CHEESE STEAKS AND THE RULE OF 72.

CHEESE STEAKS AND THE RULE OF 72. In his article about Malthus Niall Ferguson says that the price of meat for a Philadelphia cheese steak has gone up 53% in the last ten years. Ferguson takes the increase as an indication of food inflation that is a harbinger of coming shortages. Is 53% a lot or a little? The Rule of 72 provides a rule of thumb for estimating this. The Rule of 72 says that we can approximate how long it will take for a quantity growing at a fixed percentage rate to double by dividing the percentage rate of growth into 72. If the rate of inflation for meat for cheese steaks is 4%, the price of the meat will double in 18 years. Nine years would get you half way there. So the rate of inflation for cheese steak meat is less than four per cent a year—higher than the general inflation rate now of about 2%. If 53% in ten years sounds like a lot, that reflects how four per cent a year can mount up.