General Category => 3DHS => Topic started by: BT on September 24, 2006, 08:11:09 PM

Title: Time Travel
Post by: BT on September 24, 2006, 08:11:09 PM
Bias, bias everywhere!
Brad Delong writes about CPI bias here and here.

In case you are unfamiliar with CPI bias (and really, where have you been?), it refers to the idea that the Consumer Price Index (alias the CPI) overstates inflation. It is mostly believed that this happens because of the lag between the introduction of a new product to the market, and the time (generally years later) when this product is added to the CPI. So, for example, when cell phones were introduced, they were extremely expensive, and also would rip the pocket right out of your trousers. Now I get a Razr for $100 and a two-year contract. But since cell phones didn't hit the index until . . . well, whenever . . . they missed a lot of that price decrease.

Brad argues that the bias isn't that big, and even if it is, it doesn't matter:

Think about it. If there is 20% of CPI bias in the past 30 years, then median male real earnings have risen by 30% instead of the 10% in official statistics. But real national income per capita has risen by 125% rather than by 90%. A country that is so phenomenally more productive than the country of the mid-1970s should be able to do a much better job at providing an economic environment in which all Americans can have greatly improved income security, education for their children, and leisure time, as well as a much greater share in the rises in real material standards of living of which the rich have grabbed the lion's--no, much more than the lion's, the tyrannosaurus's--share.
I am more interested in making the poor and middle class better off than I am in making the income distribution more equal; I don't feel that Larry Ellison's harrier makes the modest new rug I bought in Turkey somehow less beautiful or enjoyable. There are several broad categories of goods that I would like to make sure that everyone has enough of, and which I would like to see improve for everyone at roughly the same rate: food, shelter, clothing, leisure, health, education, and autonomy.

But this is precisely why I have a hard time dismissing CPI bias. Though I was raised upper middle class, enough of my family are median wage earners for me to be very familiar with the lifestyle--and also what it was like in the 1970's. I think it's improved a lot more than 10%.

According to the Census bureau, median personal income for a man was $8,056 in 1973, which I think puts my nuclear family right near the center of the income distribution. This works out to roughly $28,893 worth of income in 2003. The figures say that in the intervening years, median personal income rose only $1,100, to $29,931--an increase of less than 4% in 30 years. Median household income has done a bit better, going from a little over $10,000 in 1973--or $37,700 worth of 2003 income--to $43,318 in 2003. (Hooray for women's lib!) That's an increase of $5,618, or almost 15%.

But let's say we could find someone who makes $29,931 today, and remembers the 1970's. Do you think that if you offered to send him back to 1973, with 4% more than the 1973 median income, he'd take you up on the deal? What if you doubled that, to 8%? What if you sent him back to 1973 making 15 or 20% more than the median wage, so that he could keep the wife at home and still enjoy a modern level of household income?

Personally, I wouldn't take the deal . . . and not just because I'd be the one stuck at home trying to make the Harvest Gold drapes match the new Avocado refrigerator. 1973 means no internet. No cell phones. No cheap air travel to exotic foreign climes. No computers. No blessed asthma drugs (see my co-blogger's memoir for just how much this means). Three television channels and nothing good on any of them. Expensive books. Air pollution. Shorter life expectancies. More crowded housing. About the only thing more available then were Manhattan apartments, and that was because the muggers were cramping everyone's style. Yes, we all wish we'd done like my parents and bought a co-op in 1973--but that's because we want to live in it now, not then.

I'm not sure you could pay me enough to go back to 1973, in fact. I think I'd rather be a journalist living now than a multi-millionaire living then. Probably other people would be willing to take that bargain . . . but you'd have to pay them a lot more than 10% of their salary, that's for sure.
Title: Re: Time Travel
Post by: Plane on September 24, 2006, 11:45:31 PM
       None of us get to keep the same problems very long , I have a very diffrent set of problems than I did five years ago and I expect to have a very diffrent set of problems again soon.

         Do you remember "Future Shock" , well the pace of change is still accellerateing and it is still change itself that has to be coped with.

         My Grandfather was a blacksmith and a farmer , the improvements tothe plow he used were significant above a plow that Moses would have used but the diffrences could have been explained to Moses in a day.

         The Farmers in my family now use tractors that cost $200,000 used and pull ploughs that are twelve to twenty bottom, it takes a university education to enter the feild now and constant monitoring of an online connection to maximise sales of crops.

      My own father plowed behind a mule as a teen and converted to a computer user during WWII when he was a firecontrollman.

       My Grandfathers blacksmithing equipment is mostly lost and the skill he knew would be hard for me to recapture , or make a liveing with.

        What will this trend of rushing change continue to do?

Title: Re: Time Travel
Post by: Lanya on September 25, 2006, 02:48:49 AM
My husband's cousin  is a blacksmith.  Makes a good living here;  lots of horses nearby.  And really, he's about the only blacksmith for many miles around.