Is the Cost of Living Really Rising?
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- Опубліковано 5 вер 2024
- According to Prof. Steve Horwitz, one contemporary economic myth is that the cost of living has consistently risen for Americans over the past century. In fact, prices are higher today than they were 100 years ago. However, prices today have been heavily influenced by inflation. One way of avoiding inflationary distortions is to look at amount of labor hours required to make a purchase. Using this analysis, Prof. Horwitz finds that most goods and services have never been cheaper.
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This video is bang on, the reason we feel differently is that even though we have ever higher earning power our expectations have grown even faster than our incomes. My grand dad was an accountant and he and my grandmother raised 5 kids just on his salary. But... they had only 3 cars in 40 years, cars that had no radios, no air conditioning, no abs, no CD player, no heated seats, it took them 30 years to gradually furnish their apartment. He ate in a restaurant twice a year not twice a day, he didn’t buy coffee on his way to work, he didn’t have a tv, no internet service, no cable, no dishwasher, my grandmother made every meal from scratch, no frozen food, leftovers became tomorrow’s lunch, they didn’t go down south every year on vacation, no Disney world for the kids. His car was only for special trips, to save gas and wear and tear he rode the bus or walked to work. You get the idea!
but, and it's a big but, is that he was probably able to purchase his house with cash.
Housing costs take most of the money in big cities.
Did your mom divorce him?
Sounds like a winner, raised 5 kids who know the value of saving money and ate homemade meals. I bet his wife wasn't happy without the hollow status and comfort women seek.
The cost of health care, education, and houses has actually increased after inflation, this whole video is wrong. Rules and regulations and speculation have conspired to increase housing prices way beyond inflation because existing home owners want to sell their properties for a profit. A house that cost 2 years of salary could now cost 15 years of salary. Go look it up on youtube.
makes sense. Never thought about it in this way. So basically we have ever bigger demands and markets struggle giving us what we want cheaper.
i think he forgot the cost of housing and school, which regulations and inflation have skyrocketed
And currently, 2022 energy, gasoline, food costs. Way too head in clouds of academia whilst being out of touch with reality. But I see that this was 2011 too. So he gets a pass, I suppose.
My grandpa got a job in a factory and with his salary he was able to raise a family of 3 children and a stay-at-home wife. With just his salary he was able to afford a home, vehicle, and a yearly family vacation in which they traveled somewhere. His job was completely average, he worked on an assembly line making chairs and only had highschool education. Try that today.
You can argue that the cost of computer power is decreasing and spending $1000 today gets you more than $1000 spent 10 years ago on a PC, but for housing, food, medical, gas, education, and virtually everything else those prices are growing much faster than wage increases.
Zippy B best comment ever!
+Zippy B I think the thing you're forgetting about is what was mentioned at the end of the video. Today, poor families have more gadgets in their home than did the average family in the '70s. In other words, the lower cost of stuff has led to Americans buying more stuff. It may very well be that the American appetite for things has outpaced the reduction in cost in terms of labor hours, but that doesn't negate the point that goods, in general, are cheaper now than in previous decades.
But the average person didnt actually have most of that old school tech. During the 70's and most of the 80's, most people didn't have VCRS, Cable t.v. and other things. And the fact that some modern gadgets can function within many capacities doesn't change the fact that buyers are still buying multiple gadgets which replicate those capacities (and often going in debt in the process).
Easier access to credit and a lower moral premium on frugality means more spending and debt.
Zippy B he is those free market bullshiters
I really wish you had done the math for the basics. The roof over the heads for a family of 5, the cost the heat it and run minimum electricity. Transprotation and shelter are the most important for anyone of any age trying to start independent life.
Well, he did do food and cars.
chicken = 0.25 labor hours .
housing and college = 150 years of labor hours
Exactly! Someone needs to tell the video professor the real truth.
What this isn't taking into account is that the majority of people today actually do make just a bit above minimum wage, with the average being distorted by people in management positions, while in 1950, most people made far more than minimum wage, even without going to college.
Additionally, you have to consider how much money people actually have left over today to buy things with. In the 50's, the house was just a portion of what people paid. Most people had money left over. Because of this, things like food and entertainment cost more in comparison to wages, because people had more to spend. Today, most people spend almost all of their money just on bills, with just a little bit left over. Because of this, things like food, videogames, and TV's are (compared to the value of the dollar) cheaper today than ever before. However, people have less money left over after paying their bills to actually buy these things with, due to rent being very high, mandatory health insurance which is extremely expensive, especially for young men, who have to pay ~$500/month just for health insurance, as well as other mandatory bills such as phone and internet (try keeping a job if you can't get phone calls and e-mails from your boss). Yes, we make more money, but we don't have any left over.
Wow TLI, you took the words right out of my mouth.
This is all based on a false premise. Only about 10% of the population earns the minimum wage, today and in the 1950's. Rising costs of housing and higher education come from a lack of free market and loads of government intervention.
Exactly! This vid maker is an Ivory Tower economics theorist who has his nose stuck to a computer screen full of data and has never ever talked to the hard working people out there. Essentially, he is an over educated moron who is in denial because "The Statistics...."
@@ZackRamsey14 it's even less than 10% of the working population today
government was 75% smaller in 1970
And even so the market had still been able to offer better goods at lower prices
I call several things in this video into question. First, the example of food, we know food has gotten cheaper 5% of GDP vs. 10% a century ago, but it has external affects like the rising cost of obesity in the same time period health care has gone from about ~7% to 18% of GDP. Additionally, due to technology the productivity / wealth generated by individuals has greatly increased but this isn't reflected in their wages.
Lastly, income mobility is declining and at a low point.
industry and mechanization make the costs of production go down, period. the government taxes and inflation make prices go up. someone please remind me why are we blaming the free market for things the government is to blame for??
Because blame is easier than economics.
Because he is a brainless democrat.
what about homes and energy?
Homes: I don't know about the U.S., but I found a simple solution in my country: Don't live in the inner city. Not everybody can live in the same place, it's basic physics, economics just atop on that. You are not entitled to live where you want for cheap. If there is only one place for you that's acceptable, you have to pay up.
Where I live rent is Inner city = 120% Suburb = 120% nearby small towns. Either it is so much better in the innter city that it is worth it, or you need to stop whining and live elsewhere.
Energy: Some politicians *want* it to be expansive. But more importantly, demand grows fast than supply. Let's hope technology solves this.
What about housing? A house that was worth $180,000 in the 1980s is at least $400,000 today. Do the math:
A 25 year mortgage right now has a prime rate of 4.5%, that's an average monthly payment of $2200 (without factoring for interest only periods) and a total mortgage with interest cost of $667,000.
In the 1980s, prime rate reached a high at 20%. That's an average monthly payment of $3000 for that $180k mortgage, and a total cost of over $900,000 on the mortgage plus interest.
@john patterson no people cant afford to exist
@@r.chavez5513 yet here we are. Less poor and less homeless than ever.
@@gotugoin House prices have increased mainly due to government action; too many regulations/not building enough (thanks to left wing policies like insane environmentalism and open borders).
You would think that the term "cost of living"" would mainly include things that are essential to living.. (ie food clothing shealther healthcare , ulitites etc.)
In the days of pitchforks, this man would have been 'an example'.
Yes!
It really is disingenuous. Becoming 1000% more productive, having 600% more stolen from you, and saying you're better off is pathetic. I usually love these videos, but this has nothing to do with learning liberty.
He didn't even address the ACTUAL COST OF LIVING! A home, rent, health care costs, utilities. Ridiculous.
these are government subsidized products or services. So stop blaming something on capitalism what clearly isn't.
Not Richard Umm, where I live nearly all the utilities are privately owned.
Housing, food and healthcare costs makes up the majority of my expenditures. So where are these items listed in this video?
The same as everything else.
What about housing? A house that was worth $180,000 in the 1980s is at least $400,000 today. Do the math:
A 25 year mortgage right now has a prime rate of 4.5%, that's an average monthly payment of $2200 (without factoring for interest only periods) and a total mortgage with interest cost of $667,000.
In the 1980s, prime rate reached a high at 20%. That's an average monthly payment of $3000 for that $180k mortgage, and a total cost of over $900,000 on the mortgage plus interest.
Still want to complain that cost of living is worse?
Houses today is bigger, safer, more comfortable, better insured and built compared to 100 years ago.
Also energy, the corporate owned government is trying to ban Thorium reactors...
Housing prices are going up mainly because of overpopulation.
Food prices are going down.
I don't know a lot about the american healthcare system so I don't know why US healthcare prices are going up.
He discussed food but housing and healthcare are subject to government intervention to such a degree that free market principles don't apply anymore, the incentives have changed and so has the resultant prices.
to get treated at a doctor it costed 5 dollars 1912 or 483.57 today 100 dollars to treat an average illness such as common cold, or infection. Cost of a hotel room .30cents or 29.01 cents today a room costs 39.99-85 dollars. If you just pick and choose amongst new technologies that we have learned to make cheaper and in mass produce more this lowers the cost. a brand new handcrafted car today will cost you around 300,000 to 1.8 million dollars today. Big difference compared to 96,000.
And in 1950, the person employed to manufacture that stereo would have worked in your country.
Now slave labor or sub living wage labor in foreign countries enables that crap in your pocket.
Generally speaking, when we look at how much time we must spend working to afford things of equal or greater value than that of what we could get in the past, I think this video is correct.
This was my step dad and i keep watching these since he passed
Your step-father was an accomplished academic.
I am sorry for your loss.
He forgot to mention that most of our US goods are now made over seas, hurting our job growth here. Does he realize how hard it is to find full-time work that give 35-40 hours per week.
My gf was lied to when she was supposedly given full-time employment at a deli which immediate cut her hours down to part-time without telling her.
As a party of three adults, we can barely afford our rent, car payment and food with two of the three working full-time. The buying power of the US dollar for things like food is far weaker than it used to be.
Back in 1996, we could fill our shelves and fridge with only my Fater working full-time and my mom working part-time. Times have changed and videos like this forget to reflect on that.
Evrything keeps going up and quality is going down.
People need to wake up
Wow. I've seen nearly every Learn Liberty video and this is the first one I have to disagree with. When comparing our economy to the 50s', you focus too much on consumer electronics, and, frankly, the cost of electronics has little to do with one's standard/quality of living.
Also, the labor cost for these goods may be cheap for us Americans, but that doesn't take in account the Asian slave labor that was required to make the cheap consumer electronics--it's hard to put a price tag on that.
A lot of Americans don't appreciate how good we have it, as Louis C.K. says in his famous video clip. You can go to a supermarket open on Thanksgiving day and buy everything you need for the standard holiday feast. That fact should amaze the hell out of us.
Yeah right
"The government almost guarantees everyone an education with subsidized and limitless student loans. "
If the supply of colleges wasn't limited, they'd have to compete for students and lower costs. Only a small portion of the population has a college degree. This is because the government lets accreditation agencies regulate for reasons other than quality.
If quality of the education were the only factor in accreditation, we'd see a lot more competition among colleges.
In the 1950's a man could support his whole family by just him working, that's not possible today so it's pretty obvious in general the cost of living have been rising astronomically, just 30 years ago many people could afford houses nowdays you have to pay loans for decades to come.
Agreed, I think he's mistaken the quality of living for the cost of living. And your're right about the price of housing. My uncle bought his house in the 70's for $40K and now its worth $350K. even if you adjust for inflation it's still less than $100k. plus the insurance premiums and taxes are a big factor as well
As with the Hi-Fi, you can only play one thing at a time with your ipod (with the two ipods you can listen to two at a time, but only one headphone per ipod). The difference is that the Hi-Fi has greater quality of sound and could even be considered as furniture.
You seem to be having trouble reading so let me articulate the point simply:
1) When the government limits the supply of a service or product, the price rises. This is just basic economics and a historical fact.
2) The government limits the supply of colleges and sets de facto price floors using accreditation.
3) The government policy, this outsourcing of power to accreditation agencies, increases the cost overtime to a level that's far greater than market value.
I generally agree with this video, but the iPod example is not accurate. You are comparing apples and oranges. The proper example would be a top of the line stereo years ago compared to a top of the line stereo today, similar to the car comparison. You did not do that, and hense you earned my thumbs down on the video.
For example, in my profession, they have upped the educational standards several times in the last decade. You once only needed 75 hours of seminars and 1,000 hours of work experience to get certified. Now you need about 400 hours of seminars, a bachelor's degree, and 3,000 hours of experience under a supervisor. But, those that were certified before the standards increased got grandfathered in. Its old people that can't use computers protecting their jobs upping the standards.
Exactly!
There are so many things wrong with this video it's hard to know where to start..
1 - Inflation stats are grossly understated (e.g. Food costs are really much higher)
2 - Health care..need I say more?
3 - Cars are way more expensive than you give them credit for. Consider all the hidden costs to owning a car. The "labor" hours required just to commute to work should be included, since that is time you have to give up that could have otherwise been spent on leisure..
1. The biggest criticism towards this video is that the cost of technology is rarely examined when discussing cost of living, so Howitz is in complete agreement with you regarding the importance of 'living a normal middle class life', and luckily (as explained in this video) costs of computer and internet have never been cheaper.
2. The point he was emphasizing in this video is that purchasing power in America, when adjusted for income, has never been better.
That was a basic demand curve shift caused by government action. In the last few decades, due to Jimmy Carter's CRA, it has been much easier to take out a loan to buy a house.
When demand rises due to more people being able and eager to buy a home (while also being able to temporarily ignore the high price of one), the people selling homes brought the prices up, knowing people would be willing and able (due to government action) to pay those prices.
most of these products are consumer electronics, which are the exception to the rule. You can't put cars in that category either.
Many people make less than 19.40 an hour...
Many people make more than 19.40 an hour...
Thats why its called an average
That's why it's called an average. MORON
sorry had to repeat this again
Most people make less tha 19.40 an hour.... more people make less than that then those who make more.
Exactly, their is plenty of supply (ie land), but cost is still going up. To answer part of this story you can see that the materials to build the house is going up, which is forcing the housing cost to increase.
Another reason the cost of living seems higher is because there is more junk that we "need" (cell phones, TVs, etc,) than before. If you calculate how much real needs cost (food, shelter etc), and think about that in terms of percentage of income, you will find that past generations typically spent a larger percentage of their income on these. The fact that most have enough left over to spend on crap is a reflection of overall decreasing prices.
*FACE PALM*. Who are these people doing stats for the GOV ?
Are you guys even paying attention to 1.) the operating costs PER MILE of the Car/Truck/Motorbike.Including insurance ? 2.) The Cost to rent or buy a house ? 3.) Clothing 4.) Dentistry other medical expenses ? ? 5.) Bank Fees ? 6.) Taxes 7.) Electricity ? 8.) Legals fees? 9.) traffic tickets ? 10. ) Telephone ? Who the hell needs an iPod or a flat screen TV ? or even the internet ? These things are LUXURY or even recreational items NOT necessities for living.
People go to the library and look up the news or other important information for free.
When I used to volunteer at the soup kitchen, a lot of the people had smart phones and laptops and stuff! I don't think pirated movies and flappy birds are necessities, wtf!
Cynadyde
Maybe they got their phone free courtesy of Uncle Sam. ?
1.) Gas prices aren't stable
2.) The value of homes increases always
3.) Where the hell do you buy your clothes? Macy's?
4.) Regulations, ACA etc affect the costs of medical expenses
5.) What bank?
6.) We're being taxed to death
7.) Gas is much cheaper than it was 70 years ago.
8.) What legal fees?
9.) Talk to your mayor
10.) Phones are much cheaper
You're heavily misinformed
1) Thats because of the international market
2) Thats because of Inflation, which increases much faster as you increase minimum wage in large cities. That's just a tiny part of the mass of regulations imposed on small businesses. Which is why a renting an apartment in downtown New York or Los Angeles could buy you a mansion in other states.
This guy goes to chicken as the single indicator, and luxury electronics when this was an emerging market in 1920...
This guy makes a false argument with a couple of poorly chosen statistics...
Aaaand I hope you ppl see that.
+loki7389 So provide more examples. I would venture a guess that most commodities (oil, gasoline, natural gas, electricity) are all cheaper in terms of labor hours than they have been in the past. Surely there are some goods/services that are more expensive, but if you think about it, wage inflation has beat out consumer price inflation for decades. That's effectively what he's saying. Just because prices have gone up it doesn't mean things are really more expensive. As long as wages go up faster than prices, things are getting cheaper to buy.
im not sure how my ability to buy a dishwasher (which was likely just included in my apartment and not me buying my dishwasher) equates to me being less poor
I'm pretty young, but I remember, as a kid going out to dinner with my family, that the majority of restaurants permitted smoking (in my home state at least..not sure about other states). Smoke saturated air and the heavy smell of burnt tobacco seemed almost inescapable even if there were "non-smoking sections". So essentially every patron had the choice of not eating out, or doing so under the pretense that you would be exposed to cigarette smoke.
@Richmunnich That planned obsolescence isn't in the mechanical aspects of your car. They still function nearly identically, if more efficiently, to older cars. The obsolescence they are talking about is in the electronics - like your stereo, etc. And it is "planned", but only in the sense that they try to estimate how far down the road until the CD player (for example) becomes obsolete. The 4 year "disposable" car GM built in the 80's? Note that CDs become widely available in the 80's.
1. While technology was the focus of this video, he also compared the food prices between 1920 and 1997, where the price of chicken was 90% cheaper then in the past.
2. Transportation, communication and availability of leisure are all important aspects of standard of living, each of which are technology focused.
3. I have seen 4 different learn liberty videos on sweatshop labour, had you watched and agreed with 'nearly every' video on this channel, you would be supportive of cheap labour.
A stamp costs more, but you are getting more. The mail is more efficient, faster, able to carry heavier packages, etc. All in all, you are paying slightly more for a substantially better product, which is what the video shows about cars as well. Take overnight shipping for example. A college professor once failed the founder of FedEx for suggesting a business model based on overnight shipping because he said it was unfeasible.
This is sooo deceptive!
A car cost 1,000 dollars back in 1912 was not the main form of transportion and a car today at 30,000 would be what in 1912 money. a car that cost 1,000 dollars in 1912 would be the same as a 96,714 dollars or an oven that costs them and yes an atari cost 199 dollars in 1977 which would translate into 1,048 dollars introductary pricing. this is great but these are luxary items if we really compare we need to compare what people were using at the time. not luxuries.
Not mentioning interest rates, health care, housing, planned obsolescence for goods, product lifespan now and then, insurance rates and so on....What a Dork!!!
It's a 3 minute video, he did three examples. You can apply his model to calculate the costs yourself for these issues.
A top of the line stereo system was $500 in the 1960's.
It's more essential to look at basic necessities such as shelter, clothing, food and energy costs, than the cost of gadgets and appliances. That's the difference between standard of living and lifestyle, which anyone who has really experienced economic hardship knows too well. I think the 2008 housing bubble showed just how unaffordable life in North America actually is, when financial institutions are not providing credit services. Now people are allowed to speculate on real estate...
The price of most goods and services is lower, but the cost of living overall is rising, If you account mortgages, cars, gas, tuition, etc. etc. It is soooo much harder being frugal today as opposed to the 1970's but even being frugal today, you have much more technology and value that a person in the 1970's, but your cost of living is higher than that person and your life is harder and more complicated...
@Niranian Horwitz is not saying that the amount of labor that is necessary to buy something is a measure of its value; he is saying that it is a measure of its cost, that is, what you have to give up in order to get it. Those are different concepts.
Already did that. I just live in a more expensive area. I wish I was fortunate enough to live in an area where the 80-120k homes are the norm.
Gov involvement of Frannie Mae and Freddie was only 1/5 of the total bailout cost, meaning that the private sector was responsible for 4/5 of the damage in sub-prime. So, yes Fannie/Freddie are just two companies, but it is more important to look at the big picture of 4/5th of the problem compared to just 1/5th the problem
What happened to housing is the same thing that has hyperinflated healthcare, tuition, and automobiles: Removal of direct cost (Through the mass introduction of the third party payer mechanism). Thirty years ago you had to pay more of the cost up front, therefore keeping cost lower due to correct competition. Get rid of consumer loans (Housing, Cars, Student) and Insurance (Housing, Cars, and Health) and direct competition will result, leaving lowered real prices and better products.
I paid less than that for my first house, and that was during the housing bubble! The timelines and data reflects your subsidy factor and supply is constantly being increased by private-sector for-profit colleges popping up everywhere. Most of these are accredited and qualify for Pell grants and gov't backed loans. There's an "education bubble" that's being fueled by grants and guaranteed loans. 55% of students graduate, 100% of student debt remains, whether the student earned a degree or not.
Regarding healthcare, it's also vital to include the dramatic effects of government regulations and intellectual property laws have on prices. In a truly free market, healthcare would be accessible for all and would be far better than it is now.
Housing has gotten cheaper, but LAND in certain areas has gotten more expensive because peoples preferences change. Plus the quality of houses has dramatically increased. A house built in the 70s sells for more now, but chances are it has updated insulation, amenities, and furnishings. Also, you need to adjust your prices for inflation.
College was cheaper for a family in yesteryear because no one sent their kids to college. It is a rare time in history that we can even hope for college
The problem here is that "living" can be defined as everything from "surviving" to "living a normal middle class life". Secondly, the cost of participation in the society has risen. For example, it increasingly requires a computer and an internet connection, and being able to complete a certain amount of education in order to even land a job that can provide participation in social life for ones kids and oneself. Thirdly, the purchasing power has sunk since the 70s with its "supercapitalism".
The example I have seen elsewhere conveying the same message is how long does it take to get an hour or reading light (aka 1 lightbulb on candle to run for on how)
Today its 1/4 of a second for the average wage.
In 1950 it was 8 seconds
In 1880 it was 15 minutes
In 1800 it was 2 hours
Different example, but still emphasizes that costs are decreasing.
Accordingly, if you bought land out in the country where land is not demanded it should be cheap. Indeed, buying the land is cheap out in the country far away from anything, but the cost to build a new house on that land is 300,000 due to material cost, and labor. So, it is not a story of simple supply and demand because there is plenty of land out there it is a factor of material cost going up.
As he said, inflation isn't necessarily taken into account. That aside my father was raised in a wooden shack about 20 feet long and 15 feet wide. Him and his cousins shared cloths and wore the same outfits for years as they could fit. The fact of the matter is that those living in poverty now can still afford what those before us only considered luxuries. How often do you hear about folks living in the urban areas who can barely feed their children but have tricked out rims on their Cadillac?
The assertion that "life isn't so bad now" versus a certain timeframe fails to acknowledge how much better life could be without a destructive state stealing from literally everyone but the leeches taking pennies on the dollar through the bureaucratic apparatus that lives large while you fight harder and harder to make a life for yourself. The data is correct, the premise ignores the reality of a life without the oppression of the state that's killing us all slowly.
The interesting thing to note, now, however, is that from 1950 to 1980, the GDP continued to rise. Taxes were high, as the marginal top rate remained above 70%. My whole point being, is that this video is misrepresentative. As it characterizes the low-prices we pay on goods as entirely the work of the Free Market. Evidence has shown for the last century, there was tons of government involvement.
Wait, a lot of people are still making minimum wage and we really need to look more at costs like rent or cost of a home (and availability of affordable options) and medical costs. Also, there's so much stuff out there that may be cheap, yes, but there is some truth to the statement that you get what you pay for. Thankfully, thrift stores are increasingly common and people can thrift items like clothes and toys and household items. My microwave was used and given to me, my couch was inherited from my grandmother, my coffee table was thrifted, my television was a gift from my father as was my washer and dryer, the computer I am currently on was my brother's, my car is used (it was a wreck and repaired before I bought it), and so on. So the fact that I have these luxury things doesn't mean that my cost of living is fine. I just wait to get it used and/or for free. I feel very lucky.
Exactly what I thought this video was going to be about. I don't believe averages really work for economic classes
erica matty
he didn't actually use the national average. If you look carefully he used the industrial laborer average. This is much more skewed to the bottom of the US income bracket. Its not a perfect methodology but if he had used the average or even the median income that would be very, very wrong as you suggest.
Looking at the lowest income earners this analysis still holds true form everything i have gathered.
In 2015, only 3.3% of hourly paid workers made minimum wage or less
www.bls.gov/opub/reports/minimum-wage/2015/home.htm
Planned obsolescence isn't that a company makes something that will break in just a few years so you have to buy a new one. Planned obsolescence is when a company makes a product they intend for a new better product to replace it sometime in the future. I heard a few comments saying how the iPod only lasts seven years. Why the hell would Apple invest in making it last longer when your likely to replace it with the newer model in a year or two.
Technically, insurance premiums have increased (before this point), due to uninsured persons and those who default going to the doctor. If a person needs medical care, and the facility has to give it...or if they simply default on their loan or a bill...part of that is passed onto the other uninsured, part is passed onto insurance companies.
Why do ins companies pay increased rates? Simply because if you don't have insurance, your likely just to default (or not get care in cases).
Stop looking in nominal $. If you use the AIW benchmark Howitz mentioned to convert $ into lh, most consumer items are significantly cheaper:
Food prices decreased 89% between 1920 and 1997
Clothing prices decreased by 36% between 1992 and 2010
Toilet paper decreased by 53% between 1981 and 2011
That said, there are some worrying increases:
Housing increased by 18% between 1987 and 2012
Healthcare increased by 130% between 1978 and 2008
Education increased by 280% between 1978 and 2008
Whats missing from this is the issue of whether or not there are more people making an industrial wage per capita or less. While it does seem that prices or the same they certainly are not better. An ipod would still require a nice stereo to get the same sound out of it. A nice stereo today will be made of plastic and cheap parts from china as apposed to metal glass and wood from a local producer.
He stressed that a top of the line stereo system was about $500 adjusted for inflation, but then compared it to a $250 ipod. A top of the line stereo system can easily be over $5,000. I feel like he's saying "Yeah, 50 years ago a Porsche cost $70k, but today you can get a Honda Civic for 16k!". But I get economies of scale. More people want them, so more are made for cheaper.
However, what this doesn't address is the cost of education or housing, two of the biggest factors of quality of life.
The professor only looked at one fraction of living expenses - product consumerism. He is right that many products has dipped compared to what they used to several decades ago because of improved efficiency. Note that improved efficiency is not always because of innovation, sometimes they are mandated by regulation (eg. ISO regulations). Government actually forces companies to become more efficient indirectly. The professor forget point out other costs of living such as services and taxes.
Rent is sky high while mortgages on deflated houses are cheap if you can get them. I've seen houses for $60k being rented out at 900/month. The problem is that people can't get credit to buy the house (or they can't rely on a job to continue paying the mortgage because of high unemployment). So with so many people unable to secure a mortgage, there is a high demand for renting places. Thus, rent is abnormally high even though houses are selling for less than the cost to build them.
that is 14,507 for tuition compared to 24,000 dollars today and the 10 dollar enrollment fee is cheaper than the standard 300 dollar fee today but it still costs more overall. Let us talk the average comic book. held tight averaging around .sorry let us start over I used pounds not dollars. .10 comic book in 1938 is worth .66 cents today compared to 3.99 today which is 3.33 increase in price. 50 dollar horse is 1,181 dollars 11.81 cents for a meal compared to 48.36 or 50.00 dollar meal today
I'm wearing them, and less then most people being I am not super active. I do stitch and patch and all that does is make to hole move, I patch and then the threads of the clothes pull apart right next to the stiches and/or patch so I then have to stitch/patch a patch to the last patch and the new edge of the hole, on and on until there is more patches the clothes.
You can read all about Mellon. But essentially, he argued that if taxes were too high, that entreprenuers would leave the nation, and it would lead to our economic downfall. This was referred to as horse and sparrow economics then, its called trickle down economics now. I can say, logically, that this was not the cause of the Great Depression, however, it did nothing to stop it. He did cut the war debt in half.
So the chicken at the beginning is "cheap plastic crap"? I mean, plastic is large organic molecules (Mostly ones like C26H54, instead of the C6H12O6 in the chicken), but he included examples from multiple categories. And he pointed out that transportation is more expensive, but also of vastly higher quality. Also, if you have a quarter, you can buy a gallon of gas today, provided it is the same quarter you used in the late 1960's.(silver)
For food, Howitz compared the price of a pound of chicken breast in 1920 and the price of a pound of chicken in 1997. Using his numbers it was an 89% drop. I will acknowledge that a pound of chicken isn't a perfect representative of food prices in America, but its easier than trying to find my own numbers.
Using data from the Bureau of Labor Statistics, a pound of chicken has gone from lh0.23 in 1997 to lh0.19 in 2012. So over the last 15 years we've seen prices decrease by 17%.
RE 1. Also, we shouldn't compare today's food prices to the 20's, because it's a little misleading. Compared to 20 years ago, food is actually much more expensive--we need to look at at recent trends, and not non-relevant statistics from a distant, unrelated economy of 100 years ago.
The government restricts the supply of universities to keep the costs up and to ensure that school administrators keep making their seven-figure salaries.
They do the same for healthcare. The AMA restricts the number of medical residencies available to keep wages high. This hurts the quality of the doctors and forces medical students to learn all kinds of things that they never use. If you don't believe me, give a medical school exam to a practicing doctor and watch him fail it.
Of course there is plenty of cheap land if you are willing to live in the woods, but i was talking about the less rural areas, where prices were skyrocketing during the last decades.
What happened to Housing? Housing is the biggest cost to anyone today. An average new house cost is about $300,000. In the 1970's a new house averaged $26,500. Adjust that for inflation and you get a 1970's new house cost $147110.52 in 2010 dollars. Food and appliances have gotten cheaper and better, but living/housing has gotten more expensive. So, ignoring the biggest cost factor seems a little suspicious to me.
Cost are deferred by cheap over seas labor, poor quality of product, and a government happy to give their bosses at XYZ Big Corporate tax incentives and subsidies. Keep on spending America.
Part of the reason may be that we live in a culture of excess. What I mean is whereas a home 50 years ago may have had just a radio and TV with free over-the-air broadcasting, today many homes have Cable TV, High-Speed Internet, Satellite Radio, DVDs/Blu-Rays, Video Games, etc. all of which cost money. Just some food for thought :)
There are two problems with your statement.
1. Gold was in a bubble in 1980
2. You are completely ignoring inflation and its effects on prices.
I agree that they are a problem, however the largest reason for the decrease in the price of food has been technology and have done far more than subsidies to reduce the price.
Proven oil reserves will last us for another 37-79 (79 is at current demand, 37 is factoring in increase demand), estimated oil reserves will last for somewhere between 34 and 450 years depending on who is doing the estimate. With fracking becoming an alternative to oil, we have enough reserves to last for 1000s of years.
All of this is correct in taking into consideration. Although, what it doesn't take into consideration is the gold standard. When we had the gold standard, everyones money became worth more, and in fact, we all became richer because actual prices would change. For instance, an item that cost $100 in 1820 would have costed only $62.03 in 1913.
That *is* the impact of knowledge building. As we develop new innovative means of production, the cost to produce goes down. This is the natural order of things, and has been a constant for roughly 100,000 years. For prices to increase, that requires the debasement of the currency used to purchase the items to exceed the productivity gain from innovation. That has been a constant for only about 40 years.
I would dispute any claim that a modern iPod is better than a 1950's top of the line stereo. Professional audio amplifiers still use tubes to this day and make MUCH better than FETs or MOSFETs (which are really the same thing). The downside is the warm up and the need to periodically swap out the tubes. I happen to have a very high end Harman Kardon amplifier AND an old tube-based wooden stereo and the old stereo sounds better in most instances, especially for bass.
That $500.00 1960's top of the line stereo system lasted 30 years because it was built to be durable. Planned obsolecense means comparable products are only built to last 3 years. So, that $250.00 high tech stereo will have be replaced 10x in the same period, true cost for comparable products $500.00 vs $2500.00. How many songs will you download at $.99 per song? Vs. Free music.
Yes he didn't directly mention the above 2 points however he did make a comparison in the amount of goods a poor family today has compared to an average family just a few decades ago. All those goods would have been purchased under the burden of student loan and mortgage repayments.
However one thing he didn't mention is asset ownership. An average family in 1971 probably owned their own home, where a poor family today would forever be paying rent.
@GabrielBacon Housing/healthcare *are* more important than iPods. Three things: 1) government is heavily involved in housing and healthcare, so the market there has been distorted, 2) I suspect housing is also cheaper than 100 years ago, and 3) healthcare is not cheaper, but consider what you're getting. If you got sick in the 20s, not only did you pay for care, you probably ended up worse off.
Not to make light, but maybe these essential areas are the ones that could do with less government.
There is a big problem here in itemized cost of living vs. net cost of living. True what was once a 2000 computer I can purchase a far superior one now for 500. Cable TV used to be a luxury, as did cel phones, computers, internet. Go back far enough you could even say cars were a luxury as we had trains everywhere. Though not everything is required to live, most people can't live without them. Most jobs you can't walk, or take a bus to. Add the cost of fuel, it's crazy!
RE 1. There are some hidden costs in our food system, and some big quality differences between the food of today and the food of the 20's. Chicken is so "cheap" partially due to government subsidizing (corn) grain feed--food the animals shouldn't be eating in the first place. Another big reason is our food system's dependence on oil. Oil is in almost every stage of our food system, but how much longer will that last?
Rising prices ARE a symptom of inflation (that has been my point all along and that falling prices can be a symptom of deflation, but can fall for other reasons and that deflation, a contraction of the total money supply is a bad thing), but it's not like inflation is evenly distributed.
The problem is this is using average industrial wages. This takes into account the top tier earners, and those on the higher up.. if you're just starting, at the low end spectrum, things cost a lot more for you in terms of labor hours.
True. All the more reason to ditch agricultural subsidies.
About the oil, I just say the Learn Liberty video on dwindling resources and it would be nice if our resources are that abundant. It's something I need to research more on.
There may be plenty of oil, but what about the accessibility of the oil reserves? What happens when it takes burning a barrel of oil, just to extract a barrel of oil?
I'm glad to know that's what you do at work, lol. Like I said, the pie is bigger. $5 is 25% of $20 while $20 is 20% of $100. Those numbers are hypothetical and resemble what has happened over the past 30 years. Getting 20% of what you produce is worse off than getting 25% of what you produce, regardless of what kind of work you do to produce it.
What is money if not a physical representation of your labor? If you have a $1 piece of wood and carve it into a spoon that you can sell for $2, your labor was worth $1. So comparing time spent working to goods is a valid concept.
Also, what would you pay for a record player today? I wouldn't pay anything, because I don't own any records. However, I do own CDs, which are the modern version of the record. Thus, comparing record players to a cd player or an I-Pod is valid as well.
In terms of sound quality, I would say cassettes are better than MP3. The main advantage of MP3 players are the enormous amount of music you can have in your pocket. At about 1mb per minute of audio, even a modest MP3 player can carry around hundreds of songs. But I would still say it's not fair to compare an MP3 player to a home stereo.
That is not to say that all of the shale reserves will be extractable. It is impossible to extract every last drop of oil from any well, but both technology and price changes will ensure that oil will be available for probably at least a century or so, ballpark figure.
He was just establishing the principle in a short amount of time. It applies to other things like healthcare and housing too, it's just those are much more complex cases with more exceptions. In order to show people what he was talking about clearly, he used examples that people can relate to.
Look at the pentagon, their budget is massively bloated and reports regularly come back wear BILLIONS has gone to the Raytheon and Lockheed Martins of the world with basically nothing to show for it. Projects are routinely behind budget and over schedule. Don't get me wrong I'm a MechEngineer a lot of my friends and my future job prospects are on defense, but many of the private sub-contractors preform terribly and then lobby for more money. -
Also, remember that, unlike businesses and corporations, we working Americans can't write-off vehicle expenses from our taxes--all of the costs associated with our Internal Combustion Engine Cages have to be paid for with after tax dollars.
4 - Take in account all the hidden fees and taxes.
5 - Inflated housing index, and therefore inflated property taxes (see #4) compared to the 50s.
yeah, and then when you add up the cost of replacing the clothes every 3 to 6 months at most. it cost much more for clothes then it used to. and even with some of the "good" quality clothes don't last more then a year or two and cost ten or more times as much but only give you two to eight times as much wear time, meaning it is not worth the extra money for them even most of the time.