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"Adjusted for inflation, would you rather make $50,000 in today’s world or $100,000 in 1980’s?"
The question comes from Wonkblog's Matt O'Brien, who is arguing that raw measures of income growth miss "smartphones and social networks, Netflix and HD TVs, apps and whatever other technology you prefer to waste time on." The truth, he writes, is "your middle-class salary is better than you might think."
The technical issues here get into some mind-numbingly complex questions around how economists measures prices, productivity, and quality adjustments. But some thoughts on the larger question he poses:
1) I definitely wouldn't want to be gay in 1980, even if I were making $500,000. Routine racism and sexism were more rampant, too (the dreaded "identity politics" has done a lot of good over the past three decades). This isn't stuff we even attempt to capture in income or productivity statistics. But being able to hold hands with the person you love, or be respected in a meeting, matters a lot in life.
2) Am I a single 20-something in this analogy? Or am I a 40-year-old with three kids? Child care, health insurance, and higher education were much cheaper in 1980. How you value them against smartphones probably depends on whether you have kids, or whether you're sick (and if you're sick, with what — treatments for heart disease are much better today than they were in 1980!).
3) I checked my email probably 200 times a day until making some serious resolutions and installing some blocking software. One way to interpret my old state of email mania is that I derive incredible value from checking my email. Another way to interpret it — a way I think is truer — is that I was addicted to checking email in a way that was providing substantial negative value to my life. I definitely use Twitter, but would I truly be less happy in a world where Twitter didn't exist and I read more of the New Yorker? I'm skeptical.
4) That said, I don't think economists have even begun to figure out how to value technological change, and I'm not sure it's possible to do. If you tracked my household purchasing, you would think I cared about my dining room chairs about as much as I cared about six months of internet access. I do not.
5) Air quality is a lot better today than it was in 1980.
6) Human beings are pretty bad judges of what will and won't make them happy. The happiness literature is pretty clear on this point: all kinds of stuff that we think will make us much happier — like buying a big house — quickly fade into our baseline. All kinds of things we think will make us much less happy — like losing a limb — we end up adjusting to. One of the main exceptions? Commuting times.
7) One thing we do know, though, is that human beings are very loss-averse. So the idea of losing the things I have today in order to live in 1980 is unbearable. But I also don't think I am a happier, more satisfied person today than I would be if I'd been born 15 years earlier. My guess is this question tells us more about how human beings value what they already have than whether people really should prefer one period to the other.
8) Similarly, we know that people are very bothered by relative inequality. It's one thing to go without a smartphone in an age where everyone has smartphones. It's another to go without a smartphone in an age where no one does. The 1980 society is more equal than the 2015 society and, in this counterfactual, you are much higher up the income ladder in the 1980 society than you are in the 2015 society. That kind of thing really does make a difference.
9) A related question that is interesting to think about, though obviously has some of the same problems, is how far back you would be willing to go if money were no object. Given the recency of antibiotics and statins, for instance, I wouldn't be willing to live in 1900 no matter how rich the Lord of Counterfactuals made me.
