It's that season once again, where some people are merry and others get grumpy - oh, the stress of it all, and the cost. But we probably make this season more stressful - and costly - than it needs to be. On the other hand - I am an economist, after all - those expenditures represent income to others. But maybe it's got a bit out of hand, at least the length of it.
Speaking of costs, economists in the U.S. Bureau of Labor Statistics (BLS) compile indices such as the Consumer Price Index. That sounds like boring stuff and, indeed, economics is often referred to as "the dismal science. " Nevertheless some of us find the subject interesting enough that we majored in economics in college. And some of us demented souls even made a career of it.
But even economists gotta have a little fun in life. Economists at PNC Wealth Management of Pittsburgh have for 30 years compiled a Christmas Price Index, tracking the costs of the 12 items in the song, "The Twelve Days of Christmas. " In addition to adding a bit of levity to the staid subject of price indices, this whimsical exercise illustrates uses, and limitations, of price indices.
So let's take a look at the price trends of the items in the song during 2013. Prices of most of the birds were constant. The Partridge price remained unchanged at an affordable $15. The Pear Tree in which the partridge resides was the only item in the song to decrease, falling by 3.2 percent to $184. The declining price of the partridge residence runs counter to the increasing prices of human housing during 2013.
Prices of the Two Turtle Doves and the Three French Hens remained constant at $125 and $165, respectively. The exception to constant bird prices was the Four Calling Birds; their price increasing by 15.4 percent to just under $600. No explanation is offered. Conventional economic analysis would suggest a decrease in supply, but declining grain prices should have lowered costs of production, promoting an increase in supply. The alternative hypothesis would be an increase in demand, perhaps stemming from an increase in consumer income, or perhaps from what economists refer to as an increase in "tastes and preferences" for those hens.
As the price of gold has stabilized, the price of the Five Golden Rings has remained stable at $750. The weight of gold in those rings is unspecified, but in compiling index numbers, economists strive to keep constant the quality of the product.
The price of the Six Geese a Laying remained constant at $210. The Seven Swans a Swimming are the costliest item in the song, and their price is usually the most volatile. But in 2013, their price remained constant at $7,000.
The long-suffering Eight Maids a Milking, billed at the minimum wage, priced out at a paltry $58. If the Congress enacts an increased minimum wage, the hard-working maids might fare better next year. However, those of us who were raised on farms are accustomed to low returns to agricultural labor.
The musicians and dancers substantially raised the cost of the song's items in 2013, a trend running counter to stable wages for most workers in the American economy. Based on info provided by the Pennsylvania Ballet Company, the Nine Ladies Dancing enjoyed a healthy 20 percent increase in remuneration, costing the song's True Love a hefty $7553.
Based on data provided by the Philadelphia-based PHILADANCO, the Ten Lords a Leaping received a lesser, but still healthy, 10 percent augmentation, costing the song's True Love $5,243.
Note that the ballet dancers are rewarded more handsomely than the males of the Lords a Leaping. A possible explanation is that the physical demands and skills required of the ballet dancers are more exacting, and therefore in short supply. Or, maybe they have more aggressive agents and advocates. I leave such matters to analysts well versed in those art forms.
The musicians enjoyed a modest, albeit larger than many American workers, increase of 2.9 percent. The Eleven Pipers Piping priced out at $2,635 and the Twelve Drummers Drumming at $2,855.
The total cost of the twelve items is $27,393 and change, for a 7.7 percent increase over the $25,431 of last year.
Recall that the gifts in the song, with the exception of the Twelve Drummers Drumming given but once, on the twelfth day, are given repeatedly over the 12 days for a total of 78 gifts. The total cost of these 78 gifts by the generous, and affluent, True Love will cost $114,651, for a 6.9 percent increase over last year.
We can draw several practical points from this whimsical, though instructive, exercise.
The 7.7 percent price increase of the 12 items and the 6.9 percent increase of the 78 items compares to the CPI measure compiled by the BLS of 1 percent. This clearly illustrates the importance of the components selected for an index, the items in the song clearly not representative of items purchased by typical American consumers.
Also important is the weight given to the items in the index. As the dancers and the musicians comprise a disproportionate weight in the index, increased prices of these items relative to stable prices of the birds pull up the overall index.
And about volatility? The BLS compiles a "core" CPI, leaving out the more volatile food and energy components. The Christmas Price Index compiles a "core" index, leaving out the volatile Seven Swans a Swimming. Accordingly, the Christmas CPI "core index," excluding the swans, is 10.6 percent, relative to the 7.7 percent including the swans. The swans, the priciest and most heavily weighted item in the song, uncharacteristically remained stable in 2013, providing a dampening effect on the total index.
So, enough of this number crunching exercise - a Merry Christmas to all my readers.
- John Waelti's column appears every Friday in the Times. He can be reached at jjwaelti@tds. net.
Speaking of costs, economists in the U.S. Bureau of Labor Statistics (BLS) compile indices such as the Consumer Price Index. That sounds like boring stuff and, indeed, economics is often referred to as "the dismal science. " Nevertheless some of us find the subject interesting enough that we majored in economics in college. And some of us demented souls even made a career of it.
But even economists gotta have a little fun in life. Economists at PNC Wealth Management of Pittsburgh have for 30 years compiled a Christmas Price Index, tracking the costs of the 12 items in the song, "The Twelve Days of Christmas. " In addition to adding a bit of levity to the staid subject of price indices, this whimsical exercise illustrates uses, and limitations, of price indices.
So let's take a look at the price trends of the items in the song during 2013. Prices of most of the birds were constant. The Partridge price remained unchanged at an affordable $15. The Pear Tree in which the partridge resides was the only item in the song to decrease, falling by 3.2 percent to $184. The declining price of the partridge residence runs counter to the increasing prices of human housing during 2013.
Prices of the Two Turtle Doves and the Three French Hens remained constant at $125 and $165, respectively. The exception to constant bird prices was the Four Calling Birds; their price increasing by 15.4 percent to just under $600. No explanation is offered. Conventional economic analysis would suggest a decrease in supply, but declining grain prices should have lowered costs of production, promoting an increase in supply. The alternative hypothesis would be an increase in demand, perhaps stemming from an increase in consumer income, or perhaps from what economists refer to as an increase in "tastes and preferences" for those hens.
As the price of gold has stabilized, the price of the Five Golden Rings has remained stable at $750. The weight of gold in those rings is unspecified, but in compiling index numbers, economists strive to keep constant the quality of the product.
The price of the Six Geese a Laying remained constant at $210. The Seven Swans a Swimming are the costliest item in the song, and their price is usually the most volatile. But in 2013, their price remained constant at $7,000.
The long-suffering Eight Maids a Milking, billed at the minimum wage, priced out at a paltry $58. If the Congress enacts an increased minimum wage, the hard-working maids might fare better next year. However, those of us who were raised on farms are accustomed to low returns to agricultural labor.
The musicians and dancers substantially raised the cost of the song's items in 2013, a trend running counter to stable wages for most workers in the American economy. Based on info provided by the Pennsylvania Ballet Company, the Nine Ladies Dancing enjoyed a healthy 20 percent increase in remuneration, costing the song's True Love a hefty $7553.
Based on data provided by the Philadelphia-based PHILADANCO, the Ten Lords a Leaping received a lesser, but still healthy, 10 percent augmentation, costing the song's True Love $5,243.
Note that the ballet dancers are rewarded more handsomely than the males of the Lords a Leaping. A possible explanation is that the physical demands and skills required of the ballet dancers are more exacting, and therefore in short supply. Or, maybe they have more aggressive agents and advocates. I leave such matters to analysts well versed in those art forms.
The musicians enjoyed a modest, albeit larger than many American workers, increase of 2.9 percent. The Eleven Pipers Piping priced out at $2,635 and the Twelve Drummers Drumming at $2,855.
The total cost of the twelve items is $27,393 and change, for a 7.7 percent increase over the $25,431 of last year.
Recall that the gifts in the song, with the exception of the Twelve Drummers Drumming given but once, on the twelfth day, are given repeatedly over the 12 days for a total of 78 gifts. The total cost of these 78 gifts by the generous, and affluent, True Love will cost $114,651, for a 6.9 percent increase over last year.
We can draw several practical points from this whimsical, though instructive, exercise.
The 7.7 percent price increase of the 12 items and the 6.9 percent increase of the 78 items compares to the CPI measure compiled by the BLS of 1 percent. This clearly illustrates the importance of the components selected for an index, the items in the song clearly not representative of items purchased by typical American consumers.
Also important is the weight given to the items in the index. As the dancers and the musicians comprise a disproportionate weight in the index, increased prices of these items relative to stable prices of the birds pull up the overall index.
And about volatility? The BLS compiles a "core" CPI, leaving out the more volatile food and energy components. The Christmas Price Index compiles a "core" index, leaving out the volatile Seven Swans a Swimming. Accordingly, the Christmas CPI "core index," excluding the swans, is 10.6 percent, relative to the 7.7 percent including the swans. The swans, the priciest and most heavily weighted item in the song, uncharacteristically remained stable in 2013, providing a dampening effect on the total index.
So, enough of this number crunching exercise - a Merry Christmas to all my readers.
- John Waelti's column appears every Friday in the Times. He can be reached at jjwaelti@tds. net.
