Historian, Writer, Commentator, Consultant.

One pound equals…

Posted by on Jan 31, 2012 in Blog | 0 comments

One pund bank note

1913-18 Australian bank note. Source: australianstamp.com

The other day I was asked to write a puff for an author whom I admire and a book I very much like. It’ll be a generous recommend, as the navy used to say. But before I wrote the puff I contacted the publisher (also a man and a company I also very much respect) to ask them to remove a line from the book. The line? ‘£1 (pound) = $2 (1966)’ Why?

It is undeniably true that on 14 February 1966 when out-went-the-pennies-and-in-came-the-cents a pound was deemed to have the buying power of two of the new-fangled dollars. But that equivalence only held for a few years. Soon inflation took hold and the buying power changed. It certainly had no currency (no pun intended) before 1966. As a result, though, we see ridiculous lines in historical books, such as ‘In 1876 William’s second-hand buggy cost 3 pounds ($6)’. What does this mean? Does it mean that William picked up a new vehicle for slightly more than the cost of a cup of coffee and a pastry? Of course not – in 1876 the value of £3 was more like about $200 today; I would suggest rather more if calculated relative to weekly income. So why do historians – and not just amateurs – persist in including this spurious comparison, even (often) in books that deal with periods well before 1966? (I once started a list of otherwise reputable historians who fell for this fallacy, but I realised that naming them would embarrass a lot of people I count as friends.)

I’m no economic historian: I’m barely numerate, and can’t be trusted with more than loose change, but even I understand that it’s all about comparing purchasing power. What was an amount of money worth historically? The implicit question that readers want answered is ‘what was this amount worth in terms of what it bought?’ One of the easiest ways to convey this is to indicate a contemporary comparison. So, for example, saying that a captain in the AIF in 1915 was paid just over a pound a day is not helped by adding ‘($2)’, because its value in 1966 has no relevance to its value in 1915. Rather, knowing that a skilled tradesman in 1915 might be paid £2-3 a week helps to immediately indicate how relatively well paid a captain was.

There are various ways of calculating relative value. The National Archives in Britain (annoying and self-importantly known as ‘The National Archives’, and the subject of a future blog …) offers a useful calculator which translates old money to new, at least for sterling –  http://www.nationalarchives.gov.uk/currency/ – but it works reasonably well as a rule of thumb for Australia in the early twentieth century. For Australia, historian Thom Blake offers a ‘How much is it worth’ comparison for Australia between 1850 and 2010 – http://www.thomblake.com.au/secondary/hisdata/query.php . It isn’t ideal, because it seems to only calculate in dollars, but it at least reminds us that the exchange of 1 to $2 in 1966 is a pointless comparison for all but the mid-1960s.

Did the publisher remove the spurious comparison from the table in the book? Yes he did: a small triumph for historical understanding. And because he removed the comparison, you’ll never really know which book or publisher it was.

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