What’s Getting Cheaper?

While we were all talking about record high commodities prices, the prices of some products have gone into free fall.

University of Michigan economist Mark Perry compiled a short list of products that are significantly cheaper today than they were ten years ago. At the top of his list: Computers (down 90 percent over the last decade) and TVs (down 74 percent). Toys are down too (44 percent), as are new cars (3.4 percent), although given the rise in metals prices that may well be a thing of the past.

In related news, The Economist is running an online debate over whether “there is an upside for humanity in the rise of food prices.”

(HT: Marginal Revolution)


Jason

"In related news, The Economist is running an online debate over whether 'there is an upside for humanity in the rise of food prices.'"

The advocate on the "Pro" side of this debate starts off by saying "Malthus was wrong."

Maybe it's just because I'm reading Darwin's Origin of Species right now, but to my mind, anyone who says that is being short-sighted. Today's food prices might not be a sign of the Malthusian apocalypse, but that doesn't mean that exponential growth curves can go on forever.

jb

and of course, if you counted what a computer in 2008 can do, compared to a computer in 1998, you're looking at a decrease of more like 900% - 9000%

Specifically, in terms of the processing ability, and the manifold ways that enhances the power of the PC: games, DVDs, streaming TV, music, telephone, videophone, home office, professional quality sound and video editing, etc.

Peter

The other day I noticed Skateboarding shoes were 1/2 to 1/3 the price than they were when I used to buy them 10 years ago.

bankelele

I keep track of some exxential commodites in Nairobi and one of the few things getting cheaper are mobile call and data rates

Eli Baker

Cars getting cheaper? The list price of my Passat Wagon with all wheel drive was 32k in 2002. Looked at one yesterday; the price was 44K!!

jonathan

The cost of information has changed too. I can read a large number of sources that would have required payment. Even if I allocate a substantial portion of my internet access fees and even if discount entirely the value of the additional information, the cost of reading this material has dropped.

Jeff

I don't know that I'd trust the BLS data on TVs. Visit walmart.com, and check out their prices. They have 17 low-end models with screen size 19" or less, median price $297, and 26 high-end models 37" or larger, median price $1,193. But there are no analog tuners or CRT displays, they're all flat screens with digital tuners. The technology change has been so radical that it's like comparing apples and oranges.

JohnJ

I keep hearing that real estate is really cheap right now.

Eric

Here's a bleg: Does anyone have any data on retail prices for video game consoles over time? For a given product, how long does it take for the price to halve? Or indeed for TVs.

Mort Dubois

Even if you pay the same number of dollars for item x as you did 10 years ago, it's cheaper because of inflation and wage gains. But the examples people are trotting out of non-increasing prices show that one of the determinants of prices is what people are willing to pay - $4k for a hot computer has become a culturally accepted number, so that's what it costs. We don't do inflation or wage adjustments in our head as we think about this kind of thing (as is definitively proven by comments above).

Mort

DQKennard

Longitudinal pricing study is *very* difficult, and generally near worthless. I include in that statement the difficulty of calculating such things as accurate price indices, price deflators, cost of living indices, and the like.

There's too much change in products, use of products, and too many problems with price indices to really say much of anything. (Not that that stops people from using/misusing price indices of all sorts for many purposes).

In-depth, nuanced analysis might result in some small conclusions that could be said accurately and usefully about the products on that list, but what's there isn't it. Bad data, badly analyzed with bad statistics, and reduced to a soundbite list.

JTP

Many people are confusing the difference between a computers utility and the actual abilities of the computer.

In a true comparison, you would look at the cost of the individual pieces that comprise the system and their price 10 years ago, and the price today. This sort of comparison is worthless because we want to see progress and pricing outdated material is next to impossible.

A second comparison could be made for just the hardware. Buying a PC/Laptop using today's base hardware configuration and running late-90's era software. This type of comparison is almost equally as useless as we show no progress in the efficiency and utility of today's software.

Finally, compare a late-90's base system and it's intangibles to a base system today and then make price point comparisons. The intangibles including utility, storage and efficiency are light years ahead of where we were 10 years ago, but this may have come at a cost of a few minutes load times over a day.

I don't buy the argument that new technology has destroyed the previous pricing model from a hardware or software side. There are now more options then ever in configuring a hardware and software package to fit any need.

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Cory Olson

#12 - Re: TV's being cheaper - Compare them size for size. Sure, you can't get a TV for less than $700. You also can't find a TV under 30". When I was a kid, we had a 19" TV, as did most other families I know. If you had a 36" TV, you were living in luxury. Today, salespeople call them "bedroom televisions."

Steve

is there a comparable list that shows price change over a longer period of time, like say 30 years?

thanks!

Rich Wilson

bike tubes

I can remember paying $3.50 for a bike tube in the mid 70s. You can still get a bike tube for $3.50.

Adjusted for inflation, that's pretty amazing.

kip

"People need more software than before, simply to handle the demands of the computing environment. Antivirus software is now a requirement, whereas 10 years ago it was only strongly recommended, for example."

And most of those that software (including antivirus) can now be obtained for free (legally). About the only thing you have to buy is the OS and maybe Office (unless you want to use OpenOffice). Most other applications you use nowadays are all online and free. (Business software has probably gone up in the last 10 years, due to effective price discrimination.. businesses are more willing to pay for software than consumers.)

"I purchased a $4000 computer in 1998. It kicked all sorts of ass. Today if I wanted to buy a computer that would do a similar kind of ass kicking in comparison to other machines, guess how much I would spend . . . about $4000."

Well that's not really fair, your $4000 computer today has something like 100x more RAM, 4x more CPUs (quad-core at least I'm assuming), 100x more video RAM, 1000x more hard drive space, 20x faster processor, 100x better graphics card.

But even disregarding all that, 4000 2008-dollars are worth about 3200 1998-dollars (according to http://www.westegg.com/inflation/), so you're *still* seeing a 20% decrease in price!

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Larry

I have no explanation, but I have read that US prices for antique furniture have declined by something like 1/3 in the past twelve months.

Traciatim

I have significant doubts that computers are 90% cheaper than 10 years ago. The only way you can compute this is if you say a computer 10 years ago can do X amount of Y, and a computer today (the same physical price) can to X^2 of Y . . . so therefore it's SUPER CHEAP!!! Buy two while the sales on!

I purchased a $4000 computer in 1998. It kicked all sorts of ass. Today if I wanted to buy a computer that would do a similar kind of ass kicking in comparison to other machines, guess how much I would spend . . . about $4000.

drusifer

I'm not so sure these numbers reflect reality. True a computer I bought 10 years ago would probably not be worth nearly as much today, but whose going to buy a 10 year old computer? It would be more interesting to compare the average price paid for a computer today to the average price paid then.

The problem is that technology doesn't get cheaper until it is replaced by newer (often more expensive) technology. By then it is obsolete and nobody want's it.

A good example is the Linksys wireless G router. A few months ago I went looking for a second wireless router to expand the coverage in my home. I was surprised to find that the original model I had bought 4 or 5 years earlier was still the only one available (from Linksys) and the price was in exactly the same $60-$70 range despite the fact that there are many competing products.

Today I checked again and although some stores are still charging $60 and up there are discounted units available for as low as $25. The reason why is because Linksys finally introduced a new model which is much faster and not surprisingly costs $60-$70. Assuming the new model becomes dominant over the next few years, the average cost for a wireless router will not change much.

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Avi

All of those things are manufactured in China or other low-cost countries, often subsidized by those countries, and imported in bulk to the US. That's not going to last. It's already changing, as the raw cost of material goes up and the cost of transport.

We've had the cream of the crop, it's only going to get more expensive from here.