Preface for the series here. The basic idea is to take an honest look at how much the American standard of living has improved over the past 30 years, rather than to cherry-pick the cases where vast improvements have been made and stipulate post hoc that these are the domains that matter most for our well-being, as though we were miserable when we only had the Walkman and not the glorious iPod. We also want to focus on whether the improvements in some key area have already hit diminishing marginal returns, so that we're plateauing rather than skyrocketing upward.
To try to keep things objective, I said I'd stick with a pre-existing framework for what matters regarding human welfare, and why not pick the familiar Maslow's hierarchy of needs? I'll start with three of the most basic concerns, not only because they are so important to us but because free-market cheerleaders ignore them and tend to focus on how dazzling today's gadgets are compared to yesterday's.
Let's start with food and nutrition. Starvation is more or less non-existent in capitalist countries, and that is largely due to the falling prices to the consumer thanks to the specialization and competition among food producers. However, this fact has been true for quite awhile, the largest gains coming at the start when malnourished peasants got jobs that allowed them to feast on animal products for once rather than subsist on grains and starches. No real progress could've been made in the past 30 years there.
When we turn to the composition of the diet, though, we see a lower standard of living over the past 30 years, due to the government, academic experts, and the diet industry converging on the backwards view that animal products are poison and that grains are life-saving. People generally trust experts and government warnings, and they indeed followed this advice and switched to a carb-intensive diet starting in the late 1970s or early 1980s. That is also when the obesity epidemic shows up in official statistics, although it is worth mentioning that this epidemic includes not just obesity but all other diseases of Metabolic Syndrome -- diabetes, heart disease, hypertension, insulin resistance, etc. I summarized the data on the change in the diet and change in health outcomes here.
It's true that people can expect to live a few years longer than 30 years ago, but I think the average person finds that improvement of lesser value than the gains we should have seen by continuing the capitalist trend away from an agricultural diet and toward one of lower carbs and more animals. If the average lifespan had increased from 30 to 33, people would be truly grateful, but 3 more years of elderly life, while still positive, don't affect us as much. Given the myriad diseases that a carb-heavy diet causes, the average lifespan would've improved even more. And freedom from those diseases -- which affect adults far earlier than their golden years, and now even small children -- is what most people would consider being in good health. That is, being full of vim and vigor, able to be physically active without passing out, having good muscle and skin tone, no cavities, and so on.
The other major component of health for modern populations is freedom from infectious diseases. Again it is plain to see that, encumbered though it may be by government regulations, the drug industry has delivered us from lots of crowd-killers from earlier times, thanks to division of labor and economies of scale, and at low prices thanks to competition. Still, most of those gains came early with Penicillin and engineering safe drinking water to prevent cholera, dysentery, and other water-borne diseases. Perhaps the last major success of eradicating nasty diseases was the Measles-mumps-rubella vaccine, although as the graphs in that article show, that was a success of the '60s and '70s, with no real change in the past 30 years.
About the only new vaccine developed since then has been the one against chicken pox, adopted here in 1995. Given that it's only good against one disease, and a very mild one at that -- although it could still spoil a summer road trip like when I caught it as a little kid -- it's not possible to rank this with the earlier triumphs over infection. In this area, we have very clearly hit diminishing marginal returns. (This is not because there are no more infectious diseases: Greg Cochran and Paul Ewald emphasize that many other modern diseases likely have an infectious component, but that most medical researchers are ignorantly uninterested in pursuing this.)
So, for overall health we're either going nowhere or perhaps somewhat backwards since 1980. Because large swings in the standard of living must be obvious to the average person -- otherwise the researcher has included things in the list that don't really matter much -- there should be a popular awareness of how unhealthy we've become. And indeed everyone recognizes that big change over the past 30 years. I just watched Death Wish, made in 1974 when Charles Bronson was 52, and although he shows basic signs of aging, the initial scene of him and his wife at the beach show that he had good muscle tone and hardly any body fat. You'd be hard pressed to find average 52 year-olds today -- that is, ones who weren't bodybuilders earlier in life -- who look like that. My grandparents could name all sorts of infectious diseases that "everyone got" as children; my parents a couple; and I can only name chicken pox.
Aside from having enough -- and enough quality food -- to eat, you'd better have a roof over your head if you want to survive. The economist Robert Shiller has a very clear chart of housing prices since 1890 at his webpage (3rd paragraph from the bottom). Not that you need to see it, but Americans have seen a lower standard of living here, too, over the past 30 years. The housing price index rises throughout the '80s, dips back a bit during the first half of the '90s, takes off during the recent housing bubble, and has dropped since the bubble burst, although it is still currently above the previous two peaks before the housing bubble (one in the late '70s and the other in the late '80s). In fact, the only period during which the index fell steadily was from roughly 1895 to 1920 (then it remained flat until about 1940). And since the quality of housing hasn't reached Jetsons-like levels over the past 30 years, we're not getting stunningly higher-quality housing as we're paying more for it, and so this major component of the average person's standard of living has declined.
This is not simply due to population growth, as Shiller's chart shows: population has increased steadily since 1890, but only since about 1940 have housing prices started to shoot up. Again the basic economic concepts of diminishing marginal returns and rivalrous goods should have led economists to expect a decline in the standard of living in recent times. If you own a piece of land, no one else gets to. When land is abundant, population can increase and instead of getting crowded and competitive, people can head off for uncolonized territory. After awhile, the space fills up and that's it. Further population increases will make the place more crowded, which increases the demand for land and housing, which in turn drives up the price.
Given how simple this dynamic is to understand, and given that economists were among the first to elucidate how the dynamic worked, you'd think that economists would pay more attention to it and heed its warning when discussing how great our standard of living is supposed to be compared to the recent past. But they are afraid that if they admit one large piece of the standard of living has sunken over the past generation or two, the public will take that as confirmation of their fears and get pessimistic about the economy as a whole, not just housing. Still, maybe the public isn't so irrational -- this embarrassing example should make us think twice about whether our standard of living hasn't been in something of a plateau stage for the past 30 years. This should shock us out of looking only at memory chips and internet access, and focus instead on what truly matters for our well-being.
Finally, what good is having a nice home and a healthy body if they can't be protected from property crimes and physical violence? Criminology statistics show that property and violent crimes move together over time -- when rape rates go up, so do the rates for homicide and burglary. Because homicide data are more reliable and go back further in time, I'll focus just on those. Here is the homicide rate since 1900. There is no trend steadily upward or downward, only cycles up and down. Our standard of living got worse during the 1980s, but much better during the '90s and 2000s. Of course, we can't expect that to last too long given the clear cyclical pattern over decades. But that is some good news in the larger picture.
As for longer-term trends, here are homicide rates from Western Europe over the past 700 or so years. We've seen plummeting rates of violence since about 1500 or 1600, and not so much change in recent times. Again this reflects diminishing marginal returns: when the centralized government starts rounding up trouble-makers, and when police and military functions are consolidated into central and neutral third-party forces -- rather than being practiced by clans and factions -- the most heinous criminals will be the first to go since they are the easiest to spot and the least likely to merit any compassion.
No one would argue that these three domains are fundamental to human well-being, and there is pretty good data on all of them for the past 30 years. Overall the picture is that the American standard of living has stagnated or declined during this time at the most basic of Maslow's levels. Obviously we have not fallen off a cliff back into Europe in the Dark Ages, and even the declines judged against the vast gains that were made from roughly 1800 to 1930 or so might seem like a barely perceptible dip. Nevertheless, it's clear that in these basic areas we're no longer improving at the dazzling rate of capitalism's bustling infancy and hyperactive adolescence.
Indeed, we seem to have stalled out -- at a pretty nice level, mind you (I know I'd be happy living in the '80s forever), but this should give free-market enthusiasts pause when trying to persuade the public of capitalism's virtues. They should focus on the enormous gains that were made from the start up through the point when, let's admit it, diminishing marginal returns seem to have set in several decades ago. That may seem more remote, but at least the audience would buy it -- slaving away on a farm with only corn and potatoes to eat vs. living in a decent house with no backbreaking labor and plenty of meat, eggs, and dairy in the ice box (as my grandmother still calls it). Trying to convince the public that life in 2010 is like The Jetsons compared to life in 1980 will only get laughs about how clueless the economist is, and rightly so, as such a change would be impossible to miss. The take-home message to the audience should be: "Look, we realize things aren't that much greater than 30 years ago, but it's a lot better than 100 or 200 years ago, and if we don't screw things up, we can continue enjoying what we've already got, nice and steady. But if we get too crazy with attacks on the free market, we could actually slide backwards."
If the average lifespan had increased from 30 to 33, people would be truly grateful, but 3 more years of elderly life, while still positive, don't affect us as much.
ReplyDeleteWhen I looked at the data, there was improvements in mortality rate across the entire span of age groups. So the average lifespan is going up because fewer people are dying at 30, at 40, at 50 and at 80.
Again the basic economic concepts of diminishing marginal returns and rivalrous goods should have led economists to expect a decline in the standard of living in recent times.
The U.S. still has plenty of land, plus there is a ton of room for building up or infill. The two main factors pushing up housing prices are a) cheap credit policies and b) zoning laws making it expensive to build.
Most things have become cheaper relative to income over the past 30 years. Clothing, furniture, most other materials goods. Car prices have remained the same (but the quality has improved significantly). The things that have become more expensive relative to income are housing, education, and health care. Compared to most other manufactured goods, these things are either highly regulated industries, have third-party payment, or do not offer return on payment. Housing has become more expensive mainly due to the bubble, which is now self-correcting, as well as building restrictions (which are often created to protect the price of existing housing).
ReplyDeleteIn the preface, I stipulated that quality of stuff overall has been improving, prices declining, and variety widening. But those are first-derivative observations, and therefore tell us nothing about whether diminishing marginal returns have set in.
ReplyDeleteFor that we need to compare rates of improvement over time since the beginning of capitalism. Just looking at cars (price, quality, safety, whatever), compare the gains from 1920 to '50, '50 to '80, and '80 to 2010.
"So the average lifespan is going up because fewer people are dying at 30, at 40, at 50 and at 80."
Right, but the average lifespan itself has not increased from 30 to 33. That would be a dramatic and palpable improvement. People at age 30 expect to live longer because of prolonged golden years, not because famine, war, and plague had recently been tamed.
"The U.S. still has plenty of land, plus there is a ton of room for building up or infill. "
Diminishing marginal returns. The most desirable land will be settled first, then the next most desirable, etc. At some point, there may be a lot of land left, but because it's not so high-quality, people are not very willing to head out there. That keeps them in crowded areas and drives up prices, all endogenous and in the absence of external state interference.
In addition to the diminishing marginal returns related to land, it's also worth mentioning that the modern economy exacerbates this problem. There's a ton of land you could live on in a subsistence agricultural hermit lifestyle, somewhat less where you could set up the means to carry out some stage of the industrial manufacturing and distributing process, and very little where you have close proximity to high quality human capital necessary for most modern economic activity. Such human capital is not a very liquid resource, since it likes to be in a community where it has pre-existing relations and can find a spouse and support a family. So nationally, there may be some halfway decent land in North Dakota but people flock to Silicon Valley and lower Manhattan and RTP etc. instead (the same dynamic plays out intra-city on a smaller scale).
ReplyDeleteWhile the quote about land I've seen attributed to Will Rogers is not entirely accurate, it is close enough - it is pretty universally acknowledged that land is a good investment on which to gain a return (as opposed to, say, a car) since its value goes up long term, so I don't understand why no one seems to ever put two and two together and think, "Wait a minute, a key human need is becoming more and more expensive."
The negative second derivative is evident in our official measures of progress - GDP - as I summarized here.
ReplyDeleteSteve Sailer has pointed out that any improvements over the last 30 years are by-products of Moore's Law. Prior to that our astonishing growth was driven by the development of steam engines, internal combustion engines, turbines, electricity, petroleum (plastics), agriculture, construction material, galvanized rubber, atomic energy, lasers, aluminum, aerodynamics, anti-biotics, optics, electromagnetism, rocketry.
The above is just a stream-of-consciousness listing of all the things I see around my house and looking outside and up at the sky. Perhaps nanotechnology will bring some awesome improvements to our standard of living, but as far as I can see we don't have anything today we didn't have 40 years ago that can't be chalked up to Moore's Law.
Genetic engineering, designer babies, more sophisticated AI/robots, artificial reality, and biomedical technology will dramatically improve the quality of life of people. There is plenty of reason to be optimistic even after factoring in immigration.
ReplyDeleteSome areas of technology need to improve at a quick pace to keep the standard of living steady, e.g. mining and energy tech have greatly improved, although this is heavily offset by depletion of easily accessible resources. Huge, huge agricultural improvements from breeding, pesticides, etc have continued in recent decades.
ReplyDeleteI agree that overall utility of typical college-educated whites hasn't changed very much in the last few decades (except for period-specific desires, like preferring the music one grew up with, or gay equality vs inequality). Still, it's important to remember that the requirements for a utility gain can increase rapidly for quite a while before that gain is realized.
In medicine, death and debilitation among the elderly is the result of many, many conditions. Eliminate a few of them, and other conditions will kill the patient a few years later. But as you come close to eliminating all of them, and then do so, the lifespan shoots through the roof. The same for cancer: until you can get all or almost all the mutations cancer treatments just make the cancer repopulate from resistant cells. So we can see long term trends in technological capacity that don't amount to much utility yet, while expecting that if they continue long enough they'll deliver huge utility gains.
Robust AI would be another such thing: replacing 25% of the jobs in the economy with robots and computers gets you some impressive gains, but as you get near to 100% you get ridiculously large effects.
When technical progress is possible, a graph of marginal returns in some sector takes on a sawtooth appearance. A technical advance enables high marginal returns, those diminish as the ramifications of the advance play out, and, if another advance appears, the whole thing repeats.
ReplyDeleteI believe our current society is damping down those graphs severely. In many areas we're stuck in the "diminished" returns zone because public policy retards, even forbids, technical advances.
Basically, our elites have finally managed to scramble back to the top of the pile which was so shaken up by the industrial revolution, and they've implemented "regulatory" policies to keep themselves there by reducing economic growth which might lift up competitors.
Some people think computers have improved faster than housing because more improvements are possible. Even I think that's partly true, but I also note that "zoning" and "building permits" and union-drafted "building codes" and "urban growth boundaries" and "school attendance zones" and "environmental impact statements"-- all of which are political problems, not technical ones-- severely limit the supply of good housing.
Something similar is going on with food-- Europe's "GMO" bans, for example, are political restraints on farm productivity, so the proles can't afford the elite's favorite foods.
The elite consensus no longer embraces clear-quill Socialism-- that has been tested and proved too uncomfortable even for elites. Instead, the elites have adopted a recipe of economic stagnation and the cartelization of most industries under the control of the elites, enforced by severe restrictions on new economic activity (in the name of "safety" or "the environment" of course).
This is hardly the first epoch in which the positive feedback loop of the "regulatory state" has produced stagnation and even regression which cannot be undone from within, but which eventually so enervates a society that it is conquered by foreigners.
I don't know if the US has passed the point of no return, but it's a very bad sign that everyone's highest hope for their children now is that they will grow up to be senior bureaucrats.