are you better off than you were 40 years ago?
Forget 4, how about 40? ;-)
The NCPA ran with the question answered at great length by Veronique de Rugy in the December issue of Reason...
Are you better off than you were 40 years ago?...This is a complicated question to measure. Wealth expands people's choices, and Americans are fabulously more prosperous than they were in 1968. According to the Census Bureau, income per capita adjusted for inflation has doubled in the 4 decades since 1968, from $13,374 to $26,804. Non-wage compensation, in the form of employee benefits, has also increased greatly during that time....
[However], there's a better measure of living standards than raw materials: consumption. By this measure, the United States is doing very well. [According to a recent study by the Federal Reserve Bank of Dallas], luxury goods that few could afford in 1968 are now standard in most households, including poor ones:
In 2005, a full 85 percent of households that were classified as poor by the Census Bureau had air conditioning (compared to only 36 percent in 1971).
Some 97 percent had a color television (compared to 40 percent in 1971) and 40 percent had an automatic dishwasher (as opposed to 20 percent in 1971).
Almost 100 percent owned a refrigerator (compared to 25 percent in 1971)....
Yet, the wealth accumulation of the last 40 years has also made the government bigger, says de Rugy. Real federal spending increased from $774 billion in 1968 to $2.5 trillion in 2008 -- a 225 percent increase -- and federal spending per household grew from $11,800 to roughly $21,000 over that period, in constant dollars. This forms a libertarian paradox: economic freedom and wealth breed not just more political freedom, wealth and choice, but also more government, says de Rugy.
posted by Eric Schansberg @ 11:18 PM
3 Comments
3 Comments:
Eric, I've not seen this posted at LRC yet, but here is something from Gary North that I found fascinating about investing over the past 42 years:
In the first week of February 1966, the Dow Jones Industrial
Average went over 1,000 intra-day and closed at 996. Over the
next 16 years, the price index increased by just under three
times. See the Bureau of Labor Statistics, Inflation Calculator:
http://GaryNorth.com/snip/706.htm
The Dow fell by over 200 points, to 777. The combined loss
was a staggering 80%.
Let's bring this up to date. The Dow closed on November 20
at 7,552. Prices have increased since 1966 by a factor of 6.7 to
one. The Dow is 7.5 times higher than in 1966. Taxes aside and
dividends aside and commissions aside (there were no no-load
funds in 1966), your investment of $1,000 in 1966 would have
reaped a profit of $6,500. But prices are 6.7 times higher.
You would be behind.
That is what an investor, age 23 in 1966, would have to show
for his faith in the U.S. stock market. He is now 65.
So much for the "buy an index fund of U.S. stocks and hold
until retirement."
What retirement?
The real question is, will you be better off 40 years from now? <grin>
Darrell, I think those choose from one peak to the next trough, but that's still some brutal data. It also underlines the subtle impact of inflation.
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