Arnold Kling  

Improved Standard of Living

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In my latest essay, I argue against the view that life is getting harder for all but the rich.


In the 1970's, ordinary working people drove Vegas and Pintos. They did not eat out much. They rarely traveled by airplane. Many of their jobs were dangerous. Do you really think that there are many working Americans today who would trade places with their 1970's counterparts?

For Discussion. In what ways has life gotten better in the past 30 years, and in what ways has it gotten worse?


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CATEGORIES: Growth: Consequences



TRACKBACKS (2 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/92
The author at ProfessorBainbridge.com in a related article titled If you read nothing else today, read this writes:
    An absolutely must-read TCS column by Arnold Kling How Much Worse Off Are We?:Today, there are two Americas. One America agrees with Congressman Sanders and Senator John Edwards that life is getting harder for working Americans, that things have been [Tracked on July 15, 2004 11:34 AM]
The author at Houston's Clear Thinkers in a related article titled Revisiting the 1970's - Are we better off? writes:
    Arnold Kling provides this excellent TCS article in which he forcefully reminds us that the standard of living for the vast majority of Americans is far better now than it was 30 years ago. The entire article is a must... [Tracked on July 16, 2004 8:10 AM]
COMMENTS (13 to date)
Mcwop writes:

Arnold I think your theory is correct, but one might wonder do we “feel” better with all of these things that contribute to a better standard of living? I have a few thoughts here.

News is now so pervasive that it affects how we feel. CNN, Fox, MSNBC, and all the web news channels present so much negative news that even a healthy millionaire might get a bit depressed.

We have much more stuff, which is good and bad. The essence here is all that stuff competes for our time, and time is not something people will claim they have more of these days.

Our expectations are different, and perhaps we are a bit spoiled. We expect there to be a magic pill for our every ill, and when that pill costs too much or does not work – we get upset.

Bernard Yomtov writes:

In what ways has life gotten better in the past 30 years, and in what ways has it gotten worse?

Better: I have more money than I did 30 years ago.

Worse: I'm 30 years older than I was 30 years ago.

Oh. You meant for everyone. Sorry.

Matt writes:

I'm not sure I follow Brian Leiter's response to your piece:
http://webapp.utexas.edu/blogs/bleiter/archives/001648.html

For starters, I thought the subject of the debate was whether life had gotten better for the working class, not what the cause of that improvement was. In that case, the fact that the price of telephones (and other technologies) has gone down seems to support your point, not Brian's.

Second, regarding the data on leisure time, the information you provide regarding 1875 vs. 1995 might not settle the issue of 1970 vs. today, but it is indicative of the large-scale trend. And, in fact, the data do appear to support the conclusion that we're better off in these terms today: 528k lifetime hours of leisure today vs. 488k in 1973, according to Cox and Alm (1999).

Lawrance George Lux writes:

Food Costs down, but Food quality also down. Education costs up, and educational quality actually down in the lower 12 Grades. Utilities actually higher percentage of basic Household expenditures. Medical Costs up while basic medical service declined. Insurance costs vastly increased, while coverage remained mediocre. Retail service and Warranties much better, but totally designed to lock Consumers into a periodic Credit-financed repurchase program. This is the exchange We made for the improvements from the 1970s. Those improvements were substantial, though, and must be given weigth: We have higher Household debt, We have higher-priced, but actually lower quality housing, and the Middle Class makes up 14% less of the total population according to some estimates.

I lived through the 1970s, and I am still alive today, so that is something. I personally think the proliferation of services We have today incites too much taxation, while unlimited Corporate Price schedules adversely affect the American standard of living. A Worker in the 1970s had only to keep his job, and he could pay his bills, buy his house, and have about 12% of his Income for entertainment or savings. Today, he is likely not to have Life or Medical insurance, and his Car insurance is a major factor of his income. The privilaged Elites--wealthy or educated professionals--image life is better in 2004, but the Working Poor are the ones to ask--they have to live in an inflated-cost life expenditure pattern. lgl

John Doe writes:

The 70s were sort of the second depression, so of course people feel better now. What about the 60s?How many hours do you have to work to buy a car or a house now? How about crime? People back then got so much back from Social Security they were effectively not taxed. How many trillions are we in the hole for now? There has been a tug of war between technology making us richer and safer and the government making us poorer and less safe.

Sam Jew writes:

I agree with the prior two posters. Why arbitrarily choose the 70s as a baseline? Why not the late 90s?

The relevant question to be asking is, are we better off now than we were four years ago?

Mike Everett writes:

A major improvement over the past thirty years has been the expansion of the investor class, an expansion partly the result of the defined-contribution plans, IRAs, 401(K)s, and so on, that began in the '70's. At the end of the '70's, less than one in five Americans owned stock, today more than half own stock. This change has enormous implications. People have more control over retirement and leisure and greater interest in economic issues and results.

Lawrance George Lux writes:

Mike,
The increase of investment spread will be a major alteration, but only under the condition that Investors are able to withdraw their funds. Markets are maintained only by keeping funds within the Market. Siphoning funds from the Markets will reduce Stock and Paper prices, as funds are not there to reinvest. Are Investments the proper way to plan for retirement? If and only if succeeding Generations with sufficient cash think to replace the investment funds which Retirees withdraw for their expenses. Failure in this pipeline reduces such retirement plans to the position of the SS program. lgl

The 70s were sort of the second depression, so of course people feel better now.

DSpears writes:

I would submit that the 1960's and the 1990's were boom times that couldn't last and shouldn't be used as a barometer.

The economic policies of the 1960's, especially the loose credit practiced by the Fed on the theory that Lyndon Johnson and John Maynard Keynes had put an end to the business cycle, lead to the stagflation of the 1970's. In the short run, loose credit (i.e., printing money) can act as a driver of economic growth, because it fools people and businesses into thinking they have more money than they really do. It takes years for the effects to be fealt in inflation. The loose conditions started in the mid-60's and resulted in very good economic growth, short-term. By the end of the decade inflation was increasing steadily. In the long-term people figure out that what they thought was an increase in wealth was really just an increase in the number of dollars in circulation, each one worth less than they thought. Onmce inflation starts to be factored into everybody's thinking, the game is up.

If the good times of the 1960's were really the baseline, then why couldn't they have been exteneded until today? Because they were based on economic conditions that lead to short term gains but had dire long-term consequences.

The 1990's were similar, but instead of stagflation, the excesses showed up in the stock market bubble, which burst.

Also, since then the world has changed a lot. 9/11 has shifted the US into a mode where security is more important than in the 1990's when international terrorism was believed to be something that couldn't happen here (however myopic that view was). I have seen estimates of up $1 trillion dollars of potential GDP has and will be lost every year due to the inefficiencies produced by all of the increased security in the post 9/11 world. What effect does a decrease of $1 trillion dollars GDP do to the so-called "full-employment" rate?

The blissful economic world of the 1990's where all you needed to get a billion dollar IPO was to create a website that would sell dog food, where everybody believed that the business cycle and inflation had been permanently done away with(we seem to come to this conclusion about once a generation), that world peace would be the norm for as long as the mind could imagine, and that the most dire national problem was whether or not the president should be allowed to lie under oath about cheating on his wife.

Those were good times, but as the events of the last few years have shown, we were just walking around with blinders on ignoring what common sense should have been telling us. We all did it, and I suppose nobody is more to blame than anybody else. The president did what the polls told him, and the polls told him that international terrorism wasn't an issue.

The country is most certainly NOT better off now than it was 4 years ago. The reality of teh post 9/11 world alone makes that obvious. It's a silly question. 4 years ago we were blissfully ignorant. We couldn't go back even if we wanted to.

Sam Jew writes:

The 90s were the era immediately following allowing public use of the Internet, which had the potential to dramatically improve business efficicencies. So of course there was massive investment in the "e-business" sector. Although it did end up becoming overinvested in to the point of being irrationally exuberent, capital was still available for other purposes such as the purchase of t-bills, even at lower rates of interest, and inflation ended up not being an issue, presumably because of increased efficiencies. Of course, part of the increased efficiencies also included making it much more convenient to tap foreign labor....

Therefore, the main economic issue we're now facing is the structural change that added 2 billion poor, desperate people to the available labor supply.

Rick Stewart writes:

We need a definition of what makes life 'better.'

I suggest a longer life is better, as is one with less physical pain. And we probably shouldn't value living with Alzheimers, etc., very highly. Economically life is better when one has more money (one can do everything one can do with less money, plus have the option to do something additional).

Other than obvious improvements in these areas, life in and of itself is probably no 'better' or 'worse' than it was 30, 40, or 1000 years ago. Mihaly Csikszentmihalyi's 'flow' seems available to just about everyone who is alive, thinking, and not in physical pain (see above). It is neither created nor destroyed by money. Although the option value still exists, I doubt Americans have exercised that option to actually create more 'flow' in their lives.

The 'would you trade' question is deceptive - just because people are willing to make the trade, does not mean they will actually enjoy life more after the trade is made.

Sam Jew writes:

"I doubt Americans have exercised that option to actually create more 'flow' in their lives."

Actually they did. In the decade prior to the 70s.

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