Measuring Worth

Fellow appraiser Judith Vance sent me an interesting website on measuring worth from economic aggregates.  You can take a value at a point in time, and through the use of various economic indicators measure the growth, or the decline. The site will give annual growth rates, relative value ranges based on numerous indicators and purchasing power. The calculator will also measure the difference between US dollars and GBP conversions and relativity.  I know I have looked at comps older comps from British sales and wondered what the conversion and equivalence would be in US dollars.

This might be an interesting tool in for appraisers to use when writing a market analysis and you wish to include some general economic trends. Overall an interesting site, and worth taking a few minutes to review.

To visit the Measuring Worth site, follow the source link below.

Measuring Worth reports

Measuring Worth Is a Complicated Question

Intrinsic things are priceless: the love of your life, or a beautiful sunset. There is no objective way to measure these, nor should there be.

The worth of monetary transactions is also difficult to measure. While there is a price, wage, or other kind of transaction that can be recorded at a precise price, the worth of the amount must be interpreted. The father of economics, Adam Smith, discussed this very question in one of the most important books in economics, The Wealth of Nations (1776):

"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it... But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated... Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities than with labour."

One can imagine that a hamburger of the same price is "worth" more to a starving homeless person than to a very wealthy one. An allowance of five pennies a week was worth more to a child in 1902 than it is to a child today. We do acknowledge though, as Oscar Wilde pointed out in his famous quip, money worth and intrinsic worth are not necessarily same.

"What is a cynic? A man who knows the price of everything and the value of nothing." - Oscar Wilde, Lady Windermere's Fan, 1892

It can be more difficult when the question is to determine the "historical" worth of something. The price, even deflated for inflation, is not enough. Was Andrew Carnegie richer than Bill Gates? Did Babe Ruth make more than Tiger Woods? Was the cost of a loaf of bread more then than now? These questions all depend on the context and the calculators on this web site enable users to make their own comparisons. We discuss these issues more in the essay Measures of Worth, which provides a methodology for deciding which measure of worth is appropriate for the subject at hand.

There two missions of this site. The first is to make available to the public the highest quality and most reliable historical data on important economic aggregates, with particular emphasis on "nominal (current-price) measures, as well as real (constant-price) measures. The second is to provide carefully designed calculators (using these data) that explain the many issues involved in making value comparison over time.

The data have been created using the highest standards of the fields of economics and history, and they are rigorously refereed by the most distinguished researchers in the fields.   Beginning with the United States and United Kingdom and following with Australia, Japan and China, we will continue to add series from other countries using the same high standard.

The emphasis on nominal measures distinguishes this site.  This attention is important because to comprehend a past transaction or asset, one must begin with the contemporary value of the item. To make this valuation meaningful, it must be measured against the value of the appropriate economic indicator in that year.  To understand the valuation from another year's perspective, one must carry that measure forward against the changing value of the indicator.

Source: Measuring Worth