Richer than Rockefeller?

Perhaps a bit off-topic, but you use this example a lot. I’ve always wondered when you consider the inflection point to be.

1. It’s worse to be the richest person in 1850 than a poor person in 2018.
2. It’s better to be the richest person in 2018 than a poor person in 2018.
3. Therefore, at some point X between 1850 and 2018 the richest person in X equals a poor person in 2018.

What year do you think that is and why? What’s the factor that puts the next year over the top?

The really huge “advantage” of Rockefeller over someone who is comfortably well off as Dr. Henderson describes himself is the opportunity to give significant resources to worthy causes. Founding the Rockefeller Foundation — significant in scientific research in the early 2oth Century — is arguably “worth” the risk of living without antibiotics.

I agree that many measures of standard of living between a poor person today and Rockefeller put the poor person at an advantage but I think a huge one is financial and social security. Rockefeller could live secure in the knowledge that he could afford the best on offer in that day, could take risks and make mistakes without risking his personal or family wellbeing or even status and that his children would get the best on offer as well and be prepared to reap the benefits of technological advancement. As someone else noted, he was also able to reach beyond personal satisfactions and contribute in a meaningful and lasting way to the future in a way he chose.

Poor people in his day and poor people today have the same lack of security or access in all of those things.

I can’t say whether or not that makes Rockefeller objectively better off, but those things do matter greatly to personal wellbeing. I can easily reach my family by video at any time; Rockefeller could build libraries across America. It’s hard to really quantify which is better

@zeke5123,
People use both comparisons. Why is only one valid?
Good point.
RohanV,
Perhaps a bit off-topic, but you use this example a lot. I’ve always wondered when you consider the inflection point to be.
What you’re wondering about is not an inflection point. I notice virtually everyone using that term wrong today.
What year do you think that is and why? What’s the factor that puts the next year over the top?
Very good question. I don’t know the answer. For me, I would bet sometime in the 1960s.
@Cliff,
What a truly awful column by Ritzhold. The whole thing is a non-sequitur. Boudreaux is wrong because he doesn’t take into account the role of luck in life success? The two things do not relate in any way.
Well said.
@Thaomas,
The really huge “advantage” of Rockefeller over someone who is comfortably well off as Dr. Henderson describes himself is the opportunity to give significant resources to worthy causes. Founding the Rockefeller Foundation — significant in scientific research in the early 2oth Century — is arguably “worth” the risk of living without antibiotics.
Well said. It also, though, depends on your frame. The social gain from the Rockefeller Foundation is huge. It’s not clear what value Rockefeller put on it, though. After all, he had to leave it to someone.

“I have entities to cook, wash, and clean too: microwaves, great takeout, dishwasher, and washer and dryer.”

Not to mention, you have far more variety of foods and can quickly reheat outside of regular meal hours. Returning home late in the evening Rockefeller had to make due with what the cooks left on the dying wood stove, assuming he didn’t wish to rouse the staff and wait for an hour(s) for preparation.

Looking for a passage giving an example above in ‘The Big Change: America Transforms Itself 1900-1950’, I came across the observation below on the economics knowledge of the wealthiest men of Rockefeller’s time.

We should note that in these discussions of wealth, no one seem to broach the education/knowledge held by even the most modest of means today. It’s almost like the heralded college education is not a factor in wealth considerations.

In 1899 there died in New York a man who, though he had never made much of a study of economics and had a curiously immature mind, may have had a more pervasive influence on the thinking of American businessmen at the turn of the century than all the professors of economics put together. This man’s name was Horatio Alger, Jr.

[snip]

And, to sum up: “In short, the way to wealth, if you desire it, is as plain as the way to market. It depends chiefly on two words, industry and frugality.”

There was no denying that the Alger thesis had a certain magnificent validity. Look at John D. Rockefeller, who had begun as a $4-a-week clerk in a commission merchant’s house in Cleveland, and by the beginning of the twentieth century was becoming the richest man in the world. Look at Andrew Carnegie, who had begun at thirteen as a $1.20-a-week bobbin boy in a Pittsburgh cotton mill, and had become the greatest of steel manufacturers. Look at Edward H. Harriman, who had begun as a broker’s office boy at $5 a week, and was building a railroad empire. And as for thrift, look at the great banker, George Fisher Baker, who not only had begun his career as a clerk, but during his early married life had imposed upon himself and his wife the discipline of living on half their income and saving the other half. These were only a few of the examples which proved the formula for success: begin with nothing, apply yourself, save your pennies, trade shrewdly, and you will be rewarded with wealth, power, and acclaim. To which the natural corollary was: poor people are poor because they are the victims of their own laziness, stupidity, or profligacy.

Naturally it was pleasant for successful businessmen to believe that these were, in fact, the first principles of economics. But, one might ask, hadn’t they learned in the classroom that economics is just a little more complex than that?

To this question there are two answers. The first is that mighty few of the tycoons of 1900 had ever studied economics. Take, for instance, eight of the most successful of all: John D. Rockefeller, Carnegie, Harriman, and Baker, whom we have just mentioned; and also J. Pierpont Morgan, William Rockefeller, James Stillman, and H. H. Rogers. Of these eight, only Morgan had had anything approaching what we today would call a college education; he had spent two years at the University of Göttingen in Germany, where he had pretty certainly not studied anything that we would now classify as economics. And it is doubtful if even in the prime of life many of these men, or of their innumerable rivals and imitators, had much truck with economic science, or thought of professors of economics as anything but absurdly impractical theorists. A man who had come up in the world liked to describe himself as a graduate of the School of Hard Knocks. Education was all right in its way, and you sent your son to college if you could, if only because it was a good place to make useful contacts with the right people; but these college professors knew nothing about business, which was a battlefield for hard-shelled fighters. And anyhow the principles laid down by Ben Franklin, and somewhat foolishly simplified for boys by Horatio Alger, were fundamentally sound.

Note in the last couple of sentences, this book from 1952 uses the signaling model for higher education.

Car loans are quickly paid off. Quicker than ever. Student loans are the opposite. Home loans also take more working hours. Rent is up too. Maybe with subsidies the politicians could make cars more expensive, and bring the cost of a car into line with the other big purchases people make.

The cost of health insurance is a big one too, because of the restrictions on the supply side and the subsidies on the demand side. And the politicians have plans for making electricity more expensive, of course, without maintaining the former quality of service. So “green energy” translates into intermittent energy and “sustainable energy” means less reliable. Politicians love wind turbines more than they like people’s refrigerators staying on.

So yes, most things are less expensive now because most things are produced within an open, competitive market economy. But the most expensive things are caught up in government’s fatal, vampiric embrace. And those things are massively more expensive.

Robert Frank has a number for how long it takes the median earner to buy the median home: “It’s now approximately 100 hours a month, up from only 42 hours in 1970.” That’s a big deal.

While all this is interesting in helping up think clearly about what is valuable about modern life, it’s irrelevant for most issues in public policy.

Suppose we could agree that even the poorest person in the US (or in the world!) today were “better off than Rockefeller. Would that be an argument for not transferring income to them? Not that I can see. The question would still be how much do we value the additional consumption or investment that the transfer will enable vrs the consumption or investment that someone else will have to give up to make the transfer (assuming the transfer is not Pareto-improving).

A point: back in Rockefeller’s day, you could buy a Cezanne or a Renoir, certainly a Van Gogh, and perhaps even a Rembrandt, for comparative peanuts (I didn’t check, but $25,000 is probably way too high).
Try that now!

This does reinforce the point about the subjectivity of wealth. No doubt many people don’t care enough about art so that the above would matter. Now, if we could have asked Rockefeller how much he’d like to have had a nice contemporary car, that would have helped …

Hi,

I’ve written parts of this before, but consider Samuel Clemens (aka Mark Twain):

1) His younger brother Henry died at age 20, after suffering for 8 days from burns from a boiler explosion. Boilers today virtually never explode. And the burn treatments available today probably would have saved Henry Clemens even if a boiler did explode.

2) Twain’s only son died at age 1 year and 19 months from diptheria. No one dies from diptheria in the U.S.

3) Twain’s eldest daughter Olivia Susan (Susy) was the writer. She attended Bryn Mawr, but dropped out. One of the potential reasons was that both her grandmothers died that fall. (How many people in the U.S. today lose both grandmothers by age 18-19?)

Susy was in the U.S. while her parents were touring Europe. (Twain was at one time a very wealthy man, but lost most of his money through failed investments.) She contracted a fever that turned into spinal meningitis. She died at her mother’s family’s home before her parents could get back from Europe.

People do die from spinal meningitis even today. But she would have been treated in a hospital today. And it’s possible to travel from Europe to the U.S. in less than 24 hours today.

4) Twain’s youngest daughter Jean had epilepsy. She was taking a bath December 24th, 1909, and apparently had a seizure and drowned. Like Susy’s death from spinal meningitis, this tragedy could happen today. But we have medicines for epilepsy…and most people take showers.

So Samuel Clemens lost not one, not two, but three children, and a younger brother aged 20. For part of his life, Clemens was a very wealthy man. (If you’re ever in Hartford, his house is pretty wonderful.) But I have no doubt at all that he would have traded all his money to have his brother and three children…all of whom probably would not have died if they’d been alive today.