The economics blogosphere is atwitter over an interesting thought experiment: Is it better to be middle class today, or much more wealthy in an earlier time.
Here’s Professor Scott Sumner:
OK, so ask a millennial whether they’d rather live today on $US100,000/year, or back in 1964 with the same nominal income. … I recall getting cavities filled in 1964, without Novocaine. Not fun. No internet. Crappy TVs, where you have to constantly move the rabbit ears on top to get a decent picture. Lame black and white sitcoms … Now against all that is the fact that someone making $US100,000/year in 1964 was pretty rich, so your social standing was much higher than that income today. So it’s a close call … In which period does $US100,000 buy more happiness? We don’t know.
And Professor Tyler Cowen, commenting on Sumner:
I say I prefer $US100k today to $US100k in 1964… But here’s the catch: would you rather have net nominal 20k today or in 1964? I would opt for 1964, where you would be quite prosperous and could track the career of Miles Davis and hear the Horowitz comeback concert at Carnegie Hall.
And with a slightly different hypothetical, Bloomberg’s Joe Weisenthal:
Would you rather be middle class in the United States now, or be in the top 1% of income in 1900? I used to always think the answer was clear, that you’d rather be middle class now with all of our modern wonders. But now I’m not sure, and in fact I increasingly lean the other way, that relative wealth is the name of the game … Relative wealth confers clear benefits. Relative wealth is likely to come with power and status and other things that humans strive for.
Before you get too nostalgic for the past, the problem with all of these is that they evaluate economic choices assuming a linear societal structure (working backward).
Only one group of people has had a consistent level of respect and rights over the past 115 years. Coincidentally, it’s a group to which all the authors above belong.
For them, perhaps, being wealthy in an earlier era would have brought power and prestige (also, still a world without toilet paper). For the rest of us — anyone who is not a white, heterosexual male — asking about utility in the early 20th century is a nonstarter. Money doesn’t mean much when you don’t have freedom of choice.
Let’s consider just a slice of what life was like for women and African-Americans in these two eras:
This was the era of Jim Crow. There were more than 100 lynchings in the US. Just four years earlier, the Supreme Court upheld legal segregation in Plessy v Ferguson. Wealth doesn’t make up for systematic disenfranchisement.
Women did not even nominally have the right to vote. Birth control was illegal. As a wealthy women, life probably would not have been unpleasant, but would still probably be largely controlled by the men around you.
For women, life was much better but still not great (I refer you to “Mad Men”). Would you rather be Betty Draper than middle class in 2014?
At the same time, the civil rights movement was heating up. Segregation was still institutionalized. Consider this piece from Ta-Nehisi Coates’ essay on the case for reparations:
From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home-mortgage market through means both legal and extralegal. Chicago whites employed every measure, from “restrictive covenants” to bombings, to keep their neighborhoods segregated.
What is the point of being wealthy if society doesn’t allow you to choose how you spend your money?
Nostalgia is useful only for those with freedom of choice in the past in question. And that is a very small group indeed. By all means, they should think about it — it’s indeed an interesting economic question — but also consider the experience of those whose experience might be different.
For another view, the ello user @richdhw had this really smart comment on Weisenthal’s original post:
This raises a big problem I have with these sort of questions: we could imagine an impersonal version: was group of people x happier/better off etc. than group y according to some criteria. Or you can ask whether a person in group y would want to be in group x. They’re not nearly the same question.
In this case, given the actual preferences of group y (i.e. ppl alive today) I think we can all agree no one would choose to go back to 1900. So, then we start abstracting away certain facts about ourselves, like desire for modern technology/medicine, beliefs about what constitutes a good life etc. And what quickly happens is you lose all grip on this being a question on what “you” would rather do.
It rather reminds me of Rawls’ veil of ignorance, and one of the major (and I think correct) criticisms of it as an intellectual device is that there’s no principled basis to decide what should be put behind the veil of ignorance, or what decision criteria you should use to adjudicate the different possibilities. And what happens is that what does or does not get put behind the veil ends up being to do with what answer you are trying to get.
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