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How Much Is That in Real Money? A Historical Commodity Price Index for Use as a Deflator of Money Values in the Economy of the United States

Author(s):McCusker, John J.
Reviewer(s):Margo, Robert A.

Published by EH.NET (February 2002)

John J. McCusker, How Much Is That in Real Money? A Historical Commodity

Price Index for Use as a Deflator of Money Values in the Economy of the United

States. Second Edition, Revised and Enlarged. Worcester, MA: American

Antiquarian Society, 2001. ix + 142 pp. $15 (paperback), ISBN 1-929545-01-0.

(Available from Oak Knoll Press, 310 Delaware Street, New Castle DE 19720.


Reviewed by Robert. A. Margo, Department of Economics, Vanderbilt University.

The construction of price indices qualifies as one of the central activities

of economic history. Such indices are essential inputs into the measurement of

changes in the standard of living over time. When hard data on outputs are

absent, price data can provide important clues about the ups and downs of the

business cycle. When price series are available for different locations they

inform about the degree, or lack thereof, of economic integration.

How Much is the revised version of an earlier “small” (the author’s

term) book of the same title. As before, the goal is to provide a single,

comprehensive price index for the entire sweep of “American” history — in this

revision, 1665-2001. The revisions are of three sorts: extensions back and

forward in time, more examples, and additional information on colonial exchange

rates. Although economic historians in economics departments will find much

that is useful, I suspect the real audience consists of students, and

historians other than economic, who, for various reasons, need a specific

answer to the question posed in the title.

Most books, even small ones, have several chapters. How Much has a

single chapter — really, an interpretive essay — five appendices with tables,

a bibliography, and a brief Introduction. The essay touches on the history and

uses of price indices, and problems therein. Appendix A presents the overall

index. As previously, the bulk of the index is derived from the work of David

and Solar, whose index itself is mostly derivative of Brady, Bezanson, Cole,

and others. McCusker updates his previous updating of David and Solar to 2001

(estimated) using the Bureau of Labor Statistics’ CPI-U (urban) cost of living

index, available at the click of a button from the BLS website. He also

backdates to 1665 using recent work by P.M.G. Harris and Stephen G. Hardy, who

have constructed indices from probate records for colonial Maryland and

Virginia. These are all spliced together, and the base period set to 1860,

allowing easy comparisons over time.

Appendices B and C draw on McCusker’s bailiwick, colonial monetary history. The

colonies all had their own currency. To convert prices in, say, Maryland and

New York into common units requires exchange rates, which are provided in

Appendix B. Appendix C does the same for paper money during and just after the

Revolutionary War. The tables in these appendices are based on a lot of hard

work in archives over many years. Colonial monetary history is an arcane field

with more than its fair share of arcane debates. Not being a member of this

crowd, I can’t really evaluate the issues but, for the rest of us, Appendices B

and C certainly seem worth the $15.00 the publishers are asking for the book.

Appendix D provides commodity price indices for Great Britain from 1600 to

2001. Table D-1, like Table A-1, has blank rows extending to 2009, suggesting

that another revision may be forthcoming in a few years. Appendix E uses the

price index in Appendix A to provide some conjectural dating of business cycles

in the United States back to the mid-seventeenth century.

How Much is easy to criticize. The interpretive essay is far from

comprehensive. There is barely a mention (except, obliquely, in a footnote) of

quality bias and none that I could find of substitution bias. Readers seeking

“nuts-and-bolts” advice in constructing a price index will not find much of

immediate use in the essay. Although McCusker is correct that some of the

criticism directed at historical price indices is off the mark he is too

dismissive, in my opinion, of the criticism that many historical indices derive

from too limited a range of locations. The essay would have benefited from more

(there are some) of McCusker’s reasoned judgments on what should be done in

future research. The footnotes and bibliography are extensive, but still rather

selective — no mention, for example, is made of this reviewer’s rental price

index for ante-bellum New York City. Then, there is footnote 22 on pp. 26-27

which claims that “[e]conomic historians are in fact guilty of some of the most

simplistic, even misleading use of price indexes” but provides no specific


One can also question the prototypical use — figuring out what specific items

are “worth” in different years — for which the index is intended. Consider

McCusker’s example of George Washington’s false teeth (p. 37), purchased in

1795 for $60.00. According to McCusker’s index, this was “the equivalent of

roughly $820 in year 2000 terms.” “Roughly” is the operative word in this

sentence. In 1984 I purchased my first personal computer, a Kaypro, for $1,500,

worth “roughly” $2,485 in year 2000 terms, according to McCusker’s index. No

one in their right mind would pay $2,485 for such a computer in today’s dollars

($51, I note, is the current price on Ebay). However, if such a machine had

been available, in say, 1964, I am quite sure someone would have paid many

times its alleged 1964 value ($448). Were we able to transport one back in time

to 1864, I am also quite sure its value would have been close to zero, since

there would have been no way to turn it on.

The point is that, given a suitable estimate of aggregate quality bias, indices

like McCusker’s can give us a reasonable sense of the average rate of change of

the price level — inflation — over long periods of time. They do even better

over shorter periods of time. And quality bias matters less when we use such a

price index to deflate indices of nominal wages, since wage indices are also

afflicted by quality bias — today’s workers are healthier, better educated,

and so on, than in the distant past. But, to use such an index to predict

changes in individual prices is more than a little perilous, because the

variance around the average rate of price change — particularly over long

periods of time — is enormous. Unfortunately, naive users are likely to forget

this caveat — embedded as it is in the word “rough” — if they are aware of it

at all. This caveat notwithstanding, I certainly value having a copy of

McCusker at hand, and expect to turn to it often.

(McCusker is Ewing Halsell Distinguished Professor of History, and professor of

economics at Trinity University in San Antonio, Texas.)

(Editors Note: The two series: RPI from Great Britian, 1600 to present, and the

CPI from the United States, 1650 to present; from this book are available

online on the EH.Net server at )

Robert A. Margo is Professor of Economics and History at Vanderbilt University,

Nashville TN. He is the author of Wages and Labor Markets in the United

States, 1820-1860 (University of Chicago Press, 2000); and, with Joel

Perlmann, Women’s Work? American School Teachers, 1650-1920 (University

of Chicago Press, 2001).

Subject(s):Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII