How much are you worth (2)

My blog How Much Are You Worth caused quite a bit of discussion, which has reminded me of another measurement of “worth” that I came across many years ago – The Mars Bar index.

As far back as 1981, Nico Colchester was writing in the Financial Times about the need for a reliable standard measurement of value, and proposed the Mars Bar.

The principle is very simple. Work out how much something was worth in Mars Bars in a particular year (the base year), then repeat the calculation in the present. The change in number of Mars Bars (MB) is an indication of whether the product (or service) has increased or decreased in worth relative to a standard measurement.

For example, in 1940 a Silver Spirit Rolls Royce cost MB 204,000. By 1981, it had increased to MB 347,000. In today’s terms, it is worth as much as MB 800,000.

A slightly more relevant example is a train ticket, say from London to Oxford. In 1940 it was worth MB 50, by 1981 it had fallen to MB 35. Is it a surprise to learn that in today’s terms it is again worth in the region of MB 50?

So what does all this mean?

Comparative pricing allows us the chance to evaluate our world. Have we desired certain things for so long that market forces have enabled their value to increase faster than the standard index? Have things fallen from favour to the extent that their worth has declined relative to the “standard”? A quick look at house prices over the last 60 years shows how demand drove the price up above and beyond every standard index. It also shows how, on at least two occasions, the market collapsed, allowing prices to return to a more sustainable and affordable level.

All this points to our apparent inability to make rational decisions about what something is worth. We are being driven to pay more for less. What is really worth more (relatively) than it did 60 years ago? Inflation is not the enemy, greed is.