Upon it’s initial release in 1946, Frank Capra’s It’s a Wonderful Life was something of a financial flop, failing to reach the break-even point of $6.3 million. Although it was nominated for Best Picture at the Academy Awards, it wasn’t until subsequent decades that it became recognized as one of the greatest Christmas film ever made.*

The film is long overdue for another reappraisal, for it’s also one of the best films ever created about economics and financial services.

In a series of three posts (to be posted today, Wednesday, and Thursday), I’ll highlight some of the financial aspects of the film (the first two posts) and a few of the broad economic lessons from one of my all-time favorite films.

The Value of a Dollar

One dollar may always be equal to four quarters, ten dimes, 20 nickels, or 100 pennies. But what that dollar can buy varies based on the rate of inflation.

Because of inflation, the value of a dollar varies not only from the time of the movie till today, but also within the movie. For example, when George is 12 years old and working in Mr. Gower’s drugstore (1919), he sells Violet “2 cents worth of shoelaces (candy).” Since $1 in 1919 is the equivalent of $13.75 in 2015, that two pennies worth of candy would cost about 28 cents today but only 2.08 cents in 1945, when George is an adult.

Also in 1919, George’s father, Peter “Pop” Bailey owes the banker, Mr. Potter, a total of $5,000. That may not sound like much of a loan, but in 2015 dollars that would be the equivalent of $68,739. Similarly, when Uncle Billy loses $8,000 of the Building and Loan’s cash (in 1945), he has lost the equivalent of $105,705 in 2015 dollars, but only $7,689 worth of buying power in 1919.

(At the end of this post I’ve calculated some of the monetary figures mentioned in the film into 2015 dollars.)

Read the article “The Economics Behind It’s a Wonderful Life” on blog.acton.org.