Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
The Price of Nails since 1695: A Window into Economic Change
Journal of Economic Perspectives
vol. 36,
no. 1, Winter 2022
(pp. 125–50)
(Complimentary)
Abstract
This paper focuses on the price of nails since 1695 and the proximate source of changes in those prices. Why nails? They are a basic manufactured product whose form and quality have changed relatively little over the last three centuries, yet the process for producing them has changed dramatically. Accordingly, nails provide a useful prism through which to examine a wide range of economic and technological developments that touch on multiple areas of both micro- and macroeconomics. Several conclusions emerge. First, from the late 1700s to the mid-twentieth century, real nail prices fell by a factor of about 10 relative to overall consumer prices. These declines had important effects on downstream industries, most notably construction. Second, while declining materials prices contribute to reductions in nail prices, the largest proximate source of the decline during this period was multifactor productivity growth in nail manufacturing, highlighting the role of the specialization of labor and reorganization of production processes. Third, the share of nails in GDP dropped back from 0.4 percent of GDP in 1810—comparable to today's share of household purchases of personal computers—to a de minimis share more recently; accordingly, nails played a bigger role in American life in that earlier period. Finally, real nail prices have increased since the mid-twentieth century, reflecting in part an upturn in materials prices and a shift toward specialty nails in the wake of import competition, though the introduction of nail guns partly offset these increases for the price of installed nails.Citation
Sichel, Daniel E. 2022. "The Price of Nails since 1695: A Window into Economic Change." Journal of Economic Perspectives 36 (1): 125–50. DOI: 10.1257/jep.36.1.125Additional Materials
JEL Classification
- D33 Factor Income Distribution
- F11 Neoclassical Models of Trade
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L61 Metals and Metal Products; Cement; Glass; Ceramics
- N61 Economic History: Manufacturing and Construction: U.S.; Canada: Pre-1913
- N62 Economic History: Manufacturing and Construction: U.S.; Canada: 1913-
- N63 Economic History: Manufacturing and Construction: Europe: Pre-1913