We assume that Milton Friedman will chuckle at this demonstration that inflation is always and everywhere a monetary phenomenon, even when the currency is disguised:
...passengers today are sitting on more than 9 trillion frequent-flier miles, 50 percent more than five years ago, according to WebFlyer.com. That is enough for 36 million free tickets, at the basic rate of 25,000 miles — or enough to give almost everyone who flew out of Kennedy International Airport last year a free ticket.
Predictably, the value of those miles (erzatz money) has declined:
"What the airlines have done," said Max Bazerman, a professor at the Harvard Business School, "is devalue miles."
In 1994, airlines required 20,000 miles for a free ticket. Coupled with higher airfares, that meant miles were worth about 2 cents each, according to IdeaWorks, a consulting firm in Shorewood, Wis.
Today, with airfares way down but the mileage requirement way up, miles are worth about 1.4 cents each, IdeaWorks says.
And they could really be worth half that, said Tim Winship, publisher of Frequentflier.com. The reason is what he calls "the hassle factor," the inconvenience many travelers encounter when booking tickets.
In fact, many are worth nothing at all, as some airlines (bankrupt, or nearly so) place so many restrictions on their use many people find them impossible to use. Sorta like Weimar Germany:
For his part, Bazerman of the Harvard Business School is using his miles as quickly as he can.
"Miles today are worth half of what they were five years ago. And they will be worth half again someday," he said.
"I'm telling all my friends: Use your miles."