Tuesday, July 21, 2009

Inflation illusion at the movies

Inflation illusion is usually defined as the failure to take account of inflation. Not too surprisingly, it turns out that movie box office numbers suffer from inflation illusion. Consider this report on "the Hangover". Apparently the Hangover is the biggest R rated comedy of all time. It has grossed $235 Million, eclipsing Beverly Hills Cop in 1984 at $234 Million.

Of course, these numbers are like apples and oranges. The CPI in 1984 was 105.3 today it is 215.693. To convert BHC to todays numbers we multiply 234 by 215.693 and divide by 105.3. This gives us a whopping $479.32 Million for Beverly Hills Cop in today's dollars.

You can get the CPI hot off the press from the Bureau of Labor Stats here.

Clearly, the Hangover has a way to go before it trounces Eddie Murphy.

However, I have to say that the Hangover was pretty much the funniest movie I have seen in a long long time.

The question remains hwoever, why don't journalists pay attention to inflation?