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George Gilder's avatar

Bill,

We thank Bill Bonner for recognizing time prices as an important way to measure our standard of living. We also grasp and respect his critiques of our claims of global “superabundance.”

As your scathing and scintillating posts depict—they are my favorite reading on the net (GG)—most economic claims these days are hokum.

We agree with you that current monetary measures and government data and economic concoctions such as GDP, CPI, GDP deflators, and such convey descriptions and calculations of value that tend to conflict with reality. GDP, for example, presumes that public “goods,” such as university and corporate ESG administrators, military outlays in the Ukraine, and subsidies and mandates related to COVID and climate change, are all worth what they cost. Meanwhile, we have shown that private goods are gauged by inflation data that miss much of the economic and technological progress of recent decades and even centuries.

We seem to agree on the negative impact of much government spending, but disagree on the value of private output.

As I (GG) have been arguing for a decade or so, money is ultimately tokenized time. Time prices start with the idea that while we buy things with money, we really pay for them with our time. When you run out of money, you are running out of the time to earn more money. The actual cost is how much time it takes to earn the money to buy something.

This means there are actually two prices: money prices and time prices. Money prices are expressed in dollars and cents while time prices are expressed in hours and minutes. Converting a money price to a time price is simple. Divide the money price of a product or service by your hourly income.

Time Price= (Money Price)/(Hourly Income)

When I (Gale Pooley) was young, my grandpa told me that when he was a kid, Hershey bars only cost 5 cents. Today they cost around $1.32 at a local Walmart. While it is true that these popular chocolate bars have gotten more expensive, the real question is “Have they become more or less affordable?” To answer this question, we have to compare the candy bar price to a person’s hourly income. We have to calculate the time price. How much time did it take grandpa to earn the money to buy his candy bar back in 1900 versus the time it takes today?

As an unskilled worker Grandpa was earning around 9 cents an hour in 1900. This means the time price of his chocolate treat was around 0.56 hours or 33 minutes. Unskilled wages are now closer to $15.72 an hour. This would put the time price for unskilled workers at 5 minutes. For the time it took grandpa to earn the money to buy one Hershey bar, you get over 6.6 bars today. We enjoy over 560 percent more chocolate abundance than grandpa.

We can calculate time prices for all products and services, at any time, in any country, with any currency. Time prices are simple and elegant and intuitive. In our books Superabundance and Life After Capitalism, we look at the time prices of hundreds of different products and services.

We compared the time prices of 42 individual food prices from 1919 to 2019. We found that for blue-collar workers the time prices had fallen by an average of 91.2 percent. This means that for the time it took to earn the money to buy one item in 1919, you would get 11.32 in 2019. Food abundance has been growing around 2.46 percent a year, doubling every 28.57 years.

You write: “Basic commodities are cheaper (in terms of hours of work needed to buy them). But finished products – those that he actually buys…those that should benefit from more technology – are much more expensive.” You cite pickup trucks and housing.

What about pickup trucks? In 1948 the price of a new Ford was $1,279. According to MeasuringWorth.com, a highly respected source of historical economic information, blue collar hourly compensation (wages and benefits) was around $1.41 per hour. This would put the time price at 907 hours. Blue collar hourly compensation is closer to $36.50 today, so the time price of a new $47,000 F-150 is around 1,288 hours. While the time price has increased by 42 percent, pickups today are much better in terms of mileage, comfort, reliability, power, and safety. Most people are happy to pay 42 percent more for all of these features. Adjusted for time, the 1948 pickup would sell for over $33,000 today. ($47,000 ÷ 1.42). The new F-150 has to be worth $25,000 more than the 1948 model.

Another way to compare is to look at the trucks China and India build that are similar to the 1948 in terms of quality and performance and safety. They sell for around $10,000. At $36.50 an hour, the time price is 274 hours. This is 70 percent cheaper than the 1948 model. Both ways of analyzing pickup truck abundance suggests that this classic American icon is becoming more abundant.

What about housing? First, we must recognize that real estate is not just about location, location, location. It’s about financing, financing, financing. A 3 percent mortgage is much different than a 7 or 13 percent mortgage. We also note that houses are much larger today than a hundred years ago. With smaller family sizes the square foot per person is much higher. It is payment divided by the square footage per person that ultimately counts. Houses in 1923 averaged around 742 square feet. This would put the price per square foot of the $3,200 house at $4.31. Blue-collar workers were earning 48 cents an hour putting the time price per square foot at around nine hours. According to the U.S. Census Bureau the average square footage of a new home is around 2,440. At $36.50 an hour, this would put the time price of a $390,000 home at 4.4 hours per square foot. This is over 50 percent lower than the 1923 house. This is before we consider any differences in quality or interest rates.

value.

We agree with Mr. Bonner on the egregious mistakes and depredations of monetary policy and debt. However, the expansion of capitalism around the globe has led to huge gains in productivity and improvement in time prices. We very much appreciate Mr. Bonner’s consideration of our approach to measuring with time prices and hope for fruitful further exchanges in the future.

George Gilder

Gale Pooley

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Paul Murray's avatar

It is likely that the USA has the worst collective case of attribution bias in world history. From the end of WWII into the 60s, America thrived as it never had before, soaring to new heights of achievement and prosperity, because we had no serious competition, given how WWII played out. We acted as if, and told ourselves accordingly, this unique condition was a result of some sort of virtue or excellence on our part. It was inevitable that the rest of the world would eventually catch up, and then what? To keep up the charade, Mr. Nixon closed the gold "window", and the USA began its madcap money adventurism. I was not present when those discussions were held and those decisions were reached, but I would bet all I have that those who undertook those actions never considered in their minds that the pretense and charade would continue for nearly 60 years and reach such absurd ends; yet, here we are. We are living insanity, and no one wants to pull the plug for fear of what will happen, while at the same time each of us understands it cannot, and will not, continue. Best always. PM

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