50 Things That Made The Modern Economy With Tim Harford

Back in the mid-1990s, an economist called William Nordhaus conducted a series of simple experiments.

One day, for example, he used a prehistoric technology. He lit a wood fire.

Humans have been gathering and chopping and burning wood for tens of thousands of years.

But, Bill Nordhaus also had a piece of high tech equipment with him, a manolta light meter.

He burned nearly ten kilos of wood, kept track of how long it burned for,

and carefully recorded the dim, flickering fire light with his meter.

Another day, Nordhaus bought a Roman oil lamp, a genuine antique he was assured, fitted it with a wick

and filled it with cold-pressed sesame oil.

He lit the lamp and watched the oil burn down, again using the light meter to measure its soft, even glow.

Nordhaus's open wood fire had burned for just three hours when fueled with nearly ten kilos of wood,

but a mere egg cup of oil burned all day, and more brightly and controllably.

Why was Nordhaus doing this? He wanted to understand the economic significance of the light bulb,

but that was just part of a larger project. Nordhaus wanted, if you'll forgive the play on words,

to shed light on a difficult issue for economists, how to keep track of inflation,

of the changing costs of goods and services.

To see why this is difficult, consider the price of travelling from, say, Lisbon in Portugal to Lawanda in Angola.

When first made by Portuguese explorers, that would have been an epic expedition, possibly taking months.

Later, by steamship, it would have taken a few days, and then by plane, a few hours.

Now, an economic historian could measure inflation by tracking the price of passage on the ship,

but then, once an air route opens up, which price do you look at?

Maybe you simply switch to the airline ticket price once more people start flying than sailing.

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