Why Time is a Better Measurement than Money
Four reasons why measuring with time makes more sense than measuring with money.
Time is the coin of your life. It is the only coin you have, and only you can determine how it will be spent. Be careful lest you let other people spend it for you. - Carl Sandburg
We buy things with money, but we pay for them with time. Adam Smith noted in his Wealth of Nations that, “The real price of everything is the toil and trouble of acquiring it …. What is bought with money... is purchased by labour.”1
While money prices are expressed in dollars and cents, time prices are expressed in hours and minutes. We can easily convert a money price to a time price by dividing the money price by hourly income. For example, if bananas cost $1.50 a pound and you are earning $15 an hour, the time price of a pound of bananas is one-tenth of an hour, or six minutes. If the money price increases to $1.67 but your hourly income increases to $20, the time price decreases to five minutes. You now get 1.2 pounds bananas for the same time it used to take to get one pound. Your banana abundance has increased by 20 percent.
There are four reasons that time is a better way to measure than money.
First, time prices contain more information than money prices. Since innovation lowers prices and increases wages, time prices more fully capture the benefits of valuable new knowledge. To just look at prices, without also looking at wages, only tells half the story. Time prices make it easier to see the whole picture.
Second, time prices transcend all of the complications associated trying to convert nominal prices to real prices. Time prices avoid the subjective and disputed adjustments such as the Consumer Price Index (CPI), the GDP Deflator or Implicit Price Deflator (IPD), the Personal Consumption Expenditures price index (PCE), and Purchasing Power Parity (PPP). Time prices use the nominal price and the nominal hourly income at each point in time, so inflation adjustments are not necessary.
Third, time prices can be calculated on any product with any currency at any time and any place. This means you can compare the time price of bread in France in 1850 to the the time price of oranges in New York in 2021. Analysts are also free to select from a variety of hourly income rates to use as the denominator to calculate time prices.
And fourth, time is an objective and universal constant. The International System of Units (SI) has established seven key metrics that are all bounded in one way or another by the passage of time. As the only irreversible element in the universe, with directionality imparted by thermodynamic entropy, time is the ultimate frame of reference for all measured values.
Time cannot be inflated or counterfeited. It is both fixed and continuous. Everyone has perfect time equality with 24 hours a day. We cannot buy time. Remember in Iron Man when Tony Stark’s father told him, “No amount of money ever bought a second of time?” He was telling Tony that politicians could not manipulate time. Time is continuous with a constant flow 60 minutes each hour.
Time prices are elegant, intuitive, and simple. They are really the true prices we pay for the things we buy in life.
Excerpt from our forthcoming book, Superabundance.
Gale Pooley is a Senior Fellow at the Discovery Institute and a board member at Human Progress
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (London: W. Strahan and T. Cadell, 1776), book 1, ch. 5, http://geolib.com/smith.adam/won1-05.html.