What Do People Have Less Of Than They Had 40 Years Ago?

Moneybox
A blog about business and economics.
Jan. 25 2013 2:53 PM

What Do People Have Less Of Than They Had 40 Years Ago?

Donald Boudreaux and Mark Perry say it's a myth that middle class living standards are stagnating, arguing that "according to the Bureau of Economic Analysis, spending by households on many of modern life’s 'basics' — food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing and utilities — fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today."

Jim Tankersley fires back that it all depends what you call basics:

Boudreaux and Perry count the basics as food, clothing, shelter and cars. Fine. But what if we add in gasoline (to run those cars), health care (to help us live longer) and education (which is increasingly required for getting and keeping a middle-class job)? Then the math looks a lot different. [...] But if you expand the “basics” group to include gas, health care, health insurance, medical prescriptions and education, there’s little change over the last 40 years. That group of basics ate up 64 percent of American consumer spending in 1970, and 62 percent in 2011.
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I feel like the longer the time horizon you're considering, the more sense it makes to think less about monetary income and more about quantities of stuff, which are less subject to the vagaries of inflation calculations. And it seems to me that when you look at it in terms of quantities consumed the stagnational hypothesis—which originally was popular on the left but now has gained a lot of credence on the right as well—seems much harder to defend.

First you have the Boudreaux/Perry basics, roughly physical "stuff," and it's clear that the typical American has more "stuff" in 2012 than they had in 1972. Houses are bigger, cars are better, we have more appliances. We're also pretty clearly better entertained today than we were 40 years ago. More TV stations, more streaming content, much easier access to the back catalogue of older movies and audio recordings.

The big counters to this are health care and college tuition. But here's where I think the quantities consumed perspective gets important. Colleges charge much higher prices today than they did 40 years ago but many more people have college degrees:

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So we don't have fewer people going to college. And families aren't giving up on food, clothing, shelter, entertainment, transportation, or durable goods in order to afford college. That leaves us with health care. Here, again, there's no denying that prices have gotten much higher relative to incomes. But health outcomes seem to be clearly better. Life expectancy has risen. We have some treatments that didn't exist 40 years ago. Gunshot wounds are more survivable. Various prescription drugs that were under patent protection in 1972 are available as generics today. The average worker works fewer hours than he or she did 40 years ago.

My question for the stagnationists is what exactly is stagnating? Men have more leisure time and women have more career opportunities. People are healthier and better educated and have more material goods and entertainment options. The main exceptions I can think of are that traffic jams are bigger problem than they used to be, and certain coastal neighborhoods have become prohibitively expensive. That's bad. And I bow to none in my advocacy of congestion pricing and housing affordability policies but those factors can't outweigh all the rest.

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