Tuesday, July 19, 2005

Modern Living

The June issue of Smithsonian Magazine has some interesting numbers:

The List: 1970 Price Index

Gasoline $.36/gallon
Median Income $8,734/year
Median Rent $108/month
Median Home $17,000
Bacon $.97/pound
Eggs $.51/dozen
Bread $.24/loaf
Vitamin D Milk $1.14/gallon
First-Class Postage Stamp $.06
Harvard College Tuition $2,600/year

Compared to 2005, the cost of food has changed surprisingly little. The price for eggs and milk have only doubled over the last 35 years while Harvard's tuition and the cost of housing has gone up by more than a factor of ten. You only have to walk down the streets of any large American city to realize that getting enough food is no longer a major problem. The problem these days is finding affordable housing and putting your kids through college.

According to a February article in Amber Waves (a USDA publication):
Between 1952 and 2003, the ratio of food prices to the price of all other goods has fallen by 12 percent. The drop is even more dramatic if you factor in `quality improvements'—the reduced time cost of acquiring and preparing food (convenience), greater variety, and omnipresent restaurants and vending machines.Foods that once were available only seasonally are now available year-round. Advances in food processing and packaging have introduced a multitude of ready-to-eat foods, available virtually anywhere and at any time.
Harvard University's David Cutler, Edward Glaser, and Jesse Shapiro have suggested that the increase in food consumption prompted by the falling time cost of food is the major cause behind the surge in obesity since 1980. They note: "Technological innovations—including vacuum packing, improved preservatives, deep freezing, artificial flavors, and microwaves—have enabled food manufacturers to cook food centrally and ship it to consumers for rapid consumption. In 1965, a married woman who didn't work spent over two hours per day cooking and cleaning up from meals. In 1995, the same tasks took less than half the time."


steve said...

Wouldn't it be more clear if you converted everything into real dollars? At 3.5% per year inflation over 35 years, I would expect an average increase in price of about 3 for typical goods. So, it would appear that the price of food has gone down slightly in real terms.

Looks like gas has gone up at about 6% per year, or 2.5% per year in real dollars. Income has gone up slightly more slowly, college tuition slightly more rapidly.

I think CEO compensation may have gone up faster than Harvard tuition :-)

Carson Chow said...

Hi Steve,

Yes, it would be more clear but I thought seeing things in 1970 dollars would be more viscerally striking.