No, You're Not Wrong to Worry About Rising Prices

In his guest essay "I'm an Economist. Don't Worry. Be Happy," Justin Wolfers, smugly telling the reader that he is an economist over and over again in an "I'm a doctor, trust me" tone, dismisses the public's suffering as a result of the surging prices of recent years. Covering himself with an acknowledgment that he is dealing with averages that may obscure the existence of a little bit of pain here or there, he argues that the perception of suffering from inflation is mainly just a matter of the way people are processing the situation psychologically, the more in as the has American public have not dealt with such a shock in decades. Otherwise people would more rationally appreciate that as the price of the cup of coffee goes from fifty cents to five dollars it is usually the case that the ten dollar bill in their wallet turns into a hundred, and they are no worse off--for as this goes to show "the currency that really matters is how many hours you have to work to afford your groceries, a small treat or a home," and that "none of these real trade-offs have changed." Indeed, he writes, the trend of the past decades all onward and upward for America's economy and the country's working people, a thing he confidently expects to go on indefinitely--envying rather than fearing for the young people who will be twice as rich as people are today forty years from now.

I was aghast at Mr. Wolfers' revolting "I'm a professional" smugness (and misuse and abuse of Bobby McFerrin's hit song), and his use of both to dismiss other people's troubles--but still more aghast at the extreme remoteness of his assessment of the economy from statistically verifiable reality. Contrary to what Mr. Wolfers claims, the reality is that over the past half century the public's purchasing power did not rise in line with prices, but consistently declined relative to many an essential good, as one can see going by the measure he himself suggests, how much people get in return for their hours of work. Let us take as such a basis the median male income--which has the virtue of being a less "processed" number than the inflation figures we see (a fact much exploited by economists inclining toward Wolfers' touted "optimism"), and which can easily be compared with contemporaneous price data .

Consider that in the decade 1963-1972 the median male income equaled 28 percent of the median home sale price.

In 2013-2022 the median male income equaled just 13 percent of that sale price in 2013-2022, and 11 percent in 2022, so that where a house represented about three and a half years of that income, at that later date it represented nine years. (So much for Wolfers' claim that the "hours you have to work to afford . . . a home" has not changed.)

In 1999 (a time in which people already regarded such charges as exorbitant and budget-breaking) the average annual premium for health insurance for a family of four was 21 percent of the median male income.

In 2020-2021 that premium was 45 percent of that income.

In 1968-1969 the average price of tuition and fees at a private four-year college was 28 percent of the starting year's median male income in 1968-1969.

In 2019-2020 it was 87 percent of that income.

And so on and so forth.

Of course, faced with such facts some retort that where many of these goods are concerned the consumer gets more value for their money--but this claim is debatable at best. Can anyone really say, for example, that the college graduate gets three or four times' more value for the proportion of income spent on their education than was the case a half century ago? For instance, as measured by the boost to the incomes of college graduates? Most would consider such claims risible these days (so much so that it is making the young leery of bothering with the commitment). Does the health insurance premium provide twice as much protection, twice as much value for one's health spending, as it did at the turn of the century? I doubt many would say so. People's homes are, to all accounts, bigger than they used to be, but it would be another thing to prove that people are getting as much as they used to for their hour of work here. Certainly there are grounds to think that home prices have risen faster than home sizes, going by the more readily available statistics (the median home perhaps half again as big in square footage terms as it was circa 1970, but more than twice as expensive in the terms discussed here). In any event, it is worth stressing that even were people to prefer the cheaper options standard in yesteryear they are simply not available for, contrary to the "consumer is king" notion of the market propounded by the intellectually orthodox, the reality is that business offers the consumer what it wants them to buy, take it, or take it, with all that implies for people's living standards, and their economic security.

No, trying to blow these facts off with talk of consumers getting more for their money in that way simply will not do, leaving us with that pronounced long-term trend of the purchasing power of a year's or an hour's earnings falling in relation to many of the essentials of daily living. Moreover, contrary to Wolfers' analysis, it is the case that the pandemic-related inflationary shock that is the occasion for his writing has exacerbated the unfortunate trend, in a way likely to remain the case over the long term.

Amid that hard daily reality for hundreds of millions of Americans who were financially battered long before the pandemic-sparked inflationary surge--and the worse being experienced by billions across the globe--Wolfers' sanguine view of the relation of price to income may strike some as not only false and condescending, but an artless attempt at gaslighting the public. Alas, however one labels or explains it such "journalism" is par for the course with a paper that puts notorious science-bashing trolls on its staff while snarling at subscribers that they are intolerant of views other than their own when they question the decision, and snarling at everyone else when they open their mouths to express an opinion that they are just a pack of Know-Nothings spreading "fake news."