The Wealth of Nations
By that standard, American wealth in general, and the wealth of poor Americans, has skyrocketed in the last half-century, and the government had relatively little -- though certainly not nothing -- to do with it. And it's not just that consumer items are cheaper than ever, they're also better than ever. An iPhone today isn't just better than yesterday's phones, it's better than yesterday's cameras, calculators, portable stereos and computers. Many of the standard features on a 2010 Honda Accord were considered luxury items 10 years ago and almost unimaginable 20 years ago."
~Syndicated columnist and AEI colleague Jonah Goldberg
11 Comments:
Well, so, this means our heavily regulated and subsidized pinko agriculture sector is the way to higher living standards?
Or that manufactured goods from state-planned economies such as China and Japan are the best?
No, it means we would have been substantially better off than we are now without the things you mention.
Free markets, capitalism, private property and enforceable contracts are the engine of our prosperity. Government is the brakes [or maybe sand in the gear box].
this makes perfect sense in a society that is getting richer. if i doubled your income, would you eat twice as much? of course not. you might eat a bit more expensive food, but the rarely in proportion to gains in income.
this implied that food consumption will continue to drop as a % of disposable income so long as disposable income keeps going up.
i'd be very interested to see how this tracks with housing, as that seems to increase in price along with income to a much greater extent. unlike food and clothing, you cannot import shelter.
Hey Benji, you left out Obamacare for some reason. Why is that?
morganovich,
In the case of housing, expenditures as a percent of income has not changed much; however, the size of the house has. In 1950, the average new home was 1000 square feet. Now it is 2300 square feet. The higher wealth represents an improvement in the standard of living.
Junkyard-
So all of the federal housing programs have been a big success? And the mortgage interest tax deduction?
Housing is yet another sector utterly and completely dominated by regulation and tax policy.
BTW, I agree with Bob Wright.
Here's the plot of home prices relative to income since 1977:
http://www.ritholtz.com/blog/wp-content/uploads/2010/06/Median-Prices-v-Income.png
Based on this chart, it looks like we had a secular bull market in housing starting in 1986 that ran for 20 years (close to typical for secular bull markets). Since secular bear markets typically follow secular bull markets, the drop in home prices since 2006 is just the beginning. We should have another 10+ years of poor housing returns.
The first indication of this is that the number of unoccupied homes in America (both rental and single family) are both near historical highs. People are still holding a lot of inventory of homes as investments thinking the market has bottomed. This behavior is typical for the start of a secular bear market.
j-hawg-
thanks.
new homes are a tricky measure though. low income folks tend to live in apartments and other multi unit dwellings. this is true of nearly everyone in the urban areas which have seen to most population growth.
this muddies the waters somewhat as sure, houses are bigger, but a smaller % of americans live in one, so you may just be seeing a skew because houses are more slanted toward the high end now.
not sure how to sort that out.
rental figures might be a more accurate indicator.
What do those numbers look like against the Median income.
The argument that Liberals have been making is not one about averages, rather it's one about income inequality. The distribution of income.
The average can stay the same through income distribution and still fewer people can be making an income anything near that average so long as there are huge incomes pulling that average up.
What liberals argue is that things may well be getting cheaper for the average American, they are getting more expensive for the majority of Americans.
Now I don't know what the numbers you site say about this.
I'd be interested to find out.
We can always depend of the pseudo benny to miss the subject at hand by many lightyears...
Remember this from last year?
I'm guessing that it will still be quite awhile before we get back to where we were in 2006-2007...
From the WSJ: Americans See 18% of Wealth Vanish
The wealth of American families plunged nearly 18% in 2008, erasing years of sharp gains on housing and stocks and marking the biggest loss since the Federal Reserve began keeping track after World War II.
The Fed said Thursday that U.S. households' net worth tumbled by $11 trillion -- a decline in a single year that equals the combined annual output of Germany, Japan and the U.K. The data signal the end of an epoch defined by first and second homes, rising retirement funds and ever-fatter portfolios. (there's more)
Part of the plunge due to stocks nose diving and part of it due to the value of housing dropping...
"Hey Benji, you left out Obamacare for some reason. Why is that?"...
Speaking of which Paul, consider the following from the Heritage blog:
Repeal ObamaCare: Yes We Can
Juandos
2006-2007 was a bubble.
We should not expect or want to get back there but we should expect regression to the mean. DOW 8000 to 10,000, depending on who you ask.
Like most people my net worth took a hit,but thanks to good hedging and aggressive investing when things looked bleakest, I'm mostly well now.
A little AIG, Wells Fargo, and CITI, went a long way.
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