Today is the last class in our current seven class set. We will start class with a casual conversation. Our material today is about inflation. The focus is on the length of the material, not necessarily accuracy. I have included a transcript.

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STACEY VANEK SMITH, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith. The pandemic has been hard on all kinds of businesses, but especially restaurants. Between quarantine rules, social distancing and now the rising cost of labor and food, it has been a brutal time. About 10% of restaurants in the U.S. have closed permanently. And a lot of restaurants have also been raising prices to try to cope with the rising cost of labor and also food. Food's been really hit by inflation. But also, in general, food in the U.S. has been getting cheaper for decades, as farming has gotten more efficient and supply chains have gotten better. And also, eating out is just a lot more common now than it used to be. And all of this got us wondering - was eating out a lot cheaper in the past, or was it more expensive? What has happened to restaurant prices?

The consumer price index tracks inflation in the U.S., and it's been doing that ever since about 1913. And we found a menu from around that time - it's from 1915 - for a restaurant in New York called Fraunces Tavern. Fraunces is still around today, still serving food, even some of the same dishes. So today on the show, we look at Fraunces' menu prices back in 1915 and compare them to its menu prices today. And then we adjust for inflation to see how much more or less people are paying for meals out. Spoiler alert - apparently, back in 1915, you really wanted things to taste like chicken.

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VANEK SMITH: To take our great menu prices restaurant journey, I'm joined by economist Allison Schrager, senior fellow at the Manhattan Institute and columnist for Bloomberg Opinion. Allison, thank you so much for doing this. I'm so excited.

ALLISON SCHRAGER: Me too. I love prices.

VANEK SMITH: So we've been experiencing a lot of inflation over this past year - food, especially. We've seen the prices go up. And food is something people really notice. Is this something, as an economist, that you're concerned about? Like, what do you see when you look at these numbers?

SCHRAGER: Yeah. I mean, I think absolutely you should be concerned about - especially because food and energy make up a large - much larger share of low-income people's budget. So it's going to really impact their standard of living in a very serious way and really erase all the wage gains they've gotten.

VANEK SMITH: Right. Has the share of our budgets that we spend on food been declining historically or stayed the same?

SCHRAGER: They've been declining a lot. Like, I found this one figure that - in 1929, people spent about 24% of their budget on food. And up to 2020, it was only 8.6%.

VANEK SMITH: Oh, my gosh. That's a huge change. What do you think's going on there? Why do you think that happened?

SCHRAGER: Well, I mean, we got a lot more productive at farming.

VANEK SMITH: Fertilizer, GMO.

SCHRAGER: Yeah. You know, even transporting food got cheaper and easier.

VANEK SMITH: Do you think that trend is reversing now?

SCHRAGER: No. I think this is largely a blip that's related to supply chain issues, to decreasing trade. But it doesn't mean it's not hard. It doesn't pose costs to the economy, and some of those costs could persist. If people get used to sort of higher food budgets, they're going to need higher wages. And then once you increase everyone's wages, you know, then that can sort of make inflation more persistent.

VANEK SMITH: Well, one of the things that I was able to dig up, thanks to the New York Public Library, were some really old menus. One of the oldest restaurants in New York - there's a small debate over which is the actual oldest, but Fraunces Tavern is definitely up there. George Washington gave his speech to his troops in Fraunces Tavern. It is a very old bar. It's still around. The library has a menu from Fraunces from 1915 with prices, and a lot of the menu is sort of the same. So I was able to compare and then adjust for inflation to see if we're paying more or less now for food. So, OK, I can go through some specifics.

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VANEK SMITH: So fries - obviously, we've got to start with french fries. They were 25 cents back in the day. Adjusted for inflation, that's $6.75. Right now, Fraunces charges $10 for fries, which is more than 40% pricier. So fries are 40% more expensive now than they were back in 1915.

Let's see. A lobster was a dollar fifty back then, which if you adjust to inflation's about $41. They don't have a lobster now. They have lobster mac and cheese, which seems really different, for 20 bucks. But the chicken was so expensive.

So a spring chicken a la Maryland is one of the most expensive things on the menu, and it is a fried chicken with gravy and bananas. It was a popular dish at the time. It cost $2.25, which, when you adjust for inflation, is $60.72.

SCHRAGER: Wait, so chicken was more than lobster.

VANEK SMITH: Chicken was more than lobster. And now you can buy a roasted chicken at Fraunces for $32. So I don't know what was going on with chickens, but...

SCHRAGER: Well, at least we have industrial production of chicken now.

VANEK SMITH: We do have industrial production of chicken. That's true.

Let's see. So a sirloin steak was a dollar fifty. That's about $40.48 in today's money. A New York strip at Fraunces is now $45, which is about 10% more that you're paying now for a very, very similar cut of steak. An omelet back in the day was $26.99.

SCHRAGER: What? Oh, adjusted for inflation.

VANEK SMITH: Yes. And now it's 19 for an omelet.

SCHRAGER: What was it with - like, chicken and chicken-related products were, like, a real luxury back then. Were chickens the most expensive thing on the menu?

VANEK SMITH: Chicken was the most expensive thing on the menu.

SCHRAGER: By a lot.

VANEK SMITH: Yeah, more expensive than, like, prime rib and everything.

SCHRAGER: I mean, it was, like, 50% larger than lobster.

VANEK SMITH: I know. I know. There were a lot of lobster dishes. I think there were lots of lobsters around at that time.

Finally, pasta was a big one. Spaghetti was 40 cents back in 1950 - a plate of spaghetti. That's about $10.79. And now the pappardelle is $32, which is an increase of 200%. So we're just - we're paying a lot more for pasta now than we did back in 1915.

So I don't know. Hearing all these, like, data points, is anything jumping out to you?

SCHRAGER: I'm thinking a lot about how we've measured inflation and how it changed over time. And how you measure it, inflation, is up for debate 'cause what they do is you first of all figure out, well, whose inflation? Who do you look at? And over time, it's become more broad. Also, the quality of goods changes. Like, that spring chicken, which cost a fortune, was probably, like, the equivalent of, like, a blue foot chicken - like, some fancy chicken now.

VANEK SMITH: Right, right, right.

SCHRAGER: So how do you adjust for quality? And the other controversy in inflation measurement is substitution. Like, right now, if you went to a restaurant, odds are, chicken's a lot cheaper than lobster. So you're more likely to order chicken instead of lobster. You substitute.

VANEK SMITH: Yes.

SCHRAGER: But that substitution would have been different back then. Like chicken, you know, that's a celebratory meal.

VANEK SMITH: Clearly, yeah. I mean, that was the power item on the Fraunces' menu.

SCHRAGER: Yeah. So how people substitute goods also is now sort of incorporated into some measures of inflation, and they can make a big difference.

VANEK SMITH: So what - like, what conclusions, if any, can we draw from the menu comparison?

SCHRAGER: One is that our taste changes, and that makes it hard to compare inflation over time. And two, that - how much cheaper food has gotten, even with the prices we're seeing today. Not that that's a lot of comfort to families who have gotten accustomed to, you know, their food budget being 8%. I mean, they've made lives and plans around that. But it used to be, like, a quarter of your budget would go to food, and going out was this just unspeakable luxury for most people.

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VANEK SMITH: This episode of THE INDICATOR was produced by the wonderful Brittany Cronin with help from Isaac Rodrigues. It was fact-checked by Taylor Washington. Viet Le is our senior producer. Kate Concannon edits the show, and THE INDICATOR is a production of NPR.

[POST-PUBLICATION CORRECTION: In an earlier version of this episode, we incorrectly calculated the percent increase of the price of a pasta dish from 1915, compared to today’s price (adjusted for inflation). It is an increase of 200%, not 300%.]

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