Wall St. to Middle Class: You’ve Got It Made

January 25, 2013
Posted by Jay Livingston 
Cross-posted at Sociological Images

The Wall Street Journal had an op-ed yesterday by Donald Boudreaux and Mark Perry claiming that things are great for the middle class.  Here’s why:

No single measure of well-being is more informative or important than life expectancy. Happily, an American born today can expect to live approximately 79 years—a full five years longer than in 1980 and more than a decade longer than in 1950.

Yes, but.  If life-expectancy is the all-important measure of well-being, then we Americans are less well off than are people in many other countries, including Cuba.

(Click on the graph for a larger view.)

The authors also claim that we’re better off because things are cheaper. 

spending by households on many of modern life's "basics"—food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing and utilities—fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today.

Globalization probably has much to do with these lower costs.  But when I reread the list of “basics,” I noticed that a couple of items were missing, items less likely to be imported or outsourced: housing and health care.  We’re spending less on food and clothes but more on houses and the energy to heat and cool them. We’re spending much more on medical insurance and doctors, and even that sum is deceptively low since a substantial part of those costs, paid by employers or by the government, does not get counted as consumer spending.

The authors also make the argument that technology reduces the consuming gap between the rich and the middle class.  There’s not much difference between the iPhone that I can buy and the one that Mitt Romney has.  True, but it says only that products filter down through the economic strata just as they always have.  The first ball-point pens cost as much as dinner for two in a fine restaurant.  But if we look forward, not back, we know that tomorrow the wealthy will be playing with some new toy most of us cannot afford. Then, in a few years, prices will come down, everyone will have one, and by that time the wealthy will have moved on to something else for us to envy. 

The readers and editors of the Wall Street Journal may find comfort in hearing Boudreaux and Perry’s good news about the middle class.  Middle-class people themselves, however, may be a bit skeptical on being told that they’ve never had it so good. 

(The Gallup survey is here.)

Some of the people in the Gallup sample are not middle class, and they may contribute disproportionately to the pessimistic side.  (Boudreaux and Perry do not specify who they include as middle class.)  But it’s the trend in the lines that is important.  Despite the iPhones, airline tickets, laptops and other consumer goods the authors mention, fewer people feel that they have enough money to live comfortably.

Boudreaux and Perry insist that the middle-class stagnation is a myth, though they also say that

The average hourly wage in real dollars has remained largely unchanged from at least 1964—when the Bureau of Labor Statistics (BLS) started reporting it. 

You might have thought that “largely unchanged” sounds a lot like “stagnation.”  But, according to Boudreaux and Perry, the former is fact, the latter a myth.  In any case, not all incomes have stagnated.  As even the mainstream media have reported, some incomes have changed quite a bit.

(The graph is from this EPI report.)

The top 10% and especially the top 1% have done well since the turn of the century.  The 90%, not so much. You don’t have to be too much of a Marxist to think that maybe the Wall Street Journal crowd has some ulterior motive in telling the middle class that all is well and getting better all the time.

And You Will Be Happy Too

January 23, 2013
Posted by Jay Livingston   

Giving money away makes you happier. 

Michael Norton has done research that shows that money, even small amounts, can indeed buy happiness  . . .  if you spend it on others rather than on yourself.  His supporting data come not just from the US or other wealthy countries but from all over the world.  The question is why?

At the Society for Personality and Social Psychology meetings in New Orleans, Norton called on “signaling.”*

One of the ways people signal they are wealthy is to give money away.

I’m not sure when the economists came up with signaling.  It seems to accompany their realization that a lot of important things people do cannot not be explained by simple economic self-interest.  Other social sciences – notably sociology – have long assumed the existence of social motives.  We didn’t even bother to come up with a single word for it. The entire basis of “symbolic interaction”– from the Mead-Cooley-James models of a the early 20th century to Goffman’s Presentation of Self –  is the assumption that we are always signaling things about ourselves, signaling both to others and to ourselves.

The signaling Norton uses seems fairly close to “conspicuous consumption,” a term coined a century ago by another economist. What’s being signaled is still wealth, not other aspects of who the person is.

Norton does acknowledge another set of sociological concepts, relative satisfaction (or deprivation) and social comparison –  the idea that what matters is not the absolute amount you have as measured on some objective scale, but how you feel about that amount.  And that feeling depends on comparing yourself with others.

We suggest that acts of generosity can also signal wealth to the givers themselves, making them feel subjectively wealthier even as money leaves their pockets,

It’s still all about money.  But is having a lot of money or feeling that you have a lot of money the only explanation? 

There are other possibilities.  For one, people feel better about themselves when they live up to the ideals of their society (or smaller social groups), and most societies preach that altruism is a virtue.  Apparently, most of us take this lesson to heart, which is why economists have such a hard time convincing the unenlightened that greed, for lack of a better word, is good and that society will be better off if we all try to maximize our own self-interest.

The rewards for altruism are not financial, they are human.  In some cases they are direct – a sincere and joyful “Thank you” or some other indication that  you like me, you really like me.  But often, it just makes us feel good to know that we have done something nice for someone else.**

Given all the evolutionary reasons for social motives, I don’t know why economists keep being surprised when people behave in unselfish ways. 


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* I have not been able to find Norton’s presentation.  I am relying on this report.    Norton summarizes his earlier research on giving and happiness in his TED talk (which I highly recommend).

** I hate websites that unbidden start playing music when you open them, but I was tempted to add auto-start background music of “Make Someone Happy” (“and you will be happy too”) to this post – a Bill Evans version, of course.

Facing Off on Fascism

January 19, 2013
Posted by Jay Livingston   

Whole Foods CEO John Mackey got himself in the news by calling Obamacare “fascism.” NPR asked him about his earlier view that it was socialism.

Technically speaking, it's more like fascism. Socialism is where the government owns the means of production. In fascism, the government doesn't own the means of production but they do control it. And that's what's happening with our health care program with these reforms.

In a way, it’s refreshing to hear “fascism” used by someone on the right.  That term has usually been a favorite of the left.  LBJ, Nixon, Reagan, Bush – if you dwelt among the left, it was commonplace to hear them and their policies labeled as fascist.  The right seems to prefer “Nazi.”  Or Obama and his jackbooted thugs (why are conservatives so concerned with footwear?). 

Mackey, as the excerpt shows, was not name-calling or shouting the epithet in some irrational, emotional way.  Instead, he was being “technical,” giving a calm, reasoned definition and categorization.  If the government makes a company do something, that’s fascism.  Social Security contributions, minimum wage, non-lethal working conditions, etc., and now health care* – all fascism.

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* And, if you’re Newt Gingrich, restrictions on child labor.

More Guns, Less Data

January 17, 2013
Posted by Jay Livingston

As part of his new policy on guns, President Obama signed a directive allowing more research on gun violence and death.  For nearly twenty years, the gun lobby has shut down federally funded research on their favorite objects.   What seems to have gotten them upset was a study that concluded that a gun in the home was far more likely to kill a family member than to prevent a crime (a NY Times story from two years ago is here). 

Brad Plumer at the WaPo WonkBlog posted this chart showing how these Congressional restrictions have affected research at the National Institute of Justice.

Still, sometimes data leaks out.  Peter Norlander on his Academic Envy, Thoughtful Rage blog, posted this county analysis of gun ownership and gun deaths in New York state.

What was true for homes was true for counties. Should it come as a surprise that where there are more guns there are also more gun deaths?  Oh, right.  Guns don’t kill people. More guns, less crime and all that.

No wonder the gunslingers have tried to stop access to this kind of information. Maybe, with this new directive, more data will be coming out of the closet.