By Michael J. Hicks, Ph.D.
America’s populist movements, on both the left and right, are wedded to the notion that our past was better than our present. This nostalgia takes many forms. Some of it is a longing for a time without cell phones, internet or social media. For others, it is a wistful desire to see stronger cultural institutions, such as families, churches, unions and civic groups. Most of us can sympathize with this feeling, even if we don’t wish to return to the past. This longing can even be constructive if we work to create new institutions that survive in the 21st Century.
For some folks, the desire is really for a fictional view of the past. On both sides of the political aisle, this longing can spiral into a surprisingly open admiration for authoritarian movements. Some of this is fostered by noxious racialist or classist ideologies. More of it is attached to the belief that the economy was better in the past, and that more active management of the economy can restore us to a golden age of the past.
This idea has surprising durability. However, it is mistaken across nearly every domain. Indeed, it is so false that it shouldn’t need to be debunked, but I suppose we all are prisoners of distant recollection.
There’s a meme that comes with this debate that shows magazine illustrations of the 1950s. It claims that once upon a time, a family of four could afford a house, own a car, take vacations, and send the kids to college — all on one income. The implication is that you cannot do so today, but is any of this true?
The average home in the 1950s was 983 square feet, which is about one-third the size of the modern home. One can purchase such a home right here in Muncie, — fully renovated with modern appliances — for $52,900. So, places exist where one can hold a low-income job and afford the sparse luxuries of the 1950s.
I could produce a long spreadsheet showing how easy it is today to financially replicate a 1950s lifestyle, but doing so would largely overlook the details of the 1950s lifestyle — much of what we consume today is so qualitatively different that the products of old are impossible to match. Automobiles are a perfect example.
Today’s automobiles last, on average, almost twice as long as 1950s automobiles, and they are far more fuel efficient. We could easily wrap this calculation into the cost of driving 100 miles. But, there’s a catch — in 1950s, the death rate per miles driven was a bit more than five times higher than it is today. Risk of extreme injury has likewise plummeted. This is due to better technology in mundane things like seatbelts. There are also 300-some semiconductors in today’s car that help to deploy airbags, sense road conditions and adjust lighting.
It is more difficult to assess the changing cost of travel when accounting for the reduced chance of death or severe injury. This is but one problem associated with comparing the past to today. As relative prices change, families will adjust their consumption. They will buy fewer or cheaper items and spend the savings elsewhere. Changes in quality are reflected in the behavior of consumers, so naturally we would need to adjust the way we compare the past to the present.
The difficulty of the comparison permits populist demagogues to mislead us about the past. One common conspiracy theory claims that the federal government is lying about inflation. The claim is based on the fact that every decade or so the statisticians at the Bureau of Labor Statistics adjusts the list of goods used to calculate inflation. Of course, the reason the BLS does this is to more accurately reflect the changes families make in buying goods due to quality or relative prices, not to lie about inflation.
If the BLS did not make these adjustments, we’d still be measuring the price of bituminous coal for household heating, and we’d overlook the cost of health insurance, airline tickets and telephone and subscription TV services. No one suggests that our measures of inflation are perfect, but if you read somewhere that the BLS is lying, you are reading a crackpot.
There are a couple of other ways to think about the large quality changes we’ve seen. One method still relies upon measuring income, but instead of simply using prices, we create something called a ‘time price’ of a good. The ‘time price’ is how long it would take the average worker with a high school diploma to buy the good. There’s a terrific book on the subject, “Superabundance” by Marian Tupy and Gale Pooley. The gist of the book is that nearly everything we buy today has a much lower time price than it did at any time in the past.
Tupy and Pooley focus on lower-income workers and examine everything from the hours it takes to provide 2,000 calories per worker in a family to a large basket of commodities that are inputs to everything else. What they report is that over the past century, the standard of living of Americans has risen about four-fold. Most of that growth occurred after World War II and continues to grow today.
The time price measurements reveal a huge drop in the time it takes to buy typical goods, from food to housing to transportation. However, costs for services have not dropped as much, for two reasons. The first is that labor costs within a region are tied to average worker productivity. We are very productive at making goods. Most of our productivity gains in services regard changes in quality. The second reason is that we demand more services.
The perfect example of this is in cancer deaths. In the 1950s, close to 35 of every 100,000 women died of breast cancer each year. Today, that number has dropped to fewer than 20. At the same time, the share of household spending on this disease has grown substantially. We pay more for diagnostic equipment and analysis of scans, and we spend much more on treatment. This reflects our preferences matched with the opportunities of economic growth. It is that which has raised our lifespans by 15 percent since the 1950s.
So when the populists of the left and right argue that we are worse off now than we were 30, 50, or 100 years ago, ignore them. They are dead wrong. What they really want is for you to have less choice in what you buy because they want more control over society and our economy. These authoritarians belong only in history books, not on ballots.
Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Hicks earned doctoral and master’s degrees in economics from the University of Tennessee and a bachelor’s degree in economics from Virginia Military Institute. He has authored two books and more than 60 scholarly works focusing on state and local public policy, including tax and expenditure policy and the impact of Wal-Mart on local economies.