Fact or opinion: Are we more wealthy than before?

Great Debates
1

We haven’t talked about the economy in about a month or so, so let me put forth this argument. [btw: I believe this is a GQ, but I’m sure this will spark a debate, so I posted in GD. Mods, please feel free to move it to the more appropriate forum]

For the record, I believe that society is wealther than before. However, in an argument with my friend (a EE), I said that society as a whole is more wealthy than say 30 years ago when our parents were at our age, wealthier than people living 50 years ago, even 100. This article seems to agree.

He told me to prove it, and said that I can’t. He also claims that Economics isn’t a science (I agree), and that I can’t verify any claim because Economics isn’t a science. He says that Economics is only opinion, and by stating that we are more wealthy than before as a fact only means that I have an inflated ego about my opinion.

I tried explaining wealth in terms of price baskets, inflation, and access to opportunities and resources, but apparently, I failed to communicate to him. I just found the linked article, but I feel that I may need more ammunition. He says that access to more products by the poor is just advancement in technology and prices are a result of inflation (which I told him in that context is used incorrectly, but I digress…)

So, are we more wealthy? I like to think so. He says that I couldn’t find 10 people to say yes (we were at the gym). I said that if I couldn’t, it’s because, like my friend, they are ignorant in Economics – to be more precise, capitalism.

So, if this is a fact, how do I prove it to a skeptic like my friend? The only similar articles I can seem to find are articles written by the linked author. Thanks for the help.

2

Wealth is a matter of possessions and buying power. Simply put, if people own more now than they once did, they are wealthier, as are they if they can buy more. Obviously, there is a lot of temporary back and forth and some werid gyratiosn between currency highs (when they can buy more from overseas) and lows (when they have extra raw cash).

Now, simply put, we can certainly prove that we are wealthier today that we used to be. Peope today possess many items considered standard and enjoyable that people in previous decades would have considered grossly expensive or were even nonexistent.

Now, some things have become so expensive that we may consider ourselves individually poorer for it: servants are far more expensive now than when all it took was food, shelter, and clothing. However, this usually a side effect of people becoming so wealthy that they no longer consider servant work worth doing.

3

I doubt it’s a linear progression across all measurable attributes of wealth. In general, commodities and luxuries are more widely available. However, labor (and its buddy, time) are probably in shorter supply. I can afford all sorts of electronic gadgetry and labor-saving devices (iPods, microwaves and so on). Even geeks like me have more clothes than most people did years back. But what makes me shudder is anytime I have to hire skilled labor.

I would guess that jobs like getting the house painted or reroofed are relatively more expensive than they used to be.

4

[/Devil’s advocate] But, isn’t this just simply advances in technology? Surely, I have no more money, am no more richer than my ancestors. Doesn’t the fact that this is all relative (i.e. to the social times and technological limitations of the era) really mean that I cannot compare my current wealth to that of my ancestors? If so, isn’t it just an opinion that I am more wealthy today than my ancestors of yore?

5

“Wealthier than before”? Before when? 30 years ago, 50 years ago, and 100 years ago are quite different yardsticks, economically.

I also wonder about the validity of any simple definition of “wealth”. After all, consumer and personal debt levels are currently at historical highs: more of us are deeper in debt than ever before, so by that measure, we actually have less net wealth.

Why should we define “wealth” as meaning consumer goods we can afford to own, rather than labor services we can afford to buy, or leisure, or education, or a healthy environment? Seems to me there’s no easy way to measure wealth without stacking the deck in favor of some desired answer.

6

Wealthier in what?

Certainly almost everyone in western society is wealthier in consumer possessions. This is simply based on the passage of time allowing for the creation of more of them. Plus the advances it our ability to mass-produce these products.

But you don’t get anything for nothing. The downside to this equation is that all these possessions are produced by exploitation (in the non-judgemental sense) of natural resources. We therefore less wealthy in these. This includes all the usually mentioned things like rain-forests, bio-diversity etc, but also the not-so-fluffy resources like crude-oil and ore.

So whether we are wealthier or not really depends on the value you place on things. Is a new car factory worth more than virgin tundra? Opinions cerainly differ. One of the frequent criticisms of Economics is that it bases its measures of progress and wealth on an increased rate of consumption, without considering the other side of the equation and that the resources being consumed are not unlimited.

My opinion is that there can only be one measurement for anyone’s wealth, and that is in their quality of life. More money and more possessions do not necessarily increase this and many trends in society’s development that go hand-in-hand with this increased ‘wealth’ (crime, pollution, etc) actually decrease quality of life. It should also be noted that something that increases my wealth may decrease yours. Again, resources are limited, it’s not an everyone-wins scenario.

7

I don’t know - why does it take two people’s income to run a typical household now, when not that long ago only one person’s income would suffice? Wouldn’t this imply that (perhaps due to inflation?) we are less wealthy than our ancestors?

8

Fifty years ago families could live pretty well on one income, and I mean if that income was as a cab driver, bricklayer, schoolteacher. Example: family of five, two cars, decent home, nice vacation trip every summer, all basic needs met, kids having piano lessons, Boy Scouts, sports, all that stuff.

Can you do that on one income today? As a schoolteacher? As a cab driver? I don’t think so.

One of the census criteria for the poverty level in either 1960 or 1950 was whether a given family had (I think) a phone and a car. In 1990 it was whether the family had a TV and an air conditioner–at the time I had neither and didn’t consider myself poor. (5000 books, 4 computers …)

I think my mother had it better than me. No job, but she still had a maid come in every Thursday (and so she would set me to cleaning the house every Wednesday, which mystified me as a kid although I understand it now). The grocery store and the dry cleaner both delivered. If it hadn’t been for garden club, bridge club, some kind of women’s study club, etc., I have no idea what she would have done with herself all day.

Now, I make a lot more money than my mother did but I think I work a lot harder, and I don’t have a cleaning woman or time for various clubs and volunteering. I barely have time to play tennis. And yet I still don’t have enough money, and spend a lot of energy seeking out bargains. If you consider that time = wealth (which I do), then we are not wealthier now.

9

If the question is whether we are more wealthy, then the answer is undoubtably yes. If the question is whether we feel more wealthy, then it’s a lot more complicated. While wealth does have an absolute component, ie, how much stuff we have, the absolute measure becomes less and less important once we pass a certain threshold where our basic needs are met. Instead, what becomes more important is our relative wealth and society enters into a kind of arms race where people work more and more to beat out the workaholics next door.

I’m not 100% familiar with the US situation so I’ll speak from the Australia perspective which should be roughly similar:

  • We live in larger houses than before. I think something like 50% more acerage per person compared to the 50’s. There have been threads on the dope about how people in the 1950’s could live 8 family members to a single bathroom whereas now we demand basically 1 bathroom per person. Additionally, 2 garages have become de rigeur and we have formal dining rooms and entertainment rooms, swimming pools and other open spaces not common earlier on.

  • We drive more cars than before and switch them more often.

  • College has become far more common and the costs are incurred relatively early in life which means young people start to save and invest later.

  • We spend more as a proportion of our income on “toys”. Entertainment centres, holidays, gym membership etc.

  • Children cost more. You now have to pay a lot more in both time and money to raise a child to the prevailing communitity standards. Stuff like soccer practise, violin lessons etc all take time and money.

  • Healthcare is better but far more expensive. The advances in medical technology means that people live far longer and spend much more of their life both not working and spending large amounts of money on expensive healthcare. This means there is less money availible for inheritances and passing on down the line.

  • Food costs, as a percentage of our income as well as in absolute terms has gone down slightly and we are eating better as well as eating out more.

  • Although the tax rates have gone down slightly, taxes have gone up since inflation has pushed us into higher brackets. We tend to expect that governments today tend to provide more and better services than before. (note: I’m not sure if this is accurate in the US).

In short, we are materially much better off but we could quite possiblt feel worse off because we work longer and our position relative to everyone elses is still the same. If a 1950’s family and a 2005 family were living on the same block, then the 1950’s family would be envious and aspire to the 2005 familys way of life and would be noticably less wealthy. However, comparing a 1950’s family within a 1950’s community and a 2005 family within a 2005 community would lead to much more mixed results.

10

I doubt this is the reason. People take plenty of jobs today that strike me as less “worth doing,” less dignified or interesting than servant work.

Fewer people employ cooks, but people go out to eat a lot more often.
Fewer people employ nannies, but a lot of people take their children to daycare.
In some instances, people are still doing the same “servant work”; what’s changed is where they’re doing it and what kind of relationship they have with those they’re doing it for.

Another reason why there are fewer in-home servants, and fewer full-time homemakers, is that there is less need for them. With washers dryers, dishwashers, freezers, microwave ovens, modern cleaning products, etc., things that used to take a person all day no longer do.

That makes it tricky to measure people’s relative wealth. I may still have someone preparing my dinner; they’re just doing it in a restaurant halfway across town, or in a frozen dinner factory halfway across the country.

11

There is no absolute measure of wealth (subsistence has an objective meaning, but it does not signify wealth). Wealth will always be a social barometer that is meaningful only when examined in the context of a population group or of interacting population groups. Comparing wealth between historical eras is essentially an exercise in opinion and personal values.

12

What period of history are you referring to when it was inexpensive to employ servants?
For those of you economically impared, there are in fact some objective measurements to measure wealth or standard of living:

-Adjusted net income
-Adjusted net assets
-Avg sq ft living space per capita
-Home ownership stats
-Per capita ownership of various consumer products - cars, computers, cell phones, TVs, etc
and so on

13

Well, for starters try the Middle Ages. There were a lot more poor people, but among the skilled or halfway-educated urban class (essentially anologous to today’s middle class), servantd were cheap and common. And many such individuals had apprentices as well, which were semi-servants.

Of course, this compares classes rather than absolutes, so from another perspective the same proportion of folks can have servants. Still, even among the rich it’s hard to get full-time servants now. Many must be imported from other continents.

14

I think anyone who has spent time in a developing country would approach the question a little differently. I think it’s a rather one-dimentional argument to debate whether people had more consumer goods in 1955 than in 2005, as compared to measures of income and so forth.

I would posit that better measurement of wealth are indirect measures of prosperty. What I would suggest is aggregating the data on how much energy is used per capita, how many calories taken in per person each day, the availability of sewer systems throughout the country, the miles of quality paved roads, the state and availability of health care services, the percent of the workforce engaged in subsistence economy, and all sorts of measures like that.

Each of those measures could be explained by many factors (ie, the number of workers involved in agriculture has dropped because farming has become more efficient). But if one takes the data as a whole, a positive trend in areas like those would, in my view, be powerful evidence that a society is more prosperous and wealthy than in the past.

Whatever the answers to those particular questions may be, I think its a no-brainer that we are wealthier than before,

Oh, and the whole argument about “we’re not actually wealthier, it’s just that technology has advanced to make things simpler” is pretty shortsighted. It is not as if God one day enlightened us with the knowledge of PCs and moon landings and hybrid cars and iPods and stuff. It cost trillions of dollars to develop all that stuff. If we had diverted money away from basic needs into technology without increasing the amount of wealth in the country, the United States would today look like North Korea.

15

Those terms are not synonymous. Wealth is a relative comparison. Standards of living are data points. Since value is not an intrinsic property of property, compiling a list of standards of living in the hopes of saying something meaningful about wealth is inherently misguided. Is can be a fun bar game (much like arguing whether Superman or Mighty Mouse is stronger), but no meaningful conclusions should be expected.

Now, if the question is phrased: do we enjoy a higher standard of living than our ancestors, then we may well be able to achieve a consensus answer. Even then, though, one would have to account for changes in social expectations and technological advances when establishing the metric of comparison.

16

I wish there were an economic historian around here. I’d be very curious to know if there was ever a country in which the standard of living increased while the economy contracted.

17

Well, to my mind there are “standards of living”; it is not really a single metric. For shorthand, economists (and reporters) sometimes simplify this metric into a simple calculation like mean population income.

Next, of course, you would have to specify what standard you would accept for an economic contraction (GDP, GNP, NNP, NNI) If you use NNI for economic contraction and mean population income as a “standard of living”, then it is only possible for one to increase while the other decreases if teh population itself contracts measurably.

I am not even close to an economic historian, but I think it unlikely that over any sustained period (say multiple years) a country managed to have an increased mean income while the GNP dropped.

18

This is true. According to PBS’ site on the Edwardian House series, even if you were just a minor office functionary, like a low-level clerk or bookkeeper, you’d likely have a couple of live-in servants at home.

19

Except basic mathematics suggest that the number of people who could afford to own servants must be very small. The problem with relying to contemporary sources for that sort of information is the notion of classes back then was very different from now. Poor people simply didn’t have a voice back then so they would be absent from any literature. This gives a very distorted view of society back then. What would be “middle class” back then would probably correspond to people making at least 6 figures today in terms of percentage of population. And an awful lot of them have Personal Assistants and secrataries.

This is discounting the effects that Thudlow pointed out about the replacement of servants with the service industry. Does it really make much difference if you have a personal chef or if you go out to a restaurant every night? In both cases, you are essentially paying someone to prepare your food except you get more variety and the restaurant gets to leverage economies of scale. The size of the service industry as a whole is massive compared to the edwardian era, mainly because we have less people involved in agriculture and manufacturing.

20

Even if it is true, I have to think there was a much smaller middle class in the middle ages, what with 90% of the population involved in agricultural shit-work.

Another way of looking at it is that servants make more money and are weathier these days.