My co-author Jonathan Hersh just left town. He is off to Wharton for his Ph.D. this fall, and we managed to get our wp on the value of coffee, tea, and sugar into shape before he left. There is a slightly longer version on VOX-EU, and here is the abstract:
Did living standards stagnate before the Industrial Revolution? Traditional real-wage indices typically show broadly constant living standards before 1800. In this paper, we show that living standards rose substantially, but surreptitiously because of the growing availability of new goods. Colonial luxuries such as tea, coffee, and sugar transformed European diets after the discovery of America and the rounding of the Cape of Good Hope. These goods became household items in many countries by the end of the 18th century. We use the Greenwood-Kopecky (2009) method to calculate welfare gains based on data about price changes and the rate of adoption of new colonial goods. Our results suggest that by 1850, the average Englishman would have been willing to forego 15% or more of his income in order to maintain access to sugar and tea alone. These findings are robust to a wide range of alternative assumptions, data series, and valuation methods.So, there you have it - your morning cup of coffee or tea should be worth 15%+ to you (or it was to Englishmen in the 19th century).