A Better Way to Measure Resources
Measuring in time prices reveals our true condition.
A good way to measure if life is becoming more or less abundant is to think about how much time it takes to earn the money to buy something. If a bicycle costs $120 in 2016 and you were earning $10 an hour, the bike costs you 12 hours. If the same bike today is $150 but you are earning $15 an hour, the time price is now 10 hours. The money price went up by 25 percent, but the time price has fallen by 16.7 percent. Which price makes more sense?
For the time it took to buy one bike in 2016, you get 1.2 bikes today. This would be a 20 percent increase in your bicycle abundance. This increase happened over a five year period. A financial calculator will tell you that the compound annual rate of growth in your bicycle abundance is 3.71 percent a year. You are getting 3.71 percent more bicycles per year for the same amount of time over this period. At this rate you will get two bicycles for the time price of one in around 19 years.
Remember, Adam Smith said we buy things with money but we pay for them with time. Time prices are better than money prices because time cannot be inflated or counterfeited. Innovation shows up in both lower prices and higher incomes, so time prices more fully capture the benefits of innovation. Time prices can also be applied in any country, using any currency, with any product, at any time.
Time prices are the true prices.
Excerpt from our forthcoming book The Age of Superabundance.