Saturday, May 27, 2006

Richer Than We Know

Topic: Economics, Wealth

The $10,000 Light Bulb Or, why it's so hard to measure inflation by Tim Harford:

A highly influential paper by Yale economist William Nordhaus made the point forcefully. He studied not commodities like bicycles or spoons but a service: light. By tracking lighting technology from campfires to oil lamps to today's energy-saving light bulbs, he estimated that the real price of light had fallen 10,000-fold in 100 years. Partly because of Nordhaus' work, many economists believe that the official statistics on wages underestimate how much richer we have become.

I have trouble seeing with confidence what the future holds economically for workers in the USA. I think people in the USA have much more reason to be fearful of maintaining high paying jobs decades into the future (than they did say in 1960).

I actually believe the most likely way to maintain a high standard of living is that the world gets so good at producing that the cost of living well is very low (along the lines of what the article above makes a case for). I also think this is true already in many ways we just don't seem to realize it. The wealth of the middle class of the United States today (in terms of houses they live in, comfort [heat, A/C, electricity, plumbing], health, food, transportation, communication [cell phone, email], access to learning [schools, the internet, libraries, books], physical safety...) is extraordinary but seems to be taken for granted. Most of what is taken for granted today was not available to the rich 50-100 years ago (and much worse alternatives had to be accepted, even by the very rich) and most of the rest of the world today (while the geography based economic gap is shrinking incredibly rapidly it is still quite large for most of the population of the world).

Another alternative future is that the society generates massive excess wealth that then allows the society to subsidize large parts of the society (not exactly the traditional American way - but if the "tax" is minor because of the massive excess wealth this may work). Another alternative is that we don't live as well (or at least large portions (say over 1/3) don't.

And another alternative is I am just wrong about all this things just continue as they are and everything works out well. Predicting into the economic future is difficult to do accurately.

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