Stagnant Thinking

by Don Boudreaux on March 3, 2015

in Myths and Fallacies, Standard of Living

In today’s Wall Street Journal, the Cato Institute’s Alan Reynolds clearly explains, again, that middle-class Americans have emphatically not suffered economic stagnation since the 1970s.  Lest anyone suppose that this stagnation claim is fading away or that it is espoused only by fringe figures, Reynolds quotes the current Council of Economic Advisors chairman, Jason Furman, as having recently lamented at the Vox blog that America has suffered a

40-year stagnation in incomes for the middle class and those working to get into the middle class.

Reynolds rightly exposes Furman’s claim as ridiculous – as, at best, an artifact of highly misleading (and often poorly constructed) statistics.  (I say “at best” because no statement coming from any political operative, of whatever party, should ever be assumed to unquestionably reflect that person’s unbiased assessment of reality.  Some number of such statements – likely a very large percentage of them – are made for their political impact with little or no regard for their veracity.  For the record, I have no idea if Jason Furman in this case really believes this claim of his, but I am quite sure that, if he does believe it, he’s a poor economic historian.)

Relatedly, Mark Perry informatively riffed on my recent comparison of a 1972 Chevy Vega with a 2015 Toyota Corolla.  Here’s a slice from Mark’s post:

In the early 1970s, the average age of the passenger cars owned by Americans was only about 5.2 years; today’s it’s 11.4 years, the highest in history. Today’s cars are more dependable, require fewer repairs, and last for many years longer than the cars of 40 years ago.

It’s both astonishing and sad that so many people fall for the absurd assertion that middle-income Americans enjoy today a standard of living that is barely improved from the standard of living enjoyed by middle-income Americans when “Happy Days” was still playing in prime time.

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