Wednesday, May 13, 2009

Inflated comparisons

Back in 1950, a car cost a mere $2,200! Boy, sure sounds as if life were cheaper back then. Back when things were simple and the economy didn't scalp you, huh? Money shockers like this are all over the place -- in magazines, newspapers, documentaries, TV news reports.

But let's spend a moment with that car number, shall we? We know that inflation eats up the value of a buck, right? So if we take a quick jaunt over to a Federal Reserve inflation calculator and plug in the date and the price, we find that in 2009 dollars, that car is $19,462. And consider just how much more advanced a car you'll be the proud owner of.

Always keep inflation in mind. It's lazy when journalists hit you with a gee-whiz number and drop all economic context. In fairness, I suspect some writers don't understand their error; inflation seems to be something many people forget about when talking about past prices. That makes it all the more important to have editors who stop and think about such details. The entertainment factor has got to be very tempting. Entertaining your audience is fine, but you fall on your face when the point you're trying to make is a fiction.

I'm not advocating against price comparisons -- they can reveal fascinating trends (among them, just how much our standard of living has grown). I simply want comparisons that are fair. Apples and apples, so to speak.