Inflation, is the simple answer. But what causes this? Why couldn’t society just keep on keeping on with prices? Examples, a $0.25 for a candy bar, $0.75 for a fast food burger, $30k for a home etc. It worked then, so why not now, why not just agree to lower the prices of everything?
In: Economics
Well first, there were far fewer people in 1964 compared to today and far less stuff available to buy. But you could almost say that this is irrelevant for most stuff.
The GDP per capita in the USA in 1964 was approx $3,500 and the price of bread was $0.20. You could say that the productive capacity of the USA measured in bread in 1964 is 17,500 loaves of bread per person.
The GDP per capita in the USA in 2024 is approx $80,000 and the price of bread is around $2. Using the same approach the productive capacity in the US is 40,000 loaves of bread per person.
I don’t know about you but 40,000 seems a lot larger than 17,500. The problem, of course, is that we have more people, who can build more stuff and as productive capacity (and therefore income) increases, we can also afford a larger variety of stuff. Some stuff we become a lot more efficient at producing more of and the price relative to income falls. Some stuff is more limited (for example land) and therefore prices tend to stay fairly flat relative to income.
Home prices for rose from an average of $20,000 to $400,000 from 1964 to 2024 and average rents increased from under $100 to over $2,000. These tend to track income levels over time.
But the data on food, for example, shows some interesting trends. A broad measure of food prices from around 1960s to 2020s indicates that food price index rises by nearly 10x whereas production has risen by nearly 20x. In that same period caloric intake has increased by nearly 25%.
In fact, by nearly every measure, one would prefer to be in 2024 rather than 1964. This doesn’t even count for variety of goods available and consumed. (no PC, internet, mobile phones, video games, etc in 1964) Inflation from the mid 1990s to 2023 (excepting 2022) have been BELOW the average in the last century for the US. The problem appears to be that it has been so low for so long that most anyone under 40 years old today would have NEVER experienced inflation close to the century average. This makes it hard to process when 2022 hits.
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