# Changes in Prices Since 1893, from David Lamb

November 29, 2007 | When I read books from long ago and it states dollar figures I'd like to know what the relative dollar figure is today. For instance, in 1893 during the Panic here in the U.S., if a bank were to make a loan of \$15,000, what is the equivalent of that loan today?

I found many ways to try to give me an idea of the relative value, by using the following: CPI, GDP deflator, Consumer Bundle, Unskilled wage, GDP per capita, and Relative share of GDP.

Using the same figure as above here are the numbers computed via the Measuring Worth website:

In 2006, \$15,000.00 from 1893 is worth:
\$346,788.99 using the Consumer Price Index
\$321,038.30 using the GDP deflator
using the value of consumer bundle *
\$1,736,739.13 using the unskilled wage
\$2,888,877.50 using the nominal GDP per capita
\$12,838,014.07 using the relative share of GDP

*Data for consumer bundle only starts in 1900.

After viewing the numbers I still don't understand what \$15k in 1893 is worth in 2006. Or, which of the above figures is correct?

## Greg Van Kipnis replies:

Income has grown more rapidly than the cost of things people buy, hence a disparity in the rise of 'price' measures (CPI) and 'income or output' measures (unskilled wage, per capital GDP). Your question relates to consumption not income. However, the answer depends on the purpose of the loan.

The question you ask: "…if a bank were to make a loan of \$15,000, what is the equivalent of that loan today?" Appears to be related to the general price level, hence the CPI or GDP deflator gives the right answer.

If the question were: "In 1893 it cost \$15k to buy a 2000 sq. ft. house in New York City, how much would I have to borrow today?" then you would have to use a different price index. The answer might be close to \$2 million.