How price changes in nails track with economic trends : Planet Money : The Indicator from Planet Money Despite being fairly simple items, nails can actually reveal a lot about the greater economy. Today, we talk to economist Dan Sichel about the history of nails and what they can teach us about economic trends.

What nails can tell us about the economy

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Here at THE INDICATOR, we spend a lot of time looking at big numbers - jobs numbers, gross domestic product, rate of inflation, markets, oil prices. But sometimes it's the smallest, simplest things that can give you the greatest insight into an economy. Consider the humble nail.

DAN SICHEL: So nails provide this really interesting window into economic change.

VANEK SMITH: This is Dan Sichel, a professor of economics at Wellesley College. He's also worked at the Treasury Department and the Federal Reserve. And he's just written a paper called "The Price Of Nails Since 1695: A Window Into Economic Change." To be clear, he's talking about nails as in hammer and nails, and he says he focused on the nail because it's kind of unique.

SICHEL: One reason why is because nails themselves haven't changed very much. So it is quite possible to do long-period comparisons. So, for instance, it's much harder to, say, compare cars over 100 years because the 1908 Model T is just so different from a recent Tesla. But nails haven't actually changed that much. You could see a nail made in 1695, and it would be very recognizable as a nail today. But the process for making nails has changed dramatically as they went from being made by a nailsmith or a blacksmith one at a time to being churned out by thousands a minute by modern machines.

VANEK SMITH: This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith. Today on the show, nails - what the price of nails since 1695 can tell us about the U.S. economy, trade, wages, productivity; also why you should never park too close to a Home Depot.

You start your paper out with a statistic that really blew my mind. It has to do with nails in the share of GDP, of gross domestic product, which is the sum total of all the goods and services an economy produces and the share of nails in that. I'd love for you to lay that out because I feel like it just illustrates so much how much nails have changed.

SICHEL: Yeah. The place of nails in the economy has changed really dramatically. The earliest year for which I could get numbers to look at kind of the use of nails as a share of GDP was back in 1810. And the share, it was nearly half a percent of GDP then, which, on the one hand, doesn't sound like much...

VANEK SMITH: That's a lot of the economy.

SICHEL: Yeah. It's comparable today to, like, household purchases of personal computers or household purchases of air travel. So nails were a really big deal. We don't think about that today, but they were really important and a really big deal then.

VANEK SMITH: And you have a quote, in fact, from "Little House On The Prairie" about the importance of nails. When the father of the family, Pa, is building the house, the little cabin, they can't spare a nail. Like, nails are clearly, like, a major expense in their family.

SICHEL: Yeah, it's a great quote. So it goes, (reading) now Pa carefully took the nails one by one from his mouth. And with ringing blows of the hammer, he drove them into the slab. It was much quicker than drilling holes and whittling pegs and driving them into the holes. But every now and then, a nail sprang away from the tough oak when the hammer hit it. And if Pa was not holding it firmly, it went sailing through the air. Then Mary and Laura watched it fall, and they searched in the grass till they found it. Sometimes it was bent. Then Pa carefully pounded it straight again. It would never do to lose or waste and nail.

VANEK SMITH: As an economist looking at that passage, what do you see?

SICHEL: I think it highlights just what a change it is to today where if somebody lost or dropped a nail on a construction site, for the most part, they'd just let it go and it would get picked up with the trash.

VANEK SMITH: Oh, yeah. I will say that I learned the hard way that if you drive near a Home Depot, you don't want one of the parking spots near the Home Depot because there are so many nails in the parking lot that they will puncture your tire.


VANEK SMITH: (Laughter) Because they're just - you don't bother to pick them up now.


VANEK SMITH: And in your paper, you make the point that the price of nails between - I guess it's 1881 and 1930 was dropping very significantly. What was going on in that period that pushed down the price of nails?

SICHEL: So continued improvements in manufacturing of nails with, one, the advent of wire nails - so a switch from the old-fashioned cut square nails that you'd see sometimes holding floorboards down in an older house to the kind of round wire nails that we use today, a shift from iron to steel as the primary material and big shifts in the power source used to produce nails, shifting from - 1880s would have been mostly steam, a little water power, still, to, by the end of that period, being all electricity. So all of those things together brought about a very dramatic decline in the price of nails.

VANEK SMITH: Do you happen to know what's going on with the price of nails now?

SICHEL: Yes. So the price of nails has gone up a lot in the last year.

VANEK SMITH: Oh, really?

SICHEL: Yeah. It's quite dramatic. It reflects a host of factors. It's the higher materials prices. It's the higher freight costs. So again, if nails, common nails...

VANEK SMITH: Supply chains - supply chain, right?

SICHEL: Yeah, yeah, imported from Asia - all the supply chain issues. It cost so much more to ship products in. And also, we had a set of tariffs on steel...

VANEK SMITH: Oh, steel tariffs.

SICHEL: ...Which are still in place that pushed up steel prices. And so there's been this almost perfect storm of factors in the last year that's pushed up nail prices.

VANEK SMITH: So how much is a nail now? Is it, like, price doubled, or what is the price now?

SICHEL: So if you look at the official statistics, which are just, what does it cost the manufacturer to make a nail - looks like that's gone up by 30, 40%.


SICHEL: But I've been exchanging - but just wait. I've been exchanging emails with someone else who saw the paper who's actually in the nail business, and he cited the figure of 100% increases, which I think is what he's getting to after including higher shipping costs and everything else. That's - you know, what does it cost him as a retailer of nails to get - actually get nails he can sell? And, you know, then you got to pay the higher shipping costs and everything else going on.

VANEK SMITH: Wow. It's just a fascinating way to look at the economy - through the nail. I mean, and the fact that tariffs are now wrapped up in nails and the supply chain issues - I mean, it all does kind of - the nail gets touched by all those things.

SICHEL: Yeah. The beauty of looking at nails is that it's a simple, easy-to-understand product. But it just shows us how intertwined different parts of the economy are. So, you know, the drop in the price of nails had big implications for the construction industry. And perhaps the most important implication would be the rise of balloon frame construction in the mid-19th century. So balloon frame construction being - right? - the modern style of making houses where two-by-four studs are nailed together to build a frame for a house. So that's a style of construction that takes a lot of nails. And in the 18th century, when nails were really expensive, nobody did that. Nobody would have even thought of doing that because it would have been so expensive.


SICHEL: So instead, people did a more typical style of construction. Then it was post and beam construction, which would have been all wood and pegs and mortises and tenons and so on. But once nails got cheap enough, then balloon frame construction made sense. So again, just these simple products highlight these interconnections throughout the economy and how, you know, we don't just need to think about innovation and computers and super high-tech fancy products. Innovation in everyday products is very important for both our lives and also for so many other aspects of the economy.

VANEK SMITH: Well, thank you so much for talking nails with me.

SICHEL: Yeah. Well, thanks. I appreciate your finding me and asking.

VANEK SMITH: Dan Sichel is a professor of economics at Wellesley College and author of the paper "The Price Of Nails Since 1695: A Window Into Economic Change."


VANEK SMITH: This episode of THE INDICATOR was produced by our senior producer Viet Le with help from Isaac Rodrigues. It was fact-checked by Corey Bridges. Our editor is Kate Concannon. And THE INDICATOR is a production of NPR. Nailed it.

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