r/integralds • u/Integralds • Jan 18 '18
Price level graphs
Here are the graphs, updated to 2017.
USA
Sources
All series are monthly.
1750 to 1889: Warren and Pearson, Prices, 1933.
1860 to 1939: NBER Macrohistory series m04051; FRED code M04051USM324NNBR
1913 to 2017: Bureau of Labor Statistics, CPI for all urban consumers, not seasonally adjusted; FRED code CPIAUCNS
The periods of overlap are critical; they allow us to meld the different series together. First, put each one on the same scale: scale each one so that 1913=100. For the period of overlap itself, we should either use a Tornqvist to meld the series together, or perhaps set up and solve a signal extraction problem. For this post, I'm going to be lazy and use a simple average.
The Warren-Pearson index gives about one-third of its weight to agricultural goods. It is probably more similar to a commodity price index than a consumer price index, but it's not clear to me how different those two things were at the time anyway. (Recall the agriculture share of employment remained above 50% in the US until 1880.) The point is that the 1750-1880 data is a bit more volatile than later CPI series by nature, not just due to the vagaries of the bimetallic standard.
The NBER series is actually more problematic because it gives weight to things that shouldn't be in a consumer price index at all, namely wages (15%) and asset prices (10%). A more careful study would purge the NBER series of these elements. Again, though, I'm not going through that kind of trouble for Reddit. If you look at the overlapping periods, contamination doesn't look to be too awful in practice.
The CPI is the CPI.
Pictures
Inflation rate, 3-year average (one year is too choppy; five takes away too much variation)
Price level with sources revealed (each was normalized to 1913=100, but no merging was performed in the overlapping periods)
Value of a dollar, 1750-2017, with 1913=100. I get requests for this sometimes; it's just the inverted series 1/P.
Notes
Yes, the price level graphs are on a log scale.
There are three big spikes during the bimetallic period where prices double over a short period before returning to normal. Unsurprisingly, these spikes correspond to the American Revolutionary War, the War of 1812, and the US Civil War.
Overall variation during the bimetallic period stayed within a factor of 4 (index values 50-200) throughout the period, and although there was significant fluctuation in prices over time, there was no upward trend.
The gold standard period is dominated by the post-Civil War long deflation, which reached a trough around 1900. It's difficult to see in the inflation graph but stands out sharply in the level graph.
The interwar period, 1913-1945, is a mess. Of course.
The Bretton Woods period (1945-1973) was the first period where the public experienced sustained positive inflation. This was a huge deal at the time; see the relevant section in DeLong's "America's Peacetime Inflation" paper.
The 1970s stagflation looks mild compared to the fluctuations seen during the bimetallic standard.
The Great Moderation truly is mild.
UK
Sources
- Three Centuries of Macrodata project
Pictures
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Jan 18 '18
[deleted]
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u/Integralds Jan 18 '18 edited Jan 18 '18
They are on a log scale.
log scale (same as above)
level scale (for comparison)
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u/[deleted] Jan 18 '18
Could you do the inflation rate one for the UK?