetary value of the present that makes any sense. That should be quite obvious if, by using three "ordinary" methods I can translate $3.576 into $120, $950, or $2,415. [Insert economist joke about "what number do you want it to equal?"]
I can't find a good graph, but basically the rough outline over two-hundred years is an upward nominal price (from the early 1900s), a higher commodity line, an even higher wages/compensation line, an even steeper for assets like property or S&P500 with various estimates of money supply somewhere in the middle. (Lyn Alden has a nice run-down in Broken Money that I quote from for "On Monetary Premia" #830458). Adjusting becomes a matter of choosing which one you like. (PLus, there's no adjusting for electricity over light, air travel over sailing ship etc, etc)
Second, instead of being troubled by her economic-statistical ignorance, Chelsea jumps straight into the dire conditions in which Dickens' characters would have lived, forgetting that the quality-of-life improvements she highlights are already (poorly, stupidly) accounted for in the numbers she referenced. Yes, we know life for pretty normal peeps was harsh in Victorian Britain... darn, it was pretty shit for the top-1 to top-10% as well -- go look at the movies or read e.g, the Jane Austen books for clues, and then check where they're at in the contemporary income distribution:
(Graph fr The Economist Christmas edition, #1350950 lining up income-earners in Austen's time, about a generation before Dickens)
That's not a reasonable starting point for rejecting that there's fiscal/economic troubles afoul and that poor Americans are poor/struggling/having a hard financial time.That's not a reasonable starting point for rejecting that there's fiscal/economic troubles afoul and that poor Americans are poor/struggling/having a hard financial time.
Third, pointing to the exact few things (low-quality foodstuffs, running water) that have dropped by massive percentages #1420917, nominally and real, isn't representative of the AVERAGE or the GENERAL economic welfare/lived life for plebs. Housing in the post-WWII world, or access to saving (Alchien&Klein style) are typical examples we talk about here a lot, where almost nobody has been enriched in decades but the insiders who happened to be there early (hashtag, fuck-the-boomers, #1301513, #1388123).
Judging living conditions ("There has been substantial progress in living conditions since the 1840s") by looking at the lowest-hanging fruit isn't fair or accurate.
Do people live better today than in 1843?
definitions:
- People
- live
- better
I'm fairly confident in answering this question in the affirmative, but it's not obvious what that means... peoplewhat, in general/average/the 90-10 distribution? live meaning access to some select economic goods sure (and Chelsea implicitly points to space... look around you, and yes you have a lot more than the working poor in dirty 1840s' London, OK you got me!), better not at all being obvious in meaning -- in everything from mental health to community to prospects and health.
Also, most of the things that are radically incomparable between "life" in America (or well, London) in 1843 and "life" in those places 2026 are a handful of select technological revolutions (electricity, internet, global trade, internal combustion engine). It's not super obvious that those things are downstream of the economic system, and that perhaps the state-fiscal-monetary arrangements from World War I through the Great Depression and World War II and the Great Inflation and the Great Recession and the Great Reset/Covid-mania... made things worse than they otherwise would have been.
Anyway, I'm not so sure Chelsea's gotcha/victory lap is much to celebrate.
Archived WSJ version here: https://archive.md/wYl6W
HP here: https://pastimperfect.humanprogress.org/p/dinner-with-dickens-was-slim-pickins
Yes, simply applying adjustments like that is very naive, to say the least.
Trying to quantify this stuff (as if settles arguments) is a fool's errand anyway.
I'm pretty comfortable saying that materially we are wealthier than ever in history, and that the poor of today have access to material things that the kings of the past could only dream of. But that at the same time, there are immaterial ways in which we are worse off than before. Self-reported happiness should be a QED for that last point regardless of what metrics of material wellbeing you're using.
Self-reported happiness is only meaningful if the points on the scale mean the same thing across eras, which is all of unknowable, meaningless, and probably false.
Perhaps, but I do think changes in the average response rate of a simple yes/no happiness question contains valuable information on trends
I like that more than the standard 5-point scale.
I also like that response to economic claims that I just came up with.
The evaluation of better would be something like whether people from the two eras would voluntarily swap places/situations with their counterparts. Let’s say counterparts are based on wealth distributions.
Obviously, most people today would not trade places. I suspect most people from 1843 would swap.
There’s no correct way to do these era comparisons but it’s hard to understand the past without doing something. How do you think we should put historical earnings into perspective?
But I think the point of their numerical argument is whether the poor making $30,000/yr today would swap with Mr. Darcy who by their metrics was earning an equivalent of about $15,000/yr.
I think the poors would swap with Mr. Darcy.
(Assuming I'm reading the chart correctly, which I'm not sure I am, given the strange footnote about 1798)
I don’t think that’s what they intend but the note is confusing.
Yeah I realized it might not be an adjustment to modern times, but some comparison between Dickens' and Austen's time? Threw me for a loop because people usually are adjusting to today's dollars
I see. I didn’t get why they were adjusting 1798 prices to 1843.
that's fair -- and unknowable, of course. There's also a novelty vs long-term consideration thing there... like, instantly most would swap just because of some aspect that catch their attention, right, but unclear they'd wanna stay there after a year or 5. But yea, generally good question to ask.
As for translating earnings, if you really must then find a local nominal anchor -- the price of [whatever] was X, an average daylabor made Y.
Or, as I suggested in a blog post long ago, make the equivalent of academic confidence intervals:
so, writing about Mr. Darcy's 10,000 a year, maybe say:
Ugly and would never happen, but it's better than the implicit nominal bias ("oh, 10,000 pound isn't that bad, that's what I make in x weeks")
It's funny because isn't translating value from the present into value in the future one of the main reasons we use money? Money is something you use because you believe (hope) that it will have purchasing power in the future. Isn't it supposed to carry value across time?
For instance, if I am deciding whether I want to go on a trip this year or buy bitcoin, I might be thinking about how much bitcoin could be worth five or ten years from now. Aren't I trying to translate a monetary value from now to a monetary value in the future? Or in the case of a business deciding whether to sell equity to raise capital or to use a loan to finance some expansion -- how else can they make the decision except by translating monetary value now into monetary value in the future?
I'm sympathetic with your points about finding it very difficult to compare life now to life in 1840 and know which is better...but I worry that another way to phrase the statement is "It's difficult to compare the purchasing power of a pound sterling now and a pound sterling in 1840." So now I'm going back on myself.
If we can't compare the purchasing power of a dollar today with a dollar from 1950, how does money work at all?
@remindme in 3 hours.
Gotta go watch the handball game first
Our standard of living has been improving in material terms for centuries because we have developed and implemented new technologies which increase our comfort and reduce our toil.
A huge factor in this is energy- coal, oil, electricity.
These modern energy sources have enabled most of the reduction in toil and increase in material productivity.
But coal and oil have resulted in altering the chemical composition of the atmosphere and that is changing the climate.
That is now beginning to have significant effects on the economy- on farming, real estate and infrastructure.
Today USA is losing its lead in the global wealth and power balance- and China has already won the trade war and cut off supply of vital rare earths to the US military industrial complex.
A contest is developing for global hegemony and any measure of wealth and purchasing power needs to factor in such global power changes.
The oil fueled US empire is in decline and China with its modern electricity based industrial and developing post industrial competitive advantage is emerging as the primary economy on the planet.
Who's this "we"? The last serious improvement in living standards was led by the US private sector in the 1800's. Governments seized control of the financial system in the 1900's, and the result was an absolute mess of death and destruction. And here you are, still playing the statism game in the big 26, after all that.
What is often missing in these discussions is a deeper recognition that money is not simply a neutral measuring stick across time. It is a living system subject to political decisions structural changes and cultural context. Trying to draw a straight line between shillings in 1843 and dollars in 2025 inevitably collapses under the weight of everything that has changed in between.
Gold comparisons as you mentioned at least ground the exercise in something tangible but even gold is embedded in its own historical context of supply demand and utility. A Victorian laborer holding .2 ounces of gold had access to a very different set of opportunities and constraints than someone in 2025 holding the nominal equivalent in today's market. Prices do not live in a vacuum and neither do people.
The heart of this debate is not whether living standards have improved in the most visible ways. Running water electricity and internet are transformative realities. The question is whether the economic architecture that governs access to these basics has delivered proportionate improvement in overall well being for the median person. In that regard the evidence is mixed. Gains in certain goods have been offset by massive increases in the cost of housing medical care and higher education. Those drags on economic mobility are as real as Victorian coal smoke.
But that's only because money was politicized by socialists. One Bitcoin still has purchasing power in 2208, so now, money really can be a neutral measuring stick. We fixed the problem.