Saturday, April 13, 2019

A Hundred Years of Food Prices Compared

From the Foundation for Economic Education, author Marian Tupy got motivated by a quote from Twit of the Year, Alexandria Occasionally Coherent, to compare food prices after a century of largely free market forces working in American agriculture.   It was the famous quote in which she babbled:
Capitalism is an ideology of capital—the most important thing is the concentration of capital and to seek and maximize profit... we’re reckoning with the consequences of putting profit above everything else in society. And what that means is people can’t afford to live.

“Capitalism is irredeemable,” she concluded.
I'm not sure if this is the talk where she said unemployment was low because everyone had two jobs.

I'm not sure how obvious this is, but it's tricky to try to compare prices from a hundred years apart.  We know, for example, that inflation has decimated the dollar, but that's hard to separate from that other price trends.  Appliances and electronics have gotten cheaper, for example, but everything where the market has been broken by the government has gotten more expensive; things like education and health care, and then products that are highly regulated, such as automobiles, homes and aircraft.  A 2019 car might cost far more than a 1969 car, but it has been regulated extensively in terms of gas mileage, crash safety, and a host of other things.

His bottom line conclusion is that food in America has become almost eight times cheaper relative to unskilled labor over the last 100 years.

Here's what he did.  First, he obtained a report called:
Retail Prices, 1913 to December 1919: Bulletin of the United States Bureau of Labor Statistics, No. 270, which was published in 1921. On pages 176-183, we encounter nominal prices of 42 food items—ranging from a pound of sirloin steak to a dozen oranges—as registered in the city of Detroit in 1919. Those can be seen in the second column of the attached graphic.

The next step was to derive the hourly wage for unskilled labor in 1919, using a 1774 to 2016 scale at and re-indexing it to 1919.  This gave a pay rate of 25cents/hr for unskilled labor in 1919.  Finally, 2019 prices for items as comparable as could be determined were obtained from - chosen because it was believed to be a place many unskilled laborers shop. For reference, the 2019 pay rate for unskilled workers calculated to be $12.70 per hour.

Their conclusions:
  1. The time price (i.e. nominal price divided by nominal hourly wage) of our basket of commodities fell from 47 hours of work to ten, 21.2 %, (see the Totals line in column five).
  2. The unweighted average time price fell by 79 percent (see the Totals line in column six).
  3. Put differently, for the same amount of work that allowed an unskilled laborer to purchase one basket of the 42 commodities in 1919, he or she could buy 7.6 baskets in 2019 (see the Totals line in column seven).
  4. The compounded rate of “affordability” of our basket of commodities rose at 2.05 percent per year (see the Totals line in column eight).
  5. Put differently, an unskilled laborer saw his or her purchasing power double every 34 years (see the Totals line in column nine).
I know that "Big Ag" gets its criticisms around the web, Bayou Renaissance Man ran one just nine days ago, but the results of this century long change in agriculture has led to quality of life improvements for all of us, here measured by the poorest among us.  Add in that American agriculture has brought food as foreign aid to many places around the world.  An average time price decline of 79% is a big improvement in life.  It means, picking one item from the second chart, that a pound of sliced ham went from costing 2.27 hours (2 hours, 16.2 minutes) in 1919 to costing 0.24 hours (14.4 minutes), so a full two hours of pay is freed.  It means that there's more money at the end of the week for other things.

What "factory farms" buy us consumers is the "Iron Law of Production", which says that as quantity doubles, price comes down by roughly 25 to 30%.  Larger farms can economically justify techniques that smaller farms can't.  Yes, I'm aware of the general protests against living conditions for livestock on these farms, and I'm sympathetic to some of it, but I see that as a first world problem.  Look at it this way: if you were a starving Venezuelan eating out of garbage can, because there are no zoo animals or pets left, do you eat the "factory farmed" ham or do you keep starving?   I think modern small farm techniques for raising livestock more humanely while keeping total costs down have a lot of room in the market.

That's getting lost in the weeds, though.  The bottom line is that the system AOC loves to hate has done very well for Americans, while the system she loves produces Venezuelans eating out of garbage cans.  Her quote that "...people can’t afford to live," due to capitalism is proven, demonstrably false.  People today have it much better than they did a hundred years ago.

I think author Marian Tupy hits it out of the park with his closing quote:
Joseph Schumpeter, the famous economist who served as Austrian minister of finance in 1919, observed that the
capitalist engine is first and last an engine of mass production which unavoidably also means production for the masses … It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within reach of factory girls.
To those silk stockings we can now add food.

EDIT 2202 EDT 4/13/19: to add the Walter Williams image I forgot.


  1. As two of the remaining producers in a field of 37,468 left in America, it's getting lonely! The example of the hog farmer is missing the point of why one produced hogs: as a means to get your grain to market. Chickens ran around eating through the droppings of the pigs and cows. Manure grew an excellent crop that fed the cycle. Milk was another means to bring crops to market. Distill your grains, it's cheaper to move a few gallons of alcohol than bushels.
    The desire to remove animals from our food chain means there will be 415 million acres that humans don't get to enjoy benefit from because WE CAN'T GRAZE and it's not suitable for fruit/vegetable production.
    In the name of efficiency, our company request we try to be able to: fill a truck, or be able to hold 48 hours production with a 4-6 hour window for pickup. I had 25 hours of storage, the truck came every day, same time. So I added storage capacity, can fill a truck in 42 hours WITH a 10 hour pickup window. The truck still comes every day. I predict they will never come for full truck loads. Because it actually makes them inefficient in relation to everybody else and their pickup needs.
    I hear tell of farmers who make more money from selling manure than they do from their milk or meat.

    1. Very interesting comment!

      I read a lot in various places, and one of the things I've read that took me down paths I've never thought was some people who were advocating for small farms like you describe. Cattle grazing alongside pigs moving around the fields at will, chickens pecking at the worms and insects in the dung and so on. They pointed out that when you see those metal buildings with hundreds of cattle eating grains from a trough, you don't see the square miles of farmland growing the grain to bring to that facility. The number of acres per cow or pig isn't substantially different, but the way its used is. It gives the animals a better quality of life and, if the research proves to be right, getting finishing grains out of the cattle's lives improves our lives when we eat the grass-fed cattle.

      The thing the vegans miss is that ruminants are almost perfect at eating something humans can't, grass, and concentrating the nutrients into a food humans can eat. Your point about 415 million acres that humans don't get to enjoy benefit from because WE CAN'T GRAZE and it's not suitable for fruit/vegetable production. illustrates the problem with repeated claim we hear about cutting down forests to graze cattle. All land can't be used for all uses. Forests aren't prime grassland or it would have developed as grassland and stayed that way. I think Alan Savory's studies on restoring grasslands by having ruminants graze on them is a lesson more people should pay attention to. (I know the vegans/"big vegetarian" hate him because he advocates for people raising ruminants and then eating them).

  2. I have to admit that When I first saw the picture of Mr. Williams I was wondering why you were quoting Bill Cosby. I am an idiot!


    Broadleaf herbicides like Grazon sprayed on hay fields persist in the manure from cows and horses who eat that hay. That manure is now toxic waste for gardening purposes for some period of years. I got this contamination this in my garden, and there was still a recognizable effect in year two. Same for non-organic straw used for bedding mixed with manure from chickens fed non-organic feed.

    Roundup is now being used on cereal crops to kill them and reduce their moisture content while still in the field. The plant isn't alive long enough to process it and break it down.

    We're looking at replacing straw for chicken bedding with free wood chips from the city made mostly from live oak dropped in storms. In the garden, manure tilled in and straw mulch on top will be replaced with oak leaves from our property, not tilled in. The top of the oak leaf pile will be mulch, the bottom will be fertilizer.

    At one time the justifications for organic may have been irrational, but in today's practice the agrochemical carryover and consequences are material. The economic effect on the manure reminds me of the scrap metal bin at the county trash collection stations. Don't you dare salvage those old appliances, we're going to destroy all the remaining value because it both creates jobs and reduces self-sufficiency. Hey, so does banning the wheel.

  4. I rip cut firewood with a $450 chainsaw because it's so much cheaper than a $2,500 splitter. I put a cubic yard of these long rip chips in a pile contained inside a fence of dry stacked concrete blocks. Top open to the weather. In a year the volume of this 100% wood had reduced by 2/3 and it was full of earthworms and landscaping plants which were huge. I no longer think compost is all that fussy about Carbon/Nitrogen balance, moisture, getting turned, all that work. If it was then when a tree fell in the forest it wouldn't rot.