Inflation Number Crunching (Current Newsweek)

Inflation, that magic word,  refers to a breadbasket of things, rather than to any specific purchase we might want to make.

I once read that, to keep things in perspective, one has to account for only the inflation from the year you graduated college to present.  For example, there has been 700% inflation since I finished college, therefore, to see if a pair of shoes is reasonable, or not, I only have to divide the price by 7 – if it then looks like a decent price, then, well, it is a decent price for me.  $100 tennis shoes, divided by 7, and that tells me it compares to a pair of $14.28 tennis shoes in 1965.  That still looks a bit pricey to me.  TV’s however, have come down, dividing a current TV set by 7 would give me $100 for a 42 inch screen.  They were surely much more than $100 the year I graduated, and big screens were not even available..  Graduation year 1965 (or thereabouts)

This week’s Newsweek Magazine is a special issue --- a blast from the past.  And in this issue is a 1965 set of prices compared to 2012.  Unfortunately they already claim to have multiplied the 1965 prices by “7” (or some number) to see if things have really gone up or down (in constant dollars).

                                                  1965*                     2012

                                            ------------               -------------      

Gallon of Milk                         $6.84                    $3.30           it has fallen by half !!

Issue of New York Times            .72                      2.50           4 times as expensive

Coffee                                         5.41                      5.50           no change, that’s curious

Share of GE Stock                     1.50                     20.20         

Newsweek cover price               2.52                      4.99          

Ounce of GOLD                      252.70               1,659.42          (was $35.12 in 1965)

Gas, one gallon                            2.25                      3.83          (if you didn’t adjust for)

 Chicken  $/lb                               2.81                      1.33          (inflation)

Tuition, room, board,

at four-year university            1,051.00           22,450.00     

*  prices adjusted for inflation

You knew there was a point to this Blog, didn’t you?  Now you see it.  College costs are appear to be out of control.  But are they?  By this chart, they are up 22 X  -- when comparing to inflation adjusted costs in 1965.  But, I remember tuition being more like $600 a semester in the 60’s.  Food was 22 cents a meal, and dorms were not that much (two to a room).   So I think their inflation adjusted costs for that item are out of whack.  After the inflation adjustment, I would think the 1965 college costs would be more like $2,500 X 7 = $16,800 (a year)  compared to $22,450 a year now. 

Please add your comments to this line of thinking.  Have you ever done the calculations to tie your value-system to your year of finishing college? 

 http://www.westegg.com/inflation/  an easy inflation calculator, this is a hot link.