David R. Henderson  

Now versus 1973

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Another Half-Baked Model... Existence, Enhancement, CPI Bi...

There's been a lot of discussion in the blogosphere lately about whether we're better off--and if so, by how much--than our counterparts in 1973. Scott Sumner has added his thoughts. Here are my further thoughts--prompted by Scott and by some of his commenters.

There are two big issues. One issue is whether we're better off now than in 1973. The other is whether, if we had the same number of nominal $ now as we had in 1973, which set of goods and services (1973 or 2011) we would choose. One could easily answer that he would choose the 1973 set. But if one answered "I would choose 1973," all that would say is that there's net inflation. The net inflation could be as little as one percent a year. In other words, with the same number of nominal $, one could choose 1973 and still, with 4 times the number of nominal $ today, choose to be around today vs. in 1973 at the same age.

So the big issue, if we're talking about the existence or non- of stagnation is the second one above: whether we're better off today and by how much than in 1973. I vote for today.

. One comparison people on both sides of the issue make is on cars. Commenter Mark A. Sadowski pointed out that it takes actually a few more weeks of median income today to buy the average-price car today: 22.1 weeks in 2009 vs. 17.5 weeks in 1973. Good point. Here's the problem. Think of how crappy the average car was then, compared to now. I'm thinking mainly repairs, which are a huge time and money sink. It's not at all unusual to go 80K miles in a car bought recently without much other than oil changes and new tires. That was almost unheard of in 1973.

. There's a huge discussion on Scott's site about the quality of music. Irrelevant (almost.) Whatever music you had then, you have now, plus new options for music produced since 1973. My life would be much poorer without Enya, Journey, Amy Grant, and Norah Jones. (OK, you snickerer--that's right--you. To the back of the room with you. :-)) Why the almost? Because I can't find on-line one of my favorite pieces of music ever: "It's a Beautiful Day" by the Beach Boys. With vinyl records still in existence, I'd be able to buy another one. You probably have your examples too.

. Commenter W. Peden points out just how far Britain has come. It's a long list of positive developments.

. Health care. Commenter Russ Anderson says this:

Other than antibiotics, medicine was still primitive in the 1960's. Hospitals were still, for the most part, a place people went to die. Look at sports medicine. Gale Sayers and Tony Oliva's careers ended prematurely due to knee injuries that would easily be repaired today. "Tommy John" surgery was an experiment in 1973 (on the real Tommy John). Now it is so commonplace and successful that healthy young pitchers are asking to have the procedure to make their arm stronger. You may not find the 5 year cancer survival rate increasing from 49% to 66% significant, but I do (as someone that knows several cancer survivors that would not have survived 20 years ago).

Scott mentions how one could fly in 1973 grope-free. Good point. Government has really messed some things up. I'll grant him that.


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CATEGORIES: Growth: Consequences



COMMENTS (17 to date)
C.D. Bradley writes:

Beach Boys, It's a Beautiful Day: http://www.youtube.com/watch?v=fWxg_WPnT8M

1. How easy was it in 1973 to buy a car with no money down etc...and just make car payments?

2. Also what share of car buyers in 73 were buying their first car versus now? I don't know if that matter, but should we distinguish between first-car purchases and second or third car-purchases?

Jonathan writes:

With vinyl records still in existence, you can buy another one:

http://www.gemm.com/item/BEACH--BOYS/IT'S--A--BEAUTIFUL--DAY/GML148777823/
http://cgi.ebay.com/BEACH-BOYS-ITS-BEAUTIFUL-DAY-7-WL-PROMO-/370480757346#ht_500wt_764
http://www.amazon.com/gp/offer-listing/B001B6ERB0/

Scott writes:

It depends on who you are.

Since the 1970s, real wages have stagnated and working hours have gone up for the bottom four income quintiles of the US population. To make matters worse, millions of them lost their life savings after 2008. It doesn't exactly seem like they're better off today then they were back then.

Doug writes:

http://listen.grooveshark.com/#/search/song?q=beach%20boys%20it's%20a%20beautiful%20day

Best to try grooveshark for these things, tends to be more comprehensive then youtube (though as C.D. points out this particular song is there too).

Curtis writes:

"It's a Beautiful Day" is included in the Ten Years of Harmony collection, which is readily available on eBay.

David R. Henderson writes:

Scott,
You're begging the question.

volatility bounded writes:

David, you are ducking Steve's question, like a good debater.

If you want to attack Cowen, abandon the fatuous argument that hedonics/substitution isn't fully addressed in CPI, and attack by pushing for Cowen to correct his wage data by taking into account increases in compensation through increased health care insurance.

The increased cost of health care insurance is non-cash comp that needs to be counted to get an accurate picture of wages. And if workers don't like it, they ought to demand cash compensation instead and buy cheaper health insurance.

John Dougan writes:

1973 is an interesting choice of year...on April 3rd that year was the first public cellphone call. The phone weighed 2 pounds and you could only make a call on the prototype towers in New York, but it worked and led to Motorola starting the commercialization process.

MikeDC writes:

I can't believe anyone would say 1973. Perhaps the folks saying it, by arguing absurdities like music quality, are simply showing they don't really believe this through sarcasm and I'm too thick to get it.

But really, let's list out some tangible things:
* As noted, wages should really be total compensation to account for the vastly increased health benefits we receive now.
* On the other hand, I don't think hedonics are fully addressed in CPI or that the monetary value of health care accurately captures our increased utility. In 1979 my grandmother died of a heart attack while preventatively in the hospital for fear of one. In 2000 my father survived a clinically similar heart attack on the way to an emergency room. Massive difference in outcome, and one that puts the lie to Sumner's scoffing suggestion that differences in life expectancy were mostly smoking.
* That being said, advances in understanding of the risks of smoking should certainly be considered a gain, even if you don't smoke yourself. Lost years of your husband/wife/friend's companionship are valuable too.
* "The bottom four income quartiles" have achieved dramatic gains in their well-being since 1973, and much of it is deeply tied to economic opportunity.

I don't know if it's a politically correct or politically incorrect argument to make anymore, but when we consider the "breakdown of the family" these days, we lament all the single-parent households and broken marriages there are out there.

And that's fine, but we also need to recognize that, in the past, those marriages were and families were frequently just as broken, and often more abusive. But because of the extreme poverty of the 1950s to mid 1970s periods (relative to now) people stuck together and absorbed the abuse out of economic necessity.

Divorce and single-parenting is still a painful and costly endeavor compared to the alternative. Hence, its prevalence, now that it's a legitimate economic option, is prima facie evidence that we're better off now, than stuck with people we despise but are dependent on.

And oh yeah, we can have abortions. Roe V Wade was 1973, no? But most of the practical application came afterward.

David R. Henderson writes:

@volatility bounded,
Who's Steve?

Liam writes:

Maybe he means Steve Love, Mike Love's brother. :)

Sol writes:

I'm with MikeDC 100%. Consider:

* Life expectancy is a fairly lousy measure of medical improvements. Consider IVF, for instance. For those who need it, it's an awe-inspiring improvement made entirely since 1973.

* Work: I am a software developer with a business serving customers all around the world, operated entirely out of a spare room in my house. Which has five working computers in it, each more powerful than the most powerful machine in the world in 1973. Back then, my career would have seemed like very far-out science fiction.

* Food: In the 1970s, getting decent Chinese food where we lived meant hopping the border into Canada. And "decent" is the right word -- that food would be considered thoroughly mediocre by 2011 standards.

* Play: One dearly loved facet of my life, role-playing games, effectively did not exist before the publication of Dungeons and Dragons in 1974.

* Or consider that I am a student of Newfoundland traditional dance music. In 1973, hearing that music would have required traveling to isolated outports and convincing the musicians to play for me personally, their community dances having mostly ended a decade before. In the 2000s, I was able to use eBay to track down the LPs they later recorded, digitize them, and I now carry them around in my pocket, on my phone -- as well as getting lessons from one of the current generation of players there every other week over Skype.

Admittedly, it would be fun to time travel to 1973 (with a *lot* of money for plane tickets) to hear all the now-dead musicians I love play, from Rufus Guinchard to Freddie Mercury, but the simple fact is that if I actually lived in 1973 Michigan, I'd never have heard of any them. Our lives are immeasurably richer now in culture and opportunity...

Jeremy N writes:

I agree that using the nominal money question to answer the broader question is problematic.

I also believe the car price doesn't capture all of the complexity as it ignores the purchase of used cars. If people were just as likely to purchase used cars today as they were in 1973, then it would be comparable, but if the higher prices today are coincident with more used car purchases (which are cheaper), then it's hard to say who's better off.

It's hard for me (I'm 27) to believe that anyone would prefer to live in the 1970s. I wonder if people who purport such preferences eschew computers, cellular telephones, and movies/book/music written in the past 30 years.

Yancey Ward writes:
If you want to attack Cowen, abandon the fatuous argument that hedonics/substitution isn't fully addressed in CPI

LOL! Prove that the argument is fatuous.

Scott Sumner writes:

Yes, my fixed nominal income comparison merely argued there has been some increase in the price level since 1973. It's a silly comparison, and I wouldn't have even made it if Bryan hadn't offered the opposite view. But note I am also claiming NO INFLATION at all between 1900 and 2011. Strangely enough almost no one challenged that claim.

I believe the CPI is a subjective concept, it's not even clear what it's supposed to be measuring in a world where both quality, and also people's perceptions of quality, are constantly changing. The is no "fact of the matter" as to what inflation really is. Indeed I've never seen a satisfactory definition of what inflation is, or what it is trying to measure.

Irascibli writes:

http://www.amazon.com/Ten-Years-Harmony-Beach-Boys/dp/B000008D9Y/ref=sr_1_1?ie=UTF8&qid=1297214633&sr=1-1

Amazon is sourcing used copies of a CD reissue came out in 1991. The early 1990s were a glorious period for music reissuance. It seemed sometimes that, for at least a heartbeat or too, EVERYthing was re-released. The catch was that some stuff had very small press runs so that if one blinked one missed it.

Kinda pricey, but I've seen worse.

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