Asymmetrical Information

The other element being that they denounce this very process, saying that it means absolutely nothing and that there really is no value to people for whom new goods are now available. They specifically denounced the spread of electronics (specifically color tv) and of convenience devices (specifically snowblowers) because the poor were still living in fleabitten rooms without dental care.

Maoists with better PR. Thankfully they have no direct body counts and little power, though they have killed untol thousands through the evil policies and regulations that they have encouraged. I used to think that Brad was a unique and insightful prof, now he's just another Berkeley cliche.

It's hard to take dour, left-wing academics seriously when the moan about how little things have improved for the common man while they pull links, citations, and documents from all over the planet electronically...

I'm more or less in agreement with you, Winterspeak, and Jane. Still, I don't think the lefties are completely off base with their general bitching about the excessively slow rise in living standards. To wit:

1. My guess is there's an overrepresentation among these types from large, blue state metro areas. And in such places, it's hard to argue with the proposition that it was far easier 35 years ago for an average person to buy a home and support two or three dependents on one salary. Nowadays even relatively prosperous people (making, say, $90k per year) don't have a prayer of being able to support a family on that one salary while buying a home (they could swing it as renters, perhaps, but that's my point: in such areas we do see at least some sign of erosion in living standards).

2. There does seem to be (again, this phenomenon may be more prounounced in Blue America) the perception that there's an especially big gap in education standards between posh and just so-so areas. My guess is this gap existed in, say, 1973, but feels a lot worse today. Which, at least from a psychological perspective, makes it suckier these days to be non-rich.

3. While we can all enjoy improvements in technology, there's at least one major trend that's unsettling: the decline in health insurance. It may well be that a higher percentage of the population is insured now than in 1973. But surely this percentage peaked sometime between now and then, and has since been in decline. I repeat, it has since been in decline. So, at least on the health insurance front -- and let's not kid ourselves: having health insurance can play a significant role in quality of life -- the trend is not what we'd expect in a country where living standards are improving.

4) Finally, although undeniably there are benefits from technology, I think these benefits can be overplayed just as much as as it's possible to underweight them when determining the CPI. When most people think about living standards, they're thinking in terms of quality of life. And when it comes to quality of life, it's easy to underweight the psychological aspect of expectations. In short, not many people in 1973 missed cell phones or the internet, because they didn't know any better. Not many people truly grumbled about the shitty non-cable TV offerings, because they were too busy rejoicing over the color TV that still seemed fairly new and revolutionary (especially with the purchase of that pretty damn good 1972 Sony Trinitron). Lots of the latest technological advancement are neato and cool and fun, and they've undoubtedly enhanced our ability to do things. I'm skeptical, however, that they've really brought us much of that elusive quality known as happiness. Again, 1973's technological improvements at the time seemed liked they rocked, too. When it comes to happiness, I think owning a home, having little debt, and taking comfort in your children's achievements is a better bet. And I'm not so sure these items are more readily available in 2006. I think for lots of folks, they're more difficult to attain nowadays.

Jane's cell-phone/Internet/etc. comment likewise struck me as the strangest juxtaposition one could come up with, since folks by definition do not miss the things they do not have, except during brief forrays into fanatasy and science fiction literature.

Seems to me that a better reason for needing a massive pay increase for willingly returning to the 1970s is, you would need quite a stack of cash to insulate yourself away from the worst aspects of that decade -- social unrest concentrated especially among the lower classes, Vietnam, and the generally lousy economy.

By many of those same measures, something has improved since the 1970s, since crime overall is lower, the economy overall is better including much better employment, and our current adventures into foreign fighting are being executed without the requirement of conscripts, or anything even resembling Vietnam-esque numbers of body bags in which to return them.

I would be very cautious about using health insurance as an indicator of anything. The term is actually rather vague, including anything from Major Medical to comprehensive insurance that includes ordinary doctor's visits, but for some strange reason does not include Medicaid.

Many people to this day only have Major Medical, which has nothing to do with routine health care. In fact, back in 1973, the only health insurance I ever heard of was Major Medical.

"1. My guess is there's an overrepresentation among these types from large, blue state metro areas. And in such places, it's hard to argue with the proposition that it was far easier 35 years ago for an average person to buy a home and support two or three dependents on one salary. Nowadays even relatively prosperous people (making, say, $90k per year) don't have a prayer of being able to support a family on that one salary while buying a home (they could swing it as renters, perhaps, but that's my point: in such areas we do see at least some sign of erosion in living standards)."

This is a function of rent control, open spaces laws, zoning laws and/or tax laws. This has little to do with the market and mostly to do with the populist attacks on the market by rent seeking/influence seeking politicians. And note, the vast majority of the places where this sre considered blue/liberal/Democrat dominated.

Yeah 99, the irony is that the blue staters created their housing price problems. http://libertyunbound.com/archive/2006_02/otoole-houses.html

The point I'm taking from all this is that a numeric comparison of periods more than a few years apart is essentially meaningless. When asking for a raise I'll point to the rise in the cost of gas or rent since last year. But when politicians try to tell me things were better or worse for me 40 years ago I'll just blow them off, because things were different 40 years ago.

There does seem to be rather a correlation evident. Over the last 50 years in Britain, lots of things have improved, largely in the market sector. Most of the government-provided sector has worsened: we're more likely to be mugged, burgled, murdered and so on, our children are less safe, our schools have gone to the dogs, and our much-vaunted National Health Service is in (irreversible?) decline. Galbraith should have been more reflective about why we get "private affluence, public squalor".

JR - Read your post on housing prices - No offense but this isn't a particular Red State/Blue state phenomenon. People that own homes in desirable areas are going to do things to protect their property values and limit supply (this means aggressive zoning most often). There are a number of red state areas where you see the similar effect. You make the mistake of speaking about real estate markets at the state level and roughly correlating that voting patterns. But correlation isn't causation. It's pretty simple really - home owner often want to improve the value of their home by limiting supply. Orange County, CA is pretty red but housing prices have skyrocketed.

I would dispute much of the aforementioned snapshot of British society - it seems more like a brief survey of tabloid-headline viewpoints of Britain than the actual truth. On crime, and the NHS, in particular, there is an amusing tendency of people, when polled, to answer that their own situation is getting better, but that they think the general situation is getting worse. Thus, "I have good experiences of the NHS, but I hear it is going to the dogs".

British crime since the 1980's, and particularly the mid-1990's, is well down. For example, see http://www.crimestatistics.org.uk/output/Page62.asp. The NHS does more each year, albeit with sometimes poor efficiency (though compare to the US rates of spending). Our murder rate is still low compared to the US (below 1.5 per 100,000, I believe, although the yearly number has gone up from 650 to 810 in the last decade), so much so that any gun-murder tends to be nationally reported.

I have no idea what "our children are less safe" means. Perhaps, tabloid-style, this refers to paedophilia? I very much doubt this is anything like as prevalent as it was in the more closed-in 1950's and 1960's. Schools going to the dogs? Again, not sure what this means - perhaps the strain on finances caused by a perhaps misguided attempt to boost university numbers to over 50% without bringing in private money. Perhaps a rose-tinted view of the Grange Hill era shows it as one of uninhibited learning and perfect discipline. But I doubt it.

http://www.statistics.gov.uk/STATBASE/Product.asp?vlnk=11046&More=Y
Road death remains internationally excellent - I think the 3500 people killed yearly is half of similar figures in France, let alone Italy (try driving there, and it is no mystery). More interestingly, I think that it is lower that 1930's Britain.

And so on. There is a timeless tendency of people to feel that their own earlier era was one that held great, normally unmeasurable virtues - I bet the Romans indulged in similar nostaligia. And JK G's rather flawed book was written 50 years ago - and, guess what, he thought things were bad THEN (but probably much better a few decades before . . . )

I'll accept that British road deaths continue to decline, but citing most other govt statistics is fruitless: the decline in their truthfulness is just another decline in the govt sector. As for the NHS, try NHS blog doctor: what he sees, what my own GP sees, and what I have experienced are rather congruent.

In 1970, about 13% of households in the US had no phone whatsoever.

As of 2000, it was 2.4%, and is probably lower as of 2006 due to the massive number of cheap "pay as you go" cell phone plans.

On the other hand, the increasing availability of affordable technology turns them into necessities. A century ago, it was very possible to live a good life without having a car; now, unless you live in a major city or are content being an unemployed hermit, a car is practically an essential expense, and a very large one. If you're looking for a job, you'd better have a cell phone (cheap, yes--but service isn't). And so forth.

people, this is a discussion of CPI. by definition, it's about material goods. so saying people may have been better off without certain goods is irrelevant. the only question on the table is what amount of 2006 dollars is equivalent to a given amount of 1973 dollars, and whether CPI accurately measures that in suggesting that wages have really gone nowhere over the past 30 years for vast portions of the population. it's also irrelevant what people now consider necessities, b/c by definition they are not if people in 1970 made do without them. that doesn't mean people may not be dissatisfied now with a wage that would have been satisfying then (b/c they can see all sorts of shiny things they can't have). but, in theory, the exercise should be little different from figuring out how much it would cost in 2006 to buy what was $1000 in gold in 73 (it's complicated by changes in products, new products, etc., but the question being posed is fairly straightforward).

i think it's easiest to look at this like a retirement question: what amount of money does the person in 1973 need going forward to maintain their standard of living? looked at that way, the person doesn't pay for cable, or a cell fone, or a DVD player, or anything new. somethings get more expensive (gas), others plummet in price (long distance phone calls), somethings have prices that remain roughly the same over time (entry level mountain bike) but quality goes way up, the ford fairmont is replaced by a 5 or 6 year old accord, etc. the resulting lifestyle would be out of step with current expectations, but would demonstrate how little you would need to live like someone from 1973 (and what you would give up by going back there with even double the salary).

"These are the days of miracle and wonder. . ."

-Paul Simon, Boy in the Bubble

"people, this is a discussion of CPI. by definition, it's about material goods. so saying people may have been better off without certain goods is irrelevant. the only question on the table is what amount of 2006 dollars is equivalent to a given amount of 1973 dollars, and whether CPI accurately measures that in suggesting that wages have really gone nowhere over the past 30 years for vast portions of the population."

Try as they might, the costs of equivelent items just aren't really comparable across too much time, because equivalent items don't exist. While the cost of a phone, may be higher, it now comes with caller id, is wireless/recharageble, and so on.

The computer on my desk, that cost $800 in today's money, would have gone for $1,000,000+ in 1955. Hell, I think my PDA is more powerful than the computers they sent a man to the moon with.

The point is, WHAT the money can buy is worth more today than what it was 10/20/50 years ago. Where is the quality improvement captured in CPI? Where is the saftey captured in CPI?

Homes are safer (fewer fires and electrocution deaths as GFCI has been added in local codes, earthquake and hurricane resistant codes have been implemented), bigger and generally more comfortable. Oh, and they cost more...duh...

Mobile phones were available in 1970. I have not been able to track down any information on what the service cost but I do recall that there was a six month waiting period just to be allowed to sign up, yoou placed your call thru an operator, and it was half-duplex (push to talk) only.

I work from home via the internet. I travel a lot. I have thousands of dollars in camera and video equipment. I do not care what toys I have as long as I can support my family and spend time with them. That's what matters to me. All this stuff you can buy is nice and I get caught up in it like everyone else, but we're always so quick to say money doesn't buy happiness without thinking it really does indeed buy happiness in the back of our heads. It doesn't. Your stuff can bring you some temporary fun, but your life will not be fulfilled without more.

I don't want to reprint your entire comment, nomorestuff, but the ability to work from home via the internet and presumably to see digital pictures or webcams of your family with your thousands of dollars in camera and video equipment while you travel a lot(assuming you travel for work) - enables you to both support [your] family and spend time with them in a way that wasn't possible for most people even 10 years ago, let alone 30+ years ago. Indeed, your stuff seems that it brings more fulfillment to your life than you realize.

Dear Pedant: Although in the Aesop Fable the lion got all, the phrase is no longer defined that way. It means the largest share or a disproportionately large share(an accurate description of the subject being discussed). Check Dictionary.com.

No way in hell do I go back to 1973. I'm allergic to latex, polyurethane condoms weren't invented until the 1990s and the lamb ones don't work all that well.

I got laid little enough in college, no reason to exacerbate it.

I've always wondered... if money can't buy happiness, why exactly am I supposed to care if people are poor?

It would be hard to live without some modern conveniences (imagine having to do statistics without cheap personal computers!). But the real killers, if you'll pardon the expression, come in medicine. How much will you pay for baloon angioplasty in 1950?

Emily,

You said

"A century ago, it was very possible to live a good life without having a car;"

You are sadly mistaken.

A 100 years ago a hangnail or small scratch could kill you (no antibiotics), medicine was primitve, childhood mortality was high, effective ways of cooling food in the house were non existent, transportation was tough, jobs were dangerous and in more ways then you and I could probably imagine it was a very tough existence.

I wish more people realized how tough things were back then it might take off some of the rose colored glasses when looking at the past.

I was about to say that most of America didn't value the internet as highly as you and I did, but then realised that they do. Genealogy and porn are perfectly valid reasons to use the internet. I'm not being snarky. This is what more people like than economics blogs. A lot more people.

The CPI probably understates inflation because it doesn't take into account things like college tuition, house prices, and medical insurance. Government has an incentive to lowball the CPI.

Since it is a given the the CPI *cannot* be a measure of what it is officially supposed to be (the cost of a constant basket of goods and services), or more accurately, such an index would be useless of *any* purpose, perhaps it is best to look at what CPI is *actually* used for and estimate how well it performs that task.

Its main use, as I see it, is to relatively measure how many dollars it takes to maintain a certain level of perceived wealth (and that level being a lower-middle class level). For example, not owning a television certainly didn't put you out of the middle class in 1920, but it would certainly do so today. A cell phone is now considered a necessity for a middle class life, etc.

Such a CPI is useless for determining whether you are "better off" than in the 1970's. The question itself is essentially meaningless given the impossibility of comparing the advent of personal computers against the increasing cost of a home. There is no absolute measures in such cases. Likewise, the CPI should measure the substitution effect (as oil becomes more expensive, should mass transit get a higher weighting, etc.)

The CPI's point is not whether you would prefer to live in the seventies or the naughts knowing what you know now, it is whether you would have the same social status in the 1970's with $x and as you would in 2000's with $x x CPI.

To be honest trying to compare whether you would prefer to live in the 1970's or the 2000's is seems useless. You live in the current era without the future to compare to (and a damn good thing). So, of course we'd all prefer to live in the 2000's, the real question people are trying to answer (and it's doomed to failure) is who would be happier: A person living in the 1970's, or that same person in the 2000's?

(This is part and parcel of the same question as "did the Native Americans benefit from the coming of the Europeans". Well, not many would prefer to go back to the pre-European life style now, but at the same time it's pretty hard to imagine that the median level of Native American happiness is higher now than it would have been in the absence of European intervention.)

Dan, good point. I may steal it for my email signature.

99: Interestingly, I make about $90K, live in an urban (downtown Denver) area and have supported two people (myself and my partner - no kids) for several years. We live very comfortably. Adding one child to the mix wouldn't be a problem financially. There would be more child-toys and fewer adult toys.

I would hope $90K can support a family. It's a LOT of money. If someone cannot maintain a family at that income level, the problem is not with the system; the problem is with him.

It would be easy to support two people - kids would be much harder - at half that income. Almost two-thirds of my take-home pay goes to the house. Simply getting a much smaller house or renting would make almost all that money available (electric, heat, water, mortgage/rent, and maintenance would go from about $3,200 a month to about $600 just by selling the house and moving into the apartment building across the street).

For example, not owning a television certainly didn't put you out of the middle class in 1920, but it would certainly do so today. A cell phone is now considered a necessity for a middle class life, etc.

But there again, is it measuring whether people have them or whether they can afford them? Maybe the numbers are large enough that the extraneous cases disappear into the noise, but FWIW I know a handful of squarely middle-class families -- my own parents included -- who decided to never have a television in the household on the basis that latrines should flush out, not in.

I can relate similar stories regarding very limited or complete lack of cell-phone ownership, again not because the expense was absolutely unaffordable, but because nobody wanted to be enslaved by the monthly service charges.

shamus, why do you assume that the CPI "doesn't take into account things like college tuition, house prices, and medical insurance."? Based on what? It explicitly takes into account all three.

http://www.bls.gov/cpi/cpifaq.htm#Question_7

It took me all of twenty seconds to find this document, starting from http://tinyurl.com/s4vuq [which I admit was not available in 1973].

Detailed lists may be a tad harder to find, but I saw no reason to bother because shamus gave no evidence for hir claim.

-dk

But there again, is it measuring whether people have them or whether they can afford them?

Obviously the CPI index is only concerned with affording them. Someone who chooses not to own a TV may certainly be middle class. Those who cannot *afford* a TV would be considered poverty stricken (in the United States) by all around them (except for a few conservatives :-))

Tom: You can get a used TV set for less than $20. Those that can't afford them also could not use them, since shopping carts and packing crates don't come with electricity.

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