Why do prices always go up? They go up because the value of our money decreases.
If you go online, you can find inflation calculators for most currencies. For some countries, those currencies no longer exist. If you look at any country that has a currency with a history, even if that is only a few years, you can see how prices have changed. Let’s have a look at a few examples.
In the UK, now, the average price of a pint of beer is ￡5.17 ($6.59). In 1300 AD, in England, you could buy a gallon of beer (roughly 4 liters) for a penny. In the USA, now, 1 kg of beef is about $25. Obviously, the price varies depending on what kind of beef, but that is a rough price. In 1799, 4 kg of beef cost 60 cents. Those are some huge price differences. So, what causes them?
Firstly, it is very difficult to compare prices directly because even though we are looking at the same thing, they are made in completely different ways and the cost of making them was vastly different. In the 14th century in England, most families would have made their own beer because they drank weak beer rather than water, which was less safe. The economy didn’t function in the same way as it does now and people were more likely to make the things that they needed because they didn’t have the available money to buy it or the system to buy things wasn’t in place. It was a very different system. People had different values as well. We are willing to spend money in places that people a thousand years ago would never have considered. I used beer and beef as examples of products that seemed far cheaper in the past then they do now, but we could quite easily go the other way. In 14th century England, a book cost about ￡1. For comparison, a suit of armor cost ￡2. Books were so expensive because the printing press hadn’t been invented yet and they were all copied by hand. Books are far cheaper now because they can be mass printed.
It can also be worth looking at the prices of things as a percentage of salary. One ￡5 beer is about 30 minutes work, going by the UK minimum wage for people over 21. If you work an 8-hour day, that beer is one sixteenth of your day’s wages. In the 14th century, a master carpenter earned three pence a day. So that 4 liters of beer is one third of a day’s wages, which, if you make the quantities of beer about the same, works out to be roughly the same as it is today.
So, why do prices generally go up over time? If a beer in the 14th century and a beer today are roughly the same value, why was one only a penny and the other nearly six pounds? Well, firstly, prices don’t always go up. They generally do, but there are often big drops that coincide with wars, or depressions, or various disasters. However, once we have recovered from those, prices do tend to go up again.
The reason prices always go up is that we are using money to measure the value of things and money is always going to be a relative measurement. We know that Mt. Everest is 8,848 m tall. The length of a meter doesn’t increase over time. We don’t say, “ooh, that Everest was so much smaller when I was a kid!” Meters are not a relative measurement. However, money is. When we are using money, we are collectively as a society agreeing that something is worth a certain price. Prices can go up or down depending on supply and demand, but over time the reason prices increase is not because the things themselves become more valuable but because our money becomes less valuable. And this drives inflation and growth in an economy. When money becomes less valuable, you can’t buy as much and so wages have to rise to give people more money. When that happens, they can buy more but companies need to pay workers more, so the prices of things have to go up. And this circle continues. All of these things are increasing in tandem, though, so the actual value of things is not increasing. A potato costs more now than it did before, but it is not more valuable. We just have to use more money to buy it. If we knocked a zero off of all of our prices, wages, and money, everything would still be the same, but that is not something we could psychologically expect, so the value of money has to keep going down. And this is what I learned today.
Photo by Mark Stebnicki: https://www.pexels.com/photo/radishes-with-price-tag-2893652/
Sources
https://medieval.ucdavis.edu/120D/Money.html
https://babel.hathitrust.org/cgi/pt?id=mdp.39015035798035&seq=18
https://www.bringhurstmeats.com/beef-prices.html