Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

So, how can we compare today’s wages with 100 years or 2,300 years ago?

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What does that tetradrachm from Alexander the Great representing pay for two days of a skilled construction worker represent today? Image courtesy Adobe Stock.

What does that tetradrachm, from the era of Alexander the Great, representing pay for two days of a skilled construction worker, represent today? Image courtesy Adobe Stock.

The following numbers are based on purchasing power parity, which is a tool economists use to compare countries across currencies and across time.

Average income across the planet is now $33 a day, which is also about equal to average income in Brazil today or in the US back in 1941.

Income in places like the US and Sweden are 3 or 4 times the planet average.

Average income per person was about $3 a day from about 1800 all the way back until humans first appeared on the planet.  Dr. McCloskey says daily income sometimes in some places rose to $6 or $8 for a while but slipped back to the $3 range.

For illustration of what $3 per day looks like, consider Haiti or Afghanistan. In those two places, the current PPP income is $3.

So where does that leave us for a comparison? Consider this purchasing power parity analysis.

  • $3 – For all of history until about 1800 average daily income was about $3.
  • $33 – Today average income is about $33 in Brazil or a worldwide average.
  • $132 – Today average income in the US and Sweden is 3 or 4 times higher than the world average. The specific days point is $132 a day in the US in 2011.

Going from $3 to $132 is an increase by a factor of 44.

That is an increase by factor of 11 from ancient times to the world average today.

The increase from ancient times to the US today is a factor of 44.

I previously mentioned a few other measurements:

  • 20 fold increase in last 100 years instead of 200 years
  • 33 fold increase from an average of ancient times to now
  • 44 fold increase, calculated above
  • 66 fold increase since early British settlers
  • 100 fold increase when considering the higher quality of medical care and technology

Let’s go with economic improvement by factor of 40

Because of the roughness of any such comparison I will go with the 44 times increase. Let’s round that down to a forty fold increase in average income. I will hold off for the moment on including factors such as the improvement of quality of food and clothes, better dental care, longer life span, and improved entertainment technology.

So an average income in the US today is vaguely comparable to 40 days wages any time before 1800 .

That means a day’s wages in Alexander’s time is 1/40th of a day’s wage today. That means we need to step up that valuation of an Athenian talent.

Here goes:

  • 2 drachma = average pay for a day for a skilled construction worker
  • 1 talent = 6,000 drachma
  • 1 talent = 3,000 days pay in 300 BC
  • 500 weeks pay at 6 days per week in 300 BC
  • 40x – step up of pay for a skilled worker today compared to 2300 years ago
  • 20,000 weeks pay today in an Athenian talent (notice I adjusted from a 6 day week to a 5 day week ?)
  • 384.6 years pay in Athenian talent at 52 weeks per year
  • 400 years pay at today’s wages in 1 Athenian talent rounded to 50 weeks a year.

We could redo the calculation for a betterment by a factor of 66 or 100. That would give:

  • 40 fold increased value of goods and services = 400 years pay in 1 Athenian Talent
  • 44 fold increase, which is specific point estimate from Dr. McCloskey = 440 years pay in a talent
  • 66 fold increase = 660 years pay
  • 100 fold increase = 1,000 years pay in each Athenian Talent

I will redo my calculations using the more modest 40 times improvement in economic value enjoyed today.

Written by Jim Ulvog

June 2, 2016, 6:30 am at 6:30 am

Posted in Economics, Pondering

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