June 18, 2017

IT IS IMPOSSIBLE TO OVERSTATE DEFLATION:

Why the falling cost of light matters (Tim Harford, 2/06/17, BBC World Service)

He burned 20lb (9kg) of wood, kept track of how long it burned for and carefully recorded the dim, flickering firelight with his meter.

Next, he bought a Roman oil lamp, fitted it with a wick, and filled it with cold-pressed sesame oil.

He lit the lamp and watched the oil burn down, again using the light meter to measure its soft, even glow.

Bill Nordhaus's open wood fire had burned for just three hours on 9kg of wood.

But a mere eggcup of oil burned all day, and more brightly and controllably.

Why did he do this?

He wanted to understand the economic significance of the light bulb.

But Prof Nordhaus also wanted to illuminate a difficult issue for economists: how to keep track of inflation, the changing cost of goods and services. [...]

Imagine gathering and chopping wood 10 hours a day for six days.

Those 60 hours of work would produce 1,000 lumen hours of light.

That is the equivalent of one modern light bulb shining for just 54 minutes, although what you would actually get is many more hours of dim, flickering light instead. [...]

According to Prof Nordhaus's research, if you set aside one whole week a year to spend 60 hours devoted exclusively to making candles - or earning the money to buy them - that would enable you to burn a single candle for just two hours and 20 minutes every evening. [...]

By 1900, one of Thomas Edison's carbon filament bulbs would provide you with 10 days of bright, continuous illumination, 100 times as bright as a candle, for the money you could earn with our 60-hour week of hard labour.

By 1920, that same week of labour would pay for more than five months' continuous light from tungsten filament bulbs.

By 1990, it was 10 years.

A couple of years after that, thanks to compact fluorescent bulbs, it was more than five times longer.

The labour that had once produced the equivalent of 54 minutes of quality light now produced 52 years.

And modern LED lights continue to get cheaper and cheaper.

Switch off a light bulb for an hour and you are saving illumination that would have cost our ancestors all week to create.

It would have taken Benjamin Franklin's contemporaries all afternoon.

But someone in a rich industrial economy today could earn the money to buy that illumination in a fraction of a second.

LED bulbs offer sharper, cheaper and more energy efficient illumination

And of course, unlike oil lamps and candles, modern light bulbs are clean, fire-safe and controllable.

The light bulb has become an icon of innovation.

It has transformed our society into one where we can work, read, sew or play whenever we want to, regardless of how dark the night has become.

But the price of light alone tells a fascinating story: it has fallen by a factor of 500,000, far faster than official inflation statistics suggest.



Posted by at June 18, 2017 7:00 AM

  

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