Odd Lots - This Is What Happened to the Price of Nails Over the Last 330 Years

Episode Date: February 7, 2022

We're in a period of elevated inflation right now. But at least there's some good news: The price of nails is lower than it was in 1695. But how do we know what the price of nails was back then? And what can such a long-term look tell us about innovation in such a seemingly simple product? To learn more, we spoke with Dan Sichel, an economist at Wellesley College, who has recently published a paper on exactly this topic. We discussed how he did it and his overall approach to the project.See omnystudio.com/listener for privacy information.

Thanks for listening to Oddlots. Follow the show on Amazon Music for more future episodes or just ask Alexa, play the podcast, OddLots on Amazon Music. Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway. And I'm Joe Wisenthall. So Joe, we have been recording a lot of supply chain episodes. And I know we kind of joke about this, about going as granular as possible into the supply chain episodes. And I know we kind of joke about this about going as granular as possible into the supply chain episodes. And I know we kind of joke about going. And I know we kind of joke about going as possible into the supply chain. But I think I finally found basically as micro as we might possibly go. This is what I love. There's always more micro. Every little part has a subpart or a subfactor. But yes, I believe our conversation today is going to get very micro. But is it like a supply chain episode for real? Yeah, I think it kind of is. I mean, this is a component that feeds into

lots of different things. And also, you say that things can always get more micro, and there must be a limit somewhere, unless we get into, like, subatomic particles or something like that, I really feel like in terms of components that feed into a lot of other things, this is maybe as micro as we're going to get. We are going to be talking about nails today, like nails that you hammer and that go into things like housing and construction. There's no, a nail is contained one part. There's no like, you know, obviously there are elements to build, you know, there's the raw metal and the labor.

But yeah, a nail is about as simple as a part you can get. Yeah, well, I'm glad you mentioned that because this is something that is kind of unique to nails. So nails are something that have existed for a very, very long time, although in different forms. But that means that they're very, very interesting to study from an economic perspective, and you can learn a lot about how the economy has changed over time by looking at nails. And so we are going to be speaking with someone who has done exactly that, someone who actually wrote a paper, basically constructing a price index of nails from, I think it was 1695 to modern times, and trying to learn what price changes in nails. actually says about the transformation of the economy. So very interesting stuff, very micro stuff. So let's get right to it. But I just want to say, I hope one thing that, you know, we've had

this inflation lately, and I wouldn't be surprised if nails have gotten more expensive. But I really hope that as a society, we're paying less for nails on a sort of like, you know, purchasing power adjusted or dollar adjusted average than we were in 1695. I hope we've seen some efficiency gains even with inflation. I guess we're about to find out. But that is by one, I'll be really sad if we're, we've said we're back worse than we were like over 300 years ago. You're going to go back to forging your own nails or something in protest.

Exactly right. All right. Well, we are about to find out. We're going to be speaking with Dan Sickle. He's a professor of economics at Wellesley College. Also used to be on the Federal Reserve Board in D.C. And also at the Treasury Department. So very interesting background. Dan, thank you so much for coming on the show.

Very happy to be with you, delighted to get a chance to talk nails. Excellent. I want to start out with a very important question. When should you use nails and when should you use screws? Great question. So nails are a lot easier and quicker to install than a screw. So if you're just putting two, two pieces of wood together, a nail might be a good way to do it. But screws have a lot more holding power. That is, their resistance to the pieces you put together being pulled apart. And screws work in a much wider range of materials than nails do. I'm trying to work in like a, if all you have is a hammer joke. Everything looks like a nail. I haven't come up with it yet. My goal, though, is by the end of the episode. So before we actually

talk about the study of nails, why do we just zoom out a bit? what is it that your work has focused on more broadly such that trying to construct a price history of nails was a endeavor that you wanted to do? So I'm a macro economist and says as Tracy mentioned spent many years working at the Federal Reserve Board doing economic forecasting. And that led me into a subfield of economics called economic measurement that looks at the methodologies we use for measuring things like inflation or gross domestic product. So that's the background I brought to this.

And I'm also, when I'm not doing economics, I'm a woodworker. So one day I was looking through a woodworking catalog and saw a listing for old-fashioned cut nails. And that got me thinking, huh, I wonder what's happened to the price of nails since back in the day when cut nails were the thing. that everyone was using. So you actually mentioned this in your paper, and I tease this in the intro,

but you kind of said out that nails are a perfect component through which to study economic changes because they've been with us for a long time and because you can actually look at them over the course of centuries. So what is it about nails that makes them unique or that lends themselves to this kind of economic analysis? So nails are an incredibly interesting product to look at. They're very easy to dismiss because they seem so pedestrian and every day. But they have a couple virtues that make them ideal for a study like this. One, as you mentioned, nails have been around for a very long time. We could easily go back to Roman times and find a nail and it would still be recognizable as a nail. So the actual form of nails hasn't changed so much. But the process for making them has really changed a lot. It's changed.

dramatically. So it really gives us a nice window into centuries of changes in manufacturing processes as the way of making nails shifted from a blacksmith or a nail smith, pounding it out from a piece of iron one at a time, to now machines that can spew out hundreds or even thousands of nails a minute at just an incredible rate. The idea of nails not having changed so much themselves, but the production process changes so much makes them a really interesting thing to look at. So it's almost a pure way to measure productivity at least in one sector. What are the numbers? Like, is there an equivalent to like how much a 1695 nail would cost today? Or maybe a better way to put it is if it's 1695 they wanted to have as many nails in a house, like how many,

in a typical house, how many blacksmith hours would that have required them? Yeah, so great question. Back in 1695, it would have taken a blacksmith about a minute to make a single nail. So let's use that as a starting point. Today, if we think about a modern manufacturing facility making nails, that one worker would now probably be handling about seven nail machines. And those nail machines might be making on average, maybe 500 nails a minute. So each of seven machines making 500 nails a minute. The latest machines might be making as many as 2,000 nails a minute, more typical machines, maybe around 350 or something.

So think now that one worker running seven machines, each making 500 nails a minute. well, that's 3,500 nails a minute that that one worker is making compared to making one nail in that minute back in 1695. This is something that is really fascinating to me, but how do you actually go back to construct this price index? And at some point, we should say what the price index actually shows. But how do you go back 300 years to actually look at how much nails cost and how long it took a blacksmith to forge a nail in the early 1700s?

So on the price piece, economic historians have actually already done a lot of the groundwork for me and pulling price records from really interesting places. So the earliest prices back to 1695, which are actually covering prices in the United Kingdom, came from an economic historian who looked through a logbooks from schools, hospitals, and other kinds of public institutions. And so the nail prices that I'm using from that period came from Greenwich Hospital in the UK. And this hospital had a logbook where every time they bought something, somebody wrote down how much they paid and how much, what was the quantity of the stuff that they bought. So every time this hospital bought nails, there was an entry in the logbook.

And there was a prior economic historian who went back, went through that logbook and translated all the of that into price indexes for a wide range of commonly purchased commodities. Coming to the United States, late 18th century, there were ads in newspapers, other kinds of circulars. And again, economic historians have gone back and extracted those data from, say, newspaper ads for how much did nails cost in that earlier period. So the thing that I've done is to gather all of these disparate nail price indexes covering different spans of time and putting them all together to get one consistent price series going all the way back to 1695. So beyond just the fact that we're incredibly more, and I want to get more into the sort of

like details of what happened between 1695 and now, but beyond just the fact that we're incredibly more efficient at making nails today. And I would obviously really hope that we would be and, you know, 3,500 times more efficient. And it sounds like it seems pretty good. What are some of the other takeaways from this that you've learned about how productivity happens or how everyday items become cheaper over time? So the price of nails, if we try and look at that big productivity increase and think about the implications of that for prices, which is ultimately what people in the economy experience,

from about 1695 through the mid-20th century, the price of nails relative to the price of all other consumer goods. So what economists would refer to as the real price of nails fell by about 10 times. So that's that productivity advance showing through to the price of nails. It came in a variety of ways. It came partly because the materials used for nails, iron in the earlier period, steel more recently became less expensive. It came partly because the energy source used for producing nails changed from hand power to water power to steam to electricity. It came partly because the machinery,

as we already talked about, the machinery used for producing nails got more efficient and could produce more nails from a given amount of time as automation to cold. It also, prices also came down because people just got better at organizing production. So when electricity became available, you could organize a shop floor for making nails in a different way than you would if people were using steam power or water power coming from a single, either a water wheel or a single steam engine. And so also a lot of just thoughtful changes in the way we organize material handling and production that also played a very important role in bringing those prices down. This is Tom Keene, inviting you to join us for the Bloomberg Surveillance Podcast. It's about making you smarter every business day. I'm Paul Sweeney.

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Search for Bloomberg Surveillance on Apple, Spotify, YouTube, or anywhere else you listen. On the East Coast, listen at lunch. And on the West Coast, listen as soon as you wake up. That's the Bloomberg Surveillance Podcast with Tom Keene, Paul Sweeney, and me, Alexis Christophorus. Subscribe today, wherever you get your podcasts. Bloomberg Surveillance, Essential Listening, each and every business day. Now, you mentioned that prices fell from 1695 to sort of the 1930s, but what happened after that? And I know Joe started this conversation saying that he hoped that the price of nails had come down over time. And, you know, that's true relative to 1695, but it hasn't been a straight line.

And as you found, prices have actually been rising since around the 1930s, 1940s. That's right. And when I first looked at these numbers, I was really surprised by the more recent price increases, thinking that the productivity advance would have shown through to prices. But there are other factors that came into play that led to those more recent, more recent in the sense of since the mid-20th century price increases. But to Joe's point, Nails today are still less expensive than in the late 18th century. So there has been this increase since the mid-20th century, but it hasn't come up to anywhere near where it was in terms of the price of nails back in the late 17th century, 1695, and so on. But some of the factors contributing to that

price increase, one, since mid-20th century, prices of basic commodities, including importantly steel, have the relative price of those things has risen. So that's one factor contributing to that. There's also this really interesting, and this gets a bit deep into. the weeds of price measurement. But this other really interesting development, which again illustrates how nails touch so many different types of economic phenomena. But starting in the 1950s, common, simple, basic nails started to be imported from other countries rather than just produced in the U.S. And so there's been a big shift since then towards most of the really basic nails, you'd get it, say, at Home Depot, being produced outside the U.S. rather than being produced

in the U.S. So there's been this shift in nail manufacturing in the U.S. from making really basic nails to that handful of companies still make nails in the U.S. now tend to make specialty nails used with particular materials or with special coatings or special shapes that are used in very specialized applications. And that creates some challenges for the folks. at the Bureau of Labor Statistics who track prices over time in the modern era because the regular old too much nail you might buy at Home Depot, well, those aren't produced domestically very much anymore, so it's hard for them to track prices. And so that leads to some really interesting and complicated issues that as the type of nails produced in the U.S. shifts to specialty nails

has likely led to an increased in measured prices, perhaps a little more intensively than what really might be happening for just the really basic, simple two-inch nail you'd buy at Home Depot. This is like the kind of debate that gets people really, their blood boiling about the Fed and the CPI and measurement and everything because you have like, oh yeah, the price is gone up. And then someone else says, yeah, but it's just we're starting to measure specialty nails. But you get so much more. Yeah, it's a better nail. It's like, I don't want a better nail.

I just want a regular old nail. And so like the hedonic adjustment, I guess. I don't know if that's technically what's going on here. But the quality adjustment of a nail is not something I even think about, like say, with a computer screen or an iPhone. But I guess it sort of has to be factored in when we're thinking about trying to create a single chart that goes back hundreds of years. Yeah. So the hedonic adjustment. is a technique used by statisticians, economists doing price measurement to try to adjust for quality

change. And for nails, there isn't hedonic adjustment going on. It would be a really interesting thing to do, but that isn't the way that they're measuring the prices. The challenge is the shift in the composition of the product, and that ideally you'd want to track the same product over time, so you're always doing a like-to-like comparison. And as the product, the product makes shifts to higher price, more specialty products, it becomes increasingly difficult to do that. And so that could lead to a situation where these specialty products see faster price increases than maybe the really basic products do. And then since you're measuring this broader category because you can't measure the narrower category, you end up seeing in

the official statistics faster price increases. Do shipping costs back? into prices at all? I know we're mostly focused on, I guess, domestically produced nails, but even in the U.S., shipping costs have gone up quite a lot recently. So would something like that actually show up in the price index or in inflation statistics? Yeah, absolutely. And a lot of the supply chain issues that we hear about so much today are quite present for nails, for nails too. If you want to look at the numbers over the last year, this would be the producer price index for the narrowest category that includes nails. Prices are up about 40% of since a year ago. So that is partly materials prices. Steel prices are up a lot. And remember, there have been

tariffs on steel that have pushed up steel prices. Shipping costs are far higher, whether it's shipping to bring in products from overseas or if it's or if it's just domestic shipping, all of that has gotten a lot more expensive. And so there's been almost in the last year, which the last year's numbers aren't in the paper because that happens since I got the paper written and out. But in the last year, there's been almost a perfect storm of factors pushing up nail prices. It's funny how many different things. So many perfect storms, I believe we've.

had a perfect storm of coffee prices. I believe we've had a perfect storm of supply chain issues for housing and diminishing housing inventory. And now to discover that there is a perfect storm pushing up the price of nails, I guess I'm not surprised. Has there been any issues for construction sites or builders? Like, is there ample supply of nails or have other issues with actually like job sites slowing down due to inability to source nails?

So I can report one interesting anecdote. So I got talking to somebody who's in the nail business in the U.S. who saw the paper and reached out to me and had a chance to talk with him. And so he's in the business. And he reports that shortages of nails are holding up construction projects. Wow. You know, so one story from one person in the business who said that this perfect storm affecting nails as well as a whole lot of other manufactured goods is actually limiting construction activity. Wow.

How easy is it to recycle nails or to source, I guess, secondhand nails from older projects or tear down buildings or something like that? That question leads to both an answer for today and an answer historically. So let's go back historically. Oh, great. So once upon a time, nails were absolutely recycled. And indeed, in the period in the 18th century, if there was an abandoned building, it would typically be burned. It would often be burned down in order to recover the nails. Nails were sufficiently expensive in that earlier period, that it was worth burning down the abandoned building, picking through the burned remains to pick out the nails because it took somebody a minute to make each nail.

So nails were very, very precious in that earlier period. Today, that really isn't done so much. Nails have, even with the recent price increases, nails are still viewed largely as a throwaway project. So it would be unusual for a builder to try to recycle older nails. Although there is this interesting anecdote I came across that Donald Trump's father, who was a builder, Ashley, was one who would walk through his construction sites and pick up the loose nails that had been dropped to return them to carpenters to use again. But in his New York Times obituary in 1999, that was,

viewed as a sign of extreme frugality rather than just kind of the typical thing that builders would be doing. Well, I respect that. That's, you know, no waste. Leave nothing to waste. You know, I joked in the beginning. I was like, oh, we're going to like be able to speak for an hour on nails, but we really could probably speak for like three hours on nails because this is utterly fascinating. I want to go back again to the zoom out, the long-term trajectory of nails. And of course, like, okay, so at one point when it was a blacksmith making one nail a minute, that was like a trade. And that was a tradesperson and, you know, a high skill, high skill work or what people would call high skill work. Was there tension over time as that got more and more automated such that it was one person running a machine that could do hundreds or their fights over the trajectory of the nail industry and the loss of the.

So the blacksmith role and created one nail a minute? So I'm not aware of any specific stories of fights over that, as would be the case with, say, the Luddites damaging looms in an earlier period. But I think nails, again, illustrate the changes in manufacturing and the change in the relationship between employees and factors. owners as work shifted from being artisanal with a blacksmith doing nails in their own blacksmith shop to the beginnings of factory production and then ultimately to very automated factory production. So I think much of the history of the labor movement and much of the history

of relations between business and labor would be reflected in what happens in nails. And maybe with a bit more digging, one could find some particular stories about nails. But I think more generally, if you think about the 19th century and the changing power dynamic between workers and business owners, that all would have played out in the realm of nail manufacturing as well as in any other type of manufacturing. Because again, the production shifted from artisanal small shop, one person making nails, to now almost entirely automated nail manufacturing. Well, can you talk a little bit about what happened to wages over the course of that period as they relate to nails? So presumably as manufacturing gets more efficient and nails start getting churned out a lot faster,

presumably the wage component that's going into the price of nails and ultimately into your price index for nails, that starts to come down. Yeah, so two ways to think about this. one in terms of wage numbers that I'm using. For the numbers in the paper, I'm using wage changes for a typical average worker. There just isn't enough detail to get wages specifically for somebody making nails. It would be wonderful if there were that kind of data. It would require immense digging through business accounts from many different companies in the 18th and 19th century. And so far, that just isn't work that I've done or seen and can do. So I'm using an average wage. That being said, typical pattern for manufacturing would be that as production

shifted from artisanal to factory work, as Joe mentioned, that blacksmith, that was a trade, that was a highly skilled task that people spent years as apprentices to learn how to do that trade. and as production shifted to a factory basis, the skill level needed to run a machine in a factory was much lower than the skill level needed to blacksmith. And so there certainly was a period in the 19th century when wages for people making nails would have been moving down. And then later, as productivity increases and general increases in wages, manufacturing wages rising, as, you know, we'd be more familiar with in the 20th century. So these days in, you know, the political debate about inflation,

some people are talking about the role of competition policy and whether, I don't know in the short term, but at least in the medium term, whether superior competitive environments could help alleviate price pressure. And when I was looking at your nail paper originally, someone pointed out to me that in the late 1800s, There was something called the Wirenail Association and that seemed to try to exert some, I don't know, coordinating or pricing power. Did you encounter sort of periods in which the manufacturers of nails attempted to,

I guess, make the industry less competitive to build pricing power? So I think the story that you're telling tracks kind of the broad history, the broad swing of history of kind of business and then antitrust power and the rise in the late 19th century of trusts and consolidation in many businesses and some exploitation of that of that market power. I didn't focus deeply on that piece of the history of nails. I think it's going to track the general story that we would have seen for other types. of other types of manufacturing. One thing that maybe is different about nails

is that in contrast to steel or railroads or meat packing, it can be done on a smaller scale, so it is harder to consolidate the production than it would be for some of these other types of things where the capital costs are so massive. So I think, again, it would have kind of generally followed the broad swings in industrial history, perhaps a little less intensively

for nails than for some other problems. products. So I know we were kind of referring to hedonic adjustments earlier or, you know, people who make fun of hedonic adjustments and the idea that everything's changed and, you know, the quality of a nail has gone up so much that it offsets the price increases. But there has been one development in the world of nails and you talk about it in the paper. But the invention of the nail gun arguably changed a lot of the dynamics. or change the nature of what nails actually do or how easy it is to use them. Can you talk a little bit about how, first of all, that changed nails, and secondly,

how you incorporate that into thinking about something like price? Yeah, so nail guns are really interesting for thinking about nails, and it highlights the importance of just being broad and in thinking about what is the product who's price for trying to track. So from a builder's perspective, the builder cares about an installed nail. It doesn't care about the nail per se, but how much does it cost to get a nail into a piece of wood to hold a building, to hold a building up? So nail guns, which appeared in the 1980s, are a really big deal because a construction worker using a nail gun can install a lot more nails much more rapidly than can a construction work. worker using an old-fashioned hammer. If you run the numbers and you do kind of for illustrative purposes, some back of the envelope calculations to think about how big a deal is it, nail gun probably drops

the price of an installed nail by about half. So one thing that has offset part of that increase in prices in nail prices that we've seen since the mid-20th century is the advent of nail guns. because from the point of view of a builder, yeah, nail prices have gone up, but nail guns have helped to offset part of that increase by bringing down the cost of an installed nail. So a great example of how, to use the economist term, complementary capital, can play such an important role in what is it actually cost to get something done or what is the all-in price of a particular product. Hello, I'm Michelle Hussein, and for more than 20 years, I was at the BBC. But all the time I was delivering the headlines, I wanted to go further than the news of the day,

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So please join me, listen and subscribe to the Michelle Hussein show from Bloomberg Weekend, wherever you get your podcast. You certainly ask interesting questions. As the number of nails in, say, a typical house gone up, And like, if you can install nails a lot faster because you have a nail gun as opposed to like hammering, would you be, would there be times where you would use two nails to make it even stronger than one just because the doubling is not a particularly, not particularly taxing for the builder? So the time when that phenomenon was really a big deal was in the mid-19th century. So we had talked about how back in the 18th century nails were so expensive that people would burn down abandoned buildings to recover. cover nails. Well, nail prices started to fall in the really early in the 1800s as automation

came in as nails came to be cut nails came to be made in factories rather than the blacksmiths making them one at a time. And by the mid-19th century, prices had already come down quite a bit. And that was an important development that allowed the rise of what typically is called balloon frame construction and balloon frame construction being the typical kind of way we build houses today where two by four dimensional lumber studs hold up the hold up the house that style of construction takes a lot of nails prior to that the typical style of construction for building a house would have been post and beam where timbers were put together with mortise and tendon joints and these kind of traditional woodworking joints and that would have made sense in the time when nails were very

expensive. But once nail prices had fallen enough, then it made economic sense to go to this other, in a way simpler to build, takes less skill to build a balloon frame house than it does to build a post and beam house. But you can't do that unless nail prices have come down enough. So that's a great illustration of how the decline in prices in this incredibly simple product have big downstream implications. I have a weird question, or I guess I'm thinking about how to phrase this, but we talked about gains in productivity in nail manufacturing. Now that nail manufacturing is so streamlined and efficient, is it harder to bring additional

productivity gains out of that particular item? Or I guess, how can nails be improved upon at this point in time? And, you know, is the next big development something along the lines of the nail gun where, I don't know, maybe it's robot workers who are suddenly able to run around with hammers or nail guns and just automatically insert nails into houses? Like, is that kind of the next big thing or does it become progressively harder to get these kind of big improvements that lead to price falls and mass production? So I think the golden age of nail production surely was that period from the 19th century through the mid-20th century. And I think the advances have slowed since that, have slowed since that time. That doesn't mean there aren't any advances that there aren't possibilities of further automation in the production of nails. But I think it does get harder in the sense of a basic nail and how much can you speed up the production of that really basic

product. And that's a pattern that would not be unusual for other manufactured goods, where there's a period of rapid advance and then kind of a stabilization as the product matures. And there are fewer easy opportunities for advances, either in the product itself or in the process for manufacturing that. That I think does, Tracy, take this in the direction that you suggested, complementary capital like the nail gun or maybe something that we haven't really envisioned yet with more automated kind of, whether it's robotics or what have you, that automate more of the construction process. And it does seem like that's the direction that things would be going. I'm sure there's still scope for someone to develop a machine that produces

nails even more, even more quickly. But I think that big productivity gains, if we think about it from a construction point of view, would likely be coming from the direction that you pointed to. In general, it feels like the big, the big change, like if I think like, okay, setting aside right now, the current labor stress, long term or medium term, it feels like the big challenge opportunity has to come from productivity gains in some of these highly labor intensive sectors, some of which would be something like construction, like building a house, but some of it might be in the care work. Obviously, we've seen the

stress that's been placed on elder care, child care, lately. How much in your view, like just even like the building of a house, setting aside the nails question, has that been an area of significant productivity gains? Or are we really waiting for like the robot that can climb up a bunch of the stuff on its own and nail in a bunch of, you know, attach a bunch of stuff without a human having to do it. So construction is a really challenging area for measuring and thinking about productivity advance. If one looks at the, and this is another area that you said, this is one of these things that just kind of drives people crazy. Yeah. If you look at official statistics on construction over recent decades, the productivity numbers don't look good. They look quite bad.

If you talk to builders, they will tell you about all of the ways that they've improved in the past couple decades in how they do things. So there does seem to be a bit of a disconnect between the experience of people in the field and what's showing up in the official numbers. And that, you know, that highlights an interesting and challenging set of measurement issues. I think more broadly, though, that Joe, just as you're saying, the productivity advances looking forward, both in construction and in other sectors, do need to come from these labor intensive areas. And the hope would be that better information technology, bit of artificial intelligence,

bit of automation could lead to improvements in many of these areas, whether it's construction or health care or some of the other care sectors. On that note, I mean, looking at your very intense research into nails, what would you say is your big takeaway or the big lesson you've learned about price or productivity statistics slash measurements in general? Like, what's the big thing that you can extrapolate to other statistics more broadly? Yeah, so I'd come back to the importance of in the setup that you had of looking at basic micro products to understand what's happening with productivity to get a full picture. So it's easy to think about technological advance in things like computers where we've seen these incredible changes.

but it's also very important to think about technological advance, in this case in the production of simple products like nails. And the changes, the big drops in the relative price of nails since, again, late 17th century to mid-20th century, had really important downstream implications, as we talked about for construction and for a whole set of just how nails are used. in a built environment. Big productivity advances absolutely for computing and electronic information technology products, but also really important changes in the most basic manufactured product. Interesting, too, right, that the kind of place of nails in the economy has shifted a lot over that period in the sense of, again, nails are very precious back in the late 17th century. And they were so precious that if you think about nails as a share of the economy,

the earliest I could go back on this was back to 1810. But in 1810, nails, the use of nails, production, imports, and so on, the total use of nails in the economy represented about half a percent of GDP, which on the one hand sounds like kind of a small number, but half a percent of GDP is a really big deal. You know, today, household purchases of personal computers are a little less than half a percent of GDP or household purchases of air travel, a little less than half a percent of GDP. So nails in an earlier period played a very important role in the economy and had a really important place in kind of popular accounts. We talked about people burning down buildings to recover old nails. Nobody would do that. Nobody would

do that today. So we also get this window into how different products that now seem like their everyday pedestrian products in an earlier period were really important products. And so we get this really interesting perspective on changes in people's lives and living standards over many, many centuries. So before I go, I want to ask one question that's sort of like, I think it's super controversial among economists. And I'm very curious, like your take. But when it comes to productivity gains, there seem to be different theories about where productivity comes from or why it happens at certain times. And sometimes I think people associate it with some technological breakthrough. So maybe someone finds, you know, someone suddenly discovers the internet or is

able to build it. We get more efficient. And others associate productivity with sort of like the high pressure economy in a period of high growth, low slack, a shortage of labor, companies are forced to invest and they forced to, you know, maybe build the, maybe develop the robot that can build a house. I'm curious, like, what is your view? And when you look at, you know, you talk about the perfect storm and the shortage of nails and we all know about other tensions in the construction market right now. Could this be a period right now where we see meaningful step-ups in productivity, particularly around these labor-intensive sectors?

So you mentioned a couple really interesting elements of where productivity comes from, whether it's big ideas like the Internet that's kind of a whole new way of thinking about how we exchange information or in the high-pressure economy, whether it's process improvements with increasing automation and so on. So if we think about not so much nails, but just more generally, where we are today. It seems like that high-pressure economy is going to lead to additional automation.

As with labor shortages, high-pressure economy, businesses are going to see it in their interest to increasingly automate processes that now makes economic sense to do that with labor shortages, whereas maybe it didn't in the past. The other big element that could well contribute

to a jump in labor productivity more recently is with the pandemic, and all of the new tools that we've developed, like being able to Zoom for this interview, suddenly make a whole lot of things possible at much lower cost and much lower resource use than would have been the case in the past. So all of those things together, I think, could well be contributors to productivity growth if we look ahead over the next five years.

All right. Well, Dan, that was an absolutely fascinating conversation. and it's so great that, you know, this kind of micro research exists. So thank you so much. Yeah, well, thanks very much for having me on. Yeah, that was fantastic. I want to see, I'm just curious, what kind of woodwork do you do? So doing furniture, done some federal period, early 18th century pieces, done some craftsmen, arts and crafts kind of early 20th century pieces.

And I'm actually, I'm just about to just start. a project on the economics of furniture. Oh, great. To sort of do the nails treatment for, you know, much broader or harder to get a handle on category of furniture. Great. So having this great opportunity to kind of mix economics and interest in furniture and woodworking. I love it.

Well, we'll have you on next year to talk about your findings for furniture. I'll let you know what I come up with. All right. Take care of Dan. Thanks so much, Chad. So, Joe, I know we mentioned this. our conversation with Dan, but it is remarkable the number of things that have had this perfect storm that has lent themselves to price increases. And I, you know, I suspect this was something Matt King

from Citigroup mentioned when he was on Oblots late last year, but I think this is probably one of the things that makes a lot of people suspicious that this is actually about supply chain issues and micro problems versus something more broad with an increase in monetary supply or overly loose monetary policy, that sort of thing. Yeah. That was a great conversation. And I can't think of another time in which we've had someone on who is able to talk so long term, like this sort of like deep like economic history, but also make it like pretty relevant to right now. Very relevant. Very relevant to right now. And thinking about, like, well, what causes innovation over time and how do you measure it? And will we see more innovation or productivity gains? I thought that was very unique. And Dan was extremely clear about all this. So I love that chat. Totally. And it makes me more determined to do that trust plate episode as well. Although I think that's slightly larger than nails, but we should still do it.

But actually, we need to do more reporting on this now if like the degree to which, you know, some of the people that we've had on, like, Ellie Wolf, you know, she publishes regular surveys. And I've seen that like all of the home builder supply chain stress, it's only gotten worse in 2022. Like, they're short. They're short of everything. Yeah. But it would be fascinating to like get a little bit more insight on like literally home builders having to slow down project because they can't get nails. I just sort of think of like nails as an endless supply of them in a bucket at a Home Depot. But if there's really a shortage of nails slowing down the construction of a new home, it's a pretty big problem.

Yeah, apparently so. All right. Well, should we leave it there? Let's leave it there. All right. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me on Twitter at Tracy Allaway.

And I'm Joe Wisenthall. You can follow me on Twitter at The stalwart. Follow our guest, Dan Sickle. He is at Dan Sickle. one on Twitter. Follow our producer, Laura Carlson, at Laura M. Carlson. Follow the Bloomberg head of podcast Francesca Levy at Francesca Today. And check out all of our podcasts at Bloomberg, onto the handle at podcasts. Thanks for listening. On April 4th, 23, around two in the morning, a man was found stabbed multiple times

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