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Discussion: (28 comments)

  1. Benjamin Cole

    Intersting post.

    In the private sector, hardware gets better, cheaper and more reliable all the time.

    In the public, and military sectors, hardware becomes more expensive and less reliable all the time.

  2. PeakTrader

    WIthout excessive, expensive, and inefficient government regulations in health care, housing, education, energy, small businesses, etc., U.S. living standards would be much higher.

  3. and yet at the same time, we have more people on food stamps and other entitlements than ever, eh?

    oh and more obese people also….

    1. The biggest cause of the increase of folks depend on various government entitlement is that the qualifications for that entitlement have dropped. While some of the increase is due to a rotten economy the bulk is caused by politicians giving away stuff.
      Kinda good to be a consumer in 2012!

    2. John Dewey

      Yes, Larry. The portion of adults who are non-productive is higher than ever before.

      Just think how much higher would be our standard of living if all those parasites (i.e., non-productive adults) were contributing to the production of the nation’s goods and services – instead of lying around leeching off the rest of us.

      1. morganovich


        a fair bit of this dependency culture can be traced back to johnson’s great society programs.

        this is an astoundingly good and meticulously researched and footnoted book on the topic:

        some of this also feeds into sowells comments that mark posted the other day. we have developed a system with perverse incentives that actually discourages work.

        there’s a sort of a chasm in low income where if you start working, your standard of living drops.

        you go from getting 15-20k in free stuff to working to make 12k.

        more work, less money is not a trade that many find attractive.

        we really need to revamp that.

        1. Not sure where ya’ll shop but where I do… some of the ladies operating the cash registers look way older than 65 – and I do volunteer taxes for folks and I can tell you that there are people working 40-50 hours a week and barely making 25K a year.

          Most folks actually want to work, to make money, to afford more, better things. There are a few who would rather get free stuff but I think those who do have a job perhaps have a myopic view of those who do not.

          In general, I would support work for entitlements but some folks already work two jobs but they are so menial that they still barely make ends meet.

          You can have someone working two jobs and they still cannot afford even basic medical care for themselves or their kids.

          It was Ronald Reagan who said: ” Reagan called the reform [which included the earned income credit] a “sweeping victory for fairness” and “perhaps the biggest antipoverty program in our history.”

          Of course there are those who say exempting income from taxes as an incentive to work is wrong also.

          1. morganovich


            many folks do want to work. i completely agree. but clearly, many also do not want to and the stigma of government assistance is gone for many, especially in the younger generations.

            my grandmother lived through the depression and talked about how shameful it was to get a handout. i think far fewer people feel that way now. that does not mean all, but somehting has to explain the massive surge in food stamps, medicaid etc.

            do you realize that 50% of us children are on medicaid?

          2. @Morg – and my Mom considered it shameful to accept handouts also.

            I was not aware that fully 50% of kids are on Medicare.

            At some schools, 40-50% are on reduced lunches but others the percentage is smaller.

            But you are correct – Kids are the recipients of much of the welfare from MedicAid, to reduced lunches to tax credits.

            We encourage people to have families…even if they cannot afford them, don’t we?

          3. morganovich

            “We encourage people to have families…even if they cannot afford them, don’t we?”

            yup. when you subsidize somehting, you get more of it. the medicaid potion of this has had the knock on effect of all but destroying research on pediatric drugs. medicaid requires a rebate from drug manufacturers on pediatric drugs that is 90-105% of the price. when you lose money on over 50% of the drug you sell (medicaid recipients use far more care than others), there is just no incentive to take the risks of developing them.

            i think the estonian system around welfare is a good one.

            you go on the dole, you lose your vote until you have been off for 6 months.

            taking care of the needy is a fine and noble goal. allowing them to vote themselves more and more goodies out of my pocket is a system prone to quite a bit of absue.

            when roughly half of the country pays no income tax and therefore gets all the spending programs they vote for for free, how on earth can a democracy be fiscally responsible?

            you are banking on an awful lot of altruism to think it could.

          4. I do not disagree although unwinding it when kids are the ones that get hurt, is going to not be easy.

  4. Better living through chemistry!

  5. morganovich

    not everyhting gets cheaper.

    housing is much more expensive relative to income that it was in the 1950’s and 60’s.

    “In 1957, the average price for a house in the United States was $2,330. Can you believe that! A house and a car cost roughly the same thing! I know “normal” people who pay $2,330 per month to rent an apartment. Just 50 years ago, this figure represented the average price for a house in this country.

    Now consider what the average price is today (not taking into account the current depressed prices due to the sub-mortgage crises); which is $212,800. The average price of a house fifty years ago represented 50% of the annual income for the average family. The median price today is four times MORE than the average family makes in a year”

    cars are not cheaper either.

    The average cost of a new car in 1957 was $2,100. Today, the average price for a new vehicle is $27,958

    income in 1957 was about $5000.

    it’s about $49,500 now.

    so as a basic rule of thumb, it’s been about a 10x increase.

    stamps were 3c, now they are 45c. of course, we probably use far fewer.

    there is no question that many things are cheaper.

    milk is cheaper.

    anyhting electronic is vastly cheaper.

    some things are better too. homes are better in many cases (though far more folks live in apartments and manufactured housing as well, so i have no idea how to net that out)

    cars are certainly better, but, as you cannot go buy a 57 chevy anymore, that does not nesc help you in terms of affordability. if cartier was all out of small diamonds but having a sale on 3 carat stones, that would not quite feel “more affordable” to me.

    but the shift of houses from 50% of income to 4-5X income is a biggie.

    a great deal of this has to do with the increased accessibility to finance. i have studied this in several markets. when insurance becomes available then mortgages do and house prices tend to rise about 4x very quickly as what was the price of a house becomes little more than a down payment.

    ZIRP and a variety of federal programs may make entry into the housing market more affordable in terms of payments etc, but as we have seen since 2006, more affordable due to leverage can have some significant downsides.

    “i can afford this by going into lots of debt” is not the same as “i can afford to pay cash”.

    there is absolutely no question that many, many things are better and cheaper than they were in real terms. we can easily find a laundry list of them.

    but there are significant counter examples as well, including some of the biggies.

    that’s worth keeping in mind.

    1. Scott Gustafson

      Not sure where your source got the housing cost numbers, but here is what the census bureau says.

      $2,330 isn’t even close.

      1. The price of the average house in 1940 was 2938 1950 7354,1960 11900,1970 17000, 1980 47200, 1990 79100 and 2000 was 11960. You can really see the Johnson/Nixon/Ford/Carter inflation in those figures. It will be interesting when the census gets the 2010 numbers out.

        1. morganovich


          if you scroll down to the second set of numbers on the page you linked (unadjusted for inflation raw data) you will find numbers that are much closer.

          the rest of the divergence may be due to the fact that the source i linked is using an average instead of a median price which can lead to a divergence as well as the fact that my source was speaking of all housing whereas the census is speaking only on signle family homes which are more expensive than apartments/coops/condos etc. that may account for some divergence. alternately, they may have just gotten it wrong.

          further, i have to admit, those prices look a bit suspect to me.

          i generally trust the census numbers, but $119k for a house in 2000? that seems pretty low to me, but i could be wrong. these housing numbers always look low to me. in SF, you could not buy a parking space for $119k and a crappy 1br in a bad neighborhood is $6-700k. that skews your perspective somewhat. i have not even heard of house for under $200k since maybe the 80’s. before guys like case shiller, this stuff was pretty rough as well. the old census housing data is not terribly high quality, though it may well be the best data we have. perhaps you are right.

          if we take it at face value, then a 1960 home was 11,900 vs a median income of $5600 a 2.07 ratio.

          income in 1940 was $1368. homes were $2938. that gets us a 2.14 ratio implying the 60’s were just a touch cheaper.

          today the median home is $176600, down sharply from nearly $240k in 2005, but still 3.6X median income (though down from the towering 5.5+ ratio in 2005-6.

          for a long time, housing has a sort of “golden ratio” around 2.2X (+/- 0.2) of median income (for single family homes)

          that ratio was exploded in the 90’s and 2000’s as more leverage became common.

          even now after a 30-40% drop in price, we are far, far off that curve.

          it would seem that housing relative to wages is about 70% more expensive than it was in the 60’s. that’s still a pretty big rise.

          1. Scott Gustafson

            Please note that the average house in the 1950’s was about 900 sq ft. Currently it is about 2300.

            I suspect that when people can spend less on other things, they will spend more on a nicer, bigger house.

        2. morganovich


          houses have gotten bigger. there is no question. but demographics have shifted as well. more people live in apartments etc. the US is more urban.

          this is not an easy thing to net out.

          it would be interesting to see the prices of the same homes that have existed from 1950 to 2012 and just look at direct comparables.

          however, i’m not aware of any such data.

          1. morganovich

            also keep in mind that in houses, average and median diverge considerably.

            the rise of the mcmasnion etc skews the numbers a great deal.

            if 10% of homes wind up being 12,000 ft, that does not move the median much, but it drives the average wild.

            one must be careful comparing medians and averages in datasets with high value outliers.

            the median home size in the us is 10-15% smaller than the average.

    2. Professor Boudreaux has been having fun with this over at the Cafe. I know that the size of the average house has also increased, so the price measurement is incomplete. Research on an iPad is a pain, so I won’t be doing any until I get to a computer, but it would be interesting to compare number of hours worked to pay for an identical home in 1956 versus today. I suspect 1956 will have required fewer hours worked, but I think the difference will be smaller than what is suggested by just looking at the average price over the years.

  6. Good post, but let me call foul on a few of the items. That iPhone 5 is only $250 if you also get a 2-year contract, which pays for the rest of its cost. If you buy one without a contract, the price triples to $750-850. Of course, it’s practically useless without some kind of data plan, so you will have to pay more, and I believe the same is true for the Tivo and SiriusXM boxes, though I’ve never used either. Similarly, you will need to rent or buy Blu-ray discs for that Blu-ray player and home theater to be worthwhile and that Garmin GPS might require a subscription also. Of course, you also needed to buy records for that Sears record player 50 years ago. While broadcast radio and TV might have been “free” back then, you simply paid in time wasted on ads, which Sirius and Tivo will remove for you today. All that said, the true cost of the modern items is not being taken into account in this calculation.

    morganovich, I don’t get your point about cars. You claim that they went from 40% of income back then to 50% of income today. What’s the big deal? Considering how much better cars are today, that’s a steal. I recently went test-driving cars and I was amazed how cars from even 5-10 years back felt like junk compared to the 2012 models. As for housing, that’s because what you’re really paying for is land, not housing. If you want to live in the middle of nowhere and commute for hours everyday, you can still get a decent house for double your salary. The issue is that people want to live closer and in a house so land prices get bid up a result, as there’s only so much suburban land to go around. That’s an inevitable result of a rising economy over the last 30 years, though it will soon be dashed by the decentralization of the economy coming because of the internet.

    Regarding the earlier thread about “welfare programs,” I suggest you take a look at this Heritage Foundation report, particularly chart 4. It’s amazing that there are idiots still railing about the poor, considering how much they’ve been extorting from taxpayers to supposedly help the poor, which magically never seems to do the job, perhaps because they’ve been stealing it.

    1. morganovich


      my point is that they are not cheaper.

      that’s all. nothing more, nothing less.

      as i said, of course they are better, but, as cars of the old quality level are not available, that does not necessarily help you if your goal is just to get to work.

  7. If we wanted to identify a “golden era” of prosperity for middle- and low-income Americans based on the affordability of consumer electronic products, that period would definitely be today.

    The stuff identified in this blog post represents 2% of personal consumption expenditures in 2011. It was 1% in 1960. Not a big deal.

    Source, NIPA Table 2.4.5, line 14

    I believe progressives are referring to the “golden era” of higher effective tax rates on high income earners and rising real median wages, for instance, not stuff.

    1. I doubt consumer electronics is only 2% of personal expenditures, given how many people are carrying around overpriced iPhones and iPads these days, and in any case, the low prices underrate how much value they add to our lives, ie the consumer surplus. As for your claim of “higher effective tax rates on high income earners,” we’re actually in that “golden age” today, with the top 10% of earners paying less than 40% of income taxes back then and 70% today. By all means, let’s tax them more in order to waste a mere $80 billion more on this gargantuan federal govt, why not?!! XO Regarding rising manufacturing wages in your linked chart, which shows a peak in ’78, manufacturing employment also peaked in ’79, dropping by 35% since. Pretty amazing that their wages stayed the same in the ensuing decades despite the demand for their labor dropping so much, although output did more than double, so maybe that’s why. Manufacturing employment is going to collapse a lot more and good riddance, let’s see what that finally does to wages.

    2. I believe progressives are referring to the “golden era” of higher effective tax rates on high income earners and rising real median wages, for instance, not stuff.

      What is the purpose of earning wages if not to buy stuff?

  8. PeakTrader

    In 1950, Americans spent 21% of income on housing. In the 2000s, Americans spent 33% of income on housing (Source: 100 Years of Consumer Spending – BLS).

    The goal is to improve living standards, which require both income and consumption.

    1900 To 2010: Evolution Of The American Home Today: Fun Housing Facts.
    June 18, 2000

    “In 1900, for instance, a typical American new home contained 700 to 1,200 square feet of living space, including two or three bedrooms and one or (just about as likely) no bathrooms.

    At the turn of the 20th Century, more than 20 percent of the U.S. population lived in crowded units, with entire families often sharing one or two rooms. Most homes were small, rural farmhouses and lacked many basic amenities, complete plumbing and central heating chief among them.

    By 1950, the typical new home had not grown at all, averaging about 1,000 square feet. It still had just two bedrooms and one bath…50 years ago, more than 35 percent of American homes still lacked complete plumbing facilities (hot and cold piped water, a bathtub or shower and a flush toilet).

    By 2000, a typical new home had 2,000 or more square feet, three or more bedrooms and at least 2 1/2 baths. We added the garage as standard, and expanded it to make room for at least 2 1/2 cars. Fireplaces and central air conditioning were built into almost every new house.

    While only 46.5 percent of the U.S. population owned its own house in 1900 and 53 percent in 1950, it is estimated that at the end of this year more than 67 percent of American households will own.

    Median family incomes in 1900 were $490 per year and in 1950 had grown only to $3,319. Today, a typical American family has a household income in excess of $45,000…new homes have risen from $11,000 in 1950 to more than $195,000 today.”

    1. PeakTrader

      As Dr Perry says: “The “good old days” for middle-class consumers are now, not 50 or 60 years ago.”

  9. PeakTrader

    I know someone who bought a house in Peabody Kansas a few years ago for $30,000. The area is likely similar to most of America in 1950, i.e. downtown less than a mile away with one general store, a gas station, post office, three traffic lights, and two police officers. The next closest town with more than a few buildings is over 20 miles away (cell phones don’t work in Peabody).

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