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FWIW, you can find more of Levin's work at various places. Prof. Danny Quah also has some thoughts on the subject.

FWIW, you can find more of Levin's work at various places. Prof. Danny Quah also has some thoughts on the subject.

Here

It's actually from march 2002. It's a 30-page academic paper with differential equations and other nice stuff, for the impatient I have reproduced the abstract:

ABSTRACT: We construct a competitive model of innovation and growth under constant returns to scale. Previous models of growth under constant returns cannot model technological innovation. Current models of endogenous innovation rely on the interplay between increasing returns and monopolistic markets. In fact, established wisdom claims monopoly power to be instrumental for innovation and sees the nonrivalrous nature of ideas as a natural conduit to increasing returns. The results here challenge the positive description of previous models and the normative conclusion that monopoly through copyright and patent is socially beneficial.

I'm sure you would buy more product at lower prices -- that's an economic certainty. But let's take a closer look at your proposal.

An average record album cost about $2.99 in the late 1950's (I collect them, and the prices are listed on many inner sleeves from LP's of the period). Let's pick 1958 as a starting point.

Now, we go to the Federal Reserve Bank of Minneapolis - Consumer Price Index Calculator where we learn that this same LP would have cost a little over $18 in 2001. That album had about 40 minutes worth of program, which equates to about $0.45 per minute of recording time.

And you want to pay $8 per CD. Assuming that the average CD offers a 45 minute program, you want to pay about $0.17 per minute. Now, I'm sure that manufacturing costs have dropped appreciably over the years, and accross recording formats. But that is only one piece of the cost structure. There are royalties, advertising and distribution costs (let's assume for the moment that payola has remained fixed over this period ;-)

Although the greed of music industry disgusts me, I think that what you propose is fairly ludicrous. Even if my numbers are seriously out of whack, $8/unit is even more so. What part of the cost of a CD should be cut out to support your 50% accross-the-board discount?

Sitting at the bottom of Lake Superior are 1000s of logs that sank while being shipped to market. They have almost no deterioration due to the cold and lack of O2 at the bottom of the lake. Because they are from original old growth forests, they have an incredibly fine grain that is quite valuable. There are companies hauling them up right now and selling them to musical instrument makers and folks like Bill Gates for office panneling.

So why not just grow forests? Chop them down every 100-200 years and dump the logs into the Arctic Ocean or the Black Sea: places that are way cold and have little O2. Instant carbon sequestration.

Based on this site and some trial and error I came up with $20 in 1974 is about $72 in 2001 dollars.

Not really. I read too many government reports and statistics to, myself, have much of a grip of reality. Occassional doses of John Walker do set me a bit closer to the straight and narrow.

A 3.5 multiplier may be a little high, but it is what's been used by the Berkeley Landowner's Association in attempting to assess damages due to price controls established by the Berkeley Rent Stabilization Board, and seems more or less right to me.

One could start with something like the CPI ( CPI Calculator) and compare a 'dollar' in 1980 to a 'dollar' in 2000. The multiplier is only 2.09... suggesting that a 100K salary is a little under 50K in 1980 dollars.

Ah, but wait! Type in 1970 and 1980. Oh. 2.12x. That already seems a little high... but the 70s did have a few economic problems... except that it took several years into the 80s for the double digit inflation to stop... except that the economy sucked 88-96 or so again, along with some real inflation before the feds damped things... but, as the example at the bottom of the page points out, items like movie tickets have been rising quite briskly, despite the Feds keeping a lid on inflation.

Have I managed to give a sense that there are multiple factors at work here -- much less that they apply to whole ranges of goods?

Alas, the CPI is poor indicator of the real cost of living, for reasons ranging from it being based on improper rations and outdated commodoties, to a lot of fiddling going on to incorporate 'special categories,' to downright fudging on the part of industries reporting their prices (does anyone really believe apparel has been getting 5% cheaper for the last four years?). The CPI is thus a very poor indication of the rate of inflation over time (there are many others, as well).

I prefer the Federal discount bond rate, as
(a) it seems to do a much better job of matching inflation of goods in practice, over long periods -- see that movie ticket example
(b)it should, on most economic theories, be the rate at which the Fed is willing to re-compensate bondholders for the devaluation of the currency -- and in fact the modern Fed sees it as the driver of "inflation."
(c)it is the de-factoreturn rate which a corporation must break to be viable for investment (before risk is calculated), and thus provides a minimum standard of economic break-even that is much more central than cost-of-living or cost-of-goods derivatives.
(d)using it usually keeps one out of tedious discussions like this, as everyone else who does these sort of calculations agrees it's fine.
(e)& as long as the Fed keeps thinking discount bond rate=inflation, they won't ever move the rate above 8% again -- else they'll destroy corporations as well as they did in 75-85.

In any case, the boil-down is that 7.5% is a reasonable rate to use for back-of-envelope compound calculations of inflation from 1980 to 2000, and it comes out to about a 3.5 multiplier; plus energy, medical care, and housing have all outpaced that by a lot. This makes 100K -- well, alas, not a lot of money, however much you'd like to think so.

For more than that, do your own research.