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Aug 24, 2008

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codepoke

?

> He noted that Americans in 1875 spent 74% of the income of food, clothing, shelter and consumer durables. Today, thanks in part to rising incomes and rising productivity in the production of those necessities, such spending accounts for only 13% of American incomes.

(From the referenced article:)
> He put up a table at the Lindau meeting that showed that Americans used 18% of their incomes to buy time off in 1875 but 68% in 1995. That calculation is intuitive to an economist, not to a consumer.

Counter-intuitive is right!

68% of my income to buy time off?

As I look at the chart, it seems like an error of definition. He seems to say that because I have more time off than I did in 1880 (which I certainly do) that my money goes to time off (which is a non-sequitor.) The dude's a genius and I'm a programmer, but this still seems bizarrely wrong. If I assume that 68% of my spending is on my weekends, vacations, and retirement (an unimaginable number) does that somehow magically mean my durable goods needs evaporate in those last years (decades?) of my life and on every Saturday and Sunday?

If I make 100k, does it really make any sense to anyone that I'm living on 13k? That only covers 1/3 of my food this year, much less through all those years of retirement. Are gasoline, oil changes and repairs now, "recreation?"

Bizarre.

Michael W. Kruse

I think Fogel is referring to what economists call opportunity costs.

We all have 24 hours in a day. I have the opportunity of working 12 hours today or working 8 hours and then huddling in front of the tube with a favorite beverage and some chips. If I trade chose the second option, then I'm trading four hours of work to "purchase" four hours of leisure. Extend that out over a lifetime and I think you get Fogel's point. With greater societal income the tendency is for more people to purchase more leisure and not to keep working at past levels.

codepoke

If it's opportunity cost, then it's compounded opportunity cost. First he smacks me upside the head for blogging with my spare time instead of producing some valuable commodity, then he pretends I actually was doing something valuable and says I only spent 13% of the money I could have made if was a useful member of society.

Somewhere, someone has to say he's gone too far down the assumption chain.

Michael W. Kruse

Codepoke, I can't tell if you're being tongue-in-cheek or genuinely feel slighted. I don't think Fogel is dissing people using more time for leisure. I think his main point would be this: Around 1850, the average work week was 66 hours. Most people had no choice but to work at this level. Now its around forty hours. Could most of us still work 66 hours if we chose to? Yes. But we chose not to be because we value other things more.

I don't think Fogel is critical of people using their time and resources for less essential needs. Nor, do I think he is saying every minute of our day should be devoted to "useful" (which I take you to mean economic labors") activity. (Nor was it my intention above to imply that kicking back and watching the game versus being economically productive with "extra" hours is necessarily bad.) On the contrary, I think he is highlighting the fact that for the first time in human history, we have choices.

The economic point he is making is that we have become affluent enough that we can "purchase" more leisure and non-essential goods. As human flourishing is about more than just economic production and bare essential existence, this is all very good news.

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