Middlemarch economics

[kev67]

I am still trying to work out the correct multiplier for £1 between 19th Century and now. Previously I thought it was 80x going by the price of gold, but this did not reflect comparative standards of living. Pip in Great Expectations received £500 a year, which multiplied by 80 comes to £40,000 a year. This is quite a lot of money for a young, single man, but not outrageously so, especially when he secretly starts to donate half to further his friend's career. Then I thought 150x was a better multiplier, going by the incomes the characters were getting in New Grub Street. Those values seemed to work out quite well for middle class people, but not working class. From reading 19th century literature, £50 a year seems the minimum annual amount for a single person to live off, who has food and rent to pay for, but no servants. Angel Clare gives Tess £50 to live on while he's abroad. Ed Reardon in New Grub Street struggles to earn £150 a year as an author with wife and child to support and a young, female servant to pay. Ed Reardon says he previously worked as a clerk for £50 a year, but that £400 a year is reckoned comfortable. Bob Cratchit is paid 15 shillings a week by his employer Scrooge, but there is probably a bit of exaggeration in that. £37.50 would be an impossibly small amount to live on with a wife and five children to support. Anyway, I fixed on a 150x multiplier, even though it seemed too low when applied to poor people's incomes, but then I discovered that today's price of a gold sovereign is about £225. A gold sovereign represented £1 back then, so I decided a 225x multiplier would be a good one. That brings £50 a year closer to the minimum wage. However, chapter 14 of Middlemarch has thrown a spoke in that idea. Fred Vincy's uncle gives him £100, telling him £80 should be enough for a decent hunter (horses for fox hunting). Fred is slightly disappointed because he has been racking up gambling debts. I googled hunters and they seemed cost in the range of £3000 to £9000. £9000 would buy you a very good horse. That brings the multiplier back to about 100x again <sigh> Mr Lydgate, the young doctor, has savings of £800, but thinks that will not go far in setting up his practice once the cost of his horse and carriage is paid for. Offhand, I cannot remember the exact configuration of this horse and carriage, but it sounds like it is indispensible for a country doctor to be taken seriously by his clients. I suppose that would be like a BMW, so that suggests a multiplier more in the 80-100x range. £100 seems to be a typical amount for Victorian characters to get into trouble with. Pip was pursued for a debt of about £115 from his jewellers; the young Tom Gradgrind steals just over £100 from Mr Bounderby's bank to cover his gambling debts. Now Fred Vincy appears to have gambling debts round about that mark. An 80x to100x multiplier would give a debt similar to that a young person can get into trouble with by maxing their credit cards.

BTW, the exchange rate is currently £1 to $1.64, and £1 to 1.20 Euros.

[kev67]

I cannot remember which chapter it was right now, but I was concerned to read Elliot say that prices were not as high in those days (1830's) as now (1870's). It is difficult to relate 19th century values of money to the present day. The one thing the 19th century had for it, I thought, was that there was no inflation. If anything, I thought money would have gone further in the 1870's than in the 1830's because of increases in productivity.

I was somewhat taken aback by Lydgate's outgoings. His practice had been worth £800 a year when he bought it, but had fallen to £500 a year. His outgoings amounted to £1000 a year. In chapter fifty-something he owes £380. Assuming a multiplier of 100, those were pretty big sums. Pip from Great Expectations was considered a spendthrift for getting through £500 a year (of which he later started contributing half to furthering his friend Herbert's career).

[kev67]

Still, rent was much cheaper then. The Lydgates pay £90 a year rent for their big house, and could find a smaller house for £30 (if Rosamund would let them).

[mal4mac]

Popular thread All these word-oriented people... But I like numbers, so you got me searching. Found:

http://www.bankofengland.co.uk/archi...4/qb940201.pdf

Note chart 1, for RPI going back 300 years (!) From this there appears to be mild fluctuations, and mild overall deflation, in the 19th century (mild compared to 20th century at least!) So has George Eliot simply fallen for the old "things were better then" misapprehension, or is there movement in the price of things that were important to her? For instance, how did book prices change in this period?

Or was she at the top of one of those mild fluctuations, and looking back at a dip? Note the spike in prices due to to the Crimean war, and the bottoming out after Peel's Bank Charter act, maybe these trends led to her confusion?

The increases in productivity would have been met by an increase in demand from the burgeoning bourgeoise, so I don't see why one should think prices would decrease. It surprises me how stable prices were, I mean, besides the burgeoning bourgeoise, the period was famous for banks and gold mines going bust, so why didn't all this turmoil cause serious fluctuations in the RPI? Or maybe there was turmoil... it's just the totally crazy 20th century that makes it look stable by comparison...

[kev67]

Popular thread All these word-oriented people... But I like numbers, so you got me searching. Found:

http://www.bankofengland.co.uk/archi...4/qb940201.pdf

Excellent find! I look forward to reading it.

Edit:
Now I have read it. It is a pity it stops off at 1994. Assuming an inflation rate of about 3% for the last twenty years would prices would have gone up by a factor 1.8 since 1994. That would mean prices had gone up by 120 since 1694. By my calculations, prices had gone up by 2.1 times between 1694 and 1830. There between 1830 and now, prices have gone up by 57 times.

That is only half the story though, because nominal wages have increased more than prices. I cannot say how nominal wages have increased over the past twenty years. I think in America, nominal wages have increased only in line with prices, so real wages have not increased at all. I don't know if the same is true here, but I would not be surprised. By my reckoning, nominal wages would have increased by 240 times between 1830 and now. That would mean real wages would have increased by 4.2 times since then.

Those formulas seem pretty approximate, and they must differ for people of different classes. I have been trying to work out what a typical family of East End Londoners from 1902 were trying to survive on in today's terms: either the equivalent of £4,320 or £11,448 depending on whether you use the Retail Prices Index or Nominal Wages. I am sure it would not be possible for a family of five to live in London for £11,448 a year. The rent alone would be more than that. OTOH, poor families often had to live in just one room, lived in rags, and grew up six inches shorter due to malnutrition. Another difference is that there were few labour saving devices. Middle class people paid working class people to work for them. Therefore a large part of the expenditure of a middle class person would be the wages of the people working for him.

I suppose that is not the whole story either, because whether you are rich or poor depends in part on how rich or poor you feel. That in part depends on how you compare your standard of living with others.

[kev67]

The increases in productivity would have been met by an increase in demand from the burgeoning bourgeoise, so I don't see why one should think prices would decrease. It surprises me how stable prices were, I mean, besides the burgeoning bourgeoise, the period was famous for banks and gold mines going bust, so why didn't all this turmoil cause serious fluctuations in the RPI? Or maybe there was turmoil... it's just the totally crazy 20th century that makes it look stable by comparison...

Come to think of it, increasing productivity may have been outstripped by an increasing population. The UK population quadrupled in the 19th century. I expect productivity probably increased more than that in many industries, but in the economy as a whole? maybe not.

It is interesting looking at how real wages fell during the Napoleonic Wars, down to 62% of 1694 levels. The French Revolution was in part caused by the economic crises brought on by waging of wars. The British government must have been worried as well. The Napoleonic Wars were in the period that Jane Austen was writing about. I have only read one Jane Austen book, Pride and Prejudice. Economic considerations were major plot devices in the book, but I did not get the impression that conditions were particularly bad due to the wars, just that young, unmarried, middle class women, as always, were in a terrible bind because they could not earn much money or inherit property.