Last Monday, the Los Angeles Times published an op-ed written by Indur Goklany and me about gasoline prices. Yesterday, it ran in the Minneapolis Star Tribune Today, that same piece has been posted at the Christian Science Monitor and it will appear in their print edition tomorrow. Our argument: Once you adjust gasoline prices in 1960 for both inflation and changes in per capita disposable income, you find that gasoline prices today are actually more affordable than they were back then. Faithful Cato@Liberty readers might well recognize this argument given that it was first offered in a blog post here a few days back by Indur Goklany.
While the predictable grousing on the newspaper comment boards followed (hell hath no fury like a motorist who thinks he was told to stop whining about pump prices), some commenters raised a legitimate issue: Would the picture change if we used median per capita income rather than mean per capita income in our analysis? Well, yes. But not by that much. Let’s walk through the numbers.
First some background. Income data come from two very different sources. Disposable income data are produced by the Bureau of Economic Analysis (BEA), an arm of the U.S. Department of Commerce, as part of its effort to estimate the gross domestic product (GDP). Data on family and household income come from surveys conducted by the Census Bureau.
Disposable income per capita or mean disposable income is simply total disposable income divided by the population of the United States. Median disposable income data, however, are not available because the GDP data do not come from household surveys. Only surveys allow us to rank order all the households (or families) and find the number that divides the bottom 50 percent from the top 50 — the definition of the median.
Median income estimates from Census data (the Current Population Survey or CPS) are available only for households and families. Data regarding median household income are only available from 1967 to the present, so the only measure available to us for longer term analysis is median family income. But BEA and CPS definitions of income differ. In 2001 for example, BEA personal income totaled $8.678 trillion while CPS money income totaled $6.446 trillion. The two income time series differ in important ways. For example, BEA data include property income and adjustments for underreporting of proprietor’s income.
With that out of the way, let’s get to the numbers.
(Leaded) Gasoline prices in 1960 averaged 31.1 cents per gallon. Median family income in 1960 was $5,620. In 2006 (the most recent year for which we have reliable data), median family income stood at $58,407. If the price per gallon were the same percent of median family income in 2006 as in 1960, the 1960 price would translate into $3.23 in 2006. Unfortunately, the (median family income) data aren’t yet available for calculations applying to 2007 or 2008.