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Can't Buy You Love

Posted By Russ Roberts On September 5, 2006 @ 8:50 am In Standard of Living | Comments Disabled

In this post [1], I raised the possibility that the data have misled us on the state of the average worker. I hope to explore that possibility in more depth this week, but here I want to mention one aspect of the discussion that is frequently misunderstood. I wrote:

What if in fact, all the other data, the data on life expectancy, on
the size of our houses, on our purchases of unparalleled luxuries—our
iPods and big-screen TVs—and enrollment in college at or near an
all-time high—what if these data are more reliable than the official
data on wages?

One commenter had this reaction:

I find the iPod and Big-Screen TV index disturbing. Conservatives and
Liberals (and Communists and Fascists, for that matter) can all agree
that the "good life" is not measured by consumer conveniences (or any
convenient economic index, for that matter). People don’t merely want
toys: they want to work and build lives for themselves and their
children. Because of job insecurity (at least perceived job
insecurity), expensive health care, etc., many people are finding it
harding to reach this goal, and we shoudn’t be dismissive.

In my two books, The Choice: A Fable of Free Trade and Protectionism [2] and The Invisible Heart: An Economic Romance [3], I explicitly make the point that economics isn’t about money, it’s about how we live our lives. Money doesn’t buy happiness or love. Material satisfaction is often fleeting. Whoever has the most toys wins isn’t true. In the new book I’m working on, I make the case for the cliche that no one on his deathbed wishes that he had spent more time at the office. 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. Having said that, it is better to live in a nice house than in a shack. It is better to have clean water than water that kills your children. So material matters do matter.

And having said all that, let’s now return to the "iPod index." The argument about the state of well-being of the average or median worker in America is a discussion about material well-being. The claim of many is that the standard of living of the average worker has been stagnant for years or even decades. My point about iPods or big screen TVs isn’t that those toys make up for the horrible living standards. It’s that the sales of iPods and big-screen TVs (and of bigger and bigger houses and of more and more tickets to football games and baseball games and sailboats and safer and more luxurious cars and college tuition) is that these data suggest that the standard of living isn’t falling at all. It’s actually rising.

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. And despite the worries about rising health care costs or rising college tuition, both life expectancy and college enrollment are both at or near an all-time high.

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[1] this post: http://cafehayek.com/2006/09/an_alternative_.html

[2] The Choice: A Fable of Free Trade and Protectionism: http://www.amazon.com/Choice-Fable-Free-Trade-Protection/dp/0131433547/sr=8-2/qid=1157460737/ref=sr_1_2/104-9141968-3667962?ie=UTF8&s=books/invisiblehear-20

[3] The Invisible Heart: An Economic Romance: http://www.amazon.com/Invisible-Heart-An-Economic-Romance/dp/0262681358/sr=8-1/qid=1157460796/ref=pd_bbs_1/104-9141968-3667962?ie=UTF8&s=books/invisiblehear-20

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