David R. Henderson  

Our Standard of Living

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Radio Shack has put its catalogs for 1939 to 2005 on line. They're worth a gander. Choose any date earlier than 10 years ago and you get a feel for just how much our standard of living has increased. The items are generally what we regard as junk--and they're expensive.

Some examples:
1976-77, pp. 4-5: An AM-FM radio and cassette tape deck for $179.95.
Same page: 8-Track Stereo player. Yes: 8-track. Price: $149.95. BTW, that's some evidence against the path dependence idea that we get stuck with lower-quality stuff because of first-mover advantages.

1949: pp. 2-3: Amateur transmitter for "only" $1450.00.

1985, pp. 1972-173: MS-DOS computer, $4250.00.

Schumpeter, in Capitalism, Socialism, and Democracy, said:

Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.

What these Radio Shack catalogs show is that Schumpeter dramatically understated the case.

For more about standards of living, see John V.C. Nye, "Standards of Living and Modern Economic Growth," in the Concise Encyclopedia of Economics and Brad DeLong, "Cornucopia: Increasing Wealth in the 20th Century."

HT: Mark Carbonaro.


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CATEGORIES: Growth: Consequences



COMMENTS (31 to date)
redbud writes:

Here's an interesting link showing how MUCH MORE we can buy, even at minimum wage. Sears catalog for this one.

http://mjperry.blogspot.com/2009/08/min-wage-stuck-in-1950s-its-not-even.html

Chris writes:

Holy cow, if the price for the amateur transmitter is adjusted for inflation, it is costs the equivalent of $13,000 today!

Steve Sailer writes:

Next, you should look through some real estate ads to see how much homes in, say, West LA cost that year.

Man, we're so much better off!

agnostic writes:

The radio / cassette player isn't a good example. The value of it comes from what music it allows the listener to enjoy. Bearing that in mind, a radio in 1977 was worth a million dollars. (See a recent EconTalk podcast with Meyer on the music industry for some recap on how great radio used to be). With what's on radio now, both music, annoying ads, and DJs, a radio isn't worth a red cent.

Same with the cassette player. What the typical iPod owner listens to is junk compared to what the typical tape player owner was listening to in 1977.

agnostic writes:

"how much homes in, say, West LA cost that year."

Or all of the many costs of putting your kids through secondary school and higher ed. Not just tuition and room & board, but tutoring, testing fees, college counselors, getting a house in a "good neighborhood" with "good schools" (wink wink), foregone wages for the kid for doing 40 hours of resume-padding junk outside school instead of working, foregone wages for the neurotic helicopter parent who makes a part-time job of "helping the kids make it to a good school" instead of their day job or just relaxing, and so on...

redbud writes:

I paid around $3000 per Kaypro computer in 1983. Had a program disk to read, and a file disk to write. No hard drive. Weighed about 40 pounds, but they were portable!

We couldn't even exchange disks, as the heads couldn't be aligned to match. Each one was an island.

The increase in technology and performance is astounding. Our Macs today are absolutely awesome, and they are about $1000 each, with big hi-def screens.

mulp writes:

So, basically, because Africans and Asians across all income levels have access in many cases to cell phones which are far superior to anything offered in the 1950 Radio Shack catalog at any price, almost everyone in Africa and Asia lives at a higher standard of living then an American in 1950?

David R. Henderson writes:

@agnostic,
The point Sailer and you make about houses is a good one. The point you make about iPods: not so much. It's called revealed preference. If I have access to the same music people had in the 70s and I choose different music in 2010, I'm showing what I prefer. You might not like it, but you don't need to. You get to listen on your iPod to what you could listen to on a cassette in the 70s. So you're better off in that respect too.

AMW writes:

So, basically, because Africans and Asians across all income levels have access in many cases to cell phones which are far superior to anything offered in the 1950 Radio Shack catalog at any price, almost everyone in Africa and Asia lives at a higher standard of living then an American in 1950?

No. But it probably means that a lot (most?) of them are better off than Africans and Asians in 1950.

Yancey Ward writes:

Come on, David- everyone just knows Americans are no richer than they were in the golded age of the 1950s and 1960s.

Bill writes:

In 1987, I bought a Mac SE and a dot-matrix printer for $3500 using my university educator's discount. The processor had a clock speed of 8 MHZ, and the machine came equipped with 1MB RAM and a 20 MB hardrive.

SymbolicalHead writes:

I'm a little concerned by using objective technical detail for measuring our standard of living.

People often comment on having a computer that had X MB of RAM, or a Y MB disk back in "the before time." I'm one of them.

They rarely talk about what they can _do_ now that they couldn't, though it is a lot. The "do" is taken for granted as contained inside the MHz and MB.

My objection to that is a standard one of diminishing return.

There was a lot that couldn't be done with a 20MB drive than can with 200GB. I'm not convinced that we will see the same benefit when we are talking about 20000GB drives. I just don't think there is that much we want to do that we aren't able to do now.

More and better video is the most intensive thing I can think of, but I still don't buy it. Downloading some show in the future in HHHHHD instead of HHHHD isn't going to make my life twice as good, and it isn't going to do for me what just being able to download a show at all did.

Maybe I'm wrong, but by using instructions/s and memory size as a proxy for living standards, I see someone saying:

Average desktops now have 24GB of RAM. Forget the price of corn. Don't you realize that you're six times better off in 2015 than you were in 2008?

Without ever trying to account for what I can do in 2015 with 24GB that I couldn't already do in 2008 with 4GB.

Phil writes:

BTW, it's not Radio Shack who put the catalogs online, just a fan. The site states at the top that it's not affiliated with Radio Shack.

agnostic writes:

Heh, I was only half-joking about the music on iPods vs. cassette players.

Revealed preferences don't matter here, though, since we're talking about standard-of-living. In ordinary usage, that refers to a set of domains where the ranking within each domain is objective though fuzzy, which the social scientist tries to figure out as best he can. This over-rides any potential disagreement with subjective preferences of the groups being compared.

So for diet, we try to figure out how various diets rank from better to worse, regardless of changing fashions. A good fraction of the population are nearly de facto vegans, despite having access to animal products that are as expensive or less than the non-animal stuff they rely on.

Still, I claim a mostly vegan diet lowers the standard-of-living. A vegan would argue the opposite ranking. We try to figure out who's right by appealing to biochemistry, anthropology, history, etc. All of these point to me being right, but that's the level the argument takes place on -- who is closer to understanding the objective ranking of diets? Neither of us relies on subjective preferences.

Similarly, I claim the music listened to on a typical cassette player in 1977 was better quality than the music listened to on a typical iPod today. Someone else claims the opposite ranking. Consulting all lists of best songs in any genre, in just rock, in just R&B or soul, whether anthem or ballad, celebrating love or expressing heartbreak, my hunch looks closer to the objective ranking than does the iPod-music defender's.

Again, half-joking, but there is something there. The point to be made is that arguments about the standard of living improving, staying the same, or declining never rely on subjective preferences, as fashion etc. could make people prefer an objectively lower standard of living. Rather, it's an almost aesthetic argument about what objectively brings human beings closer to the good or beautiful life.

Steve Sailer writes:

Have you also noticed how much faster we can fly from LA to New York today than in 1977? Back then, those poor shnooks could only fly 560 mph. Today, we take the hypersonic suborbital shuttle and it gets us there in 45 minutes, then we get picked up at the spaceport by our autopilot flying car and we're home in ten minutes.

Rebecca Burlingame writes:

Okay, this is a no brainer! If we are talking about consumer goods which the producer perceives are not totally necessary for survival, the price has dropped with time because the producer is competing with many others to provide us much more than we could have had in 1960. The bar for entry is not as high in these areas either, a high school education may well suffice. Whereas housing, education and healthcare are not only perceived as necessities but are presented as total packages with many components that are not negotiable by the consumer. Hence, these necessities have gone up in price instead of down.

Jeremy, Alabama writes:

Poor people are worse off now because there are more things they should not be spending their money on.

Tom Dougherty writes:

People are worse off now than they were 50 years ago because we have so many more whiners now than ever before.

Yancey Ward writes:
Have you also noticed how much faster we can fly from LA to New York today than in 1977? Back then, those poor shnooks could only fly 560 mph.

Poor sknooks didn't fly, the cost was far too high.

Yancey Ward writes:
There was a lot that couldn't be done with a 20MB drive than can with 200GB. I'm not convinced that we will see the same benefit when we are talking about 20000GB drives. I just don't think there is that much we want to do that we aren't able to do now.

Thats just it- when a 20MB hard drive was state of the art, no one had a real idea what you would use a 200GB drive for (really, who could possibly create and store that many Word files or Excel Spreadsheet data?). Digital video storage wasn't even on almost anyone's radar who wasn't actually involved in inventing the stuff to come. 20 years from now, we won't be able to understand how the cavemen of today managed to do anything without their 1000TB on their cell phones inplants.

redbud writes:

A $1000 piece of software on a $1000 Mac now approximates a TV station production suite.

Have you tried printing digital photos at Walgreens? Do it at their kiosk, or email the files, and pick them up at the store in an hour. Tried making a custom photo book at Walgreens? Amazing.

It's incredibly easy to format and print a book, complete with ISBN required by retailers.

Soon-to-be-marrieds can register LONG lists at several stores, online.

Productivity tools are amazing.

ajb writes:

You might consider Nye's article on Irreducible Inequality right here at Econlib which addresses the issue of standard material goods vs positional goods like housing:

http://www.econlib.org/library/Columns/Nyepositional.html

Vacslav Glukhov writes:

I am reading Schumpeter's "Depressions, Can we learn from past experience"/1934, and it's not the similarity between the railroad boom and, say, the Internet boom, that strikes me but the following paragraph about 1873 that begins with:

"American speculation collapsed in September, carrying with it, almost immediately, the failure of brokers and many banks. Others had to suspend legal tender payments... It was the market for railroads that suffered most, and the speculation in lands that went to pieces most completely..."

and ends with...

"It would, of course, have been possible to prevent the preceding boom. But this would have strangled also its achievements."

SymbolicalHead writes:

@Yancey

I wrote one long reply, but I think I'll take another tack.

I think people are both too starry-eyed about tech, and not starry-eyed enough.

They imagine this amazing future full of the computing equivalent of flying cars (except no one knows what they are, only that they'll be amazing).

What they don't realize (and the source of my skepticism) is that we are already there and no one noticed.

For $500 you could store every book ever written by man, with room left over for the audio version. When do we get excited? When it hits $350?

I've got every work by Bach, Mozart, Beethoven, Brahms, Haydn, etc. It fits lossless compressed on a drive that you can buy for $85 with 2/3rds free space left over. It wafts wirelessly to any room in my house that I pick.

I'm jumping out on a limb, I know, but I don't think it is going to get much better than this.

Better, yes. Easier, yes. But incrementally better, not transcendently better. Not the kind of better that was had going from piano rolls to FLAC, or even from records to FLAC.

It is hard to improve on "every" and "all", which is rather the problem.

Once you have all the music you can listen to, all the books you can read, and basically all of human knowledge available to you, and yes, even wirelessly streaming video-on-demand to your TV, all of which costs about $2/day, I'm not waiting for things to get 10x better: we're here.

To apply that to my earlier critique about MHz/RAM, people so underestimate what is possible with 4GB of RAM they overestimate what will be possible with 24GB. What could you not do?

They rely on some unknown something that no one has thought of till now to come in. But the things that are important: books, music, art, entertainment, science, communication, etc. people have written software to do.

There is always room to improve that software, sometimes lots of room: make it easier, better, etc. However, that improvement is now almost always about trying to better understand how people use it and writing the software to incorporate that understanding. It's not about throwing hardware at it to make it faster, even though hardware is easier to measure.

I'm certainly not counting on that improvement to come from some entirely new avenue of human experience that no one had thought of till now.

To take one more stab with a different analogy. I can listen to music now at 24b/192kHz, which is already far wider in bandwidth than the human ear. Would 32b/384kHz change my life?


*After thought*
One truly world-changing thing would be some sort of tech/mind interface where you could access all of this directly with your mind. Personally, I think that is too creepy to ever have, but it would be transcendently different.

Yancey Ward writes:
I'm jumping out on a limb, I know, but I don't think it is going to get much better than this.

SymbolicalHead,

You don't mention how old you are, but if I had to take a wild guess, I would say you are in your 20s. I grew up, for the most part, in the age before personal computers and in the age of vinyl LPs. I can remember when PCs first hit the mass market, and a common complaint was that no one knew what to do with one. To take your analogy about music, people thought the vinyl LP wasn't "going to "get much better than this". Along the way, people thought the same thing about cable television, VCRs, compact disks, and now about DVDs and MP3 players. If you plucked a person out of the 1890s and landed him in the 1930s, he would be knocked on his ass by the goods and services available, most of which he would not have even been able to wish for because they weren't within his range of experience and imagination. The same thing would be true of a person removed to the 1970s from the 1930s, and of a person from the 1970s to today (me, for example). I promise you, in 20 years, there will be many somethings that you will think then couldn't get much marginally better that you don't even conceive of today because they simply are not available yet- not even to wish for.

SymbolicalHead writes:

@Yancey

Even if you are right*, you are still missing my main point, which was that you can't measure this kind of progress by clock speed.

Zune allowing _you_ to listen to _my_ music on-the-fly and from half a world away; or Pandora picking out music it "knows" I will like, are progress, but aren't easy to measure.

Twice as many MIPS are easy to measure, but may not be providing anything like the same benefit to my standard of living.

I'll take one good idea over 10x as much RAM any day of the week.

To reiterate, my primary objection is to the assumption that RAM in GB or speed in GHz can be used as proxies to measure progress in the standard of living.


[*I'm not certain that you are in terms of the _rate_ of progress, only because you are missing the main point of digital. It is costless to produce, infinitely transportable, and essentially indestructible (since it can always be replaced).

Improving on a record is easy: you make it free to produce, easy to use, and you make the physical medium unnecessary so that you can always have it with you, and it is impossible to lose or break. That is, you make it what we have now.]

Carl writes:

Information technologies (computers, bandwidth) double in nominal output (MIPS, not dollars of benefit to consumers as displayed by revealed preference which go with something like the logarithm of computing power) every couple years, while developed country GDPs (inflation-adjusted based on people's actual consumption baskets, which are mostly non-IT) double on a scale of decades. It seems like a bait-and-switch to make statements about standard of living based on the *only* significant sector of the economy where the amount of product we can produce per unit of labor has grown an order of magnitude faster than economy as a whole.

Tracy W writes:

Similarly, I claim the music listened to on a typical cassette player in 1977 was better quality than the music listened to on a typical iPod today. Someone else claims the opposite ranking. Consulting all lists of best songs in any genre, in just rock, in just R&B or soul, whether anthem or ballad, celebrating love or expressing heartbreak, my hunch looks closer to the objective ranking than does the iPod-music defender's.

Now you are fully joking. In 1977 rap was only just getting started, and we didn't have grunge at all, so how could the best songs in those genres already been written?

Plus the iPod listener can listen to all the top songs that were around in 1977 as well.

I suspect this is an age thing. I was born in the 1970s, so the music I was listening to as a teenager included a lot of stuff written after 1977.

Yancey Ward writes:

SymbolicalHead,

But you are missing the point- your argument would have been just as valid or invalid if you had made it 20 years ago. You don't know what a 100-fold increase in computing power/storage capability will bring, but you are just assuming that it couldn't possibly improve much on the things you have today (this may or may not be true, as I pointed out), but you are completely missing that a lot of things you have today, as a result of that increasing computing power, weren't even on the radar of wishes 20 years ago. I see absolutely no reason to assume diminishing returns on increases in such fundamental concepts. For every technology that plateaus out, advances in computing power have lead to many others that we didn't even wish for 20 years ago. Exactly why should we expect this to change now? You haven't even made an argument, just an assertion that isn't supported by even the trend of the last two decades.

Curt Doolittle writes:

Regarding Tech and Storage, and the idea of 'finite content' as an allegory to the 'end of history':

Humans are notoriously victims of boiling-the-frog biases: they cannot sense long term changes and discount prior (and forgotten) opinions for current ones. Inter-temporal cognitive biases are legion.

We are going to store increasing amounts of data - nearly endless in quantity. And as that data accumulates we will transform business, social life, and the economy. Think of it along these lines:

We have decreased the transportation cost of content. But in doing so we have reduced the barrier to distributing content. The problem will be whether we become better at the use of the available content, or whether we can synthesize something from all that content, good and bad, and produce another generation of new content. Frankly, as the number of channels with weak or repetitious content demonstrates, we are short of content, and innovative content is becoming very expensive to produce.

Or are we stuck with the same limited number of permutations of our basic narratives, and stuck with the same very large number of human cognitive errors and myths, and destined to live under the eternal problem of pedagogy: the vast number of permutations of the same content needed in order to convey the same 1500 ideas (that's all there are) to billions of people in hundreds of cultures, all at different ages, at different states of development, each solving different problems in the context of their own individual experiences? Can we produce the conceptual equivalents of the mono-myth is each of our fields of study? Can we simplify pedagogical symbols as if they were fundamental truths, when such truths would be contra-beneficial to some cultures, races, classes, and much more beneficial to others?

As someone who does a painful amount of research, it is vastly easier today to learn anything at all than it was even five years ago. And compared to library-trading obscure works in college, vastly faster. What will come of this availability of information, or rather the frictionless availability of information?

Our accounting standards are a catastrophic block on data collection, because as they exist, they launder causality - accounting as we practice it is the dusty remnant of a bygone age of sea voyages. if we changed to tagged accounting data we would produce volumes of data for mining that cannot be easily found today. What would this mean for data and analysis? Taxation? Policy? Product development? THe structure of the corporation and credit cycles?

There are a number of startups producing hardware that you wear around your neck, and that take photographs every second, and record all sound all day long, creating a visually indexed record of your day. How would a storage system of that nature change the world?

Privacy is changing because we are socializing a new kind of manners wherein everyone is expected to be flawed, or imperfect. How will that change the world?

From a product and service manufacturer's standpoint, the typical economic analysis using factors of production is antiquated. The primary problem for most companies is to produce a product that is interesting enough to purchase. All other things being equal, today people are purchasing almost entirely aesthetic objects for purely status-seeking and therefore opportunity-seeking purposes. The price of materials is not an issue any more than is the price of food. How is this design-economy accounted for in our models and how does this affect the craft of economics, when the design function is not as visibly a factor of resource costs?

Companies do not measure their brand potential (the sentiment of consumers toward a company and its products and how that sentiment is convertible into revenue) as a form of equity. If investors could see this information, how would that affect management of companies? If it becomes increasingly easy to measure it, how will that affect markets?

In the post war period, social democratic society was unified under a proletariat-and-middle-class system of inclusion-and-status-seeking-through-consumption. Now that the consumer society is 'saturated', and status due to ownership is insufficient to provide access to opportunities, (because everything is so cheap) how will people express their identities as purchases?

Each nation state has a different IQ distribution. (If you don't like the reality of it, I'm sorry.) Since there are material thresholds to the learning of, and use of, abstractions, there appear to be limits at 130's for designing and using ideas, 122 for designing machines, 110 for a classical education. 105 for repairing machines. How will this affect the markets, demand for technology, or the lack of demand for it?

There is no end of history. The problem of human coordination and cooperation is an endless process of temporal calculation for intert-emporal ambitions. The great revolution in farming took thousands of years to span the globe. The revolution in scientific thinking started by the anglos has only been in process for eight hundred years. The great revolution in production (and calculation) of the Anglos has taken only five hundred so far. But it has been a bloody process of resistance to change.

There is no end of content. Because there is no end of history.

There are a limited number of fundamental truths available to man. But fundamental truths are not as useful as we think they are. THe coordination of human beings toward shared goals requires that they believe in myths. And truth will only hinder their achievements. Combined with the human drive for status, and the different abilities of men - some less, some more - the permutations of myths (or deceptions) will create similar themes as we have seen in the past, forever. And the media and data used to distribute those infinite permutations will do nothing except increase in scale. ***Because, in the end, the primary purpose of our data collection is political in nature.***

It always has been.

nils writes:

Generally, products/services with little government regulation has become cheaper, and vice versa for stuff with plenty regulation.

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