A post about inflation over at Little House in the Valley compared the cost of several goods in 1971 to 2011 and determined that inflation had increased at a rate much higher than the average salary increased. I do not doubt that this is true but I don’t think that inflation is as bad as it seems.
The most expensive item on the list of goods was a house. House prices have increased dramatically but a 1971 house isn’t the same as a 2011 house. According to the National Association of Home Builders, the average home size in the United States was 2,700 square feet in 2009, up from 1,400 square feet in 1970. Houses have almost doubled in size which accounts for much of the increase in price. Modern homes also have a lot more amenities than 1971 era houses. For example,it wasn’t uncommon for a house to not have central air in 1971 but it is rare for a house to be built without central air now. There wasn’t nearly as many granite countertops back then either. A new house today is a lot more house than a new house was in 1971.
The next big ticket item is a car. I actually owned a circa 1971 car once and I can easily say cars are much better today. My 1971 car had an AM radio – not an AM/FM radio – just an AM radio. It got about eight miles per gallon and certainly didn’t have an airbag. The average 2011 car is safer, more fuel efficient, and much more reliable than the average 1971 car. Once again the 1971 product and 2011 product aren’t that comparable because the modern product is far superior.
Movies costs more but we now have the option of easily watching movies on DVD or Blu-ray in the comfort of our own home. You can get them for as little as a dollar at Redbox or with promotions you can get them free. You can also get free movies from your local library or at sites such as Hulu online or Hallmark movies.
Stamps have gone from eight cents to forty-four cents but that is still a bargain. There isn’t much need for stamps today since letters have largely been replaced by email and billpay. In 2011 the average person doesn’t need to spend much money at all on postage.
I won’t go into details on every item but here in the U.S. gas is cheap and food is cheap too. For tuition it looks like inflation really is as bad as it seems but maybe someone can explain how the tuition inflation is justified.
There is no doubt we have experienced a lot of inflation from 1971 to 2011 and salaries haven’t kept pace. Inflation isn’t as bad as it seems though because the 1971 items aren’t really comparable to the 2011 versions.