Look, there have always been people who could command a wage that could support a family, and people who could not.
In the old days, the people who could not were called women. And various other names related to skin color that I will not include here. That whole notion of earning a family wage with no specialized education or skills only applied to a subset of the population, and the organizations protecting their interests worked to keep it that way.
Nowadays, white men have no special protections. If they want to buy a house and raise a family, they need to learn a trade better than Walmart clerk. And they may need to move away from depressed rural economies.
The gain is that a lot of people who never had a shot at the good jobs in the past do have that shot now. White men are competing with everyone now, and they can't coast.
They are even competing with the entire populations of China and India. Terrifying thought, but you can't get around it.
The 50s were fake, so we can't really use them as our baseline. And even that fake only applied to some people.
It's also worth remembering that companies were not only legally allowed, but expected, to pay married men more that anyone else, and that ordinary people lived much, much more modestly than they do now. Many workers lived with other family members, or in rooming houses--the houses in television and movies from the era are, just as now, abnormally large because average-sized houses would be too small to film. In the popular mind, every blue collar worker in 1950 was pulling down a hefty wage at GM, but union membership peaked at about a third of workers, and most of those jobs were at companies that didn't have the profits, or the freedom from competition, to support those kinds of wages. A lot more blue collar workers were people like the mechanics and pump operators at my grandfather's gas station, who raised families on . . . the kind of money you could generate working at a gas station.
Our memories are distorted by two things: first, the tendency of all cultures to focus on their own outliers (many fewer people work for silicon valley startups in real life than in either our entertainment, or the popular imagination), and second, the fact that the people who have written about the period are abnormally likely to have come from successful families who pushed them through an education. Their memory of a well-appointed blue-collar childhood in a nice suburb on Dad's generous steelworker wages endures; few memories of a straggling blue-collar childhood as the child of a factory janitor do, because those kids were less likely to go to college and become people of letters. The successful and educated are disproportionately likely to be represented in all parts of our written and spoken culture, from man on the street interviews to letters to the editor. History really is written by the winners.
This is all vitally important to remember--there's an awful lot of selective remembering going on. It's also worth noting that if our per-capita GDP were to fall by 20%, we'd just be back to the 1970s...not exactly the stone age.
What wage would one have to earn today to be able to raise a family in the style of the median household of, say, 1955?
The answer is probably, not much. It's not clear that the median family had a car, and if they did, it didn't have air conditioning, any safety features and broke down a lot. So being able to afford a really crappy used car now will suffice. How much does it cost now to rent a very small apartment or house with no dishwasher or air conditioning? How much does it cost now to get 1950's quality medical care? You can't count cost of most drugs because they simply didn't exist then. You get cancer, you die. You don't eat out, even fast food, more than a few times a year. When you eat at home, you eat a lot of very low quality canned food. You get to count for clothing as much as it costs to keep your family warm, which, given Wal-Mart is close to free now, but not then. No expensive sneakers. No cell phone. We don't even have party lines anymore, so count the most basic local phone charge. No cable. In fact, the cost of a black and white TV is basically zero now. No air travel (the median family in the 1950's didn't travel much by car, much less by air.) No pampers. You wash your own cloth diapers. Anything else?
I find the centrality of the concept of "fake"-ness in laissez-faire economics to be more and more interesting:
"The 50s were fake, so we can't really use them as our baseline. And even that fake only applied to some people."
What do you mean, "fake"? You mean the labor market in the '50s had distorting factors? What planet do you live on? Every labor market always has distorting factors. You're born in San Diego, you get a US public school education and average $40,000 a year; you're born in Mexico, you get a Mexican school education and average $10,000. I guess the US economy is fake!
It seems to me, from the outside, like maintaining a laissez-faire worldview increasingly relies on the assertion that more and more of reality is "fake". At this point that seems to have to include the entire decade of the 1950s, as well as the 1930s. At some point do you guys have to start insisting that the entire economic history of the world is an illusion designed by a malevolent imp?
Meg, real wage
Sure, they couldn't by tons of cheap Chinese consumables back then, but their money went much father then it does now.
Car's, houses and real unprocessed food.
It really was is amazing at how well my grandparents did on a one income, factory job in a small town. Enough for them to buy a 3 bedroom house for $7,500 back in the day.
Same with my parents.
For me to be making relatively their same income and be able to purchase a house in the same time I'd have to make 3X's my current salary.
But I can get a cheap $10 blender that will break in 18 months from walmart, so I'm supposed to think I have a fair chance in the game.
What do you mean, "fake"?
What she means is not that the actual conditions of the 50s were inauthentic (which is what you seem to be assuming) but that, for most people, the 50s were not much like our current idealized image of that era.
Matt,
While I can't possibly know what Megan meant, I believe she is saying fake not because there are distorting factors, but because we are not counting the entirety of society, but only the most well to do segment (white, male workers) To get the "real" wages, we must average in women, minorities, etc.
"It really was is amazing at how well my grandparents did on a one income, factory job in a small town. Enough for them to buy a 3 bedroom house for $7,500 back in the day."
Are you sure you're not still using 2007 numbers? In many parts of the country, house prices are down 50%, if not more.
Took me all of 2 minutes to find out that a 2br/2b house in Odessa, TX commands a princely price of $65,000 (there were, like, 5 of them on the first page of realtors listing). With 20% down (was 20% enough in the fifties, BTW?) it amounts to a mortgage loan of $52,000. Scaling down the numbers from my own 30yr at 6% fixed, this will come out at about $430/mo including insurance and taxes. Going by the 3x rule we get the required annual income of $15,600 or $7.80/hr.
Blah,
If you are willing to relocate to a small town in a rural state, you can afford to buy a small 3 bedroom house while making less than $10/hr on a full time basis.
A good friend of mine started his rent house business when he was 19, buying a 3 bedroom house in a small town for $9,000. It was old, but in no danger of being condemned. Its not everywhere that you need $100k just to buy a shack.
And if anything, modern communications should make it easier to make a living from a small town today.
I am talking about real wages. The real income of a median family of four in 1950 was close to today's poverty line for that family. Of course, the cost of some things, like housing in certain desireable urban areas, has gone up (but that's coming down now, and at any rate, the housing bubble is hardly Wal-Mart's fault). But the cost of other things, like food and clothing, has plummeted. We romanticize the real, unprocessed food of the era, but that real, unprocessed food was only available in most areas during a fairly short growing season. My parents and grandparents ate canned fruit and vegetables 8 or nine months of the year in Western New York; fresh produce was very limited except in high summer. The reason iceberg lettuce was such a sensation was that it could be grown in California and shipped without rotting, not because people in the 1950s didn't know about other kinds of lettuce.
It's also actually true that many appliances of the era broke frequently--it's just that all that has survived until now is the super-reliable ones, so we say "they don't make things like they used to". Ditto furniture, houses etc . . . the cheap crap didn't make it to the current era, which is why, for example, we have this illusion that the Victorians all lived in marvelously well-built homes, because the only Victorian houses around are the mansions of rich people.
So if everybody moves to a decaying small town with dim job prospects and crumbling infrastructure, we could all get on well with 10/hour!
and then there's the elephant in the room: Taxes.
FICA/Medicare: off the top of income
Sales taxes: with every purchase
Property Taxes: attached to home or rent
Taxes on the health insurance (my favorite)
Taxes on the phone bill
Taxes on the power bill
Taxes on the gasoline
Funny how economic comparisons between the '50s and present never include that particular difference.
(if you drive a car, car;) - I'll tax the street;
(if you try to sit, sit;) - I'll tax your seat;
(if you get too cold, cold;) - I'll tax the heat;
(if you take a walk, walk;) - I'll tax your feet.
I like this post Megan. I'm tired of people thinking that everyone on the face of the earth is entitled to have as many children as they want, and not pay the difference.
If I can't afford a car, I don't get to have a car. If I can't afford a giant plasma TV, I cannot have one. But if I can't afford children (the most expensive investment anyone can make), then am I "owed" more money by society for my god-given right to multiply?
Every time I hear descriptions of "poor" or "struggling" people who earn more money than me, it irritates me even more when they talk about deciding to have children and worsen the problem. I know I cannot have children until I earn 4x what I'm making now, and I accept that.
US GDP per capita in 1950 was $1,937; adjusting for inflation that's about the same as Poland, Lithuania, or Puerto Rico today.
So the implicit point of this post is that people are simply more spoiled now and it wouldn't kill us to learn to live with a bit less in order to live comfortably. Nothing wrong with that.
Where my problem lies is that this post also seems to suggest that this only applies to the working class.
Are the wealthy also prepared to go back a few decades and not earn upwards of 200X (or whatever the hell the exact number is) the wages of the average person? They certainly haven't become 200X better at their jobs since this time.
Thanks codebanger - you saved me the trouble.
I don't see at all how Matt Steinglass connects commentator MC's "fake" with laissez faire economics, seems like a real stretch.
I interpretated "fake" to mean that economic conditions is the 1950s were extremely atypical and therefore inappropriate to use as a baseline: the US produced almost half of world GDP, Europe was still rebuilding from WWII (you can easily see how poor English and Italians were then by watching movies fromt he day, which while not cinema verite at least give a window into expectations), USSR was totally focussed on military, and like MC says, a fairly significant portion of the US population was excluded from the lifestyle being described.
That said, I also remember some of the younger non-white "box boys" at the local grocery store driving Cadillacs. We used to "joke" that they must live in the cars. Actually they like many of the caddies at the local country club (where I also was a caddy, not a member) often used to take the train from NY City out to Long Island to their jobs, saving the Caddies for more special occasions.
"Are the wealthy also prepared to go back a few decades and not earn upwards of 200X (or whatever the hell the exact number is) the wages of the average person? They certainly haven't become 200X better at their jobs since this time."
Yeah, exactly. I'm sure everyone knows how much more concentrated wealth is in the top 0.1% now versus 30 or 50 years ago (as in, tremendously more concentrated). Might we imagine what the median living standard would be if we had the same income distribution among various classes as in previous decades?
Adam,
"I'm sure everyone knows how much more concentrated wealth is in the top 0.1% now versus 30 or 50 years ago (as in, tremendously more concentrated)."
Again, much of that had to do with bonuses in the finance industry and the value of stock options for corporate managers. The market correction and the massive layoffs in the finance industry will do much to narrow that gap.
I can't help but think that people are still trying to compare 1954 to 2007. The numbers have changed a lot in the past 2 years.
Tyler, do you think many people would be willing to go back to the standard of living in 1970 or 1950 held by people in their percentile just for the satisfaction of having CEOs earn salaries a smaller multiple of theirs? I certainly wouldn't, as it would mean going without a drug that provides pain relief without which I would have offed myself long ago...
I think the point of this post was the mis-remembering of the 50's. I would like to add one more bit to that. I have been told that our society is cruel and unjust because it now takes two incomes to raise a family. That in the better days of high-paying union jobs, wives were free to stay at home and raise children.
My recollections are that staying at home left only some time for children. Many of the stay-at-home mothers of that era were making clothes, raising gardens, canning and preserving food, making quilts. Families produced as well as consumed.
"I'm sure everyone knows how much more concentrated wealth is in the top 0.1% now versus 30 or 50 years ago (as in, tremendously more concentrated)."
Is wealth more concentrated or just income? The class of people that owned (rather than managed) GM/GE/Dupont/Ford would seem to have been smaller (but in comparision richer) than that same class today.
Decaying small town with dim job prospects and crumbling infrastructure
Please peruse the Demographics section.
Those coastals... they're not from 'round here!
As to the wealthy becoming wealthier... I wouldn't be surprised to learn that the amount of real power they wield has reduced drastically in the last 50 years and many of them just might be willing to trade a lot of that money back for the power. Personally, I'm so not selling!
Odessa rocks. Love the Cheerleader.
Mark_0454 -- True that there was more labor/production going on at home. But I don't think it reduced the time with the children.
When mom was sewing, gardening, canning, cleaning, the kids were right there, and depending on age, they had their own share in the chores.
You're absolutely right though that staying home didn't mean a lot of time for museum tours and gymnastics classes.
What Mark_0454 said about stay-at-home mothers, but add things like plucking chickens, carrying pails of coal, and doing the laundry in one of those tub-style washing machines with the wringers. Not everybody became an upscale suburbanite at the same time.
The mothers may have been spending time with the children, though, because the children had to do that kind of work too.
As for the "fake" comment, that was mine. What I meant was that upper blue collar life at the time was unrepresentative of how the world usually works, for most people in most decades. The need to rebuild after World War II was part of the reason, as were racism and the decision to force women out of many jobs at the end of the war. Some of it was just the state of technology at the time -- machines were making muscle power a lot more productive, but weren't yet eliminating the need for it entirely.
We're not going back to that world, and there really isn't a set of policies that would get us there. And I don't think we want the parts about the war and the racism etc. Instead, we have to think through the kind of labor force we need given current technologies and conditions, and then put in place the training and education that will allow people to move forward.
Actually, I've been to Odessa and I wouldn't want to move there from Plano. That's not the point though -- I can afford not to. The point is that it is a decent sample of a blue-collar city where people who fit the culture (love the Cheerleader, and high school football in general, among other things) may very well like to live. And they, apparently, can afford to just fine.
So now this screech we hear from the left isle appears to be not so much about the working man but about precious themselves who didn't bother to pick up a useful paying profession in college. Like you know, an engineer, a doctor, (with a bow in Rob's direction) an attorney. Instead they graduated as lit- or polit- majors, highbrow and useless. And now they can't afford a house in the beloved coastal metro area for what they earn -- those greedy unwashed broker types price them out.
There, I vented!
The main difference between then and now is taxes and government expansion! At all levels of government, blue collar workers are paying taxes that their ancestors would never have stood for. These taxes are both direct and indirect, as higher prices. The beneficiaries of the high taxes are government workers (overwhelmingly Democratic) who produce nothing. It always amazes me that people refuse to see what is most clearly visable. For example, California government spends billions on services for illegal immagrants and billions for welfare extravagance over decades and then wonders why its budget is billions in the hole. Unbelievable.
Megan, it's certainly true that people have a tendency to romanticize the past.
It's also true that in the US, the gap between the median worker's wage and the median CEO's wage in 1955 was an order of magnitude lower than it is today.
MC tries to escape any responsibility for dealing with the fact of rising inequality in the US economy by arguing that the '50s were "fake". You may mean, by "fake", that people have a "fake" nostalgic image of the '50s that doesn't reflect reality. But that's clearly not what MC means: "The 50s were fake, so we can't really use them as our baseline. And even that fake only applied to some people." MC means that high wages for high-school-educated white men in the '50s were an artifact of various distortions (gender, racial and international-trade barriers, primarily) which shouldn't exist in a "real" distortion-free global economy.
Different countries have different ways of structuring their labor forces and societies. The Chinese workforce enjoys a tremendous subsidy from early-retired grandmothers who provide free childcare for working parents. In Norway and France they have state-subsidized childcare to fill the gap created by the modern universal-participation labor force. In the US we fill the gap with...well, it's not really clear what we fill it with, but we are very stressed. None of these systems are more "real" or "fake" than the others, nor are they more "real" or "fake" than the system that adhered in the US in the 1950s. They're different, and they involve different tradeoffs. But you can't get around the fact of rising wage inequality by saying the '50s were "fake".
The fifties also did not have nearly the amount of high paying white collar jobs we have today. Your "median worker wage" computation includes those, perchance? Who am I, chopped liver? Or maybe I am a CEO? Damn, from your lips to God's ear...
Matt -- you're way too smart to be focusing like a laser on the word 'fake'.
You could easily substitute "distorted by conditions that will never exist again."
"fewer people work for silicon valley startups in real life than in [...] our entertainment"
IT workers aren't exactly popular in TV or movies and they are very common in real life. I disagree with this point
Matt --
You're putting words into my mouth. The notion of distortions and laissez-faire are your concepts, and I don't know where they came from. I don't have a partisan or economic theory axe to grind here. I simply think the 50s were off the trend line for a lot of reasons, and that we tend to fixate on them because they were the early formative years of the Baby Boomers (A.K.A. the generation in power).
My formative years were the 70s, so I have a different take on things. People who grew up in the 30s also had a different opinion about what was normal, as do people who grew up in the 90s.
But we are unlikely to get back to any of those times, even as they really existed. Going back to the optimal fantasy version of those times is still less likely.
The past wasn't a nirvanah, and it had its winners and losers too. Rising inequality isn't the result of the losers losing any worse. (Actual hunger was not strange in the 50s.) It's the result of the winners winning a whole lot more.
The Chinese workforce enjoys a tremendous subsidy from early-retired grandmothers who provide free childcare for working parents. In Norway and France they have state-subsidized childcare to fill the gap created by the modern universal-participation labor force. In the US we fill the gap with...well, it's not really clear what we fill it with, but we are very stressed.
Matt, this is also pretty moronic. You don't think the three-generation family doesn't exist in the US? How many poor and immigrant kids are taken care of by their grandmothers here? Hmm?
Really? I wonder how Megan knows this . . . and how anyone could go about disproving it. If I say that my mother still uses three appliances whose freshness dates from the late 40's to early 50's, {sarcasm}why obviously they must be one of those high quality consumer items.{/sarcasm}
If people are going to have to ratchet back their expectations of a living wage to 1950 standards, does that mean CEO pay is going to be rolled back proportionally to norms of that era as well?
Mike M,
I don't think anyone said we have to ratchet back our expectations to 1950. I believe that the main point is that idyllic 1950 American is a mirage that mainly existed for a subsection of married, high school educated white males. I'm pretty sure CEO pay is currently being rolled back, but I'm not sure how that has any relation to the discussion.
Basil writes: The main difference between then and now is taxes and government expansion!
This is just silly. The top income tax bracket between 1950 and 1960 paid between 84.36% to 92%.
Mike M: sure, and we also cut 90% of the public funding to "soft science" academia. Oh, and bring back the Congressional hearings and the Subcommittee on Investigations -- Hollywood has been needing them sorely for the last 40 years... What else did I forget? Freedom of association comes back, and also I can buy myself a real M14, M16 and an AKM -- the latter for purely sentimental reasons ;-)
Heck, I can drive stick and probably can figure out how to clean the dirty carb in a pinch. And since I learned my computers the hard way, I can always find myself a job programming the Eniac... if they give me the TS clearance, that is :-D
Goof topic, Megan.
I had this same discussion with my sister a few months back.
If people wanted to live "like back in the 50s", they need downgrade their lives and slow the hell down.
Go find that 1200-1500 square foot, 2-bedroom house with one bath. Put one modest car in the driveway, chop your possessions in half or more, get basic, basic cable, put one TV in the living room with nothing attached to it, throw the cell phone away, keep just a few simple toys for the kids and keep their clothes for hand-me-downs and eat in 6 days per week and you'll be on your way to that nice, cushy, middle-class life-style....not even the level of the lower classes of the time.
Do all that and watch your disposable income and savings soar....even on a lower-middle class wage.
The problem is not one of empirical indicators of well-being and wealth. The problem is human nature. People don't judge their life style on some static scale. They judge it relative to those around them and those "doing better". It's the classic case of "keeping up with the Jonses'"
And yes, I'm sure we had this same problem back then as well. I find it hard to believe that most people were sitting around marveling at their own life. They were looking at what others had and always feeling like they could and should have more than actually do. It's human nature and it's never going to change.
Appliances are definitely more reliable today than they were 30 years ago, and I suspect those were more reliable than the ones 30 years prior to that, if the antecedants even existed.
Proof that appliances broke: Look up an old phone book and see the listings for appliance repairman. I remember a guy coming to our house to fix the television (in the 1970s).
It's a tradeoff. Appliances were built to last longer, but they cost a (relative) fortune, and you would have to spend some money on repair. And if you bought a state-of-the art range/oven in 1962, you had no reason to believe the state-of-the-art would change much in the next 20 years.
Now you buy a cheaper appliance that will last 10 years, good chance it will not need repairs in that time, and at the end of the 10 years, it's obsolete anyway.
You don't think the three-generation family doesn't exist in the US? How many poor and immigrant kids are taken care of by their grandmothers here? Hmm? - Klug
Very, very few, in comparison to third-world countries with nearly intact village/clan social structures. (Or, in China's case, with mandatory retirement at 60 and a one-child rule creating legions of fussy grammas.)
MC, I'm sorry if I misread you, but it really did look that way to me. But I think that it's quite misguided to decide we shouldn't be comparing cross-decade trends because people tend to romanticize things. We should simply be comparing cross-decade trends based on solid data. And the solid data shows that workers' median wages grew very strongly all through the 50s and 60s and slowed or stopped around 1973, AND that inequality increased radically from the '50s to the 2000s.
The massive entry of women into the labor force up through the '80s no doubt accounts for some of that effect; then you'd expect to see household income continue to rise even as median individual wages stagnate. But since 2000 median household income has been stagnant too. (Surely it's falling now.)
As for "nostalgia for the '50s," I don't know that it's any stronger than nostalgia for the '60s, or '70s, or '80s, or '90s. "Mad Men" is the current incarnation of pre-Beatles nostalgia, and it actively despises the period.
I'm 62 years old, grew up on a family farm and worked in sawmills after I got out of the Marines in'70. Now I'm a Silicon Valley IT professional. The '30s, the '40s, the '50s, the '70s, the '80s and the '90s are gone folks, they were what they were. Historical debates are a great way to not talk about now. Our world is not the world of 1929 and our crisis is not the one of 1929. Obama is not Roosevelt. I've always been a history buff, and I've seen a sudden increase in historical concern and discussion since September of last year. I lived though all or part of those decades and I'm more worried about my country and my world now than I ever was about nuclear annihilation. It's time to look at now, not then, and determines what's wrong, now not then. The fact that nobody can even describe the problem is the reason for everybody spinning their heads around backwards looking for answers to questions the can describe.
There is something about the complaints of "income distribution" that I just don't understand.
We are all much richer now, but the rich are much richer, while the poor are somewhat richer. Well, that's compound interest at work for you. The rich have more opportunities (that's what being rich means) and they have more income to invest. So what?
No one even tries to prove that those rich are entranced, no one is looking at the turn over rate at the top one percent, all you have is silly finger pointing "look, that guy makes more than you!"
If you give a random stranger $2,000 he is grateful. But if you tell him that some other person he does not know is getting $10,000 all of a sudden he is angry. What sense does that make?
This thread from Megan's (excellent, btw) post clearly demonstrates why arguing on the internet is a total waste of time. There are no rules even to the point of limiting your opponents to the discussion at hand.
The left whines about the plight of the poor and the oppressed WalMart worker.
In response to these complaints about how awful the poor have it and how much better it used to be, somebody makes the completely non-controversial observation that the poverty line today is right about where the median was 50 years ago.
This is denounced. Megan puts up a post fleshing out the observation and showing that it's clearly true. Indisputibly true.
Reaction from the vociferously loquacious lefties? Change the subject: what about CEO pay?? why are you asking everyone to start living like the 50's??
And if those objections are answered it'll be off to some other races until eventually it all circles back and you have some idiot whining about the wages at WalMart and how awful it is that those people can't live as well as the UAW workers did in the 50's of their imagination.
Good Christ.
Thanks, Megan, for doing the yeoman's work of shouting sense into the darkness.
that inequality increased radically from the '50s to the 2000s
Depends on what yardstick you measure it with. The pickup truck the roofer comes in to fix my blown shingles didn't cost him much less than I paid for my Audi. And the venture capitalist's Lexus LS is twice as expensive at most. The TVs are all the same, I'm sure, unless a particular rich guy special-orders his. Not that he can get any exclusive Blu-Ray content to watch on that screen. Ross Perot must be flying in his fresh seafood from France since it can't be had around here for any money as far as I am aware... and what passes for it locally can be had for not that much.
If I don't care to live in Manhattan or ski in Aspen, what's that exclusivity that CEO-level money will buy me compared to what I (or, say, that successful roofer) already have? The only real tangible benefit to wealth I do see is the ability to retire and not have to work another day. I suspect the rich always had it... and it doesn't take a C-level options plan to achieve today.
Since I grew up in the 50s and 60s, I remember exactly how things were. People were much more frugal. The only ones who pissed away money were the VERY wealthy. I grew up in Forest Hills Gardens, Queens, NYC - hardly a "poor" area, yet nobody had nearly the amount of "stuff" that even lower middle class people have today. Nobody missed having all that "stuff" since not having it was the norm. The average amount of clothing owned by a a lower middle class family, and even some lower class ones, far exceeds the amount owned by an upper middle class family in earlier times - and the turnover of that clothing was far less.
One of the reasons for this was that we were, for the most part, a cash society. Use of credit was rare. People borrowed for a house and a car. That was it. Revolving credit cars did not exist. "Credit" cards that did exist, like AmEx, were paid in full each month. Very few people even had such cards. For the most part you paid cash or did not buy. It was even harder to get cash. You had to get to the bank between 9 and 3 to take a withdrawal. My guess is that net worth of middle class families actually began to fall, or stagnate, with the advent of Visa and Master Charge, along with revolving credit cards from stores,
When one did borrow money, it was for a far shorter period of time. Mortgages were for 10 to 15 years max. Car loans never exceeded 3 years. This served to keep the prices of things down since people could not spread payments for this stuff over a longer period. If you track the increase in mortgage terms, You will see that the average size of new homes went up (along with their cost), as mortgage periods got extended. When I was younger, a "burn the mortgage" party was pretty common. That was when people paid off their mortgage and they'd ceremonially burn the old mortgage docs. Today it's common (until the housing collapse) to see people in their 60s taking out 30 year mortgages.
If you track the terms of car loans, you will see that bells and whistles got added to cars as the length of the loans increased. Of course, car leasing by individuals did not exist back then.
By the way, I bought my first house in 1875. At that time the max mortgage period was 15 years, 20 for VA and some FHA mortgages. I paid $35,000 for an 800 sq, foot bungalow in good area on a lot that was very large for that area. As mortgage periods got longer, I watched the value of my house skyrocket. ARMS came in and the value went up higher. By the latter 80s my house was worth about 400,000 dollars. Then Jumbo ARMs came in and the value of my house went up more. In 2004, I pulled the plug and got $800,000 for the joint (and bought a house for 367,000 - banking the remainder). If average mortgage periods had stayed at 15 years, I guarantee you I would not have anything close to that amount.
There are a few other major changes. Since people were more frugal, they were happier with what they had. Major expenses, like new appliances, etc were incurred as needed, rather than as WANTED. The "home improvement" business back then was nascient. It was very rare for people to replace their kitchen or bath and most were perfectly happy with what they had.
Lastly, today we piss away money on things that did not exist back then. You did not pay a monthly cable, cell phone, and internet access bills since none existed. That can amount to quite a few bucks every month. People did not take the kids to the fast food joint since fast food joints did not exist. People did not buy, often quite expensive, frozen dinners since most did not exist - except Swanson TV dinners. The deli counter at the supermarket did not exist. The instore bakery at the supermarket did not exist. You could not pick up the phone and call 800 Something to buy things because 800 numbers did not exist. There were far fewer stores than today and malls were rare. All of the above, and more, have made it far easier for people to piss away money - and they have.
John V. nails it. My first house was built in the late 1940s. It had one dining area, a small kitchen, 3 bedrooms and one bath. Total of about 1300 s.f. It was basically one of the thousands of bungalow houses that were built nearly everywhere in post-WW 2 America. And it was completely updated when I bought it and in a nice area of Dallas with schools that are still acceptable to most middle class parents. In other words, you could backtrack to the 1940s, and it was basically the same house in the same area.
The family that owned it before me raised 3 kids there. I moved out when I got married (no kids) because it was too small for two people.
Very, very few, in comparison to third-world countries with nearly intact village/clan social structures. (Or, in China's case, with mandatory retirement at 60 and a one-child rule creating legions of fussy grammas.)
I could be wrong, but I don't think the folks back in the village are competing in the global economy. As for the fussy grammas, well, I had one growing up here. We may not have as many, but it's much more a matter of quality of life (who wants to live with their parents?) than anything else.
"In the old days, the people who could not were called women."
How is the current situation better, where there are plenty of bread-winning women who are single because they look down on lesser-earning men -- who would be making more if women hadn't entered the work force en mass and increased the supply of labor, while lowering the demand for it (massive immigration from Mexico didn't help either)?
We've got "equality" for women, but now it takes two working parents to support a middle class family. Are most women even happier today? Is anyone else?
Thanks, PL
And to go a little further:
I live in a small town in PA. Last spring, my fiance and I were looking to buy a house. Just for kicks, I drove through a neighborhood I used to live in because the house I partly grew up in from about 1975-1979 was for sale. My fiance grimaced. She couldn't believe I actually lived there. My parents were rather upper-middle class by the town's standards back then. The house looked so incredibly modest and rather undesirable.
I looked around and after pondering a moment, I had to agree. It looked nicer back then. The house actually dates to the 50s or 40s. This was where upper-middle class families lived. Now, these same houses are the hand-me-downs for the lower-middle class.
The modern counter parts to this level of life are now outside small towns in developments and communities in typical 2000-2700 sq. ft. homes with 2 1/2 baths including the master bath) or in the nicer "Victorians" in the formerly "Rich area".
I'm trying to understand your logic here. I don't think anyone is contesting the fact that they did.
But that's not Megan's point at all. She extends her wishful thinking hypothesis to appliances and flatly states that if they lasted longer, it was because they were so comparatively expensive, and that there were lots of cheap mixers, toasters, etc, that are simply no longer around to give lie to the myth.
I'm wondering how she 'knows' this, and what it would take to disprove the hypothesis. My mother has a coffee pot from either the late 40's or very early 50's; it comes apart into a pot, grounds basket, hot water reservoir, and lid, all aluminum except for the bakelite handles. That's it. You boil water in a kettle (the same one she's been using for at least fifty years), pour the water into the top, the coffee into the grounds basket(no paper filter either), and that's it. She's got at least six or seven state-of-the-art coffee makers unopened . . . which she will use as soon as her old coffee pot breaks.
Trust me, it didn't cost a fortune.
Only, according to Megan, it must have.
Iow, you seem to think that yes, modern appliances are of inferior quality by certain measures. Oh, I don't mind that Megan's putting forth a hypothesis and applying it to particular cases. I do mind very much that she is blithely doing this with absolutely no research at all, along with a dismissal of any disconfirming cases.
"Are most women even happier today? Is anyone else?"
I for one sleep better being part of a two income family.
Also, my grandmother was a brilliant educated woman who married my grandfather a professor. She was miserable for despite her academic and intellectual gifts she had no socially acceptable outlet for those skills. I doubt quite as many women were as happy being stuck at home as you might think.
A little basic internet research on one popular consumer item, one that is so ordinary that I bet we don't even consider it a consumer item anymore.
In 1940, about half of American homes didn't have full indoor plumbing. In 1960, this was under 20%.
Now, this is huge progress. A lot of good things happened after the country emerged from depression and war. But still -- nearly a fifth of all homes without PLUMBING. Outhouses, people, and pumps in the yard. The year Kennedy was elected.
(Actually, pumps in the yard must have looked pretty slick once upon a time, compared to those wells with the buckets.)
The current number of households without indoor plumbing is under 1%.
It is true, as many people here have mentioned, that one path to upward mobility that worked quite well in the 1950s stopped working so well in the 1970s and works even less often now. Some people can still make a go of it, but fewer than before, and many people who have stuck with that strategy are experiencing downward mobility. On the other hand, people using other strategies have been upwardly mobile during the same period.
We end up back at the question of how to educate people, especially those who don't take to book learning at a young age, so that they can eventually do something more lucrative than entry-level retail. I believe that Sarah Palin's husband was trying to speak out on this during the campaign, before he and the rest of that family got shouted down. I wish more public figures would take on the question of good vocational education.
The successful and educated are disproportionately likely to be represented in ... letters to the editor.
Maybe in the New York Times. Certainly not in the second-tier papers I've read over the past 20 years. Minor quibble, though, Megan.
I'm with SOV.
My mother's got a whole basement full of state-of-the-art bread-makers, automatic mixing bowls and the like which she plans to use just as soon as her current system breaks.
Her current system consists of a stone mortar and pestle to prepare the grain, a large stone bowl to prepare the dough, and wood-fired stone oven out back to do the cooking. All of it dates to approx. 10,000 BC and works exactly as well as it ever did.
So don't give me any sass about the better quality of appliances now...
M.C. said it best:
"Rising inequality isn't the result of the losers losing any worse. (Actual hunger was not strange in the 50s.) It's the result of the winners winning a whole lot more."
The 'losers' are better off now than they were, overall. As has been noted more than once in this thread, the poverty line now is about where the median income was in the 1950s. And in large part, the reason that we're all better off is because some people have created substantial wealth for everyone, including themselves.
If we focus on "rising inequality", the only natural solution is to hurt everyone in order to cause the most pain to those that contribute the most. And the solution won't even really cause them the most pain, since they'll still be better off than the rest of us. What we have to decide is whether the pleasure that poor people get from knowing they've hurt the rich will offset the harm they cause themselves in the process (plus there's the whole ethical question of whether it's the role of society to punish those that contribute the most, just because the rest of us enjoy doing it).
Last, if we're going to look at rising income inequality, we should certainly look at the increased inequality in leisure time. Part of why skilled professionals get paid more is because we're giving them an incentive to give up their personal lives in order to put in longer work hours.
I'm looking at a photo, in Wisconsin Magazine of History, that shows the crew of a Texaco Gas Station in Sturgeon Bay, WI in 1960. There are eight uniformed men (no high school kids) standing in front of the three pumps. Presumbably, these are all the employees who earned their living from this one gas station.
A couple of points about this hoary old chestnut. First, quite a few people live in these old houses still, and (rather obviously), their asking prices have risen far higher than inflation. Second, with regards to the new houses, are the prices increases linear wrt square footage after inflation? There have been a few people over on Calculated Risk who most emphatically think otherwise. Iow, all things being equal, a 3,000 sq ft house is not going for twice the price of a 1,500 sq ft house, but rather more than twice. Finally (though there are other points to consider), it seems that the actual cost of constructing houses have gone down, i.e., that 'housing technology' has significantly improved.
The same could be said for quite a few items which other people use to sneer at the differential life style theory: sure, there were no cell phones in 1955. Whadda surprise. But doing without now is not the same as 'going back to the fifties'. The same for computers, microwaves, etc. Ditto for medical care on a number of fronts.
Iow - and it should be obvious to all but the most ideologically impaired - technological progress counts for something. My dad bought a monster color TV/radio/record player console in 1963, which I remember quite well(it was not only our first color TV, it was one of the first color TV's on the block. We had quite a few people drop by that month.) The price he paid then would have been the equivalent of about $1,000 - or more - today. Yet for less than $400 I bought a plasma flat-screen HDTV with better speakers than were available back then, and with the capability of playing all sorts of recorded media.
Don't tell me that going back to a 'Fifty's Lifestyle' means I have to give up my computer, TV, or anything else of that nature. That's a rather invidious comparison.
Blah,
If you are willing to relocate to a small town in a rural state, you can afford to buy a small 3 bedroom house while making less than $10/hr on a full time basis.
A good friend of mine started his rent house business when he was 19, buying a 3 bedroom house in a small town for $9,000. It was old, but in no danger of being condemned. Its not everywhere that you need $100k just to buy a shack.
And if anything, modern communications should make it easier to make a living from a small town today.
True, but where do we stop? What happens when we're told we need to relocate overseas and be paid a "comparable wage". It's starting to happen!
My point was coming from a town nestled between two cities in Central MA. Both my grandparents and parents were able to get good jobs, and afford to settle down within reasonable means.
Now here I am with a great job, but unable to afford the same standard of living.
Sure I could move away, but that doesn't change the fact that inflation and speculation is increasing the cost of the things that matter, as were distracted by the cheap things that are not.
If you want to work in a economic center in the US doing something besides retail, you're expected to pay much more then what your family did before you.
It's proof of the chopping away of the middle class. That income is going to CEO's, shareholders and boards.
SoV,
And the non-linearity probably results from differences between neighborhoods. A 1500 sf house in a "nice" neighborhood probably goes for more than half the price of the 3000 sf house next door. If on the other hand you tore down a 1500 sf house in the 'hood and put up a McMansion, you probably wouldn't double the price.
If you want to work in a economic center in the US
Let's not distort the terms. You are not talking about the economic centers, you're talking about cultural centers -- as you understand the culture. "A town nestled between two cities in Central MA", indeed -- how is it not part of Boston metro, I wonder? Do you expect those little towns to be preserved in time as [the oldest in the country!] metro area grows? Why is Odessa, TX not a fair comparison, again?
And as to having to relocate out of the country... yes, that may well happen. Nobody guarantees that you should be able to get a living wage 50 years hence with today's skillset. What is the gripe? 10-year old children could pull their weight on the farm doing manual labor; 14-year olds in the old factories. Now you're saying 17-year old school graduates can't get real adult jobs -- big bloody deal, they need to study longer! If they refuse, relocating to a country that's lagging us by 50 years is indeed an option.
Someone claiming to teach economics or finance or something, but as a 'conservative' claims that the 'losers' are still better off than they were before, but it's just the envy talking. What are the odds on that?
In reality, of course, median income has been stagnant over the last thirty years, and in particular, some of the people in the lower quintiles are worse off than they have been in quite a while:
And the non-linearity probably results from differences between neighborhoods.
Sure. Real estate prices have two components, the land value and the improvements. You can build a bigger house, but that doesn't make the land it's on any more valuable.
SoV, what is the point of lengthy quotations from what will be dismissed as a biased source by the opposition?
Really? You know this for a fact? I'm merely pointing out that this chestnut about the small houses of the 40's and 50's is just that - a chestnut. No meaningful comparison is being attempted, else the analysis would be just a leetle more . . . sophisticated.
My own guess is that the costs of doubling the floor space of a house (above and below certain limits) would actually be sublinear - for example, the amount of concrete used in foundation does not scale directly as the area, but some smaller power, probably closer to one-half than to one. Iow, all other things being equal, one would suppose that the costs of building a given house would decrease over time, given the constant state of technical advancement.
No meaningful comparison is being attempted, else the analysis would be just a leetle more . . . sophisticated.
Dammit -- I had the square for 2 PM for the SoV "not enough calculations" trope. Arrgh -- Rob's been killing me in the pool.
Really? You know this for a fact?
No, that's why I said "probably."
But the point under consideration is an interesting one; most well-off people don't want to live in a poor neighborhood, even if they'd be satisfied with a smallish house. So they buy into the "nice" neighborhood, where the big prices are in part justified by the big square footage. Works out well for the builder, too, because as you point out, a marginal square foot is not that expensive. especially in the era of nailguns and computer-controlled sawmills.
SoV -
As you've surely seen from reading through this thread, living standards have risen. You're using statistics on median income based on our measures of inflation, but our measures of inflation don't sufficiently account for technological progress. By failing to adjust for these technological changes, the numbers can make it appear that living standards are stagnating, when clearly they aren't, as many people here (including you, at your 1:02 PM posting) have pointed out.
Well, Max, the point is to show just how biased and idiotically ideological the opposition is :-) Hard to believe that someone would dismiss census data showing the incomes of certain groups falling one percent as 'biased' . . . but there you have it.
The larger point, however, is not to simply spew forth an opinion as if it is verifiable, factual writ(I teach math, btw, and before that,physics.) I try to be careful to label my opinions, observations, and suppositions as just that - opinions, observations,and suppositions. If I want to declare that something is a fact, I best have a checkable source that backs me up. One that is not seen as being hopelessly partisan to the point of just making 'facts' up, distorting them, quoting them out of context, etc.
I don't always succeed, of course. But that's the goal I'm shooting for. My philosophy in these matters, if one can call it a philosophy, is that facts trump theory every time. Hey, I don't like paying taxes, and it would be great if there was a real, workable theory that showed that raising taxes resulted in decreased revenues for the things that needed to get done. The facts, however detestable they are, tell us otherwise.
Blah,
"My point was coming from a town nestled between two cities in Central MA. Both my grandparents and parents were able to get good jobs, and afford to settle down within reasonable means.
Now here I am with a great job, but unable to afford the same standard of living."
You don't have a great job if you can't afford a house in suburban Worcester. A 3bd 2 bath 1,500 sq/foot house in Clinton, MA can be had for under 200k easy.
SoV: first time I just looked at your link in the browser's status bar. This time I actually clicked on it. Surprise... turns out it really IS an opinion piece in NYT that maybe quotes or maybe misquotes something from the census (didn't see an annotated reference or a link to a .gov site in there).
In my previous lifetime I was a grad student in a physics lab... this is not how the research was done there. Then again, we Russians must be backward people.
>i>and then there's the elephant in the room: Taxes.
[...]
Funny how economic comparisons between the '50s and present never include that particular difference.
In the 1950s the top marginal income tax rate reached 90%. So if we're saying that blue collar workers pay more taxes now, we're probably right; not so much true for the high income workers.
You don't think the three-generation family doesn't exist in the US? How many poor and immigrant kids are taken care of by their grandmothers here? Hmm?
Very, very few, in comparison to third-world countries with nearly intact village/clan social structures.
If we're going to go all historical, the three-generation family household was historically rare in the countries following the Northern European pattern* of family formation, and the US has always been one of those countries.
Another way the 1950s were anomalous for the US, as well as the ways already mentioned, was demographically: the (newly) lower age at first marriage and (for women) first childbirth and a high fertility rate.
* The Northern European family formation pattern: typically older age at marriage (in the mid-20s), and the new couple is expected to have their own home and support their own household when they marry; associated with a lower lifetime fertility rate. Contrast to other formation patterns, such as the one where a young bride moves into her mother-in-laws house, often young, and starts childbearing immediately.
First, "households" are not comparable over time, but are shrinking. (If a two-income couple splits up, all of the sudden we have two smaller household incomes instead of one larger one.)
Second, "households" are not the same. Add a bunch of immigrants and the "median" drops, but nobody is worse off.
Third, that "household income" dishonestly only counts cash wages and not benefits.
Wow, SOV, you've really got something there. I don't even know where to start.
Ignoring for the sake of comity the fact that you are citing an NY Times editorial for your facts, lets start with the point that you talk about 30 years of stagnant incomes and then pull two quotes about income in the 2000's for... support? I guess?
Taking the 30 year canard, that's actually one of my favorite statistics. It's great because it so casually and completely misrepresents what's actually happening.
The natural reaction to seeing that stat is exactly what folk like you try to elicit through using it: OMG! People's incomes haven't risen in 30 years! Awful!
But if that's the case, why not use some measure of income per individual? Why use households instead? Could it be b/c the average household size has fallen over the past 30 years? So that "stagnant" household income actually represents growing income per actual, you know, household member? Why would we use household groupings for such statistics when they will consistently hide gains and magnify losses so long as the average household size keeps shrinking? Maybe because using the "household" grouping allows us to create a statistic to match the narrative we want to tell regardless of the facts?
Nah, that couldn't be it.
I leave it as an excercise for the reader to discover whether the Times editorial's use of the "facts" for the 2000's is similarly meretricious.
SOV,
Your points are noted. Yes, technological progress counts for something. One can get a better TV now for less money. One can have techie gizmos that didn't exist back then. A Wii/PS3 is probably about as much as an Atari 2600 was in the late 1970s and early 80s.(I'm guessing but I'm sure it's close). However, this doesn't change my simple point...which, put briefly, simply means that nearly everyone today could very easily live a fabled 1950s "middle-class" lifestyle if they chose to and live comfortably by that standard. The thing is that standards on what "an average life" means in terms of wealth go up and people don't want to settle for that life. I'm sure it was the same back in the 50s. John Doe peeked out his window to see what his neighbor had and people probably moaned about how much better "the rich" were living. This never changes. It's human nature.
Never mind the quality. Go ahead and substitute a modern car with modern amenities, a modern house with modern amenities...including a plasma TV. It doesn't change anything.
The point is that it's quite easy for lower quintiles of the population (relative to the 1950s) to attain the same material standard as higher quintiles were attaining back in 1950s. You don't need to "successful" or have a minimum of blue collar union job.
Today, you don't need to be solid middle to upper middle class by 1950s standards to have the same life in terms of quantity...never mind that the quality is better. That quality, due to tech progress, is beside the point.
Arg! David Nieporent beat me to the punch, mostly, I suspect, through his succinctness.
But I actually spent the time to look up some numbers too.
So here we go, using 2007 dollars, the median household income in 2007 was 50,233. In 1977 it was, again in 2007 dollars, 42,300. So not stagnant.
But wait! It gets better. Number of households in 2007 was 116,783K for 301,280K people, so 2.58 members per household. In 1977, it was 76,030K for 220,239K people, so 2.9 members per household.
So what's the income per member in 2007 dollars? 19,471 in 2007 vs. 14,603 in 1977. A 33% increase.
Now that works out to only something like 1% annual growth which is not super fantastic, but it also doesn't take account of David's other trenchant points about the changing composition of those households.
Sources:
Historic Income Tables
http://www.census.gov/hhes/www/income/histinc/h06AR.html
Historic Population Tables
http://www.census.gov/cgi-bin/ipc/idbagg
(Sorry to use the US Census as a source, I know it's not as unimpeachable as the NY Times, but hopefully Obama's interest in putting it under direct White House control will change soon change that.)
Sorry to use the US Census as a source, I know it's not as unimpeachable as the NY Times
Now you've gone and done it! I need a new keyboard... again!
A related, and genuine, question here:
Possibly the most striking graph I've ever seen is log(US GDP per capita, constant dollars) vs. time 1790-2007.
(I'll wait while you go look it up.)
It's a straight line. Not, 'it has a trend', or, 'it's generally upward'. With a decade-long divergance during the great depression, it's otherwise a dead-solid if-you-were-faking-it-you-would-add-more-noise line.
So what I really want to know is, WtH? If that's for real, all our arguments about economics are meaningless diddling around in the noise (and why is the slope, say, 3% growth, not 2% or 4%). But what else could it be? Hindsight bias? An artifact of the way we measure inflation?
And technological progress means, unfortunately for some, that it takes fewer and fewer workers to make X quantity of anything. That's one reason why things gets cheaper.
Some of the lost jobs weren't all that great to start with. My father talks about walking into big rooms with rows and rows of young men, all calculating diligently with slide rules. One computer can handle all that work now, freeing up human brains to do other things.
But we do have to figure out how to help displaced workers, and even displaced regions. Not by putting them on the dole forever, but by helping them make the transition to the next thing.
The things that are expensive now are things that don't get a whole lot more efficient with improving technology. Housing, medicine, nursing and daycare, and education. Perhaps energy. I don't know what technology would take care of kindergarten kids any more efficiently, or make high-schoolers learn chemistry faster. These fields don't seem to work the same way as manufacturing.
With respect to appliances, one point of reference is automobiles. As documented by Consumer Reports, cars have gotten steadily more reliable (and longer lasting) over the years and decades. I believe the same is true of household appliances, and I'm sure that CU would also have the data to prove (or disprove) that, but I can't point to it.
One of the confounding factors is that household appliances have gotten cheaper relative to the cost of labor to repair them such that it often doesn't make economic sense to fix an appliance that's more than a few years old. When a new washer costs $300 and the minimum charge for a service call is $150 -- you tend to do the math and buy a new one.
Look. From 1950 to 1973 median income grew dramatically AND technology improved and made consumer goods much cheaper for the same quality. A 1973 car was much better than a 1950 car AND the worker who made it or bought it was much richer, in constant dollar terms.
From 1973 to 2007 technology got a lot better and consumer items got cheaper, too. But the median income was stagnant.
Do I want to go back to 1955 TVs? No. Do I want to go back to 1955 rates of wage growth? Yes. I fail to see how 1955's superior wage growth was caused by the low quality of 1955's TVs.
From 1973 to 2007 technology got a lot better and consumer items got cheaper, too. But the median income was stagnant.
I guess you missed all the posts about how the household measure of median income is completely misleading.
" I fail to see how 1955's superior wage growth was caused by the low quality of 1955's TVs."
Without any competition, US companies could afford to offer generous compensation to unskilled and semi-skilled labor. With the rise of Germany and Japan et al that was no longer possible. Money that used to go to pay generous benifits now had to go into providing a higher quality product.
When a new washer costs $300 and the minimum charge for a service call is $150 -- you tend to do the math and buy a new one.
Or you spend $20 for the failed part, one hour of your time to drive to the warehouse district and another -- along with a pint of sweat -- to pull the damn thing out, wrench it open, extract the part, reverse the sequence. Ask me how I know :-D
The cookie points earned with significant other in this approach are priceless. For everything else, there is Mastercard.
None of those boys in the '50s with paper routes were payed a living wage. Does that mean they were worse off for having the job?
Because of competition for labor, wages are primarily determined by the productivity of the laborer. That's not a factor that can change with legislation. The laws giving by politicians have limited utility, but the laws of economics cannot be repealed or ignored indefinitely.
Hey, jmo! What about the money that was saved because high quality tv's were cheaper?
It seems to be a lot easier to get a high rate of growth coming off a low baseline. China has been doing that recently, and many countries did it before them.
The US wasn't desperately poor prior to the 50s, but it hadn't spent much on consumer items since 1929. And some really fundamental technologies hadn't fully penetrated society yet. People needed basic stuff, in a way that makes the contemporary "need" for an iPhone look trivial.
Businesses could grow rapidly in that environment. It's a lot harder to do so when people are well-equipped and only need to replace things as they break. You do get mini growth booms when new technologies come out, the way we did with computers, but the economy as a whole mostly perks along.
Until some fool goes and inflates a bubble based on Nevada desert and Florida swampland. I mean, what were they thinking?
Actually, one television show that is underrated in the accuracy of its portrayal of what life was really like for many in the 1950's is "The Honeymooners".
"Ignoring for the sake of comity the fact that you are citing an NY Times editorial for your facts" - blighter
If you persist in the belief that the New York Times prints inaccurate factual material in its editorials without issuing corrections, you will make reasoned debate impossible.
The New York Times' editors may not generally share your ideological predispositions. They may contextualize their information in ways I agree with but which you consider misleading. But the statistics cited in NY Times editorials are without exception factually correct except on very rare occasions, and on such occasions the paper prints a retraction.
As to your point: yes, households are indeed shrinking. Why might that be? Well, for example, the number of single-parent households has grown. From 1980 to 1998 the percentage of children in the US living in a single-parent households went from 20 to 27. The overwhelming majority of such kids lived with their mother. 32 percent of women heading single-parent households are under the poverty line. So what your figures there are describing, to some extent, is a society with a rising number of well-off singletons and divorced dads, and a rising number of poor single moms and kids living in poverty -- 22 percent, at the moment.
Matt - Is it okay if I persist in the belief that they will twist statistics to match their prefered narrative just as you do?
Is it okay if I don't think that "reasoned debate" involves making statements that are factually wrong and once that is pointed out, rather than acknowledging it, shifting the debate to talk about some other set of statistics?
I don't have time just now to dig into the household data in sufficient depth to either prove or disprove your latest moving-goal-posts "debate" response, but suffice it to say that I'm not super interested in the "reasoned debate" of someone who posts about "income stagnation" immediately after I posted census data disproving that and then, in reponse to said census data, can only find fault with a small jibe of mine towards the Times while conveniently shifting the discussion to some other point. No mention of the fact that his previous statement was straight up not true.
Not just "misleading" but absolutely false. It's misleading if you site a misleading statistic without explanation --- as the Times routinely does -- but it's something different to state it immediately after it's disproval and then once you notice the disproval to just blitherly dismiss the poster b/c he doesn't trust the Times' use of statistics and then go on to raise more misleading or un-sourced "facts".
I'm sorry if my little jibes towards the Times offend you so. I thought you folk were all about "speaking truth to power" and that. I guess the idea that statistics quoted in an editorial might be selective and misleading is just crazy talk.
Mama says if it's in the Times, it's so, right, Virginia?
Matt S. -- Another factor in shrinking household size is more old people. Empty nesters living longer, and drawing on SS and pensions.
If you want an apples to apples comparison of workers' families over time, you need to get the old folks out of the statistics. Are they included?
And households are shrinking because people of childbearing age have children later and have fewer of them by a significant factor.
The relevant measure is income per household member.
However, correct statistics will never win with some people because they immediately change the discussion to something else without ever acknowledging that they were wrong to begin with. This is just a fact of life.
"If you persist in the belief that the New York Times prints inaccurate factual material in its editorials without issuing corrections, you will make reasoned debate impossible."
I thought it was pretty well documented that the NYT prints corrections for the editorial page in only the rarest, most embarassing of circumstances, but otherwise doesn't get involved.
I'm too lazy to actually investigate this, but I think Dan Okrent or some other public editor had pointed this out at some time in the past.
Sigh. To the contrary, blighter, you look like an unreasonable and unreasoning idiot. In point of fact, these points were addressed by the article itself:
Note further that income per individual wage earner is also cited:
Gee, I guess you didn't bother to read that either. Or maybe you have some explanation as to how this all fits together to support your preconceived notions? In fact, given that median household income is rising (per the census) and that median wages of individuals are falling, this conclusion seems eminently reasonable:
In fact, you look like a rather dishonest git, given that you say things like this:
But don't actually, you know, produce any evidence to that effect. But that's your notion of 'reasoned debate', isn't it? Try to score off points that have already been covered as if they haven't been addressed, and then by implication suggest that the "earnings of men and women working full time actually fell more than 1 percent last year" is some sort of twisting of the facts.
Is that true, or not? Yes, or no? Finally:
Is just idiotic. It suggests that you don't know what 'stagnant' means, or what household composition has to do with the topic (and in fact, wage growth has actually been less than one percent.) Here's a hint for you: the number of people in your household who are not working doesn't have much to do with whether or not wages are stagnating. That is, I repeat, idiotic.
Oh, and yes, wages have stagnated for 30 years or thereabouts. Disputing that is yet more evidence of wingnuttery. As is disputing the fact that wages (at least as of 2007) for individuals have fallen.
For those too lazy or stupid like SOV, here, again, are the actual numbers as put together by blighter, and correctly I might add:
So, SOV, what exactly does "stagnant" mean anyway? Really, what level of increase in 30 years time going to be called stagnant? Is it stagnant if the household median has increased 18.7%, or if the income per household member is 33%?
And, by the way, here is the definition of "stagnant": not advancing or developing.
SoV's point appears to be that, if you put this in annual terms, the yearly growth doesn't sound as good. So 33% growth is in fact stagnant, if we break the growth rate into small units and round down.
I'd like to reiterate my earlier point that, in addition to changes in household size and composition, there's also the pretty well documented problem that our measures of inflation understate improvements through technological change. My first VCR cost me $330 in mid-1980s dollars. The last time I checked, I could have bought a much better VCR a few years ago for less than $40. We don't have to adjust to constant dollars to see some improvement there. And that VCR was pretty exciting back then, but seems like nothing compared to my Tivo now.
"New York Times publishes correction... 48 years late"
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article4514049.ece
I guess we will have to wait a little while before we can be sure SoV's editorial isn't in need of any corrections.
Ann,
Yes, a lot of people completely miss the fact that goods and services available are never stagnant in composition, quality, or quantity. My parents were solidly middle class when they raised me from 1966 to 1988. The middle quintile today has goods and services in their homes that would have stunned us in 1980, or even in 1988.
Women who in the 1950s would have stayed with the husband that abused them because they didn't have any other option. Children who in the 1950s were given up because raising a child often wasn't an option for a single woman.
I'm sorry, but I refuse to believe that most of these women would rather be living in the 1950s.
But then - assuming for the sake of argument this is true - measures of house sizes are inapplicable. At best, they stand in as a proxy for the cost of living in a 'nice neighborhood'. And - again at best - the only sort of comparison you could do would be the cost of a house in a 'nice neighborhood' then with the cost of a house in nice 'neighborhood now'.
So using house sizes to demythologize the 50's is, er, bogus. You can't use this measure until you've done a lot more data reduction. And that is my major point in general. By all means, say the 50's (or 40's, or 60's) weren't really that great. But try to use statistics that are a little bit more convincing to back up your point.
Actually, the point under discussion is why a 'low-skilled worker's salary is no longer enough to support a family'. Arguments of the form, 'But the Victorians didn't have electric lighting, so even if income is still completely flat since 1850, the median worker is still better off' just don't cut it. As I've already pointed out, the comparison is not cell phones/no cell phones, but cell phones/radios for these types of comparisons.
So these sorts of technological improvements - which no one disputes - are completely irrelevant to a slippage in life styles. Nor can you just blithely make statements about what should and should not be factored into inflation. Not without supporting them at any rate. And indeed, there are a great many people who think the inflation has been systematically understated. Serious people, not fringe types (oddly, this seems to be a point of agreement for those on the far left as well as the far right.)
As I've already pointed out, the comparison is not cell phones/no cell phones, but cell phones/radios for these types of comparisons.
I don't understand why this is true. What does "slippage in lifestyle" mean if not "I can't buy what my Father bought"? And if I can, in fact, buy what he bought and lots more besides, how has my lifestyle "slipped"?
Possibly the most striking graph I've ever seen is log(US GDP per capita, constant dollars) vs. time 1790-2007.
(I'll wait while you go look it up.)
It's a straight line. Not, 'it has a trend', or, 'it's generally upward'. With a decade-long divergance during the great depression, it's otherwise a dead-solid if-you-were-faking-it-you-would-add-more-noise line.
Paging Bernie Madoff ...
Yeah, that "Father" shouldn't be capitalized. Presumably the Father doesn't need to bother with buying things.
This is sufficiently in-your-face bizarre to be worth addressing. If the number of two-income households was shrinking, with both wage earners going on to maintain separate households, a point might, might be made (it's necessary but not sufficient.) But in fact, the number of two-income households is growing, per the census bureau:
In fact, the bottom quintile has a median of zero workers per household, the next two - including the median - have one worker per household, and finally, the top two quintiles have a median of two income-earners per household. All bog-standard stuff.
I trust that the second point is thus refuted as well. Really, is there some sort of central shop where these talking points get generated? Don't answer that.
It means "what can't I buy that my father bought that is comparable?" Otherwise, you get nonsense like someone living in a house with half the square footage of one built in 150, working 70 hours a week, etc, but owning a 2008 desktop computer. Why, a computer like that would be worth $100 million in 1950!!! Our poor downtrodden worker drone is multi-multi-millionaire by 1950's standards.
Really, what this comes down to (as I have tried to point out several times now) is how to compare a changing market basket of commodities over time. What counts as a valid substitution, what doesn't, what counts as 'core' inflation and what doesn't, etc.
As you can plainly see, there are certain people who feel this is an ideological or political question, and not an economic one. At least, that's what I tend to think until I see them start to behave otherwise.
Really, what this comes down to (as I have tried to point out several times now) is how to compare a changing market basket of commodities over time. What counts as a valid substitution, what doesn't, what counts as 'core' inflation and what doesn't, etc.
I agree with that completely, but that means that any discussion of wages stagnating or lifestyles slipping is going to be vastly more complicated than anything that has even been attempted here. The CPI doesn't capture arthroscopic surgery or cars that run 200k miles very well.
SoV: "Actually, the point under discussion is why a 'low-skilled worker's salary is no longer enough to support a family'. "
Let me clarify SoV's question. He is being unclear.
"Support a family" is a time-dependent definition. In 1950, it means "provide a family with basket of goods and services X". In 2009, it means "provide a family with basket of goods and services X U Y" (U = union symbol).
A low-skill worker's salary is certainly enough to provide X. We've already established this.
So the question is "why is growth in low-skill wages slower than growth in the basket of goods people consider required to support a family?" Or, more simply:
Why do our desires grow faster than low-sill wages?
Pointing out that standard of living (in terms of goods and services) has gone up doesn't answer this question.
Scent of Violents,
So if life expectancy, overall health and life-improving material possessions aren't good enough, what would be a measure that you would accept to show that standards of living had improved over time?
Ann, you can't claim to be doing finance or economics or whatever, and post tripe like this:
Those small units have a technical name, which we in the profession call 'years'. You can't talk about the amount the growth without factoring in the number of years as well. 33% growth sounds good, right? Not if it occurs over the course of a thousand years; that's an annualized rate of 0.0029%. A 2% growth sounds terrible, right? Not if that's over the course of a month; that's an annualized growth of almost 27% a year.
You're saying you didn't know this Ann? You've got to be pulling my leg. Nor in point of fact did I round down; blighter rounded up. I merely corrected his figures, $14603 to $19471 over the course of 30 years.
Or phone calls:
1950- most homes, if they had a telephone, paid by the call - even for local calls
1970- local calls flat rate, long distance $1 per minute (and that's not adjusted for inflation, it's $1 1970 dollars, or nearly an hour at minimum wage.)
1990- land line long distance $0.10/minute (once again, not adjusted for inflation). Cell phones just beginning to be available to the rich.
2008- long distance calls by land line are too cheap to meter. People complain about the cost of cell phone service...
SOV: You have to be very careful when looking at average household income stats.
As others have pointed out there is a vast increase in retired people. Many have little reportable income but live quite well - due to drawing down resources saved in their working years. My own parent fit that bill when they were alive. They were well off and drew down money they had saved. Their only reported income was dividends and interest. Of course they received Social Security. When my mother died, 26 years after my father retired and 10 years after his death, she left a very sizeable estate, yet fell under the poverty line as to income.
You also have a large increase in a permanent underclass - mostly in inner cities. Their income is miniscule but they receive a large benefits package in things like welfare, Medicaid, project or Sec 8 housing, food stamps, etc. None of that is recorded as income.
We're not talking little numbers here. It's lot's of people. They draw down average household income a lot. In the 50s retired people did not live as long and there was little welfare and other poverty benefits - thus forcing people to work.
One things about old-fashioned appliances: they could be repaired, often cheaply, sometimes even by the owner. My father told me how you would take a suspected bad TV tube to the store, test it on some sort of machine, and buy a new one if needed. Backyard mechanics were everywhere working on cars. Nowadays if something goes on the blink you pretty much have to replace it.
SoV -
We're just trying to understand your definitions. You said: "In reality, of course, median income has been stagnant over the last thirty years."
Most of us don't think of 'stagnant' as meaning 'grown by about a third'. You can argue that the growth rate per year isn't as high as you'd like - that's a reasonable point for debate, but it's different from saying that there hasn't been any growth.
As for qualifications, yes I have a PhD in economics and am teaching finance, and yes I've taught present value formulas, compound annual growth rates, etc. But the dispute isn't really about that, it's about whether 33% growth should be characterized as 'stagnant'.
Re: Because of competition for labor, wages are primarily determined by the productivity of the laborer.
Make that plural ("laborers") and you have a valid point. Productivity is fungible: one person can be paid out of the productivity of another. In the past it was more common to divide up the workplace pie more equally among the employees (the size of the total pie being determined of course by the summed producitivity of all), and to use factors like seniority to determine who made more. Unions of course enforced standardization of pay rates. Nowdays this is less common and people in the same business (or the same career) make wildly divergent amounts of money. More notoriously, a lot of present day productivity improvements are captured not my labor at all, but by capital.
Re: 1990- land line long distance $0.10/minute
That cheap? Maybe on off times. I recall when my father died in 1991 (on a weekday) I ended up with a $50 dollar long distance bill, and thinking that extraordinarily pricey, as I had never made that many long distance calls in a billing period before.
Sigh. To the contrary Ann, there is always a time component, that's what 'most people' think(even people on your side of the aisle.) Nor does stagnant mean 'no growth'; it means small or very small growth or even zero growth. And indeed, a growth in wages of 0.0096 per year is rather small[1]. As is a growth 0.000029 per year. Of course, such is the power of exponentiation, that this does add up over time.
I know you know this, please stop trying to pretend otherwise. To say that wages have increased 33% over the last 3,000 years, or 15,000 years so that they aren't 'really' stagnant is just idiotic.
[1]And of course, if inflation has been understated - which many quite respectable, quite mainstream economists think, the rate of growth is even smaller, perhaps even negative.
I might add that it's rather obvious Ann herself doesn't believe her line:
Why stick this in if it's all about 'growth'? If Ann really believed what she was saying, she would have omitted 'yearly'; but of course and in fact, that's how most people figure these things. No one cares, for example, if your account has grown 33% if this has taken place over fifty years (at least, that sort of growth would have been considered absolutely terrible in 2005.) The cost of living is up 10% . . . from last month. The cost of living is up 10% . . . from 1950. Anyone involved in finance who wants to pretend that those two statements are just as good - or just as bad - really shouldn't be in finance.
Sigh. No one has been disputing that there have been improvements in lifestyle because of technological progress. For about the 47th time. What people are telling you is that you're not allowed to factor this in to measure economic progress. You're not allowed to say that a 2008 home computer in 1955 would be worth $100 million, so that by 1955 standards, the average computer owner is a multi-millionaire. Even if they're only making $18K/yr in 2008.
Now, if you want to make a careful comparison of market baskets, then and now, you might have an argument. But no one is doing that. They're throwing out poorly researched factoids in a rather pathetic attempt to convince the rest of us that, economically speaking, the median wage earner is doing better than ever.
That's so lame as to be almost sad. It's reminiscent of the line back in the 80's that if the poor are so poor, how come they have color TV's? Well, possibly, just spit-balling here, maybe it's because color TV's are so incredibly cheap?
"Support a family" is a time-dependent definition. In 1950, it means "provide a family with basket of goods and services X". In 2009, it means "provide a family with basket of goods and services X U Y" (U = union symbol).
I like the definition even if I am going to quibble a little with it. Its not the union of X and Y since its not a matter of pure addition. Its more like "support a family" means provide for a specific level of goods measured against the goods available in the society. If a mean salary could buy a reliable (by the standards of the times), basic sedan it would be expected that in a wealthier society the mean salary could also provide a reliable (by the standards of the time) basic transport. Maybe my dad's Corvair from the 60's to my Civic for example. BTW, this is complicated by the fact that I am not at all a car person. If I have completely miscategorized the Corvair I hope the idea is still understandable.
So the question is "why is growth in low-skill wages slower than growth in the basket of goods people consider required to support a family?"
Or perhaps "why is the growth in low skill wages slower then the growth in higher skill wages?" since I think this disparity is at the heart of the matter. On the other hand, fundamentally it would seem that the mathematical nature of growth, interest, and ROI guarantee that there will be a disparity. Perhaps we should just think about how to deal with the issue.
>i>and then there's the elephant in the room: Taxes.
[...]
>Funny how economic comparisons between the '50s and present never include that particular difference.
>In the 1950s the top marginal income tax rate reached 90%. So if we're saying that blue collar workers pay more taxes now, we're probably right; not so much true for the high income workers.
Considering that the "taxes paid" quintiles have the top 20% paying over 50% (warning, numbers from memory) of the Federal income tax, that doesn't seem likely.
The reason I didn't mention Federal or State income taxes in my list is because the majority of the population is getting hammered on a daily basis with all of the other taxes.
An earlier post put the current median income at ~$52k while ca. 50's was $42k. But that current income gets 7.5% taken off the top (FICA/Medicare). Then there's the sales tax (typical NYS is ~8%, Chicago is 10%?). So lower income folk are paying 15+% in taxes before you get to property, excise, gas, phone, etc. ad nauseum.
I should lurk at a psychology blog and see what they have to say about the tactics used to avoid discussing elephants.
Here's yet another way to compare then and now, something that was briefly alluded to above. Suppose that the income distribution in 1955 was the same as it was in 2008. What would the wage structure look like for the households of yore? What kind of a house could they have bought, what kind of car, of education? I don't know off the top of my head, but it shouldn't be too hard to figure out.
"What people are telling you is that you're not allowed to factor this in to measure economic progress."
But why not? You're the one telling us that factors that improve our lives shouldn't be considered in deciding whether we're better off. Why not?
As for annual vs. total growth, I agree that it's important to pick the relevant units when doing comparisons. That's precisely why I thought that, in your comparison of now vs. thirty years ago, the relevant growth unit to consider would be now vs. thirty years ago (i.e. 33%).
And since you keep throwing out the idea that inflation has, if anything, been understated rather than overstated, can you give us some idea of why? I've already pointed out the logic for the opposite conclusion - that failing to adequately adjust for quality improvements, plus often failing to include new technology at all until after the price has dropped dramatically, leads to overstating inflation. Why do "many quite respectable, quite mainstream economists" think otherwise?
Ann, at this point, I'm about ready to drop you as being too disingenuous to waste any more time on. That is not what I said:
And many variants thereof.
Now, you can either admit that you're twisting my words into something I manifestly did not say and we can move on, or you can insist on your misrepresentation, at which point I'll simply stop bothering to respond to you. It's entirely your call.
Scent of Violets,
I don't recall suggesting that owning a computer makes someone the equivalent of a millionaire in the 1950s.
What I am saying is that the material conditions of the poor are significantly better now than they were in the 1950s. What is the point of wealth if it isn't to improve your well being?
For you the only thing that seems to be meaningful is relative wealth with the other members of a society. Not all of us agree with this assessment.
Umm, SOV, "stagnant" does not mean "low growth", it means no growth--that the growth level is close to varying randomly around a zero mean. Something "stagnant" is definitionally something that does not move or change significantly. Your definition is innovative, but incorrect.
I can see why you made the error, however. You are confused presumably because over very short time periods, when measurement error makes, say, 0.5% hard to conclusively differentiate from no growth through direct observation, economists sometimes describe the economy or wages as stagnant. But as the period lengthens and you have enough observations to see significant improvement, they generally change it for a word that means "low growth" rather than "no growth".
Someone who would argue that one should not factor technological progress which improves lifestyles, when measuring economic progress, is likely the same sort of person whho would argue that Fannie Mae and Freddie Mac were private entities prior to September 2008. One may as well debate folks who claim that Neil Armstrong made his giant leap for mankind in a t.v. studio.
As to observable reality, if the median income citizen of today were told that he would now be forced to live in the manner of the median income citizen of 1960, he would forment revolution.
Wow, reading through this thread it almost felt at times like I was taking crazy pills, like I was debating people from the mirror universe where words mean different things and the facts are all similar but also very different.
But then, finally, SOV posts something that clarified the whole disagreement for me:
So, you see, any material gain in absolute terms that the average person or the average poor person or whomever has experienced is irrelevant at best, a horrible illusion perpetrated by an evil ideology at worst. It's all about the current inequalities.
This is not actually a crazy way of thinking, it has merits. It is a useful approach for thinking about the various tradeoffs that different policies will bring. I don't know why in defending a desire for a flatter income distribution SOV feels it necessary to hurl invective against those that raise the obvious points that living standards have risen over the past 50 or even, yes, 30 years pretty much across the board for a variety of reasons.
SOV is indisputably correct that inequality has risen in that time: yes, everyone's living standards have increased but the rich's have increased far more by some measures.
I still can't wrap my head around why wanting to rail against rising income inequality would lead someone to argue again and again that any apparent growth in living standards does not exist but there it is.
It's these kinds of basic misunderstandings that, I think, lie at the heart of many of our political disagreements in this day and age.
If we were to enter a generation of unprecedented economic growth tomorrow such that in a generation the median wage for the lowest quintile had increased by 1,000 times leaving them much better off than even most of the richest folk today, but at the same time the median for the top quintile increased by 10,000 times, we would have folk like SOV hurling insults and screaming that the poor had never had it so bad.
When it was pointed out that every poor person had their own personal teleport machine and access to private islands of beaches served by perfect androids or whatever wonders such riches might bring, the SOV analog would dismiss all of this as not comparable and only driven by ideology and whatnot and point out that if you extrapolated that income distribution into the past the poor wouldn't be able to afford breakfast cereal so clearly they are worse off.
It's why whenever some lefty proposes the reasonable sounding position that they are just looking to ensure the poor have access the X level of absolute living standard I simply can't believe them. If you went back 100 years and explained the level of income to which the median poor person today has access to, say, Jacob Riis, he would most likely feel that you were talking crazy. There's no way that kind of prosperity would ever flow to the worst off. But here we are and it's "worse than ever" because despite that unprecedented-in-all-of-human-history increase among the poor, the rich did even better. So it's all an illusion. And worse, an illusion that only evil ideologues could even try to pass off as reality.
blighter, you are more charitable than I. The line of logic you describe results in a conclusion that there has been no economic progress for non-neanderthals since our ancestors left Africa to populate the wider world. To call a disgareement with that line of logic a "misunderstanding" is akin to asserting that one has a "misunderstanding" with the poor soul at the end of the freeway ramp who maintains that he is Jesus Christ.
Here's a great 1996 column on this topic by Paul Krugman that has a little something for everyone.
http://www.slate.com/id/1915/
snip
"Imagine that a mad scientist went back to 1950 and offered to transport the median family to the wondrous world of the 1990s, and to place them at, say, the 25th percentile level. The 25th percentile of 1996 is a clear material improvement over the median of 1950. Would they accept his offer? Almost surely not--because in 1950 they were middle class, while in 1996 they would be poor, even if they lived better in material terms. People don't just care about their absolute material level--they care about their level compared with others'.
I know quite a few academics who have nice houses, two cars, and enviable working conditions, yet are disappointed and bitter men--because they have never received an offer from Harvard and will probably not get a Nobel Prize. They live very well in material terms, but they judge themselves relative to their reference group, and so they feel deprived. And on the other hand, it is an open secret that the chief payoff from being really rich is, as Tom Wolfe once put it, the pleasure of "seeing 'em jump." Privilege is not merely a means to other ends, it is an end in itself."
snip
In other words, people are petty. The role of economic policy should not be to make irrational people feel better about themselves.
"I still can't wrap my head around why wanting to rail against rising income inequality would lead someone to argue again and again that any apparent growth in living standards does not exist but there it is."
This is the key, the most important argument that people like SoV have to make, in order to justify a major focus on reducing income inequality (as opposed to helping the 'less fortunate'). In order to reduce inequality, we have to deliberately punish those that contribute the most, punish them enough so that they'll cut back and not do so much. That's going to reduce overall growth, which will hurt the poor as well as everyone else. But if SoV types can convince everyone that most people haven't benefited from growth, they might think that they can equalize income without losing anything.
People like SoV claim to have two goals - helping people in the bottom half of the income distribution and reducing income inequality - and they want to convince others that these two goals are compatible. The evidence goes against this argument, so they need to rewrite the past. Eventually they'll even try to rewrite the history of communism - the ultimate equalization system.
"People don't just care about their absolute material level--they care about their level compared with others"
They care about both, but there's no way we can satisfy everyone's desire to be 'better' than everyone else (outside of Lake Wobegon, where all the children are above average....).
We can't eliminate people's desire to get ahead, but we can use it to help everyone. In our current system, we've basically put everyone on commission, telling them that if they go out and create wealth, they will be allowed to keep a proportion of all that they create. This harnesses the desire of people to get ahead. It also means that some, who are unable or unwilling to contribute as much, don't end up with as much.
As I've said several times now in this thread, the way towards greater equality is to handicap those that would otherwise contribute the most. This makes the poor worse off in an absolute sense without managing to trick them into thinking that they've kept up with everyone else (unless we go to absolute equality of outcome, which will be incredibly painful for everyone).
Re: As I've said several times now in this thread, the way towards greater equality is to handicap those that would otherwise contribute the most.
You donlt have to handicap anyone. Just don't let them glom onto an excessive share of the goodies.
"Just don't let them glom onto an excessive share of the goodies."
But if they won't be allowed to keep a sizable part of what they've built, why should they build it? Where do you think "the goodies" come from - someone that just shows up, follows directions and goes through the motions every day?
Re: Women who in the 1950s would have stayed with the husband that abused them because they didn't have any other option.
They could move home with their families. My aunt's first husband was abusive. Her parents found out about the sutuation and demanded she divorce the creep (before her brothers outraged killed him) and she and her three children moved in with them. Eventually she got a job and met another, much nicer man and married him.
Really? And you don't see people making any argument at all that technological advances, like computers have made their lives better 'because they didn't have that in the 50's'? You can't have it both ways. You can't say home computers have made life better than they were in the 50's, so that economically, the average citizen is better off, but no, it's really not appropriate to attach a dollar amount to this improvement.
Colloquially, that's known as having your cake and eating it too(not unlike a lot of other bromides on the right actually, such as arguing that decreasing taxes will increase revenues.)
But they are better in general because of technological progress(at the consumer level), not because of rising incomes over time. You can't just conflate 'wealthier' with 'better technology'(that's my point.) If the income in the lowest quintile in 1950 was $12K in, say, 2010 dollars, and the income in the lowest quintile in 2010 was $18K, then, yes, the poor are better off - because of improvements in the general economic condition. If instead, the income in the lowest quintile in 2010 was only $8K, then, economically speaking they are worse off than their counterparts three score years in the past. Yes, they have better consumer electronics, better medicine (if they can get it), etc. But, and pay attention, you can always make that argument, you can always say that, no matter how worse off the denizens of 2010 are. If they're only making $2K in 2010, you could still try to argue that, 'Well, they have internet access, something poor people didn't have in 1950, so really, they're still better off.' Iow, this sort of qualitative argument is absurd; it doesn't really work until you are ready to attach dollar amounts to these sorts of things - and that's just for starters. No one has attempted to do so yet(there is still the problem of figuring out the market basket equivalencies.) Suppose our 2010 family subsists off a diet of beans, rice, government cheese, and powdered milk. You can't say they are better off than they would have been in 1950 just because they have internet access, to name one invidious example.
Here's another example: The general thought of people who know this stuff is that as far as putting payload into orbit, rockets are the only feasible way to go, and that rocket technology is at the limits of perfectibility. There is a general consensus that it's going to cost roughly $1,000 to put a kilogram into orbit for a long time to come, and no possible technical improvement is going to change that. Which means that a ticket to low Earth orbit for a paying customer is going to cost around $100K (taking the optimistic figure), which means that the killer app for space flight, space tourism, is pretty much a pipe dream right now.
But - so the thinking on sci.space.tech, sci.space.policy, etc goes - in something like a hundred or so years, median income will go from $40K/yr to $240K/yr. What was once an impossible fancy for most people can be had for less than six months of wages, i.e., the market for space tourism will grow from a few dozens or hundreds of paying customers to several hundred thousand, perhaps even millions. At which point, economies of scale would kick in, dropping the price still further, a factor of anywhere from four on up. So then for the price of two weeks wages, one can enjoy a weekend in space. And finally, finally, there will be an extensive human presence in space.
This is an example of things getting better without technological progress, i.e., things getter better because people are wealthier.
Otoh, there's always the possibility of some sort of near future scientific or technical breakthrough, tabletop fusion, say(anyone remember the first news reports about cold fusion?), which would potentially lower the cost to low Earth orbit to around $100/kg. Which in turn means the cost of a ticket would then be three month's wages for the median household, etc.
Do you see the difference between these two scenarios? Do you see that the former is based upon general economic wealth, the latter on technological improvements, that the former implies a certain of standard of living which the latter most definitely does not?
That's the sort of thing I'm getting at.
Sigh. Challenge. Lemon, please post the quotes from my missives that would lead you to believe this. If you can't, I want a retraction from you. As it is, this imputation of impure motives seems to me like a classic case of projection. Because what I see here is a group of people whose economic philosophy has failed, failed glaringly under the pitiless public gaze of the TV cameras. People who are trying very, very hard to do anything other than admit they were wrong.
So, you wanna keep making those sorts of accusations? (Accusations which, apparently, I'm supposed to take in the place of argument.) The only thing I'm trying to do is discuss the premise of this thread. And, sigh, as usual, am telling people that they need to have facts, numbers, cites, rather than supposition, opinion, and rhetoric.
And speaking of supporting your position with facts, cites, evidence:
Really? Why don't we have a look around:
Looks to me like economists are saying wages are ‘stagnant’, despite the fact that they are rising, albeit very slowly.
Wow. More poor use of that word to indicate rising incomes instead of incomes not rising at all. Note, btw, that when incomes fall, they say ‘incomes fall’.
Note again that stagnant wages is not being used to denote ‘no change’.
Gee, yet another source describing wages rising less than one percent a year – but still rising – as stagnant. These quotes, btw, took less than two minutes to find. And you know, when so many people say 'stagnant wages', and then go on to use that term to reference wages rising slowly, or very slowly, citing statistics that presumably we all roughly agree with, then maybe, just maybe, that word does not mean what you think it means.
Not that this dissembling over the definition of the word is recognized for anything else than what it is - a way to distract from the point that, Wages for workers with a college degree increased by just 0.4% between 2001 and 2007, and that even the most favourable government surveys show real pay for an hour's work rising by less than 1 percent a year between 1979 and 2003.
A few people are trying to argue that these are twisted statistics, statistics of the damned lies sort, not really reflecting the underlying reality(rather putting forth arguments like 'Hey, they have big screen plasma TV's! They can't be that badly off.') so at least there is a tacit acknowledgment in some 'conservative' circles that these are some bad numbers. That's something, I guess.
Chuckle. By that I suppose you mean that when when someone says that Fannie Mae was privatized in 1968 and then gave cites to prove it - including Fannie Mae's page itself - that is just the sort of someone who uses cites and facts to back up their assertions. I note on another thread that RW, a guy who actually works in finance, also says that FM was privatized. Oddly enough, he seemed to think you were a nut too.
Especially tasty is the unintended projection 'One may as well debate folks who claim that Neil Armstrong made his giant leap for mankind in a t.v. studio'.
What, a right-winger railing against trying to determine accurate measurement as 'class warfare'? I'm shocked, shocked, I tell you.
Blighter would be better off trying to defend his own weird postings (those statistics? Lies! Lies I tell you) rather than attack the motives of others:
What, blighter isn't going to mention that he was 100% backwards on this one? That yes, median income has fallen since 2000? That this is not something wrenched into existence by the Times' editorial staff? Again, I'm shocked.
Um, blighter, I thought the whole question is how to determine whether living standards have risen, by how much or how little, and in what way. You know, like it says at the top of the thread?
I can't wrap my head around the fact that someone who argues like you thinks they have the slightest scrap of credibility. Especially since I never said that rising income inequality was a bad thing in and of itself, or that there is no way that the poor can be considered to better off now than 60 years ago.
Oh, let me save you the trouble of posting yet another deranged tirade:
I don't think rising income inequality is necessarily a bad thing in and of itself.
SoV,
I think your distinction between "getting wealthier" and "technological progress" is somewhat illusory; unless the productivity of rocket builders goes up over time (due, presumably, to technological progress), space flight won't become more affordable because the price of something is largely determined by the alternative uses of inputs. If labor in other sectors becomes more productive (leading to "rising" wages), it will cost "more" to pay people to continue doing the inefficient work of rocket building rather than something else.
It's a simple as this: The average worker will never be able to buy a rocket trip on 2 weeks' wages unless technology progresses to the point that a rocket can be built using only 80 average-man-hours.
That is to say, "technological progress" and "getting wealthier" are more or less synonymous as far as I can tell.
What I really don't get, though, is where your faith in the official inflation statistics comes from. You yourself have identified a genuinely difficult problem with building comparable baskets. What makes you think the official method for building baskets is the unambiguously correct one?
"coffee pot from either the late 40's or very early 50's; it comes apart into a pot, grounds basket, hot water reservoir, and lid, all aluminum except for the bakelite handles. That's it."
First, a pot is not an appliance. From the context she obviously meant large appliances, things like refrigerators, freezers, washers, and dryers.
Second, most from that period have worn out or been damaged, mainly from corrosion.
Third, I have one of those pots, it's no better than my cheap coffe maker and a new one would cost a lot more than my coffe maker did (so I don't use it when I can use my coffe maker, since they do wear out/corrode).
I can't make a lot of sense out of this, but to the extent that I can, you're making statements that have to be drastically qualified. For example, 'won't become more affordable because the price of something is largely determined by the alternative uses of inputs' seems vague to the point of uselessness. It's also not true under all circumstances. For example, once a certain threshold in volume is passed, costs are drastically reduced - a one-off versus thousands or hundreds of thousands of identical units rolling off the assembly line(in fact, this is precisely what doomed the Shuttle; marginal costs were predicated on an unrealistically high launch rate. Depending on how you figure it, actual costs are anywhere from four to twenty times as high as predicted.)
This doesn't make any sense that I can discern. Sure you don't mean something else? It sure doesn't take two week's wages for me to buy a plane ticket; are you saying that airplanes can be produced with less than 40 man-hours of labor?
Again, this needs to be qualified. To the extent that advances in the sciences and technical arts increase productivity, this is largely true. But to the extent that 'technological progress' means consumer items like greeting cards with a voice chip . . . not so much. To put it another way, I just finished finished several hours worth of chopping through some rather complex equations using a program called Macaulay 2, and then whipped up a spiffy graphic off of them in Mathematica, and finally wrote up the results in LaTeX, and emailed it to various math guys. In the old days, something like this might have taken several weeks just to compute the resolutions; a graphic would have been out of the question, and I would have had to have worked with a secretary using a fancy typewriter to express the equations and diagrams, then used physical mail if I had to go out of the building or off-campus. Yes, my productivity in certain narrow areas has been greatly enhanced by advances in computing. Otoh, my daughter and her mother can now bond by playing old 80's video arcade games using the same computer.
That doesn't necessarily imply that they are wealthier for being able to do so.
I don't think it is the unambiguously correct one. I also agree with a number of people (economists) that inflation 'looks' lower than it really is, primarily because of incentives to keep certain costs from rising too much and too quickly. For example, COLA adjustments in various federal programs. This isn't some sort ofpinko paranoia:
In the 1990s the U.S. CPI was subjected to three additional changes that have not been adopted to the same degree (or at all) by other countries, each of which resulted in downward adjustments to our annual inflation rate. Product substitution and geometric weighting both presumed that more expensive goods and services would be used less and substituted with their less costly alternatives: more hamburger/less filet mignon when beef prices were rising, for example. In turn, hedonic quality adjustments accelerated in the late 1990s paving the way for huge price declines in the cost of computers and other durables. As your new model MAC or PC was going up in price by a hundred bucks or so, it was actually going down according to CPI calculations because it was twice as powerful. Hmmmmm? Bet your wallet didn’t really feel as good as the BLS did.
It's possible that inflation may be understated because of technological advances . . . but I don't see anyone making that argument. Asserting it, yes. Because it props up their ideology, yes. But hard numbers and analysis? From people like Ann? You've got to be kidding me. And let me say this again, putatively conservative publications like Money Week are saying this, as well as various economists. It's not some sort of delusion particular to those on the far left.
are you saying that airplanes can be produced with less than 40 man-hours of labor?
An airplane is a durable good. I'm saying that, amortizing over the airplane's useful life, a single ride requires considerably less than 40 man-hours of construction time to provide. Rockets being typically single-use, you need to buy the whole thing at once.
The median worker will never be able to buy more than a median worker's output, because his income is (at most, and deducting taxes, overhead, profits) equal to his own output. The price of a rocket ride always be roughly equal to the number of man-hours required to build a rocket times the worker's (nominal, not inflation adjusted) wages. Increases in wages merely increase the wages we have to pay the rocket builders to keep them from leaving and working at car companies.
You can mess around at the margin by shooting, say, 20 people at once, but we're multiple orders of magnitude away from weekends in space. Barring a concomitant increase in rocket-production productivity, no amount of increases in "real wages" will ever make space tourism affordable. The only way to make that happen is to reduce the number of man-hours required to build the rocket.
I would note by way of illustration that a fine hand-made automobile is just as out of reach to the median worker today as it was in 1920. It's just that unlike then, we also have lots of mass-produced cars today. This is also the reason that appliance repair is so expensive relative to replacement: building a washing machine requires far less human effort than diagnosing a problem and fixing it.
Or to slightly modify my early statement, increases in wealth come from increased productivity, which is frequently the result of technological progress.
But to the extent that 'technological progress' means consumer items like greeting cards with a voice chip . . . not so much
OK, I can agree with that particular example. But there is surely some utility to, say, cable television, or else so many people would not pay for it.
This sentence is incorrect: "building a washing machine requires far less human effort than diagnosing a problem and fixing it."
I meant to compare the effort to build in 2009 to the effort to build a comparable machine in 1959. The repair effort hasn't changed in that time, but the building effort has gone way, way, down, making replacement much cheaper relative to repair. Repair may still be absolutely cheaper.
'Rockets' as in rocket propulsion, LOX and something like kerosene or propane or even liquid hydrogen. The Shuttle is reusable, for example. But I think you've got the right idea: it's the cost of the ride(paranthetically, that $1,000/kg figure? About 2% of that, $20, is for the actual cost of the fuel), not the vehicle itself.
Again, not true. To elaborate on one reason given in my previous post, think of building an automotive plant that builds . . . one car. And then shoots down. How much did that one car cost? Rocketry is an awful lot like that. Think of hand-crafting vs assembly line work (a pertinent example would be the enormous amount of hand labor that goes into manufacturing shuttle tiles and hand-gluing them onto the body.)
See my comments above. The marginal costs per unit produced is not the only cost driver, nor is labor the only cost. I think I know what you're trying to say, and there is some truth to it; however, you're not saying what you think you're saying, and I can't be sure of what you mean as opposed to what you say. One of the things you seem to be assuming is that all advances contribute equally; they don't. Advances in information technology or medical or biological technology might make people wealthier, maybe much wealthier. But those sorts of advances probably wouldn't figure all that much in making a better or cheaper rocket.
Oh, I certainly don't disagree with the statement that better consumer tech means people's lives are better. I'm just questioning how much wealthier it actually makes them.
I don't think anything you've said about assembly lines conflicts with what I've said; I think we're saying roughly the same thing.
What I'm trying to say is that for rocket rides to be affordable, rocket-making productivity must rise, and that it is this rise, not DOL statistic on inflation, which is the relevant consideration in determining the affordability of space tourism. Even if the CPI were to show that the 2050 autoworker were a billionaire by 2009 standards, he won't be able to afford space tourism unless rockets can roll off the line in quantity like cars do (or be highly reusable).
This is essentially the flip side of your point about what a Pentium notebook computer would have cost in 1979; the fact that you can buy one today doesn't make you a millionaire in "real" terms, and being called a millionaire in "real" terms doesn't mean you can afford what millionaires could afford back in the day.
"OK, I can agree with that particular example. But there is surely some utility to, say, cable television, or else so many people would not pay for it."
Ah, but the key question here is how we measure what matters to people. Do we allow elitists like SoV to decide what people 'should' care about and force those opinions on everyone? Or do we look at the choices people actually make, and what they're willing to pay for, given their limited incomes? I'm not a big fan of those greeting cards with voice chips in them, but if they sell and provide a profit for the sellers, people must value them sufficiently to make them worth producing.
Centrally planned economies never had good toilet paper (or even enough bad toilet paper, in most cases), because elitists didn't want to be bothered with silly things that didn't seem important to the people at the top. Let them use newspaper.... But if people are allowed to choose, they can set their own priorities and the market will tell businesses what to produce. If people think that voice chips in their cards are worth the extra money, why not?
I think we're getting there. The argument the fine people on those newsgroups use is not that the costs are inflated away, but that everyone is genuinely wealthier. Hmmm . . . think about youthening treatments that really work, but are very expensive and human-labor intensive. Maybe something like tiny robots that can zap those wrinkles away one tiny groove at a time under human guidance. Not a high-skill job, but a lucrative middle class one that requires fiddling attention to detail for hours on end. A job which pays the middle-class salary of $240K/yr. Yes, everyone is wealthier, but the tech for making rockets hasn't advanced a smidge.
So I'm wondering what you mean by 'productivity' in this context. Bear in mind that 'assembly line rockets' are possible right now. It's just that there isn't the demand for them. Yes, a handmade car is more expensive than one built on a line. But if you're only talking about one or two cars, the handmade option is the way to go. Note also that while rockets are precision machinery . . . they're not that finicky. So while labor costs are important, so is the cost of the other inputs.
Let me try another example. My brother seems to be a pretty fair mechanic; he works on all manner and make of cars, and has specialty tools for some weird problems. He has this gizmo that can pull the spark plugs out of just a couple models, useful because on these particular jobs the only way to get to the plugs otherwise is to do some serious disassembly. Cleaning and regapping, or just replacing outright is a matter of minutes. Nevertheless, those minutes cost more than some others. Overhead, you see. Even if he wasn't performing a rare service, he still has to recoup the cost of this little tool, which gets used maybe once a year or less.
Iow, determining cost is not so simple as a straightforward man-hour count(In fact, all of this is extremely hard, probably up there in Nobel territory if you're talking about a good theoretical basis for comparisons that actually objectively work.)
I'm glad you glommed on to this example. You are entirely correct, and that is precisely my qualitative objection to certain people wanting to count this as being 'better off' in an economic sense. To follow through with this example, if computing technology today was no better than in 1979, but the average person could still purchase the equivalent power, and for proportionately the same percentage of median income, then one could say that people were unequivocally wealthier, were 'better off' in the economic sense, but not in the technological sense. At least, not in terms of information processing.
Thank you.
You are entirely correct, and that is precisely my qualitative objection to certain people wanting to count [technological improvements] as being 'better off' in an economic sense.
Your objection is not with the claim, but with the people making it.
"I would say that my standard of living is pretty good because of mathematical, scientific, and engineering advances. [...] I suspect that most people quite sensibly realize this, with only a tiny minority of ideologues who view everything through a political lens dissenting." - ScentOfViolets|January 21, 2009 9:14 PM
So it would seem you're either claiming standard of living is non-economic or you've become an ideologue "who view[s] everything through a political lens"?
How do you square these two positions?
Sigh. If you don't get it by now, you aren't going to get it; probably because of your ideology.
Read what was just posted right above:
Or think of difference between the average person being able afford a ten-carat diamond ring because the average person is wealthy enough to spend $200K on a bauble vs the average person being able to afford a ten-carat diamond ring because of a new growth process that drops the price down to $3/carat. The latter case does not imply an income of hundreds of thousands to millions of dollars a year(in adjusted dollars); the former does.
I really don't think this is all that difficult to grasp.
I really don't think this is all that difficult to grasp.
No, it's not. In both cases the average person has a 10-carat ring. But for some reason, you only want to count the second case as an improvement to the average person's life, even though either path reaches the same end state.
This whole thread is about whether or not people's lives have improved over the last n years. You argue that it hasn't because incomes have been stagnant/low-growth and (in this thread at least) rejected the argument that technological advances count as improvements in standard of living.
No one is arguing that technological advancements have flattened the distribution of wealth (Intuitively and historically it would seem to have the opposite effect). The argument is that technology improves the quality of life at a given income level. That stagnant/low-growth in income is (at least) partially offset by the fact that a same amount of income buys more/better (food/tvs/computers/cars/whatever) as time advances. That attempting to answer the question "Are you better off now than in the '50s?" just by a look at median income statistics is overly reductive.
If a nanofabricator were developed and the average person could have literally anything they desired, would it matter if their income never changed? Would a truly stagnant income be a problem in that situation?
Do you care about the final score (income) or how you play the game (quality of life)?
Okay, here's the deal: provide the quote where I said anything like that, or admit that you are misrepresenting my position. I have very charitably and many times over made my position very clear, and I'm not going to waste any more time with someone - who apparently for ideological reasons - insists that I have said things that I have not said.
There's really no call for behaving the way you're behaving.
Now, the ball is in your court. What you do from here on in I really don't particularly care. I would also note that other people seem to understand what I am saying perfectly well.
I understand what you're saying - I'm asking you to justify it. Why does income matter? I'm arguing that income is a means to an end (improved quality of life). If the same end is reached through other means, why is that not sufficient?
Who cares if some future average person doesn't have the wealth to buy what a 10-carat costs today if they can have a 10-carat ring at that time? Why does their income matter?
Oh and as to where you said that:
I don't see any other way to read that than you claiming that improvements to quality of life don't matter ("In reality" ...) if there isn't income growth. Were you not arguing against the claim that standard of living has improved by saying that incomes had not improved?
How about going with "In reality . . ." means just what it means? Since, in fact, median income has been stagnant over the last thirty years. In fact, let's extend that passage a little bit further:
Iow, all I did was state a cold, hard fact, with supporting cites. Iow, your quote doesn't support you at all. Since this is supposedly the best you've got as 'proof' of something I've said, I think you really need to backtrack and admit that you've misrepresented my position. Which has been given any of a number of times:
Yeah, I sure have been denying that people are better off because of improvements in the state of the art, haven't I?
So, where's that admission that you're twisting my words? Because if I don't see it, I'm not going to bother to respond further.
I don't believe I'm twisting your words in the slightest. I think you don't understand what I'm saying. I'll take this quote:
What people are telling you is that you're not allowed to factor this in to measure economic progress.
You assert this but don't justify it. I'm asking you to justify it. The economy is the production, distribution and consumption of goods and services. Technological change affects all of those. Why should it not be factored in to economic progress?
If people made no more money than they used to, but the same amount of money buys more and/or better things than in the past, why should that that not be considered economic progress?
Note that I'm not saying that technological advances have brought net economic improvement; that has yet to be shown. I'm only saying that it needs to be factored into any economic analysis and not simply ruled out of bounds or stipulated as a given (I'm unsure of which way you're judging it). Among others reasons, technological progress is not a given. It's one of the tradeoffs that we make when determining public policy (think patents, health care funding etc.).
Listen, and listen good: you have claimed "No, it's not. In both cases the average person has a 10-carat ring. But for some reason, you only want to count the second case as an improvement to the average person's life, even though either path reaches the same end state."
You have been shown repeatedly that this is not the case(with quotes), you have presented no quotes from me, nothing. So you need to admit that you're wrong, and retract your distortions.
I'm guessing that you can't do that, because you're constitutionally unable to do so.
I think the real question we all have to be asking ourselves is this:
If the adult members of an average household in the 1950s converted their wealth (in today's dollar) into paper currency to roll around in naked, would the pile of money they were rolling around in be bigger or smaller than the pile of cash of today's average family?
Do you accept that technology can and has improved the standard of living, and therefore given the technological advances in the last 30-50 years, stagnant/low-growth of median income does not necessarily prove that median person has not gained economically? That technological advances have to be factored into any meaningful gross-generational comparative economic analysis and so simply looking at median income over time is an incomplete and possibly misleading metric?
If you agree with that then I have misread you - my apologies. If you don't agree with that, then I haven't misread you.
Sigh. Read my post on February 21, 2009 1:55 PM, which itself is a reposting of old material. Look in particular at the bolded points.
Now, do you have anything to say? Or, perhaps, unsay?
Now, do you have anything to say?
Yes, you don't understand what I'm saying. But I don't expect you to admit to a mistake so I'll take responsibility for the misunderstanding.
Let me re-write a sentence that you took offensive with in a way that (I hope) explains the difference (emphasis added):
No, it's not. In both cases the average person has a 10-carat ring. But for some reason, you only want to count the second case as an economic improvement to the average person's life, even though either path reaches the same end state.
I don't understand how you're defining these sort of technological changes as (somehow) non-economic improvements to average person's life. When you change the quality, quantity or distribution of goods that the average person can afford, you've made an economic change. What definition of "economic" can you be using where it isn't?
As I said, the reason (I think) this is important to include in a cross-generational economic analysis is that technological change doesn't just happen, it happens because our policies allow the drivers of those changes to capture an arguably outsized portion of the reward from those changes. If the only metric we use for economic advancement is median income growth, we run the risk of implementing policies that reduce the reward and thereby reduce the rate of change. If you believe that change is (generally) improving the quality of life, such policies could have the effect of eating our seed corn.
But as you did leave the door cracked open for a "careful comparison of market baskets", I'm curious about what you think would make the cut. You immediately ruled out existing products becoming cheaper (color TVs) and have separately ruled out new technologies creating substitute products (the 10-carat diamond hypothetical), new technology creating entirely new products (Pentium computers in the '70s), and have disputed evolving consumer preference for "better" goods (McMansions vs. 50's tract housing) as economic improvements. I'm not sure what's left for your basket.
Two points: first, and I'll say for about the 50th time, while both scenarios have as the end state a 10 carat diamond ring, they are not equivalent. For the good and sufficient reason that increases in income are fungible in ways that synthetic diamonds are not. If I choose not to buy this ring in the first instance, I have an extra thirty or so dollars to spend. If I choose not to buy in the second case, I have an extra $200K.
Is this really all that difficult to understand?
The other point is this: when I say an economic improvement, I mean simply an improvement in income, in benefits, that sort of thing. As illustrated above, though both changes improve the 'quality of life' in some sense, they are not the same.
I have no idea what you're saying here. But in fact, median income growth is not the metric that that is generally used. It is median income growth adjusted for inflation. That is, it is a combination of changes in income, together with changing mixes and prices of the market basket. Let me quote something from above:
Note the bolded text. So these sorts of things, like the dropping price of phone calls over time, or increases in computing power, are already factored into inflation.
This is a misreading; if someone wants to do a careful comparison of consumer tech items like TV's over time, by all means do so. I'm all for it. But that's just it: it has to be a careful comparison over a realistic market basket. That's not what is being done here. Certain proponents of a discredited economic ideology want to vigorously apply their thumb to the scales, just to - I am quite sure of this - attempt to debunk the claim of falling incomes. As I said before, the consensus among most people is that inflation is understated, and has been for a long time, for very good political reasons. The notion that inflation has been understated seems to be the province of cranks bent on resuscitating a dead theory.
Is this really all that difficult to understand?
No it's not. But while synthetic diamonds aren't equivalent to a $200k increase in economic well-being, they're not equivalent to a $0 increase either. Both extremes are overly reductive. You (fairly) criticize one, only to make the same mistake in the opposite direction. Sure, any one change may be minor, but when every technology is evolving all the time, it rapidly adds up.
BTW, suppose the same artificial diamond process enables a new diamond coating for artificial joints. What's the economic value of allowing a crippled person to walk? There was a time when curing the lame made you a God, soon enough it will be an out-patient procedure.
And that's where these analyses devolve down to whatever your assumptions are. What's the 1950's value of a cell phone? It's a meaningless question. You can make it be whatever you want it to be to get the answer you want to show.
As your new model MAC or PC was going up in price by a hundred bucks or so, it was actually going down according to CPI calculations because it was twice as powerful.
I let this pass before, but since you brought it up again...When have computers ever gone up in price? Technology in general, and computers in particular, are profoundly deflationary. They simultaneously get cheaper in real dollars while simultaneously getting more powerful. There has certainly been inflation, but Macs and PCs just aren't the examples that show it.
I don't claim to have done the analysis, but my understanding is that a higher percentage of income (at all economic brackets) is spent on leisure and consumption, and a lower percentage on basic necessities, than was in the 1950s. If true, I would argue that is proof that everybody is richer now than then. If you have to work less to cover your basic needs, you're richer. Everything beyond the basic necessities is a matter of choice. If you've got more (potential) leisure time, you're wealthier.
You can still legitimately argue if all the new wealth has been fairly distributed, but that's a different argument than simply whether people are richer than they used to be.
Oh Sweet Suffering Jesus, not again. Can you tell me where I said anything like that? Do I have to repeat this yet again:Now, if you want to make a careful comparison of market baskets, then and now, you might have an argument. But no one is doing that. Again, I have no objection to an accurate accounting. I do have an objection to an accounting that is done solely for the purpose of trying to inflate stagnant wages - accounting that is nothing more than a haphazard attempt to inflate the standard of living with absolutely no recourse to numbers.
Put in in the market basket and find out. Give me facts and figures. But don't say that it's a value incalculable, or that it's not adjusted upward far enough by conventional accounting methods.
Iow, you do want to say that it's worth hundreds of millions of dollars, and that cell phones and home computers are more than enough to tip wages over from being 'stagnant'. Uh-uh. Like I said, put it in the market basket and figure it out, using transparent methods.
What, precisely, is your objection to this?
Google is your friend:
Or this:
My point here, btw, was not that computers are increasing in price, but that this sort of hedonic price index is already being used. You'd have to explain how things like, say, power windows on cars are not already factored into the market basket, or how they are not accurately measured.
Please don't make an 'if-then' argument and then implicitly assume that it is true. I will say in regards to your last point however, that to the extent that worker productivity has improved, it has improved because of - wait for it - technological advances. And that in point of fact, had the productivity gains been proportionately shared, there would be no reason to be talking about median wages stagnating.
What, precisely, is your objection to this?
I don't know how to do it. We'll just switch to arguing about the assumptions, because the assumptions will determine the result. I say a cell phone in the 1950's would have been worth $1,000,000 per person. Am I right? Am I wrong? How do you disprove it?
And I don't want to say a cell phone is worth $1,000,000 dollars. I'm saying I don't believe there's any reasonable basis on which to make any claim. The most obvious way would be to simply extrapolate back the exponential decay in price, but I know you're not going to like the answer that gives. I don't like it either.
(I note that you're presenting just as much interest in what a 1950 cell phone is worth as the people you're arguing against. What makes your claim any less ideologically driven than the one you're arguing against?)
That's why I'm putting out a different basis on which to analyze differential standard of living that (I hope) avoids the issue: Hours of work required at the median wage to provide the basic necessities. I know I've read that food and energy (and even there energy consumption has cone up) consume a smaller percentage of income than in the past, although you'd still need to determine what "basic housing" is (i.e., probably not granite countertops).
I'm not assuming it to be true (as I said, I don't have the data), however I am laying down a marker. If the percentage of income required to meet basic necessities has decreased, you're wealthier. Is that a reasonable frame of analysis? My initial presumption is that people are wealthier (independent of what cell phone is/was worth) but I may be proven wrong
Google is your friend:
Why yes it is. Apparently in 1988, IBM talked about collecting a royalty against PS/2 clones and that could (although it's not clear that it did) raise the price. Meanwhile, that $3000 (in 1988 dollars) desktop computer is now a $300 (in 2009 dollars) desktop computer. I stand by my general claim.
But given your quote, I will concede that, perhaps once in 1988 an IBM patent made PS/2 computers briefly rise in price. So the answer to my question "When have computers ever gone up in price?" is once, 21 years ago.
And just to preempt the other claim, a change in cost breakdown on the PC BOM is not necessarily the same as an increase in the cost of the system. You need more data to claim the price of the system increased. But again, even if it has happened (and I'm sure it has), it's at best an upward blip on a near-exponentially decaying price curve.
(Seriously, if this is the best evidence you've got, perhaps it's just not a claim worth pressing. Technology has been deflationary not merely in a hedonic sense, but also in the absolute sense.)
I will say in regards to your last point however, that to the extent that worker productivity has improved, it has improved because of - wait for it - technological advances. And that in point of fact, had the productivity gains been proportionately shared, there would be no reason to be talking about median wages stagnating.
Yes, but there's a public policy reason why we don't strictly proportionally share those gains; it would eliminate the incentive for the next round of technological enhancements.
If the government were to seize every currently valid patent and continued to collect royalties and redistributed those royalties on per-capita basis, it would undoubtedly raise the median income and it would be as "proportionally shared" as you can get. I hope you agree this would be bad public policy.
I think it's a larger error to assign a discount value of zero to technological change than it is to assign a large discount value. You may say you're not assigning a value of zero, but you strongly resist every attempt to assign it something non-zero. What the true value is unknowable, but I assert that zero is the wrong value.
Sigh. I don't mean to be condescending. Really, I don't. But, here's the thing: I don't have to disprove anything. Nada, zip. If you make a claim, back it up. You don't get to say that we've made 'equal' claims, that my skepticism is just as much 'ideological' and 'dogmatic' as your positive assertions.
This really is just one of the basic principles of science. And if you don't know how to support your claim . . . why are you making it? It just feels right?
I'm just not following this at all. And I am not presenting any particular interest in how much a cell phone is worth. Really, you just need to read what I write - what I am taking an interest in is how those determinations are made.
I think you're having a problem with differing standards to which each of us is held, perhaps think that it's a little unfair. Well, in a way, yes, it is. But that's just life. You're entirely correct that if I had made a positive claim, that if I had said that technical advancement X had increased the standard of living by an effective Y dollars, that yes, the burden of proof would be equally shared. But that's not the case; the skeptics' side never has anything to prove.
This was actually a largish issue in the late 90's, but really that was not my point when I posted that quote (you really do need to slow down and actually read what I say.) I simply grabbed that article because it was the first thing that came up that a)was written by someone that nobody in their right mind accuse of being a leftist, b)said someone was giving the usual common reasons for thinking inflation was understated - not overstated, and c)also happened to point out that these sorts of hedonic pricing techniques were already being used. Since they're already being used (No one knew this? Not our 'econoblogger' host? Not Ann, who claims to have a PhD in economics? Anyone? I would have thought this was common knowledge, given that even someone like me knows it.), the question then is why the economists at the BLS are getting it wrong, and everyone here is getting it right.
I've never heard this argument before. I thought that this was the whole idea behind patents, actually. That it was to encourage technical improvements, new inventions, that sort of thing. You're saying people need even more 'encouragement' than that? Again, color me skeptical, especially since the differential sharing of productivity gains didn't really lopsided until - surprise - about the time workers wages started stagnating.
Uh-huh. Being skeptical about how you're assigning the value is 'resisting every attempt to assign it something nonzero'. Look at what you yourself wrote: you yourself just said that the true value is unknowable(I happen to disagree), but that people were attempting to assign values anyway. Given your own assessment, doesn't your formulation of my behaviour strike you as odd?
Oh, it's certainly true that I've been objecting to the nonzero values, but again, because they were being thrown out there with absolutely no attempt to justify them numerically, just to make wage stagnation go away - 'by 50's standards, computers and cellphones have made everyone a zillionare!' Not because they were nonzero.
Maybe I'm wrong. Tell me, where has anyone made any sort of attempt to assign a nonzero value that was anything but an unsubstantiated wild guess? Since I've been so obliging with the quotes, would you be so kind as to show where this was done? Because if it has, I've missed it.
You'll notice, btw, that when references were made to the changing cost of phone calls that I made no objections whatsoever.
Could it be because here we have an unambiguous schedule for calling rates in the 50's, that we have an equally unambiguous schedule now, and that the amount of inflation (all other things being equal) is well-known and also has a numeric value? So that if someone were to say that costs have dropped fifty-fold since the 50's for long distance calls, and here are the figures to prove it, and here's where it appears in the market baskets of both times, so we have a hard figure for that being factored into the cost of living as well?
Naw, that couldn't be why I didn't object.