This week a huge debate has sprung up over the color of “The Dress.” The item in question is a two-toned sleeveless dress sold by an English clothing chain called Roman Originals. Over the last few days many people have had furious debates over whether the dress is gold and white OR black and blue. Even the Wall Street Journal, a staid conservative publication devoted primarily to business, devoted more than a half-page to the debate over “The Dress’s” color this weekend. For an economist, however, “The Dress” is really amazing because of its price.
The dress sells for £50 in England, which is currently about 77 US dollars. The price even includes free shipping within the United Kingdom. Why is that price so amazing? Because dress prices today are about the same price they were 25 years ago! There are relatively few products that we buy that cost the same today as they did a quarter of a century earlier. The U.S. government has tracked the price of ladies’ dresses since 1935 as part of their effort to understand and monitor inflation. Using the U.S. government’s Consumer Price Index for women’s dresses (series CUUR0000SEAC02 for those who really want to know) I have graphed the price of a dress that today costs $77 back twenty-five years .
The dress cost about $76 in 1989, $79 in 1990, and peaked at $84 in 1993. Then it fell to almost $60 in 2001 before slowly climbing back to $77 today. What has happened to the average price of everything else? Overall, the price of the typical items families and individuals have purchased have increased by over 60% since 1990. This means if “The Dress” were like other items that people buy it should not cost $77, but instead around $125. That is what is really amazing about the dress to an economist.
One reason for the continued low price of clothing has been the fierce competition among developing countries to produce clothing. The manufacture of clothing has been used by these countries to employ millions of low-skilled workers. The exports have helped these economies grow and resulted in low apparel prices in the developed world.
By the way the answer to the question “What color is The Dress?” seems pretty simple to me. The store’s website lists the dress as “Royal Blue,” not white or gold. However, I doubt telling people this information will change anyone’s opinion.