The long post-WWII boom came to an end around 1973. That period saw rapidly rising productivity, and fast rising real wages. Lots of people look back on it as a sort of Golden Age for average Americans.
At the same time, many of these same people have a set of beliefs that imply this was a nightmarish period, a period of horrible living standards. I’ll discuss four examples, but I could cite dozens more.
Here’s the Economist:
In the 1970s eight in ten American children’s blood contained at least double the “elevated” level of lead that now prompts the authorities to intervene. In 1980 the average Australian child contained similarly high amounts. By then, medical studies had made it clear that even smaller amounts could damage children.
When I was young we had large sheets of lead in our garage. I’d chip off pieces and put them into a little pot, where I melted them down. Then I’d pour the lead into a mold to create lead soldiers. If the rifle became bent, I’d stick in in my mouth to straighten it out. As a kid, I’d help my dad restore old houses, scraping paint off the windowsills. Anyone wearing a mask would have been laughed at, called a sissy. Then there was leaded gasoline. I can’t even imagine how much lead I was exposed to. (Please, no “that explains . . . ” jokes.)
In 1973, America was a Flint, Michigan-style dystopia.
Then there was second hand smoke. You could smoke everywhere; in restaurants, offices, airplanes, etc. Bob Lucas used to smoke while he taught us macroeconomics. Younger Americans who can’t stand second hand smoke would be horrified by life in 1973.
Have you ever visited China and seen the air pollution? Many American cities were like that in 1973.
Horrified by the recent gun violence? The murder rate back then was twice as high as today.
So here’s the question. Have living standards for average Americans improved dramatically since 1973, or not?
I think they have improved dramatically, but for reasons that have nothing to do with the points I just made above. To me, it’s obvious that America is a much richer country than in 1973. Average people splurge on everything from jet travel to pedicures, which were considered luxuries back in 1973. Or cell phones, which didn’t exist. But I find the environmental gains to be especially interesting. If you really believe that lead paint, second hand smoke, air pollution, etc., are horrible problems, and clearly the media believes that to be the case, then why would you think that 1973 was some sort of golden age? Life was miserable back then. Right?
And keep in mind that these issues are not unrelated. One reason why productivity growth slowed sharply after 1973 was that more resources were put into cleaning up pollution, which does not show up in the GDP data. One reason why real wage growth has recently slowed is that housing prices in many areas are artificially inflated by NIMBYism, which also came out of the environmental movement. (Admittedly a perversion of that movement.)
PS. Don’t say “we expect life to get better over time.” I know that. My point is that life is getting better over time; 1973 was not some sort of golden age. Why would anyone think otherwise?
READER COMMENTS
Chuck
Mar 6 2018 at 3:08am
Part of it is that people tend to look back on their childhood with nostalgia. Life is more hopeful when you’re young.
Thomas Sewell
Mar 6 2018 at 3:21am
To be fair, I was born in 1973. That may have caused the turning point of the golden age.
Rajat
Mar 6 2018 at 6:29am
“One reason why productivity growth slowed sharply after 1973 was that more resources were put into cleaning up pollution, which does not show up in the GDP data.”
In the past you’ve said that these sorts of quality improvements also occurred – if not more so – prior to the great stagnation. For example, lifespan increased more during your grandmother’s life than yours, etc. Is the different now that resources are devoted explicitly to these types of quality of life improvements rather than being a spin-off of improvements in the quality and quantity of goods and services? Or were resources previously also allocated to quality of life improvements, but we have more recently experienced a great stagnation in quality of life improvements, which has created the spin-off effect of a(n apparent) great stagnation in the measured production of goods and services?
Anecdotally, this does seem to be the case. While in the past, spending on schools may have involved more classrooms to enable more kids to be taught, since the 70s it seems that we have more teachers for the same number of kids, more spent on student comforts (eg heating and cooling, carpets, better desks, etc), and stuff like counselling, better sports facilities, drama, music, etc.
The same goes for the health system, disability support and government services in general – a lot more is spent on ‘client’ hand-holding and consultation, none of which increases measured output, or any form of tangible output. Rather, it’s about making people feel better.
Our local government recently laid down a brand new concrete bike & walking path along the river. It took ages and must have been very expensive. The old bitumen path was fine – it just needed some patching up where tree roots had caused some corrugation. While they were at it, the council built new super-wide paths from the street pavement down to the river path, presumably to make it easier for people in wheelchairs to access the river path. All very resource-intensive and expensive for mainly psycho-social benefits.
Alan Goldhammer
Mar 6 2018 at 8:19am
Also 1973 saw the first impactful oil boycott by OPEC in response to the Yom Kippur war. Oil prices continued to increase after this and the US saw periods of shortages. There was an impact though out the industrial sector on prices of lots of stuff.
Certainly someone has modeled the economic impact here. If not, it would be a very nice thesis project.
I well remember the prevalence of cigarette smoke. At the time I thought that a clever restaurateur or bar owner might generate more business by voluntarily establishing a smoke free environment.
E. Harding
Mar 6 2018 at 11:06am
Agreed strongly with all four of your examples, Sumner (living standards today are surely better than in 1973 overall), but to me, it’s far from “obvious that America is a much richer country than in 1973.” The only major obviously positive economic change since then has been in the field of computer technology. It’s obvious the 1940s had high material poverty totally unlike what most of us are ever exposed to except in the most benighted of inner cities and run down Hispanic-majority rural areas. It’s far less obvious material poverty has declined at all since 1973. Yes, calorie consumption has increased (and clothing has become more affordable due to imports), but the cost of education, housing, and medical care (especially in areas with good jobs) has skyrocketed to make up for that.
Thaomas
Mar 6 2018 at 11:33am
Sure living standards have gone up, in art due to cost effective regulation of negative externalities (although not enough use has been made of taxing those externalities instead of regulating them). But how does that negate the complaint about the slower rate of increase of income of middle and lower income people? I do not see any argument for regulation of externalities being responsible for the differential rates of income gain between high income earners and the rest.
Scott Sumner
Mar 6 2018 at 11:34am
Rajat, It seems to me that we are running up against the constraints of physics and biology. We don’t know how to get people to live more than 115 years—the same maximum as 1000 years ago.
We don’t know how to build (much) better airplanes than the 747, the same plane as 50 years ago. In contrast, the 747 was much better than the airplanes of 1918. It’s something about the constraints of physics, but I’m no engineer.
We can do electronics far better than before, but that’s just one segment of the economy. Our economy is no longer improving fast on all fronts.
But I don’t see that as bad. Even 1%/year growth is wonderful, given that America is already a fabulously rich country.
Be happy!
Alan Goldhammer
Mar 6 2018 at 1:27pm
Scott writes:
Today’s planes are better as they are lighter per passenger carried and more fuel efficient. Composite materials have made a huge difference in both air frames and turbine engines.
Quite Likely
Mar 6 2018 at 4:34pm
Yeah how dare people be mad about the things that are getting worse when there are also things that are getting better.
mercer
Mar 6 2018 at 6:19pm
“Why would anyone think otherwise?”
Many young people can’t afford to buy a house when their parents and grandparents could buy at a young age.
john hare
Mar 6 2018 at 7:41pm
The young people can’t afford a new house due to zoning and permitting costs, including impact fees. Grandparents house often at under 1,000 square feet and 1950s quality could easily be built inexpensively, if it were legal. More square feet, insulation, electric, central heat, air conditioning, garages and so on add considerably to the cost. Make it legal, and we will build affordable houses.
Alec Fahrin
Mar 6 2018 at 8:23pm
I agree completely. Comparing the difference befween my childhood and now is far easier though since I came from an extremely poor nation.
Humanity as a whole is far better off nowadays. I’d be hard-pressed to find even one year where humanity was worse off in the post-WW2 period.
Yet, let’s not forget that this prosperity and peace is maintained through three main inventions.
1. International trade and economic dependence.
2. Mutually Assured Destruction.
3. Technology used to improve lives advancing quicker than technology used to destroy them.
#1 is rapidly being torn apart by the current administration, and the proliferation of exclusionary regional trade blocs. Not to mention increasingly exotic protectionism in India/China/EU.
#2 is currently being degraded through the US/Russia arms race. The US is trying to shoot down all ICBMs while the Russians are upping their offensive capability and brinkmanship. The Chinese are watching the US place anti-ballistic missiles all around their nation, ostensibly to stop NK. We all know what that leads to though…
#3 technology that can improve and destroy human life is merging. AI, predictive capabilities, neo-propaganda, influence operations, WMDs, automomous vehicles, etc. All of these technologies can easily be used to ruin the world quickly. There are numerous reports showing that the Russians (and NSA) are the culprits behind huge cyberattacks since 2012, and that these attacks were purposefully limited.
I have always been an optimist. I still stand by that belief.
Yet, the equilibrium of the post-WW2 period is rapidly coming to a close.
Mark Bahner
Mar 6 2018 at 10:54pm
Yes, in 1973, I could run a mile in under six minutes, and three miles in about the same time it takes me to run two.
If the air was so polluted in 1973, how could I run so fast?
😉
P.S. Possibly more substantive comments to follow.
Mark Z
Mar 6 2018 at 11:19pm
Quite Likely,
“Yeah how dare people be mad about the things that are getting worse when there are also things that are getting better.”
I think the argument is that far more things are getting better than worse, and the things getting worse tend to be more ‘subjective.’
‘Oh sure, the infant mortality rate is gone way down, but rock music isn’t what it use to be, and what’s with all these kids not wearing matching socks?’
Matthew Waters
Mar 7 2018 at 1:26am
“We don’t know how to build (much) better airplanes than the 747, the same plane as 50 years ago. In contrast, the 747 was much better than the airplanes of 1918. It’s something about the constraints of physics, but I’m no engineer.”
Air travel has improved considerably in productivity terms though. Inflation-adjusted ticket prices are 50% lower than 1980’s.
Retailing, manufacturing, etc. all actually had big productivity increases. Finance, in pure transaction cost terms, had huge improvements.
IMO, there wasn’t really a “Great Stagnation.” There was more a Great Capturing of Rents. A huge amount of productivity gains were captured by rents. Perhaps nostalgia for 1973 should be translated to “nostalgia of less rent captures 1945-73.”
BC
Mar 7 2018 at 1:49am
Forget about comparing the 70s to today, even by the *mid-80s* no one, not even progressives, would try to claim the 70s were a golden age. Political debates basically consisted of Republicans warning that Democrats would bring back the 70s and Democrats denying that they would. The Democrats would *not* try to argue that the 70s were better, just that we had bad luck during that period (oil embargo, for example). (Nor would Republicans try to argue that 1973 was better than 1979. Everyone just understood that the entire decade was the low point in 20th century US history.)
Scarred by memories of the 70s, young people in the 80s and 90s were actually more conservative than their parents, one of the few times (the only time?) in history. Those memories were also the reason why, by the 90s, even center-left parties were pro-market and anti-Big Government. The reason we have 70s revisionism now is simple: we finally have enough voters too young to remember the 70s that progressives feel comfortable bringing back the Big Government policies that were discredited by that dismal decade.
Millennials have known nothing but prosperity their whole lives and, thus, can’t believe just how bad things can get when Big Government runs amok. Any American, including progressives, in 1985 would have found it laughable that anyone in 2018 would be looking back fondly at the 70s. It would have been like telling someone right after the Berlin Wall fell that, in the 21st century, writers would claim that women had better sex under Communism. Oh wait, that’s actually happened too [https://www.nytimes.com/2017/08/12/opinion/why-women-had-better-sex-under-socialism.html].
BC
Mar 7 2018 at 2:09am
Correction: I shouldn’t have claimed the 70s was the worst decade of the 20th century. Obviously, the Great Depression was worse. The 70s were the low point in *post-WWII* US history.
Lorenzo from Oz
Mar 7 2018 at 10:52pm
Nostalgia ain’t what it used to be …
I suspect that, apart from the younger-glow effect, people are focusing perhaps on more intangibles, such as a sense of optimism and achievement.
Lorenzo from Oz
Mar 7 2018 at 10:56pm
The sort of optimism that built interstate highway networks or put a man on the Moon.
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