David R. Henderson  

Larry Summers's Perspective and Mine

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I'm presently working my way through, and enjoying, Robert J. Gordon's magnum opus, The Rise and Fall of American Growth. I'm reviewing it for Regulation and already, just 30 pages in, I'm seeing some problems.

Arnold Kling highlighted a paragraph of Larry Summers's review of Gordon's book and has an excellent and nuanced discussion. It's short, so I will simply recommend Arnold's post rather than selectively quoting from it.

I do, though, want to highlight the same paragraph that Arnold highlighted and make a different point.

Larry writes:

But whereas my grandmother would have been at sea if returned to her girlhood home, I would miss relatively little if suddenly placed in the home I grew up in. It takes longer and is less comfortable to fly from Boston to Washington or London than it was 40 years ago. There are more highways now but much more traffic congestion as well. Life expectancy has continued to increase, though at about half the pace it did during my grandmother's day. But the most important transformation--child death being an extraordinary event--had already happened by the time I was born.

That is striking and I'm not challenging Larry's memory--he's 4 years younger than me and his memory is probably better than mine.

But my story about the home I grew up in is very different. I'll leave out the first home I grew up in, from 1950 to 1960, and from age 0 to 9. In that one, we didn't have running water until I was about 7.

But even the home I grew up in from 1960 to 1967, in Carman, Manitoba, was so different from what I have now. Part of it is that I'm substantially wealthier than my father was, even at his peak wealth. (He reached his peak wealth sometime in retirement, which was after my mother died in 1969.)

But I don't think that's the main story. Here are some things I would miss, and I'll contrast now with what we had in 1967, the last year I lived in that house. Virtually everything we have now we could have even if my wife's and my wealth were 1/3 of what it is.

1. TV. We had a black and white 23-inch TV, that got 3 English channels and one French channel, the latter of which I never watched. We now have a smart flat-screen 42-inch TV with thousands of options.
2. Washing machine. We had an old-fashioned one with a ringer. No dryer. We now have both an automatic washer and an automatic dryer.
3. Dishwasher. Didn't have one. Have one.
4. Bathroom. One then versus two now. And the "shower" then was a hose that you hooked up to the bathtub faucet.
5. Phone. One black phone and, of course, no answering machine. Long-distance calls were so expensive as to be essentially irrelevant. Our family made, at most, 10 long-distance calls per year. Now: Smart phones plus landline.
6. Microwave. Didn't have one. Have one.
7. Smart phone. You know the story.
8. Computer. You know that story too.
9. Food. Very limited fresh vegetables in winter. Not so now.
10. Music. Back then, one turntable and a collection of 40 popular albums and about 30 classical records, plus collection of about 100 45's, which I still have. Now, it's hard to know how to count. I want to play David Bowie and Bing Crosby singing "The Little Drummer Boy: and I go on line, find it, and click.

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CATEGORIES: Growth: Consequences

COMMENTS (13 to date)
Mike Hammock writes:
It takes longer and is less comfortable to fly from Boston to Washington or London than it was 40 years ago.

That seems like a strange assertion to make without mentioning price. Does anyone happen to know how much a first class or business class ticket today compares to ordinary airfare from 40 years ago?

Mike Hammock writes:

Ah, I see Arnold Kling highlighted the same thing, and said that flying first class today is cheaper than air travel back then. Never mind.

David R. Henderson writes:

@Mike Hammock,
I’m glad you called attention to this anyway. When someone isn’t paying his own airfare, he is less sensitive to price than others who pay their own fare, and tends to notice other non-price aspects of the trip more. My guess is that even in the 1970s, before airline deregulation (which started about 1978 and really got going in the early 1980s), Larry Summers, who, in his mid-20s, was already a star in economics, paid for fewer than 10% of his flights. He probably pays now for fewer than 5% of his flights. So he hardly notices price at all.
If I am right that he hardy notices price, then he is committing a cardinal sin that makes him less good an economist than otherwise. I tell my students that to analyze a problem, they need to put themselves in the shoes of the economic actors whose actions they are analyzing, and not just settle for asking how they themselves would act.

Gerald Dwyer writes:

In part this is an example of what Friedman often mentioned: The improvement in the lives of lords of the land is much less than the improvement in the lives of peasants.
Not that you're a peasant David or I am, but this is true even going back hundreds of years.

MG writes:

Sticking with Summer's air travel example, Mike has already questioned why cost is being ignored. There are other ways in which air travel is better today: flight schedules/availability/choice of airports; in flight entertainment, that provided for us, and that we provide for ourselves; ability to work; safety (statistically, yes). TSA? I would say: blame government. Moreover, 40 years ago we were already starting to make our lives miserable with security inspections, etc.

RPLong writes:

I once had the opportunity to transcribe some audio interviews with senior citizens from Alberta for a friend of mine who was working on a history project for her PhD. These seniors would have all been in their 70s and 80s at the time, which I believe was 2004 or so.

I remember being surprised by the fact that so many of them had stories about the installation of the power grid. For a substantial portion of their lives, they lived without access to electricity. In Canada. And these are people younger than my own grandparents.

That was when I started noticing how little I really understood about progress.

john hare writes:

I had a Huh-What moment a few years ago when a friend said that "It was better before deregulation when phones worked like they were supposed to and airline travel was safe and affordable." Needless to say, my recollection of the time period is quite different.

J Mann writes:

Email, phone calls, video calls, etc. are a big change. (But my ultimate bet is that Summers would realize fast that he misses air conditioning and heated car seats, and he misses them a lot.)

Do you all remember:

- When a cross-country call was a big deal, and you literally budgeted how many minutes you could spend talking to Grandma in a given month?

- When the kids headed out someplace, and the parents didn't have any idea where they were until they got to a land line and called with an update (which the parents received only if someone was home to answer the phone)?

- I was at a conference last year and my daughter texted me pictures of her algebra homework and the work she had done so that we could work through a couple tricky issues.

- I routinely fix things around the house by looking up and following instructions on Youtube, after reading exchanges on subject matter fora diagnosing similar problems and reporting on fixes. I have no idea how to fix any of these things before hand.

- Online shopping is pretty amazing. I routinely think of a problem I want to solve (e.g., "is there a fence I can use to keep the dog out of my daughter's study area?" and find it.)

- When I was growing up, not only did we not have air conditioning in our home or car, I didn't know anyone with air conditioning.

I can't say that any of that is as life changing as electrifying homes, but the penetration of modern communications and computer technology is pretty amazing.

Ramon writes:

Growing up in Mexico in the 70s (of course poorer than Canada or the US), most people saw traveling by plane as a luxury for the rich. Something they would likely never do in their lifetimes.

I remember also that pizza was very expensive. It was something we saw in american sitcoms but never ate ourselves (I remember Alf having an obsession with pizza but it was all pretty much an abtraction for me. I ate it myself for the first time in 1994). Today pizza is common even for lower income families.

Sean S writes:

Getting cancer back in the good ole days was no cup of tea.

Todd Kreider writes:

Larry Summers mentions nothing about the coming anti-aging pills, stem cell repair or other rejuvenation techniques that are clearly coming within 5 years and more so within the next 10.

In an NPR interview, Robert Gordon implied that there would be no cure for Alzheimer's disease within 25 years.

Economists (except Arnold Kling) who are in the media or blogging seem oblivious to any likely medical advancement.

Andrew_FL writes:

"It takes longer and is less comfortable to fly from Boston to Washington or London than it was 40 years ago. There are more highways now but much more traffic congestion as well."

My first thoughts were "TSA" and "Government doesn't charge you to use its highways the way a private entity would"*

So Larry Summers has identified two things that haven't improved much, or even gotten worse in recent generations, and guess what, the government is responsible for both problems.

*Well, most of the Interstate Highway System doesn't, at any rate.

LD Bottorff writes:

I have to admire Professor Gordon for attempting to quantify all the things he quantifies, but sometimes he confuses innovation and simple expansion. Running water had been around for centuries. Running it to virtually every household wasn't an innovation; it was a matter of economics. Urbanization put more people in proximity to water mains. Lower prices for materials made the piping more affordable. Better construction tools and techniques also made the development of the water delivery network more affordable. However, I did say virtually every household; in fact many houses do not have running water supplied by a central source - they have individual wells or cisterns. Again, not a matter of invention, more a matter of things being affordable.

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