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01 / 05
Mark Twain Explains Time Prices

Blog Post | Economics

Mark Twain Explains Time Prices

We buy things with money but pay for them with time.

Gale Pooley —

Summary: A passage from Mark Twain’s novel A Connecticut Yankee in King Arthur’s Court illustrates the concept of time prices, which measure how much time it takes to buy something. Time prices are more accurate than money prices, because they reflect the true cost of goods and services.

Kody Jensen found a great reference about time prices from Mark Twain’s story A Connecticut Yankee in King Arthur’s Court. The story follows a 19th century American who is bonked on the head and goes back in time to the Dark Ages.

A blacksmith debates the Yankee on trade and protectionism:

“In your country, brother, what is the wage of a master bailiff, master hind, carter, shepherd, swineherd?”

“Twenty-five milrays a day; that is to say, a quarter of a cent.”

The smith’s face beamed with joy. He said: “With us they are allowed the double of it!”

The Yankee is forced to admit that wages in the smith’s country are generally higher. However, he comes back with some questions of his own. “What do you pay a pound for salt?”

“A hundred milrays.”

“We pay forty. What do you pay for beef and mutton—when you buy it?” That was a neat hit; it made the color come.

“It varieth somewhat, but not much; one may say seventy-five milrays the pound.”

“We pay thirty-three.”

The time prices tell the story:

While the blacksmith’s wages were twice as high, salt was 150 percent higher, and beef and mutton were 127 percent higher. This made the time price of salt 25 percent higher and beef and mutton 14 percent higher for the blacksmith relative to the Yankee.

From the Yankee’s perspective, wages were 50 percent lower, but salt was 60 percent lower, and beef and mutton were 56 percent lower. This made the time price of salt 20 percent lower and beef and mutton 12 percent lower for the Yankee relative to the blacksmith.

The blacksmith continues to argue that since his wages were twice as high, he must be better off. The Yankee responds:

Yes-yes, I don’t deny that at all. But that’s got nothing to do with it; the amount of the wages in mere coins, with meaningless names attached to them to know them by, has got nothing to do with it. The thing is, how much can you buy with your wages?—that’s the idea.

Mark Twain was a great storyteller, and he understood that we buy things with money but pay for them with time. Time prices are the true prices.

Blog Post | Food Prices

Thanksgiving Dinner Will Be 8.8 Percent Cheaper This Year

Be thankful for the increase in human knowledge that transforms atoms into valuable resources.

Gale Pooley —

Summary: There has been a remarkable decrease in the “time price” of a Thanksgiving dinner over the past 38 years, despite nominal cost increases. Thanks to rising wages and innovation, the time required for a blue-collar worker to afford the meal dropped significantly, making food much more abundant. Population growth and human knowledge drive resource abundance, allowing for greater prosperity and efficiency in providing for more people.

Since 1986, the American Farm Bureau Federation (AFBF) has conducted an annual price survey of food items that make up in a typical Thanksgiving Day dinner. The items on this shopping list are intended to feed a group of 10 people, with plenty of leftovers remaining. The list includes a turkey, a pumpkin pie mix, milk, a vegetable tray, bread rolls, pie shells, green peas, fresh cranberries, whipping cream, cubed stuffing, sweet potatoes, and several miscellaneous ingredients.

So, what has happened to the price of a Thanksgiving Day dinner over the past 38 years? The AFBF reports that in nominal terms, the cost rose from $28.74 in 1986 to $58.08 in 2024. That’s an increase of 102.1 percent.

Since we buy things with money but pay for them with time, we should analyze the cost of a Thanksgiving Day dinner using time prices. To calculate the time price, we divide the nominal price of the meal by the nominal wage rate. That gives us the number of work hours required to earn enough money to feed those 10 guests.

According to the Bureau of Labor Statistics, the blue-collar hourly wage rate increased by 240.2 percent – from $8.96 per hour in October 1986 to $30.48 in October 2024.

Remember that when wages increase faster than prices, time prices decrease. Consequently, we can say that between 1986 and 2024 the time price of the Thanksgiving dinner for a blue-collar worker declined from 3.2 hours to 1.9 hours, or 40.6 percent.

That means that blue-collar workers can buy 1.68 Thanksgiving Day dinners in 2024 for the same number of hours it took to buy one dinner in 1986. We can also say that Thanksgiving dinner became 68 percent more abundant.

Here is a chart showing the time price trend for the Thanksgiving dinner over the past 38 years:

The figure shows that the time price of a Thanksgiving dinner for a blue collar worker has gone down since 1986.
The figure shows that the time price of a Thanksgiving meal has decreased, while population, the nominal price of the meal, and hourly earnings have all increased.

The lowest time price for the Thanksgiving dinner was 1.87 hours in 2020, but then COVID-19 policies struck, and the time price jumped to 2.29 hours in 2022.

In 2023, the time price of the Thanksgiving dinner came to 2.09 hours. This year, it came to 1.91 hours – a decline of 8.8 percent. For the time it took to buy Thanksgiving dinner last year, we get 9.6 percent more food this year.

Between 1986 and 2024, the US population rose from 240 million to 337 million – a 40.4 percent increase. Over the same period, the Thanksgiving dinner time price decreased by 40.6 percent. Each one percentage point increase in population corresponded to a one percentage point decrease in the time price.

To get a sense of the relationship between food prices and population growth, imagine providing a Thanksgiving Day dinner for everyone in the United States. If the whole of the United States had consisted of blue-collar workers in 1986, the total Thanksgiving dinner time price would have been 77 million hours. By 2024, the time price fell to 64.2 million hours – a decline of 12.8 million hours or 16.6 percent.

Given that the population of the United States increased by 40.4 percent between 1986 and 2024, we can confidently say that more people truly make resources much more abundant.

An earlier version of this article was published at Gale Winds on 11/21/2024.

NBC News | Personal Income

The Typical US Worker Out-Earned Inflation by $1,400 a Year

“While higher costs for everything from milk to medicines have preoccupied U.S. consumers in the pandemic era, earnings have also risen enough, on average, to push up households’ purchasing power a bit. And blue-collar workers have been the biggest beneficiaries.

An analysis published in July by economists at the Treasury Department found that the median worker can afford the same representative basket of goods and services as they did in 2019 — plus have an additional $1,400 a year.”

From NBC News.

Wall Street Journal | Wealth & Poverty

The Dramatic Turnaround in Millennials’ Finances

“The median household net worth of older millennials, born in the 1980s, rose to $130,000 in 2022 from $60,000 in 2019, according to inflation-adjusted data from the Federal Reserve Bank of St. Louis. Median wealth more than quadrupled to $41,000 for Americans born in the 1990s, which includes the generation’s youngest members, born in 1996. 

The turnaround has been so dramatic that millennials—mocked at times for being perpetually behind in building wealth, buying homes, getting married and having children—now find themselves ahead.

In early 2024, millennials and older members of Gen Z had, on average and adjusting for inflation, about 25% more wealth than Gen Xers and baby boomers did at a similar age, according to a St. Louis Fed analysis.”

From Wall Street Journal.