Economics

Here is another point of reference I’ll use for my discussion of ancient finances. The Wall Street Journal reported on 6/7/16:  Americans’ Total Wealth Hits Record, According to Federal Reserve Report.

Want to add this additional frame of reference before getting back to looking at Alexander’s haul as he looted various Persian cities.

The Fed released an estimate of the total wealth of all Americans for the first quarter 2016, which includes individuals and nonprofits.

…

Total wealth held by American households as reference point for ancient financesRead More »

I suggest you are in fact richer today than John Rockefeller was 100 years ago. If it were possible for Prof. Don Boudreaux to switch places with John Rockefeller’s life and even if he could have a billion dollars after he arrived back in 1916, he would not make the switch. He would rather live as a comfortable professor today than be a billionaire 100 years ago.

I agree.

Here are three posts to explain this strange idea: first, what life was like 100 years ago, why Prof Boudreaux would not make the switch, and then why Coyote Blog wouldn’t either.

(This post may seem to be out-of-place on my blog discussing accounting and auditing topics. This discussion is part of my enjoyable research on ancient finances and a related thread of how much life has improved over the last 200 years. Since I discuss finance at this blog, it actually fits.)

An article in The Atlantic on 2/11/16 describes America in 1915: Long Hours, Crowded Houses, Death by Trolley. The article is drawn from a report by the Bureau of Labor Statistics: The life of American workers in 1915. If you enjoy this brief discussion, I heartily recommend you read the full BLS report. It is a fun read, but then, I am an accountant.

I will update a few of the stats in the Atlantic article where the author took a shortcut. When I browsed through the BLS report, I noticed some sentences which were repeated nearly verbatim in the article, which is okay since the report is a public document.

A few highlights:

Workers in factories averaged 55 hours a week. The fatality rate across the economy was 61 deaths per 100,000 compared to about 3.3 per 100,000 today.

…

Are you richer today than John D. Rockefeller was in 1916? The answer is, um, yes.Read More »

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.

…

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

A view of economic progress. Ponder the productivity improvement and resulting increase in wealth to go from this:

To this:

The overall standard of living has increased by a factor of somewhere between 30 and 100 in the last 200 years.

The little side trip in this post and the next will lead me back to my discussion of ancient finances in general and Alexander’s haul from his military campaigns in particular.

Writing in Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, Professor Deirdre McCloskey says it this way:

..in the two centuries after 1800 the trade-tested goods and services available to the average person in Sweden or Taiwan rose by a factor of 30 or 100. Not 100 percent, understand— a mere doubling— but in its highest estimate a factor of 100, nearly 10,000 percent, and at least a factor of 30, or 2,900 percent. The Great Enrichment of the past two centuries has dwarfed any of the previous and temporary enrichments.

Let me phrase that another way. The value of what is enjoyed today by an average person is roughly equal to what 30 or 100 people had two centuries ago. That means the constant dollar value of what is consumed and enjoyed has grown by a factor of somewhere between 30 and 100.

…

How much has our economic wellbeing improved from that our of distant ancestors?Read More »

Update:  I have revised my calculations here. Adjusted the value of an Athenian talent from 10 years salary today up to 400 years salary due to the dramatic improvement in our wealth and standard of living in the last 200 years (the Great Betterment). Also adjusted from estimated average wage in the U.S. of $20 an hour to average wage for skilled construction worker of $70,000 per year. That takes the rough valuation from $20 billion to $1,400 billion, or $1.4 trillion. That actually seems to make sense in a very rough way.

Continuing my discussion of a few tidbits of financial information from Alexander the Great’s military campaigns.

When Alexander approached Susa, the capital of Persia, news of his non-stop victories preceded him. Previous cities he captured surrendered before he arrived. That typically spared most citizens their lives and prevented the torching of the city.

Thus, Susa was handed to him without a fuss, except for a huge amount that Darius III carted off well in advance of Alexander’s arrival.

The author looks at the various reports of how much loot was acquired. Integrating the report that is likely to be most reliable with the other reports results in an estimate Alexander capturing a haul of 40,000 talents of uncoined bullion and about 10,000 talents of gold coin. The gold is roughly valued by expressing the amount what it would be in silver value.

Apparently the Persians didn’t cast most of their precious metals into coins, instead preferring to mint what they needed as they needed it.

Revised value of a talent

Multiple changes have shifted the relative value of gold and silver in relation to each other and in relation to their purchasing power. Instead of converting a talent of silver into ounces and converting that to current dollars at current exchange rates, I’ll start looking at piles of money in terms of average days wages.

Warning: I plan to update my valuation of a Talent based on the radical improvement in living standards that has developed since the Industrial Revolution.

…

Alexander’s haul from looting Susa, the capital of Persia. Revised estimate of value of one Athenian TalentRead More »