A Method for Determining Historical Monetary Values

Dr. Eric W. Nye 


In order to convert British currency of former generations to present-day American dollars, I use three sources in concert:

 1.        L. E. Davis and J. R. T. Hughes, "A Dollar-Sterling Exchange, 1803-1895," Economic History Review, 2nd ser. 13:1 (August 1960): 52-78.

 2.        Douglas Jay, Sterling: Its Use and Misuse, a Plea for Moderation (London: Sidgwick & Jackson, 1985), esp. "Appendix: The Purchasing Power of the Pound Sterling 1264-1983."

 3.        John J. McCusker, How Much is that in Real Money?: A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States, reprinted from Proceedings of the American Antiquarian Society (101:2 [Oct. 1991]), Worcester, MA: American Antiquarian Society, 1992.

Davis and Hughes discuss variations in the 19th C exchange rate using factors like value of gold and silver, regional fluctuations in bills of exchange, etc. The greatest stability in these rates occurred in the final quarter of the century. In these years the rate never deviated by more than a percentage point from "par rate" of $4.8665 to £ 1, though the actual rate was sometimes less.

Douglas Jay enlarges on the landmark work of Sir Henry Phelps Brown and Sheila Hopkins whose A Perspective of Wages and Prices (1981) contains two related indices drawn from data in southern England over seven centuries (setting values in 1451-75 = 100). One index was of a "composite unit of consumables" and the other of "equivalent of wage-rate of building craftsmen." Jay reproduces only the former. The most stable decade in the last quarter of the 19th C was the 1890s during which the Phelps Brown-Hopkins consumables index averages 965. If we set 965 on the PBH index equal to $4.8665 we can determine dollar equivalent values for any given year with a simple ratio.

It just remains to convert those dollar values into modern ones. Here is where McCusker comes in. He produces a table of Composite Consumer Price Indexes for the United States from 1700-1991 (Table A-2). More recent CCPI figures may be produced by multiplying the Bureau of Labor Statistics CPI-U by 11.96. For the latest BLS statistics see their website: http://www.bls.gov/cpi/. End-of-year data usually appear by January 12th and are contained as part of the CPI-U News Release.

For example, to find the modern-day equivalent of the cost of Jane Austen's Emma (1816), we start with its price on publication of 21s (a guinea or £ 1.05). PBH in Jay assigns 1816 an index of 1344, so the equivalent price in the 1890s would be

That £ 0.75 in the 1890s converts to dollars as $3.67 (.75 x $4.8665). It just remains to convert to modern dollars. McCusker assigns the 1890s an average CCPI of 104.  The CCPI at the beginning of 2024 was 11.96 x 306.746 = 3669 (with a slight error from rounding).

$3.67 = $today     ...so...   $today = $129
  104    3669

So when John Murray issued Emma in three volumes in boards around the start of 1816, its value was about what $129 would mean to us at the beginning of 2024.  This system works equally well in former years. All you need is the PBH index for that year.

When the equations are combined and simplified they look like this:

Remember that a pound (£ or quid or sovereign) consisted of 20 shillings and each shilling (s. or bob) of 12 pence (d. for denarius, or pennies or coppers).  Thus £ 10.5.6 would denote ten pounds, five shillings, and sixpence.  "Five and six" means five shillings and sixpence and would be written 5/6.  £ 4 8s. signifies four pounds, eight shillings.  A crown is five shillings (5/-).  A sovereign was a gold coin worth one pound and a paper note of the same value was called a "quid."  A guinea is £ 1 1s. and a half guinea equals 10/6 d.

When decimal currency was introduced on 15 February 1971, the shilling was reduced from 12 d. to 5 new pence, or 5 p, and the coin itself ceased to be minted.  Thus the pound which had always equaled 240 d. now represented 100 p.  (People with jars of pennies laughed all the way to the bank.)  For purposes of these calculations, it is necessary to convert older currencies to their decimal equivalents as in the above example.  An old shilling is £.05 and an old penny is £.004166...

To see an interactive spreadsheet on the web that allows you to plug in the source year and amount in pounds sterling, specify a target year and discover the equivalent in US dollars, click here.


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