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John and Jane Doe of Anytown, USA, Worry About Middle-Class Stagnation As They Read Reports of It On Their IPads as They Wait to Board Their Flight to Cancun

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Over at EconLog [2], my brilliant colleague Bryan Caplan points out the interesting fact that in totalitarian countries the press consistently reports that ordinary citizens there live materially much better than those citizens actually live, while in free countries (that are at least reasonably market oriented), the press consistently reports that ordinary citizens there live materially worse than those citizens actually live.  The persistent reporting about the alleged 40-year-old economic stagnation of America’s middle-class is a case in point.

Here’s a lightly edited comment [3] – with an extra link added – that I left at EconLog on Bryan’s superb post:

At least one aspect of the bad-news bias is perhaps, in part, the unconscious result of simple economic ignorance. The aspect that I have in mind is the narrative of middle-class economic stagnation in America. This narrative says that ordinary Americans – in some versions the 99 percent, in other, less-hysterical versions the bottom 90 or 80 percent – have enjoyed no or only very little improvement in their material standard of living since the mid-1970s or the early 1980s. This narrative has been around since the mid-1990s. (SMU economist Mike Cox, then an economist at the Dallas Fed, and his co-author Richard Alm, began to try to debunk this narrative as early as, I believe, 1993. Their 1999 book, Myths of Rich & Poor [4], is a still-relevant read.)

It’s one thing for today’s college kids, or for bloggers in their mid-30s, to believe this narrative; they obviously have no recollection of life in the mid-1970s. But people such as Paul Krugman, Robert Reich, Harold Meyerson, and many others who should know better repeat this narrative as if it is an undeniable truth. Yet while a handful of aggregate statistics – e.g., the inflation-adjusted average wage for production and nonsupervisory workers (which has been flat over the past many decades) [5] – can be trotted out to support the narrative, work by serious scholars such as Cox and Alm [6]Terry Fitzgerald [7]Scott Winship [8]Steve Horwitz [9]Mark Perry [10], and others show that this narrative is utterly mistaken. Ordinary Americans’ access to real goods and services has grown enormously over the past 35-40 years. (Improvements in this access might have slowed down a bit since 2008, but even this claim is questionable – albeit not as questionable as the claim that from the mid-1970s to 2008 there was middle-class economic stagnation.)

I suspect that at least part of the reason for the persistence of this myth of stagnation is that those who believe that high-tax, heavy-regulation government is the key to economic prosperity for ordinary people do not wish to believe that ordinary people continued to grow richer once a bit of deregulation and tax-cutting commenced around 1978. Many people who have prominent public voices – who are mostly left-leaning – simply ‘know’ in their bones that Carter-Reagan-BushOne-ClintonOne ‘limited’-government policies must have been bad for ordinary people. Having access to some aggregate statistics that can be interpreted – for reasons explained by Jonathan Haidt [11] – to confirm their ‘knowledge,’ the myth of middle-class stagnation thrives.