In this cartoon by the Cincinnati Enquirer’s Jim Borgman. (HT: Andrew Samwick)
Source link: http://archive.mises.org/5087/real-versus-nominal-prices-explained/
Real Versus Nominal Prices Explained
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Real v. Nominal– Explained?? Exactly, How?, pray tell?
Seems like a rare editorial error fom the fine vMI staff.
Sorry, the point is that “real” gasoline prices — i.e., prices adjusted for inflation — have been on a secular decline for the last 100 years, with a few exceptions. While today’s nominal prices are near record highs, the real prices are not nearly so frightening (though they have risen sharply during the last 6 months). (Picture here.)More to the point of the cartoon, the relative price of gasoline — its price relative to the prices of other goods and services — is not at all unreasonable.
Yeah, that’s my question. How does this cartoon “explain” real vs. nominal prices? What would the cartoon artist title it? That answer would help you assess the extent to which he/she is an economist. A good economist.
In the cartoon, the real price of gas is 1/3 of a movie ticket ($3 for gas vs. $9 for a movie ticket). Of course, the nominal price is $3.
Nat, I appreciate your attempt, but your are describing “relative” prices, not “real” v. “nominal”.
M.E., relative prices are a good proxy for real prices in this instance.
It seems I chose a poor title for my post. A better one would have been “Why Gasoline Prices Seem High.”
Peter,
I think that the editorial cartoonist maybe more learned than many, at first glance, suspect.
It may be his message that: “The FedRes is fortunate Most price signals are silent.”
Yet, who knows the mind of another? Maybe we should ask him?
Past that, worry not about a simple miscue, you hardly scratched on the 8.
By the way, to me, the whole “real v. nominal” frame should only pull into view the sad picture of reality drawn by Fiat. Further than that, it(r v. n debate) is a paper tiger that, nonetheless, consumes us in another non-productive pursuit.
Giving the fact that all other products advertised on that cartoon need energy for production, the observation that all prices seem high may indeed not perfectly express what I thing the artist wants to …While to him and most other people this would probably point on inflation, it could just express “shortage”.
Still, to put all prices next to another “up on a sign” and make them look outrageous… makes you consider inflation at first. The fact that gas prices are usually considered more outrageous… may thus be a political trick …calling for intervention on the sector, I believe that’s most likely implied.
Call the cartoon: Does the government need intervening on the gas market?
Of course the left wing reader’s answer could be YES… but again, the irony of the cartoon pleads for no (Irony is a libertarian thing)
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