Absolutely! These are excellent points. If someone wanted to live in an extremely small house and not buy all these gadgets, they could save enough to have all the security they need. Instead, people are choosing to live well because they realize that life has gotten better and that they're reasonably secure. Claims to the contrary are being made for political purposes.
Mcwop
· 3 years ago
Russell writes:
"So let's be clear about this. The goal of life is to live well, not to accumulate the most electronic gadgets or the biggest house."
Living well is subjective. For some, having a 100" TV that allows them to enjoy an NFL game might mean happiness. For others, hapiness has nothing to do with material things. What is most important? People's ability choose what makes them happy, and not have government decide what makes people happy.
Patrick R. Sullivan
· 3 years ago
I grew up in a family that was most years is the bottom income quintile, I also read Betty Smith's 'A Tree Grows in Brooklyn' on of those years.
I learned a lot more about real poverty from Smith's book.
John F. Opie
· 3 years ago
Hi -
Great post.
I remember back when I was just getting into forecasting and had a discussion with the husband of a good friend. He is a tax consultant, and we talked about forecasting.
The point he raised was that there are huge problems based on using "real" numbers that are anything but that. "Real" numbers aren't real: the vast majority of people work with nominal numbers and not real. Real numbers are of interest to economists, econometricians and the like who want to seperate out "real" development from "accidental" development because of price increases due to inflation.
The man had a point. If you "really" want to understand economic development, then you must perforce not only use hedonic deflators, but use them with a vengeance to also generate different weighting procedures for each and every year, not wait for 5 years to change a theoretical basket of goods that no one has ever bought.
The differences in quality have been nothing less than amazing, as all of us technofreaks know. A 5-series BMW of today compared to a 5-series BMW of 10 years ago is a completely different car. Ten years ago you simply could not have bought the car for any price, given the technology in the motors and automative systems; today it is only slightly more expensive, after taking into account the loss of purchasing power, than the car 10 years ago.
That is what is critical and has been poorly treated in both the science of economics and the literature. Us economists have failed to get the idea of quality into a field so heavily dominated by quants.
This is true of most products who use significant technological inputs in manufacturing; for the simpler things in life, like a good shirt and a decent bottle of wine, these may be less important (but one hell of a lot important than you think, especially for the wine!), but the quality improvements have been staggering.
John
Mr. Econotarian
· 3 years ago
My house is awesome.
My car is awesomely dependable, which is awesome.
My computer is awesome.
My HD projection TV is awesome.
My commute is not awesome, but then again the roads are not privatized.
George
· 3 years ago
I don't understand how housing prices and energy prices can go up so much if income has stagnated or been reduced for the average person. The house price increase in the last few years in NOT simply in the highest price segment of the market, but in all markets. The increase in gas prices has not appreciably affected the amount of driving.
I just have one question to ask Russ: How can researchers report a drop in income when it is so apparent that the market is bidding the price of big expenditure items so much? Where is the money comming from for these things?
Ivan
· 3 years ago
Yah, the good-life argument is big fat bait-and-switch.
People complain workers aren't getting enough money. The response is, in part, that you can buy a lot more stuff with that money.
They the retort is that life isn't about stuff.
Why bring up the stats about workers' incomes if life isn't about stuff?!
Moore's law is exponential, and we're complaining about a +/- 5 percentage points for growth of real compensation. Ridiculous.
Chuck
· 3 years ago
"Go out and look around and you see everyday people, not just the top 1% or 10% or 20% buying luxuries that were undreamed of 30 years ago. This behavior suggestst that they are not hoarding their fragile incomes for their health care or the roof over their head, they're living better than ever before."
Have you controlled for unprecedented consumer debt?
Also, were not the folks of 30 years ago also buying luxuries undreamt of 60 years ago?
Noah Yetter
· 3 years ago
"Also, were not the folks of 30 years ago also buying luxuries undreamt of 60 years ago?"
Which only reinforces the point that, to quote The Beatles, it's getting better all the time.
Will C.
· 3 years ago
I just traded off a 10-year old minivan. The current version of that van, with many, many improvements including a $1000 DVD player advertises for the price I paid 10 years ago and I got a deal back then; dealer cost minus $50. Someone once said that the only material gains we experience are productivity gains. Supporting the point about Moore's Law.
Chuck
· 3 years ago
Your abosolutely right. I was going to call my financial advisor and complain that my investments are lagging the market by 2%. But now that I've thought about it, I'm going to call him and thank him that I'm simply making money at all!
All Comments
Absolutely! These are excellent points. If someone wanted to live in an extremely small house and not buy all these gadgets, they could save enough to have all the security they need. Instead, people are choosing to live well because they realize that life has gotten better and that they're reasonably secure. Claims to the contrary are being made for political purposes.
Russell writes:
"So let's be clear about this. The goal of life is to live well, not to accumulate the most electronic gadgets or the biggest house."
Living well is subjective. For some, having a 100" TV that allows them to enjoy an NFL game might mean happiness. For others, hapiness has nothing to do with material things. What is most important? People's ability choose what makes them happy, and not have government decide what makes people happy.
I grew up in a family that was most years is the bottom income quintile, I also read Betty Smith's 'A Tree Grows in Brooklyn' on of those years.
I learned a lot more about real poverty from Smith's book.
Hi -
Great post.
I remember back when I was just getting into forecasting and had a discussion with the husband of a good friend. He is a tax consultant, and we talked about forecasting.
The point he raised was that there are huge problems based on using "real" numbers that are anything but that. "Real" numbers aren't real: the vast majority of people work with nominal numbers and not real. Real numbers are of interest to economists, econometricians and the like who want to seperate out "real" development from "accidental" development because of price increases due to inflation.
The man had a point. If you "really" want to understand economic development, then you must perforce not only use hedonic deflators, but use them with a vengeance to also generate different weighting procedures for each and every year, not wait for 5 years to change a theoretical basket of goods that no one has ever bought.
The differences in quality have been nothing less than amazing, as all of us technofreaks know. A 5-series BMW of today compared to a 5-series BMW of 10 years ago is a completely different car. Ten years ago you simply could not have bought the car for any price, given the technology in the motors and automative systems; today it is only slightly more expensive, after taking into account the loss of purchasing power, than the car 10 years ago.
That is what is critical and has been poorly treated in both the science of economics and the literature. Us economists have failed to get the idea of quality into a field so heavily dominated by quants.
This is true of most products who use significant technological inputs in manufacturing; for the simpler things in life, like a good shirt and a decent bottle of wine, these may be less important (but one hell of a lot important than you think, especially for the wine!), but the quality improvements have been staggering.
John
My house is awesome.
My car is awesomely dependable, which is awesome.
My computer is awesome.
My HD projection TV is awesome.
My commute is not awesome, but then again the roads are not privatized.
I don't understand how housing prices and energy prices can go up so much if income has stagnated or been reduced for the average person. The house price increase in the last few years in NOT simply in the highest price segment of the market, but in all markets. The increase in gas prices has not appreciably affected the amount of driving.
I just have one question to ask Russ: How can researchers report a drop in income when it is so apparent that the market is bidding the price of big expenditure items so much? Where is the money comming from for these things?
Yah, the good-life argument is big fat bait-and-switch.
People complain workers aren't getting enough money. The response is, in part, that you can buy a lot more stuff with that money.
They the retort is that life isn't about stuff.
Why bring up the stats about workers' incomes if life isn't about stuff?!
Moore's law is exponential, and we're complaining about a +/- 5 percentage points for growth of real compensation. Ridiculous.
"Go out and look around and you see everyday people, not just the top 1% or 10% or 20% buying luxuries that were undreamed of 30 years ago. This behavior suggestst that they are not hoarding their fragile incomes for their health care or the roof over their head, they're living better than ever before."
Have you controlled for unprecedented consumer debt?
Also, were not the folks of 30 years ago also buying luxuries undreamt of 60 years ago?
"Also, were not the folks of 30 years ago also buying luxuries undreamt of 60 years ago?"
Which only reinforces the point that, to quote The Beatles, it's getting better all the time.
I just traded off a 10-year old minivan. The current version of that van, with many, many improvements including a $1000 DVD player advertises for the price I paid 10 years ago and I got a deal back then; dealer cost minus $50. Someone once said that the only material gains we experience are productivity gains. Supporting the point about Moore's Law.
Your abosolutely right. I was going to call my financial advisor and complain that my investments are lagging the market by 2%. But now that I've thought about it, I'm going to call him and thank him that I'm simply making money at all!