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Consumer inflation is the issue of the year. It raise myriad issues. What parts of government should respond? Federal Reserve? President Joe Biden? Congress?

And respond how? Tighter money? Reduced government spending? Investigations of industries where prices rise?

And how do households, businesses and sundry organizations respond?

Spend $500 on our old beater and hope that used car prices drop? Keep on renting even after the rent got jacked up — or plunge into a still-high housing market? Moral duty to pay the organist and church custodian a lot more because both have long commutes and kids? Assess condo residents more per month because costs of eventually redoing the roof and replacing the 30-year-old elevator are up a lot?

Such questions aside, today’s inflation also triggers memories and questions for those who remember the high-inflation 1970s or some idyllic 1950s.

For example, our 15-year-old printer-scanner-copier just died. What would a replacement cost? How would that compare in price and utility to my first computer printer 41 years ago or the typewriter mom bought her high-school student kids in 1965? What about gassing up the ’62 Rambler Classic I drove in college compared with filling the RAV4 now?

We often hear the phrase “adjusted for inflation,” but what does that mean in terms of the actual relative prices we’re paying and the relative value we’re getting?

These questions tantalize many, but few know how to solve them. One way is to search online for: Minneapolis Fed inflation calculator. Plug in a dollar amount, choose beginning and ending years and see the equivalents. You can see actual CPI numbers since 1913 and estimates back to 1800.

The calculations are easier to do than most people think without triggering math phobia.

Think of it as scaling a banana bread recipe up or down to use up all the mushy bananas I have on hand even if they are more or less than the exact two-cups in my recipe. I accumulate over-ripe bananas in the freezer. When I bake, I thaw them, peel into a large measuring cup and puree. My recipe calls for two cups. If I have 5 cups of mashed bananas, I divide 5 by the 2 per recipe batch and increase all the ingredients 2.5 times. Use common sense rounding things like eggs and in choosing how many baking pans. If I only have 1 1/2  cups of banana mush, I divide that 1.5 by 2 and multiply all ingredients by 0.75. If you can use a spreadsheet you can just plug in a multiplier and change that as needed.

Now do this with prices. In college in 1971-72, I drove a ’62 Rambler Classic bought for $200. Six cylinders, straight stick and front seats that folded down completely, it was a superb 1970s college student vehicle. What would that price equal today adjusted by the CPI?

Well, the CPI, available on the Minneapolis Fed site or downloadable in your choice of file formats from the FRED database at the St. Louis Fed, was 40.5 in 1971 and is at 294.4 now.

Just as 5/2 = 2.5 for the banana bread, 294.4/40.5 = 7.27. The general price level has increased 7.27 times over the past 51 years. So, the $200 laid out for the Rambler, adjusted for inflation, would be $1,454 today. Not too bad. Gas commonly was $0.329 a gallon then, that would be $2.39 today — which actually was the U.S. national average gas price as recently as January 2021.

A used car with 70,000 miles on it for under $1,500 today sounds like a dream. But it was already taking a quart of oil every 200 miles, needed a “rings, rod bearings and valve-grind” overhaul by 80,000 and a new clutch at 90,000. A car battery cost about $35 and was good for maybe three years. Tires were about $28 and were good for perhaps 25,000 miles. With no A/C, an AM radio, a lot of rust, no power on brakes or steering and no airbags, this car is inferior in every respect to a 2013 model car with 70,000 miles today, except as a venue for quality time with very close friends.

Now take something backward in time. We paid $21,000 for a new, basic-model 2007 RAV4 Toyota just after the 2008 models came out. The only other new car I had ever owned before that was a bare-bones 1979 Ford Fairmont wagon bought for $4,000 after the 1980 models were released. With 72.6 and 207.3 as the annual CPI numbers for 1979 and 2007 respectively, the ratio is 2.86. So the cost of the Fairmont in 2007 dollars would be $4,000 times 2.86 or $11,440. But divide the $21,000 we paid in 2007 for the RAV4 by 2.86 and the 1979-dollar-equivalent would be $7,343 — almost double the $4,000.

So has basic transportation nearly doubled in “real” dollars over those 28 years? Well, yes, if features, quality and durability were all equal. But they are not. The Fairmont was a great car, but if, in 2007, we could have gotten that very basic one for $11,400, I would have picked the RAV4 at what we paid.

That is the knotty problem for people compiling the CPI. Some items consumers buy don’t change: a pound of sugar, a can of tuna, a line of bowling, kids underpants, pine 2X4 are the same in 1960, 1980 and 2022. A tire or battery, clothes washer, TV set or computer printer is not.

A $69 Smith-Corona portable typewriter in 1965, a $400 Epson 9-pin printer in 1982, and a $485 copy-scan-fax-color print Canon in 2005 would be $645, $1,220 and $731 in 2022 dollars respectively. The new Canon, same capabilities, that we just bought, was $269.

Another knotty problem besets statisticians: When detailing all the items that should be considered in constructing a price index, what do you do as consumer preferences change?

The monthly press release for the CPI that’s been front page news recently has several pages listing items and the numerical weight given to each. However, in 1970, Americans on average ate 11 pounds of lamb a year; now it isn’t even 11 ounces. The reverse is true for turkey: Then, over 90 percent of turkey was eaten on two days of the year, Thanksgiving and Christmas. Now many households eat some turkey every week. Pasta consumption has gone from 2 pounds to near 30 pounds per person per year in my lifetime. But how many 8-year-old boys have a “Sunday suit” and ties? As a kid, I didn’t know anyone with a TIVO or mobile phone. How many women today buy hair rollers or girdles?

The details and pitfalls of price indexes merit another column. Until then, just practice comparing past prices you remember with current ones. You may be surprised.Related Articles Business | Real World Economics: What gives with these great state jobless numbers? Business | Real World Economics: Politics and the pricing of drugs Business | Real World Economics: A ‘stronger’ dollar: Good or bad? Business | Real World Economics: National debt is a math issue

St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.

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