This article appeared in The Burlington Free Press on May 1, 2014.

Hanson’s index compares 28 years of prices in Burlington

“I wish I didn’t know now what I didn’t know then”, is the old country and western line. I started the Hanson Index back in 1986 and over the years have learned some important and sometimes frustrating lessons.  First, this Index is like cellophane that sticks to your fingers no matter what you do.  It just won’t go away. Secondly, some of the prices that seemed fun and entertaining at the time are a nightmare today.  I am talking about pricing, say, a no-fault divorce (which may in fact be a total illusion), tuning up a BMW and the cost of babysitting.  Where you stand depends on where you sit with some of these prices.

Eric Hanson, CFA, CFP Partner

Eric Hanson, CFA, CFP
Partner

1986 is now a long time ago and some of the Hanson Index prices do seem ancient. Most of us can’t remember too much about what was happening 28 years ago.  Ronald Reagan was President, the Chernobyl nuclear reactor had just exploded and the Boston Red Sox found another way to snatch defeat from the jaws of victory, this time losing the pennant to the New York Mets in seven games.  Bill Buckner let an easy grounder roll through his legs and the rest is history.  The Sox had to wait another 18 years to end their 86-year World Series drought. 

Technology changes so fast today that it is often a good way to measure time. 1986 saw IBM introduce the first laptop computer and the Internet Mail Access Protocol was formerly introduced which opened the way for Email.  Hard to imagine that email is just 30 years old.

The original purpose of the Hanson Index was to test the thesis some pundits had that everyday prices were increasing much faster than the official Consumer Price Index (CPI).  So I created the essential price list for Burlington. Right from the start my list increased faster than the CPI and today only two prices have increased at a slower rate than the CPI. The median price of the Index is up 200% versus 114% for the CPI.

What observations can I make about the Index?  Well first, the list is almost entirely services.  There are very few “things” here.  I wish I had included more of these like a pair of blue jeans or a TV. In general “things” have gone up a lot less in price than services the past 28 years.

A second observation is that the product may stay the same but consumer behavior changes.  A funeral has doubled in price but more and more people are choosing cremation which is less expensive. The cost of a bounced check has nearly doubled but electronic payments and debit cards are changing the way people pay and checks are less important today.  Finally, an item that was very important in 1986, a round trip air ticket to Boston for instance, is not even really on the table anymore.  You have to fly to New York or Philadelphia or even Washington to get back up to Boston. 

Even with all the headaches involved I will continue to price The Hanson Index annually. Just like the cellophane that sticks to your fingers this Index seems to be the Eveready Bunny of the local economic scene. If nothing else it is an interesting and sometimes sentimental look back at the way things were. But the Index does claim some inflationary successes. Leunig’s is very proud to be the caboose on this list. An espresso on Church Street has not gone up in price in 16 years. Thumbs up for caffeine. 

Hanson Index