Comparing the Purchasing Power of Money in the United States Economy from 1774 to 2007

You have accessed a program to calculate what an amount of money from sometime in the past is worth either in today's dollars or in those of some other year in the past. The calculations are based in a commodity price index (CPI). The form at the site permits a value in dollars for any year from 1774 to last year to be restated in its present-day equivalent, adjusted for inflation. Comparisons between any two years in the period are also possible. This computation is done in the very same way using the very same data that economists and statisticians employ regularly.

The numbers since 1913 use the CPI compiled by the United States' Bureau of Labor Statistics and released by that agency every month. The older numbers, before, 1913, are based on the efforts of economists and economic historians who have recreated CPI estimates and then linked them to the modern series. Measuring Worth will undertake regularly to recalculate the index using the most recent CPI numbers in order to keep the program up-to-date. The result, while far from perfect - and increasingly less perfect the further back in time we go - provides us with a reasonable approximation of the modern-day worth of a sum of money from some past time.

To be honest, there is some debate among "the experts" about every aspect of this exercise. The discussions begin with the wisdom of even attempting such things and extends down thorough to what data to use, how to do the compilations, and the meaning of the results. Even though this is not the place to reiterate any of these disputes, it is very important to underscore here that they are immensely important and result, reasonably frequently, in a redoing of past calculations and a complete reconsideration of their application. The "science of economics" is no more fixed in its wisdom than any other human attempt at understanding the world about us. Nevertheless, it is also fair to say that, in the interim, on our way to understanding the issues even better, the same scholars who debate these matters also use the CPI as it exists to draw the very same kinds of rough comparisons that are possible from the form at this site. EH.Net does no more than provide visitors to this site with what everyone else is using, no more, no less. It offers no guarantees either of precision or user satisfaction. As in all such matters, caveat emptor.

Example of the problem of comparisons over time.

The user of these data is better prepared to understand the potential problems involved if she or he aware of them. Anyone who wishes to explore the issues behind the construction and the use of the CPI for deriving these comparisons is encouraged to read more on the subject. One book that discusses all of this is John J. McCusker,How Much Is That in Real Money?: A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States, 2nd ed., rev. and enl. (Worcester, Massachusetts: American Antiquarian Society,2001). There are many other work of a similar character, most of which are mentioned in the notes and bibliography of that book.

Prices before 1776

People interested in the period before the American Revolutionary War do basically the same calculations, although with one additional step. Moreover they must be even more cautious in their conclusions because of the much longer time span involved. The CPI that is used for the conversions at this site is based on the dollar. Before the introduction of the dollar as the money of account of the newly established United States in the years after the American Revolution, the residents of each colony had their own distinct colonial currencies, even though - confusingly - all were denominated in pounds, shillings and pence and all used the same counting system and the same abbreviations and money symbols (the pound sign was "£"; the shilling was abbreviated "s"; and a "d" stood for the penny or pence - abbreviated "d" from the Latin word for penny, denarius; £1 = 20s; 1s = 12d; therefore, £1 = 240d). Because our CPI is in dollars, we must first convert any seventeenth- or eighteenth-century prices from pounds to dollars before proceeding to the next step.

Such conversions to dollars are most easily accomplished by exchanging an amount in colonial currency for its equivalence in pounds sterling and then going from pounds sterling to dollars at the standard seventeenth- and eighteenth century ratio of 4s 6d sterling per dollar. (This is now more easily accomplished because of the inclusion in the new edition of the book mentioned above of tables that indicate the exchange rates between colonial currencies and pounds sterling. See Table B-1.) For example, in 1774, when the exchange rate between Boston and London was £135 Massachusetts currency per £100 sterling, £400 Massachusetts currency was equivalent to £296 sterling. At £0.225 sterling per dollar, or, inversely, $4.44 per one pound sterling, £296 sterling was equal to $1,314. Entering into the form that amount in dollars and specifying the year 1774, we find that £400 Massachusetts currency in 1774, when adjusted for inflation, works out to have been worth about $28,000 United States currency in the year 2000.

Please read our Note on Data Revisions.

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