Category: Economics

100 years ago only the very richest people had servants – today even the poor have servants

I have discussed Russell Roberts’ book, The Price of Everything, here, here, and here.  At one point in the book, he suggests that today even poor people have servants.

As a way of measuring increasing standard of living in the last hundred years, the main character in his book compares a rich guy served dinner by a waiter today to a rich guy 100 years ago served dinner by a servant.

As a starting point, consider one of Prof. Roberts’ comparisons:  the rich guy back then had an expensive, fancy watch while the servant had no watch.  Today, the rich guy has an exquisitely expensive, fancy watch, while the waiter has an inexpensive digital watch. 

Which do you suppose keeps better time and requires less maintenance?

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Have things gotten better in the last 100 years? Hint: there’s no better time to be alive than today.

This is a continuing review and commentary on The Price of Everything (introduced here and here).  At one point the characters discuss how much better off we are today than 100 years ago.  The main character, Prof. Ruth Lieber, makes a guess on the improvement in overall standard of living:

A good guess is that we’re somewhere between five and 15 times better off in terms of material well-being than we were 100 years ago. Maybe more.

A good point estimate is that our standard of living has increased tenfold in the last century.  Not 50% better.  Not 100% better.  But perhaps something range of 1000% better.

Continue reading “Have things gotten better in the last 100 years? Hint: there’s no better time to be alive than today.”

What are the underlying drivers of economic development?

I’ve previously mentioned that freer countries are richer countries. See

What does freedom have to do with countries getting richer?

Russell Roberts offers a partial explanation in his book The Price of Everything – A Parable of Possibility and Prosperity

Continue reading “What are the underlying drivers of economic development?”

Introduction to The Price of Everything

I’m going to have a series of posts discussing a fiction book that teaches economics.  I just finished reading it for the second time.  Enjoyed it more the second time than the first!

In the last few years I’ve thoroughly enjoyed books that are called “didactic fiction.” These are teaching tools written in the form of a novel.  This gives the author the opportunity to teach in an entertaining format.

Russell Roberts offers an explanation of the price mechanism in his book The Price of Everything – A Parable of Possibility and Prosperity.  As a bonus, the author explains how we developed into a rich economy.

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Teen’s purchasing power from working for the summer in 1952 and 2011

What could a teenager working minimum wage 60 years ago buy with his summer earnings compared to now?

Mark Perry has a calculation at his blog Carpe Diem: Young Americans: Luckiest Generation in History:

Here is the short version:

1952 after working for the summer, a teen could buy:

  • Typewriter
  • Phonograph
  • 17” TV

2011, after working the summer, a teen could buy the functionally equivalent items as 1952:

  • Laptop & printer (if you can call that comparable to a typewriter)
  • Ipod,
  • 32” HDTV, blue-ray player, home theater system (just a tad bit more than a 17” TV, but still comparable functionality, sort of)

Plus in 2011 our hypothetical teen still would have enough money left over at the end of the summer to buy some bonus stuff on top of matching types of things from 1952: Continue reading “Teen’s purchasing power from working for the summer in 1952 and 2011”

I can’t think of a better time to be alive. Or, is the middle class better off today than in 1975?

Don Boudreaux has a fantastic PowerPoint presentation posted at Café Hayek:  Stagnating Middle-Class? It is from a presentation he gave at Cato University.

He opened up a 1974/1975 Sears catalogue. He then calculated how many hours a person would have to work to buy something in 1975 compared to buying a similar item today.

To make the comparison he obtained the hourly wage of an average non-supervisory employee in 1975 and the same average wage today. Those average wages are $4.87 in 1975 and $19.00 today.

For example, in 1975, a 35mm SLR camera, pretty nice for back then, was $347. That is 71.3 hours work for an average worker. In contrast, a Nikon Coolpix 12.0 mp camera today is 4.8 hours of labor.

Continue reading “I can’t think of a better time to be alive. Or, is the middle class better off today than in 1975?”

Space shuttle as illustration of opportunity cost and cul-de-sac

How to combine the idea of opportunity cost, cul-de-sac, and government overruns in one post?

Yesterday’s Wall Street Journal editorial (behind paywall) says:

When it was first conceived, the shuttle was supposed to be a kind of space truck, going into orbit 50 to 75 times a year and carrying large payloads at a cost of $54 million a launch in 2011 dollars. It didn’t work out that way. The shuttle went aloft an average of five times a year. The cost-per-launch averaged some $1.5 billion. Its heaviest payloads barely exceeded what an unmanned Delta IV rocket can carry.

Let’s do some math, shall we?

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Radical cost reductions in technology – illustration from external hard drives

Storage costs are about zero.

Got to thinking about the cost of storing data on external hard drives. Did a few calculations to look at the radical change in costs over the last few years. Used my actual purchases and listings today at Amazon. Wow.

Here are the costs per gigabyte of storage for the newer portable hard drive (2 of ‘em are about the size of a paperback book) and for the larger externally powered ones (more the size of a thick hardback): Continue reading “Radical cost reductions in technology – illustration from external hard drives”

Cheapeners make life really fantastic for all of us – the radical cost reductions in technology

It isn’t the initial idea of a technology that makes life so fantastic for all of us. It is the next round of people who figure out how to make it ridiculously cheap that lets everyone enjoy the really cool inventions. So explains Matt Ridley, of the Wall Street Journal, in Three Cheers for the Cheapeners and Cost-Cutters.

 “A feature of innovation is that the greatest impact of a new idea comes not when the light bulb goes on over the geek’s head, but when the resulting technology eventually becomes cheap enough for many people to use—perhaps decades later.

This is the driver behind the tremendous productivity gains in the last few centuries.

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