Misleading Economic Statistics: Things Are Vastly Better
Most economic statistics don't lie, but they mislead.
The statistics produced by the Bureau of Labor Statistics are pretty good, according to prevailing economic theory and statistical theory, but they are misleading to a fault. This is not because the government rigs the statistics. It is because objective statistics cannot deal effectively with subjective value. But subjective valuation is the essence of economic theory. This was discovered in the early 1870's. The statisticians still have not come to grips with this development. They try hard, but the labor theory of value is wrong. They fail.
Let me prove this to you.
ANCHOR YEAR: 1970
Why 1970? Because that was a census year. Also, Nixon abolished the last traces of the gold standard on August 15, 1971.
Beginning sometime around 1973, American household economic real growth began to slow. The tremendous increase that had taken place from 1946 to about 1973 never again reappeared.
I like Dave Manual's statistical insights. He offers a table that shows median household income from 1967 to 2012. In 1970, it was $46,000, adjusted for inflation. In 2012, it was $51,000. So, if we're going to look at American economic progress from the point of view of median household income after price inflation, we have been in a period of stagnation.
But there is a problem with looking at our lifestyles in terms of the figures regarding median real household economic growth per annum. A great deal is concealed by the statistics. A lot of you cannot remember what it was like in 1970, but I can, at least vaguely. If I think back to what it was like to live in 1970, and I leave out anything controlled by government, there are only a few areas in my life where I would not regard a return to 1970 as a disaster.
One is housing costs. That is because I lived in Southern California in 1970, and the world of Southern California real estate is much more expensive today than it was in 1970. Also, I would enjoy the freeway traffic of 1970. But let's face it: the big changes in Southern California have come as a result of a tremendous increase of population, all trying to fit into Southern California. That is because people want to live there. I wanted to leave, which I did in 1971.
Another area is clothing. It was about the same in 1970. But I buy so little clothing that this would not matter. Most men don't buy suits very often. They didn't in 1970, either. I can remember buying several three-piece suits that were made by a Hong Kong tailor in 1971, and I spent just about what I would spend today to buy suits from a tailor in India. The quality of the suits is about the same. Discounted for inflation, the price of the suits today is about the same -- maybe a little cheaper. But I buy almost no suits. I have bought three suits since 1995. Three of the four suits that I bought in 1994 sit in my closet, unused -- never even tailored.
A third area is household cleaning: clothes washers, clothes dryers, irons, dishwashers, and vacuum cleaners. My wife just bought a replacement for her 1970 Viking sewing machine, which she bought used in 1975. She paid $125 on eBay. Today's machines are computerized. They are no more expensive. She likes the used 1970 machine better.
Everyone acknowledges that medical procedures are far better today. They are more expensive, but that is because of government intervention. Medicare was barely a blip on the statistical radar in 1970.
Consider automobiles. Automobiles today are far more efficient than they were in 1970. Gasoline mileage is superior. Diagnostics are superior. Cars last longer than they did back then. There were almost no Japanese cars on the road in 1970. There were no Korean cars. Everything was controlled by Detroit's big three, and the big three were putting out substandard cars compared to automobiles today. There were no minivans. There were no SUV's. There were muscle cars. Who bought them? Teenage boys of all ages.
If we look at international trade, it was much worse back then. The range of choice was therefore less.
https://www.census.gov/foreign-trade/statistics/graphs/gands.html
Labor unions were much more dominant in 1970 than they are today. There is far greater freedom of entry into jobs than in 1970. This is from Wikipedia.
Even here, the statistics are misleading. A growing percentage of these are unions in governments, not the private sector. Private sector unions are mastodons in the tar pits.
In terms of book publishing, there is simply no comparison. In 1970, there were fewer than half a dozen conservative publishing houses. One was Regnery, which had been around for 25 years. It was tiny. One was even tinier: Devin Adair. One was Arlington House. Then there was the newly created neoconservative publishing house: Basic Books. If you had a book that you wanted to get out, you had to get it out through one of these companies if you were a conservative. You could not get your book into the bookstores. The conservative publishing movement was so far on the back burner that it was almost invisible. Anybody who came of age after 1980 simply does not know what the wilderness was like.
Private education, kindergarten through 12th grade, is vastly superior today. The number of curriculum materials today is almost overwhelming. There were virtually no Protestant curriculum materials in 1970. The three main Christian conservative Protestant curriculum publishing organizations -- A Beka, Accelerated Christian Education, and Bob Jones University Press -- did not exist in January 1970.
Because so much of my life is tied up in digital communications, I cannot imagine going back to 1970. It would be like going back to the 1940's. Because I am in the field of communications, Moore's law encompasses most of my life. Here, things just keep getting better. This began in my life in 1980, and I have gotten more productive ever since.
Because of Moore's law, the cost of information keeps dropping at what is now an exponential rate. Telephone calls across the country were expensive in 1970. They are essentially free today. There was no Skype. There were no international phone calls for most Americans, let alone live visual communications.
There were no cell phones in 1970. There was no Internet. There was no Google. I used a manual typewriter that was not significantly better than what had been available in 1930.
There were three national television networks, and up to four local channels in large cities. Cable TV was for the boondocks: poor TV signals by air.
Color television sets were widespread in 1970, but home theaters did not exist.
You could buy stereo sound systems that were as good as sound systems today, but they cost vastly more money, and they could not escape the clicks and pops of vinyl records. Anybody who tells you that vinyl records are better than CD's is living in a world of nostalgia. The clicks and pops of vinyl were inescapable, and they were annoying. You could buy cassette tape albums, but they were expensive, and the range of choices was limited.
There was no videotape in 1970. You could take a few home movies of your kids, but they would be silent. You would only show them on rare occasions.
In photography, if you were way ahead of the curve, you could buy a 35mm single lens reflex camera, but almost nobody owned one. Film was expensive. Today's digital SLR cameras are superior: far more versatile. I don't know if SLR camera lenses are significantly better today. They were very good then, and they are very good now. They are not more expensive. The cost of photography was far higher. The average person with a cell phone has a better still camera than almost anybody had in 1970. But a cell phone takes sound movies.
So, I ask you: in what economic area of your life would you prefer to go back? Why?
A STATISTICALLY INVISIBLE TRANSFORMATION
What I'm saying is this. The statistics of real household income do not reveal anything like the extraordinary transformation of our lives that we have experienced in the United States.
If we look at food costs, or clothing costs, or transportation costs, things look comparable. But the cost of flying across the country is dramatically cheaper today. The range of flight schedules is vastly wider. We don't get free airline food these days, but who cares?
In other words, all statistics of aggregate economic trends mislead us. They indicate relatively minor changes in our lives, 1970 to today, when in fact the changes have been monumental in most areas of our lives. In those areas that the changes have been relatively mild, such as food and clothing, they are comparatively marginal in our monthly budgets today.
Moore's law keeps lowering the cost of information and communications, and as a result, far more is demanded. As more is demanded, the percentage of our daily time budgets that is affected by this decline in information costs gets larger. The cheaper it gets to communicate, the more we communicate. If you have any doubt about this, consider the average person's time spent on Facebook.
This means that the economic statistics will get even more irrelevant as the digital transformation accelerates.
We humans are now the weak links. We still read slowly. We still forget most of what we read. But Wikipedia and Google compensate. They are our virtually zero price digital assistants. They are digital crutches on which we are increasingly dependent, because our brains don't improve, and after age 45, they get worse.
CONCLUSIONS
The free market has made all this possible. The free market is not going away. As digital communications and production become cheaper, decentralization will accelerate. The ability of the bureaucrats to control our lives will recede.
This is why I think we are going to have continuing improvements in our lifestyles over the next 45 years. In fact, the pace of innovation will accelerate, just as it has since 1970. These improvements will not be reflected in the statistics provided by the Bureau of Labor Statistics, any more than the changes in our lives over the last 45 years have been reflected in these statistics.
Here is the good news: no matter how bad a job the Federal Reserve System has done, Moore's law has more than compensated. We are living in the twilight of Keynesian intervention.