You are correct, if we only look at the Consumer Price Index.
The problem is: that gives a less-than-accurate picture of relative dollar values.
Better comparisons would include the question -- comparing average unskilled workers' wages in 1860 to today, how much does $500 equal?
The answer is, approximately $89,000.
And there are several other reasonable comparisons.
Here is one list:
Based on these, I picked nice round numbers, saying $500 in 1860 could equal anything from $100,000 to $1,000,000 in today's values.
Here's one way to look at it: in 1860 with $500 you could buy a farm of 100 to 150 acres.
That same farm today would cost you from circa $500,000 to $1.5 million.
Or consider: an investment of $500 in 1850 was roughly equivalent to buying a very nice house today.
You’re right. You have to look at the productive capacity of the investment and its ROI cash on cash. How much arable land would $500 buy?
Amazing how difficult it is to compare prices, wages and cost of living from one era to another, isn’t it?
The more you study the subject, the murkier it becomes.
I’ve given some thought to a universal metric.
Median income for a year divided by 2000 (50 forty-hour weeks).
The cost of food, housing, medical care (or slaves) could then be compared in “medians” from one year or century to another. I’ve never thrashed this out with 1860 due to inability to locate accurate median income figures.
One of the interesting things you find when looking into this subject is the way the price differential between things changes.
Food, for instance, used to cost a LOT more on a relative basis than today, at least if you compare staple foods. People think food has gotten more expensive largely because they insist on eating mainly processed and restaurant foods.
What do you think about my metric?
One relevant factor is that USA Army privates were paid $13/month during the war.
Which meant it would take 40 months earnings for him to buy a (low-end) $500 slave.
Base pay for a US Army E1 today is around %1500/month, a differential of 115:1. 40 months pay for an E1 would be around $60,000.
Of course, comparing wages and prices for slaves and army privates from 1860 to 2014 doesn’t make much sense. Which is kind of my point. These things are really, really hard to compare. And the usual inflation calculators are comprehensively worthless.