Yes, Americans Probably Are About 46 (or Maybe 65) Times Richer Than in 1776

By Jeremy Horpedahl.

"My post and chart from last week showed the phenomenal growth of average income in the US since the Founding. Using GDP per capita historical estimates and adjusting for inflation, this figure is about 46 times greater today than right around the time we declared independence.

It will probably not surprise you that some folks were skeptical. Could this really be true? Two major objections were raised to using GDP per capita. First, wouldn’t it be better to use a median income value rather than a mean (simple average)? Second, wouldn’t a measure of wages be better than GDP per capita?

I really would like to show you an annual series of median income data back to 1776, but unfortunately it just doesn’t exist. Good median income data are hard to find much before the 1950s, much less the 1770s. However, while median values are often better for showing levels, the growth rates of median wages and mean wages aren’t that different for periods when we have comparable data. Consider the following chart, which compares median wages (as calculated by EPI using CPS data) and mean wages (from BLS’s series for non-supervisory workers) since 1973. I have stated these in nominal terms, so don’t take this as real growth rates, but rather it is a raw comparison of two series (we could apply the same inflation adjustment to both, but that won’t change the picture, only the numbers).

 

Median wages increased by 667% and mean wages increased by 657%, almost identical. Again, these aren’t inflation adjusted, but that’s not the point of this exercise. The point is that whether you use mean or median wages, at least since 1973, the growth rates are the same. Was this true if we went back another 200 years? We can’t say for sure. But many people have this same skepticism about mean wages in recent decades. I think it is better to use median values when you have them, but we shouldn’t throw up our hands and claim we know nothing if all we have is mean wages.

Next, consider the following chart. It begins in 1790, but instead of using GDP per capita, as I did last week, it uses a measure of average wages from economic historian Lawrence Officer. This measure is for “production workers in manufacturing,” and it is a total compensation measure, meaning that it will include the value of fringe benefits as well — though these aren’t noticeable in the data until the 1930s. This is still an average value, but because it is for manufacturing laborers, it won’t be distorted by the wages of managers and owners in that industry, and it won’t be affected by the growth of new industries that might require more years of education (indeed, manufacturing wages are lowering than overall average wages today, so this is taking the hard case). I have also included a second line, which only includes manufacturing wages (not benefits) that I have blended with Officer’s compensation series starting in the 1930s, in case you think including benefits is somehow “cheating.” (Note the log scale again, as in last week’s chart.)

 

The trends here are very much in the ballpark from the GDP per capita chart I created last week. Using total compensation, wages are 65 times higher than in 1790. Using only wages, they are 49 times higher. Notice that these are both better than the 46 times multiplier using GDP per capita. How is that possible, since I am using the same price deflator in both cases? First, average hours of work have fallen significantly since the 18th century, so incomes haven’t risen quite as much as wages. Second, there was a bit of a decline in GDP per capita during the Revolutionary War, and if we use 1790 as the baseline for GDP per capita, the multiplier is 63. But again, these numbers are all in the ballpark: whether the true figure for a typical American is 46x, 49x, 63x, or 65x, this is a tremendous amount of economic growth.

If you want to look at that chart pessimistically, you will see that there is some reduction in growth rates in the past few decades. That’s true whether we use wages or compensation. This is a well known issue, and has been discussed endlessly in academic papers and on social media. I don’t want to glaze over it here, but I mostly will: the long-run trend of growth in the US is amazing. That’s true whether you use GDP per capita, or wages or compensation for production workers.

So once again, Happy 250th Birthday to the USA and all of you living in the wake of that amazing 250 years of economic growth!"

Keeping Cool: The Air Conditioner That Changed America

The time price of air conditioning has fallen 98.6 percent since 1952. That ordinary luxury saves lives every summer.

By Gale L. Pooley. He teaches US economic history at Utah Tech University. Excerpt:

"One of the great triumphs of entrepreneurial capitalism is how quickly air conditioning traveled the familiar path from luxury to necessity. What began as an expensive convenience for a tiny elite became, within a generation, affordable to ordinary families. The market did not merely invent comfort — it democratized it.

In their report Time Well Spent: The Declining Real Cost of Living in America, Michael Cox and Richard Alm found that a 5,500-BTU air-conditioning unit cost about $350 in 1952. At the time, entry-level workers earned roughly 83 cents an hour, putting the time price at 422 hours.

Today, Walmart sells a far more efficient 6,000 BTU air-conditioning unit (with a remote control) for only $115. The current hourly wage for limited-service restaurant workers is around $19 an hour, putting the time price at six hours.

The time price has decreased by 98.6 percent. For the time it took US workers to earn the money to buy one unit in 1952, they get 70 today.

If air conditioning saves lives, why don’t more Europeans have it?

Europe’s electricity prices are typically much higher than the US, driven by higher taxes, network costs, renewable energy mandates, and energy import dependence. Customers in the US pay 17 to 19 cents per kilowatt-hour (kWh) compared to 25 to 32 cents in Europe. This means Europeans pay roughly 47 to 68 percent more per kWh than US customers.

Americans are also much richer than Europeans. According to World Bank data, American gross domestic product (GDP) per capita was $84,809 in 2024, while the European Union’s was 25 percent lower at $63,585. That $21,224 difference could buy a lot of comfortable cooling.

The European Union also prioritizes environmental targets over human comfort by imposing strict regulations for heating and cooling, making these amenities much more costly. The commission encourages citizens to use fans instead of air conditioning. Imagine the government doing that in Phoenix and Atlanta in July. Italy, Greece, and Spain even announced temperature limits in public spaces during the 2022 heatwave in an effort to meet these environmental objectives. Spain limited air conditioners to be set no lower than 80°F. No wonder European productivity is 38 percent lower than the US.

Historic preservation laws and strict landlord rules frequently ban exterior window units to maintain aesthetic uniformity.

While air conditioning ownership increases households’ electricity consumption, it may be a small price to pay for comfort and avoiding death.

The problem is not the climate but the policy mindset. Too many European regulators approach energy and technology through the ideological lens of scarcity rather than creative innovation and human flourishing. One reason such policies persist is that the officials who design them are largely insulated from the consequences of their decisions and rarely experience their costs directly. Instead, those costs are borne by millions of ordinary citizens.

Air conditioning is not ultimately a story about cooling. It is a story about knowledge. It transformed oppressive heat into comfort, inhospitable regions into thriving communities, and summer misery into year-round productivity. Coal, copper, and electricity become valuable only after humans discover how to harness them. The history of air conditioning is the history of knowledge triumphing over nature’s constraints.

The ultimate resource is neither energy nor matter. It is the infinite capacity of human beings to learn, create, and discover."

Work and leisure over time

 Tweeted by Vincent Geloso.

 

‘The Permanent Problem’ Review: The Soul and the Market

Critics allege that capitalism causes spiritual poverty. They misunderstand the proper role of an economic system

By Judge Glock. He reviewed the book The Permanent Problem: The Uncertain Transition from Mass Plenty to Mass Flourishing by Brink Lindsey. Excerpts:

"One wonders if Mr. Lindsey thinks capitalism is preventing people from organizing community gardens. If their adoption isn’t universal, one struggles to understand why we should demand that people plant them. And how many in the author’s crowd have done their part to restore civilization by moving into co-housing units, spaces typically reserved for impecunious 20-somethings? Perhaps the simplest explanation for the limited impact of these practices is that they work for some people but not for others.

Similar desires for small-scale production have a long history. John Ruskin, a Victorian art critic, raged at how the division of labor broke down traditional communities and turned people into automatons. William Morris, in the novel “News From Nowhere” (1890), imagined a world in which people returned to small-scale gardening and gave up shoddy consumerism. In the 1960s and ’70s, communal radicals and intellectuals such as E.F. Schumacher, in his book “Small Is Beautiful” (1973), made similar demands."

"no critic has attacked all consumption of all goods, only the goods the critic considered unnecessary."

"The other term for making things more affordable is economic growth—something that is ineluctably in conflict with a vision of producing more goods outside the market."

"He suggests more people could “build their own housing.” Beyond the fact that this would make housing immeasurably more expensive, these personal homebuilders would still have to buy the nails, lumber, shingles and—since the author is not a Luddite—communications and electrical wiring, HVAC systems and other complex goods from the market."

"The author recommends a domestic service corps, modeled on the military, to build infrastructure"

"Mr. Lindsey assures the reader that a government redistribution of goods will help people declare independence from both government and market." 

Fuel Costs Are Way Up, But It’s Still Pretty Affordable to Fill Up Your Tank (relative to wages)

By Jeremy Horpedahl.

"Two months ago I wrote about gasoline prices and tried to give the current prices some historical context. Gas prices have, of course, only continued to increase since then. Here’s a chart I created to give a bit more context, using an idea from Ryan Radia: how much does it cost to drive a car 250 miles? Since fuel efficiency has increased over time, we might be understating how much it costs to drive today relative to the past. And of course, to give the “cost” proper context I have stated in terms of hours worked at the average wage (note: the final data point is from April 2026, as we don’t have wage data for May yet):

 

In April 2026 it took about 1.4 hours of work at the average wage ($32.23) to purchase enough gasoline to drive 250 miles (10.7 gallons) at the average fuel efficiency (23.4 miles per gallon). That average fuel efficiency figure is from 2024, the latest available, so it could be a bit higher today. Maybe it’s a little easier than 1.4 hours of work to buy it, but even if fuel efficiency had crept up to 25 mpg (that would be a big increase in 2 years, historically speaking), it would still be 1.3 hours of work.

1.4 hours of work is certainly a big jump from earlier in 2026, but you’ll notice it is still on the low end in this chart, and well below the peak we saw in June 2022 of just over 2 hours of work to buy 250 miles worth of gasoline.

But 23.4 miles per gallon is pretty low, as this is includes lots of trucks and SUVs with pretty bad fuel efficiency. What if we looked at some more fuel efficient vehicles?

Here’s a few I checked on (all for 2026 models, with gas and electricity at current national averages):

• Toyota Camry: 0.71 hours of work
• Chrysler Pacifica Hybrid: 0.61 hours on electric, 1.18 hours on gasoline
• Tesla Model Y: 0.37 hours of work

It will probably not surprise you that the all-electric Tesla Model Y is cheaper than the average car to operate at current prices, but you may not have realized that it is almost four times cheaper. But the Toyota Camry, with all models operating as hybrids now, also comes in pretty good at about half the cost of the average vehicle to operate (and the Camry is a very affordable car to purchase). The Chrysler Pacifica hybrid minivan does pretty well too, though even operating only on electricity (30 miles at a time), it’s only slightly more fuel efficient than the Camry."

Capitalism does a far better job than socialism of feeding people.

A tweet from Chris Freiman. 

 

Chicago’s “Disappearing Middle Class” Can Be Found in Its Proliferating Upper Middle-Class Neighborhoods

By Scott Winship of AEI. Excerpts:

"In a recent  with Stephen Rose, I argued that the narrative of a “shrinking middle class” was based on a kernel of truth, but one that undermines economic pessimism. We showed that while 36 percent of families were part of what we called the “core middle class” in 1979, the share had fallen to 31 percent by 2024. However, the share of families who fell short of the middle class shrank even more. The middle class has not been hollowed out; rather, the overall decline stems from the net movement of families upward into the upper-middle class. That group, with incomes between 5 and 15 times the 2024 federal poverty guidelines, rose from 10 percent of families in 1979 to 31 percent in 2024.  

Analyses that find a hollowed-out middle invariably rely on definitions of the middle class that peg thresholds to how the typical family is doing. In that case, even if everyone is better off over time in inflation-adjusted terms, if the middle’s gains are stronger than those of families lower down, more people can fall short of “the middle.” The Pew Research Center, for example,  that the share of families that were “lower-income” rose between 1971 and 2023, even though the purchasing power of those lower-income families rose by 55 percent. The explanation for this seeming paradox is that “middle-income” families saw a 60 percent gain, making it harder to reach the middle-income threshold if income rose more slowly than that.  

The point of my paper with Rose was that claims of a “hollowing out” of the middle class wrongly reinterpret widespread gains across the income distribution as rising insecurity and declining living standards. Unbeknownst to us, a perfect example of this misinterpretation appeared a week before we published our report in Chicago magazine. The offending article title  that “Chicago’s Middle Class Is Disappearing.” My reanalysis of the data behind the piece indicates it would be difficult to articulate a more misleading conclusion. Fewer Chicagoans live in middle-class neighborhoods than in 1970—but only because more live in richer neighborhoods."

"the Voorhees Center methodology has the same shortcoming as Pew’s analyses of the shrinking middle class. Both define middle-class status relative to a benchmark that changes over time and is tied to typical contemporary income. If everyone’s income doubles, the middle class is no larger, yet everyone’s income has doubled."

"instead of “middle income” requiring 80 to 120 percent of the 2017 metro average income, it requires 80 to 120 percent of the 1970 metro average income (adjusted for inflation to keep income in terms of constant purchasing power). Using this approach, the share of people living in middle income tracts fell in half from 1970 to 2017—from 51 percent to 25 percent. The share living in tracts below the middle income was roughly constant—42 percent in 1970 and 43 percent in 2017. In contrast, the share living in tracts above middle income more than quadrupled, rising from 7 percent to 31 percent."   

"If we instead use 2015-2019 as the end point (average national unemployment rate of 4.4 percent), the middle income share falls from 51 percent to 26 percent, the lower-income share falls from 42 percent to 36 percent, and the higher income share jumps from 7 percent to 38 percent."

"From 1970 to 2024, the share of Chicagoans who lived in middle income tracts fell from 51 percent to 25 percent. The share living in tracts falling short of middle income dropped from 42 percent to 28 percent. Meanwhile, the share living in upper income tracts rose sevenfold—from 7 percent to a whopping 48 percent. Looking at the top group, very high income tracts were home to just 4 percent of Chicagoans in 1970 but 38 percent in 2024."

"In reality, per capita income in the median Chicagoan’s census tract rose from $29,600 in 1970 to $39,300 in 2024 (both in 2025 dollars)—an increase of one-third. Using relative thresholds and letting class thresholds increase over time, the average Chicagoan in a lower income census tract lived in a tract with a per capita income of $22,300 in 1970 but $27,800 in 2024 (25 percent higher). For Chicagoans in middle income tracts, the increase was from $32,400 to $49,900 (54 percent)."

Is each American generation doing better?

From Tyler Cowen. 

"We construct a posttax, posttransfer income measure from 1963 to 2023 based on the Current Population Survey Annual Social and Economic Supplement that allows us to consistently compare the economic well-being of five generations of Americans at ages 36–40. We find that Millennials had a real median household income that was 20% higher than that of the previous generation, a slowdown from the growth rate of the Silent Generation (36%) and Baby Boomers (26%), but similar to that of Generation X (16%). The slowdown for younger generations largely resulted from stalled growth in work hours among women. Progress for Millennials younger than 30 has also remained robust, though largely due to greater reliance on their parents. Additionally, lifetime income gains for younger generations far outweigh their higher educational costs.

That is from Kevin Corrinth and Jeff Larrimore in Demography.  Via the excellent Kevin Lewis."

The Human Progress Index (HPI) shows an even more dramatic improvement in human well-being since 1990 than either the UN’s HDI or the Augmented HDI

Tweet from Chelsea Olivia Follett. 

 

A Look at Our Material Progress

Modern life is more affordable and abundant than nostalgic claims suggest

By Alex Tokarev. He grew up in Bulgaria. He teaches Economics and Classical Liberal Philosophy at Northwood University. Excerpt:

"Imagine having to sweat on an assembly line or in a dangerous mine for three or four hours every day just to cover your grocery bills. Not excited about this prospect? Sorry, but that’s probably what you’d be doing if you were born a century ago. Today? The typical jobs are not only better, but you can earn the same amount of calories in just 30 minutes. Affordability, baby!

For most of humanity, the historical pattern was daily malnourishment interrupted by periods of starvation. Today, we have an epidemic of obesity. A hundred years ago, Americans fared better than most. Yet, compared to you, they were appallingly poor. In 1925, meat was expensive. The produce was seasonal. There was no refrigeration, no global supply chain, no high-yield farming.

Despite our government’s “food pyramid” propaganda, diets are now much healthier. Despite our government’s theft of 99% of the purchasing power of the U.S. dollar (through unconstitutional Fed policies that cause inflation), I can now grab a pint of fresh blueberries from Chile at our Michigan Kroger store for just $1.99, even though my backyard is already frozen. Unaffordable?

Capitalist competition, free enterprise, profit maximization. These pursuits led to the age of plenty that you enjoy. CATO’s scholar M. Tupy and BYUH professor G. Pooley have estimated (read their 2022 book Superabundance) that even the unskilled American workers can afford dozens of common food items by working 10 times less today than a century ago. Some crisis!

My son loves Universal Orlando’s parks. As a student, he works as a lifeguard, a minimum wage job. Even that pays enough to cover his round-trip to Florida by working just 8 hours. A hundred years ago, that travel would have taken three days and cost a weekly salary. Today, he leaves home after breakfast and eats dinner at the Islands of Adventure after swimming at Volcano Bay.

Our cars are faster, safer, more comfortable, last longer, pollute less, need less maintenance, and cost less in real terms. An unskilled employee needs to work only half as much today as 50 years ago to buy a pickup truck. Most vehicles on the road today come with safety features, entertainment options, and navigation controls that were science fiction to drivers in the 1920s.

Average Americans take vacations that their grandparents couldn’t have dreamed of. Alternatives to hotels have multiplied. Competition has lowered travel costs for everyone. Climate control, clean water, countless restaurants serving exotic foods from around the world, and limitless recreational options. These are no longer luxuries. I still marvel while my kids take those things for granted.

Debt? When your parents were your age during the fall of the Berlin Wall, the average, inflation-adjusted net wealth (assets minus liabilities) per household in the bottom 50% was $33,000. Today, it’s almost double: $60,000. Homes too expensive? Today—perhaps. Blame government restrictions on the supply. Price per square foot between 1975 and 2015? Almost no change.

College tuition rising faster than inflation? Blame the government for messing with that market. When taxpayer money is channeled to consumers of goods or services, higher demand means higher prices. Econ 101. Do you need two salaries to raise two children? We saved enough on one modest salary in 7 years to buy a house in Midland, MI. We paid it all with cold, hard cash.

The world isn’t getting worse. Your spending habits might be. In every measurable way, life is getting better. No previous generation has had more physical comfort and such amazing chances to develop productively and prosper. Study some history. If you stop moaning about decline and start noticing the progress, you might even enjoy your lives as Gen X is enjoying ours."

AI, Unemployment and Work

By Alex Tabarrok.

"Imagine I told you that AI was going to create a 40% unemployment rate. Sounds bad, right? Catastrophic even. Now imagine I told you that AI was going to create a 3-day working week. Sounds great, right? Wonderful even. Yet to a first approximation these are the same thing. 60% of people employed and 40% unemployed is the same number of working hours as 100% employed at 60% of the hours.

So even if you think AI is going to have a tremendous effect on work, the difference between catastrophe and wonderland boils down to distribution. It’s not impossible that AI renders some people unemployable, but that proposition is harder to defend than the idea that AI will be broadly productive. AI is a very general purpose technology, one likely to make many people more productive, including many people with fewer skills. Moreover, we have more policy control over the distribution of work than over the pure AI effect on work. Declare an AI dividend and create some more holidays, for example.

Nor is this argument purely theoretical. Between 1870 and today, hours of work in the United States fell by about 40% — from nearly 3,000 hours per year to about 1,800. Hours fells but unemployment did not increase. Moreover, not only did work hours fall, but childhood, retirement, and life expectancy all increased. In fact in 1870, about 30% of a person’s entire life was spent working — people worked, slept, and died. Today it’s closer to 10%. Thus in the past 100+ years or so the amount of work in a person’s lifetime has fallen by about 2/3rds and the amount of leisure, including retirement has increased. We have already sustained a massive increase in leisure. There’s no reason we cannot do it again."

The time price of a family meal at McDonald’s is 25% lower than in 1958

Letter to The WSJ.

"Mr. Greene (Bob Greene’s op-ed “When McDonald’s Was an Inexpensive Treat” (March 21)) notes that his family’s entire meal—six hamburgers, four cheeseburgers, four orders of fries and three milkshakes—cost only $2.66 in 1958. With entry-level wages around $1.12 an hour at the time, that put the time price—the amount of labor time required to acquire a good or service—at two hours and 23 minutes.

Today, that same meal costs about $33.47 at my local McDonald’s. But wages have risen too. With average hourly earnings at limited-service restaurants around $18.69, the time price is now only one hour and 48 minutes. That’s a 25% decline in the time price. In other words, for the same amount of time, a worker today can buy 33% more from McDonald’s than in 1958.

McDonald’s isn’t a more expensive treat—it’s a more abundant one.

Gale L. Pooley (he teaches US economic history at Utah Tech University)"

Cray 1978 versus iPhone 2022 (and the astronomical drop in the cost of light over time)

By David R Henderson.

"On January 20, 2024, I posted on EconLog about the differences between a 1978 Cray computer, the most powerful computer at the time, and a 2022 iPhone 13. The latter dominates in every way, and by a very large margin. Here’s my post, edited slightly.

Cray 1978 versus iPhone 2022

If you want to see a truly amazing trip down 44 years of memory lane, check out this comparison of the 1978 Cray computer, at the time the most powerful computer in the world, and the 2022 iPhone. I won’t bother giving you the specifics because the narrator, Dave Darling, does a very good job in a short time.

In talks I gave in the early 2000s in which I highlighted the huge advances in computing, I said that if we had seen the same advances in, say, kidney surgery, you could have decided whether to get kidney surgery–or buy yourself a cup of coffee. Now the comparison would be way more extreme.

The video reminds me of the less spectacular, but still spectacular, effects of the lightbulb that William D. Nordhaus pointed out years ago. Interestingly, in granting him his half of the Nobel Prize in economics, the Nobel committee didn’t even bother to mention what I thought was one of his biggest contributions. Here’s what I wrote on the issue in my biography of Nordhaus in David R. Henderson, ed., The Concise Encyclopedia of Economics:

He showed that the price of light in 1992, adjusted for inflation, was less than one tenth of one percent of its price in 1800. Failure to take this reduction fully into account, noted Nordhaus, meant that economists have substantially underestimated the real growth rate of the economy and the growth rate of real wages." 

THE 1950S: A NOT-SO-GOLDEN AGE

By John Cochrane. Excerpts:

"Look at standards of living. Real gross domestic product per capita, which is also national income per capita, sat below $19,000 in 1955. In 2025 it approached $69,500. These figures are expressed in 2017 dollars, thus accounting for inflation. The average American is about 3.7 times better off today than in 1955. It’s not even close.

Yes, GDP grew faster in the 1950s. Real GDP per capita grew 28 percent from 1949 to 1959, and only 18.3 percent from 2009 to 2019. Slowing growth is a major economic problem today. Be that as it may, we eat levels, not growth rates. We might not be getting even better off as fast as we were then, but we’re still 3.7 times better off.

How about jobs? In August 2025, 163 million people were employed in the United States; in August 1955, 63 million. America created 100 million jobs over those seven decades. This growth occurred even as manufacturing employment shrank and machines took over. People found better—and better-paying—jobs, most in services. Has any evangelist for union jobs of the 1950s considered how dirty, dangerous, and mind-numbing it was to work on an assembly line? Isn't being a desk drone, a nurse, a bank employee, or any of a hundred mid-level service jobs a lot nicer in addition to better paid? In 2025 the unemployment rate, the fraction of workers looking for a job, stood at 4 percent, just about what it was in the 1950s and what economists think of as a normal labor market.

The great 1950s union labor market was great only if you were a straight white man, and usually one with connections. “We don’t want nobody nobody sent” was the great saying of Chicago Machine job allocation. Women, African Americans, other minorities, and immigrants faced bleak prospects. One of the great achievements of the U.S. economy since the 1950s has been to expand the labor force as well as opportunities for high-paying jobs to all sorts of people who were excluded then. Civil rights, the emancipation of women, and the increasing acceptance of gays, foreigners, Catholics, and Jews (not so true in the 1950s)—these are nothing to sneeze at. The unions made good jobs for white men, relative to other jobs at the time, in part by excluding others.

What about those easy-to-buy houses? The average house in the 1950s was about 1,000 square feet. The famous Levittown houses were 750 square feet. One bathroom. Today, the average house is about 2,500 square feet, even though the average number of people in it declined from 3.4 in 1950 to 2.5 in 2024. People are choosing larger and better homes.

To men of my age, 1950s cars evoke nostalgia. But they were awful, unsafe rust buckets compared to today’s boring SUVs.

What about those easy to buy houses? The average house size in the 1950s was about 1,000 square feet. The famous Levittown houses were 750 square feet. Today is it about 2,500 square feet, even though the average number of people in it has declined from 3.3 to 2.5. And modern houses are much better. People are choosing larger and more expensive homes. 1950s cars, to men of my age, evoke nostalgia. But they were awful unsafe rust buckets compared to today’s boring SUVs.

THE MYTH OF AN EGALITARIAN UTOPIA

GDP isn’t everything, though it is a lot. Was health care cheaper in the 1950s? Yes, though for many diseases, including heart conditions and cancer, treatment then consisted of asking whether you wished to see a priest, a minister, or a rabbi to send you off to the next world. Life expectancy at birth has increased by a full decade, rising from 65.6 to 75.8 for men and from 71.1 to 81.1 for women.

Pollution in the 1950s was atrocious, especially in those industrial areas so beloved by nostalgic left-wing professors. (I grew up on the south side of Chicago. I remember coal dust that accumulated on anything outside.) The fraction of people living in extreme poverty has plummeted, even as the goalpost keeps moving. And we all benefit from nearly free technological marvels undreamed of in the 1950s. Most homeless people have cell phones.

Our prosperity is, in fact, widely shared, though the inequality warriors would have you believe otherwise. Most research on income inequality doesn’t account for taxes and transfers, especially in-kind transfers. Consumption inequality is much lower than income or wealth inequality, and has expanded a good deal less. You just can’t have that many vacation homes. Wealth inequality largely consists of high stock market values in a low-interest-rate environment. Just how much social harm is Elon Musk’s huge holding of Tesla stock doing, remaining invested in the company, and producing cars and rockets?

Some observers regard the 1950s as a sort of egalitarian utopia because the rich faced high statutory tax rates. Yes, the highest federal income tax rate stood at 91 percent for most of the decade. But people confronted with sky-high tax rates go talk to their lawyers fast. Even the far-left economists Thomas Piketty, Emmanuel Saez, and Gabriel Zucman found that the top 1 percent of American households paid on average 42 percent of their income in taxes in the 1950s. Six decades later, at a time of supposedly stark inequality, that number had fallen only slightly, to 37 percent.

These figures account for all forms of taxes. In the 1950s, the top 1 percent paid, on average, an effective rate of just 16.9 percent in federal income taxes, as the Tax Foundation documents. How could they pay so little when the top federal tax rate reached 91 percent? The answer is: loopholes—many, many loopholes. Celebrities incorporated themselves and bought oil wells for the write-offs."

Groceries in November 2025 are the Most Affordable They Have Ever Been

By Jeremy Horpedahl.

"In surveys more than two-thirds of Americans say they are are struggling with the cost of groceries. And yet, relative to average wages:

 

The chart shows a simple measure of relative grocery affordability. Starting with the levels of wages and grocery prices in 1947, if in any year wages increase more than prices, the line goes up (it can also go down, as it does in some years). Cumulatively, you can see that today groceries are over twice as affordable as in 1947.

You could reasonably complain that there hasn’t been much progress since the early 1970s. Fair enough. But there has been significant progress since the 1990s. Even if the progress is less than we would have liked, groceries are still, right now, the most affordable they have ever been in the US relative to average wages. And since US consumers spend by far the lowest share of their income on groceries in the world, we might be tempted to say that right now groceries in the US are the most affordable they have ever been in human history. Period.

This is not just a trick of using average wages, which can be distorted by outliers. First, we are already using an average wage series that strips out the highest earners (supervisors, managers, etc.). But we can show this more clearly by using a median-wage series, such as the CPS series (calculated by EPI) starting in 1973. Notice this affordability trend gets slightly better if we use median wages from 1973-2024

 

It’s true that using the median wage series, 2020 and 2021 look more affordable than 2024 — but that’s because the compositional effects of the job losses in the pandemic really throw off the median wage. But the growth rate since 1973 is slightly better for median rather than average wages — it’s not a trick! And when we have the median wage data for 2025, it will also likely be the most affordable measure on this chart.

So why are people so pessimistic if wages have been rising faster than grocery prices? One theory: availability bias. People focus on the prices where they notice goods becoming less affordable, but ignore the ones that are more affordable. Many consumers could probably tell you that a dozen eggs increased from $1.40 per dozen in November 2019 to $2.86 today, and at times was much higher, topping $6 briefly in early 2025. Likewise they could tell you that a pound of ground beef soared from $3.81 in late 2019 to $6.54 today. Both of these prices increases vastly exceed wage increases over the same timeframe (about 33 percent for wages), but most consumers probably couldn’t tell you that these were outliers and most major categories of food increased by less than average wages since late 2019:

 

While the “beef and veal” category has clearly outpaced wages — by almost twice as much! — nearly every other category of meat and as well as other food product prices increased less than wages. Poultry is the one exception, though here it is almost equal to wage increases. But if we are talking about pork or fish, or the non-meat categories, most food is more affordable than in late 2019 relative to wages. Consumers won’t as easily identify these more affordable categories, and they probably have no idea how much average wages increased." 

Boosting Demand Won’t Fix Affordability

Washington helps buyers. It should focus on producers.

By David Hebert. He is a senior research fellow with the American Institute for Economic Research. Excerpts:

"The law expanded insurance coverage to millions through subsidies and mandates, dramatically increasing demand for healthcare. However, the ACA did remarkably little to increase the supply."

"healthcare employment has grown at roughly 2% each year both before and after the ACA was passed."

"Freddie Mac estimated that in the fourth quarter of 2020 the U.S. was short 3.8 million housing units."

"The Brookings Institution used the same methodology and estimated the shortage in 2023 to be 4.9 million units."

"For healthcare, this means reforming licensing to increase the number of medical practitioners. It also means reducing the regulatory burdens that make opening clinics difficult." 

Everyone Is Talking About the ‘Affordability Crisis.’ It Can’t Be Solved.

Trump and Mamdani both campaigned on affordability, but the issue is amorphous and poorly defined

By Greg Ip. Excerpts:

"Like the climate crisis or the crisis of democratic legitimacy, the affordability crisis has become an umbrella term for countless loosely connected phenomena."

"Like those other crises, this one defies definition and thus resolution."

"Inflation reached 9% in mid-2022 but was down to 3% in September."

"Real personal income was up 2.3% in the year through August, and real hourly wages climbed 0.8% in the year through September, both in line with the 19-year average."

"Because there is always something going up in price or someone whose incomes are suffering, affordability is an especially potent issue"

"There is nothing any elected official can do to “solve” the affordability crisis reliably."

"For prices merely to stop rising for a year (i.e., an inflation rate of zero), would probably require a deep recession."

"Housing affordability is now slightly below its pre-2008 average, according to the National Association of Realtors, so room for improvement is limited."

"New York isn’t expensive because of public transit. When the fare rises to $3 in January, it will have climbed an average of 1.7% annually over the past decade, below the city’s inflation rate."

"New York rents have gone up a lot recently, while they have stabilized or fallen in other cities thanks to a surge of supply." 

The Adverse Consequences of High-Tax Welfare States

From Dan Mitchell.

"Honest leftists (the “Okunites“) generally acknowledge that laissez-faire policies deliver more growth, but they nonetheless favor high taxes and redistribution because they argue that social equality matters a lot.

However, according to this chart, there’s a negative relationship between bigger government and social welfare indicators such as health, education, unemployment, and exclusion.

 

Looking specifically at labor markets, you see a negative relationship between bigger government and good results.

This holds true even for workers with only a basic level of education.

 

The two charts come from a new book (available online for free from the London-based Institute of Economic Affairs) by Nina Sanaddaji and Stefan Stefan Fölster.

Here’s how the authors summarize their findings.

A group of low-tax countries has moved to the top in terms of most measures of welfare quality, surpassing high-tax countries such as the Nordics. is is relevant, not least since for a long time the Nordic high-tax models were considered internationally as the best model for welfare delivery. Yet even the Nordic social and economic success was built during periods of low taxes, and stagnated in relative terms after shifting to high taxes. …At the core of this book is a systematic analysis of the available statistical measures that capture the quality of welfare in higher-income countries. …In the overall ranking, Switzerland, Japan and South Korea occupy the top spots. All of these are low-tax coun tries, with a tax burden between 26 and 32 per cent of GDP. By comparison, a high-tax country like Sweden now ranks 12th in terms of overall welfare, …Low taxes are not sufficient on their own to ensure good welfare outcomes.

Given my interests, I especially liked Chapter 7, which investigated the relationship between economic performance and the size of government.

The authors did something I haven’t seen before, which is to measure that relationship by decade.

For what it’s worth, the strongest link was during the 1980s, which may have been caused by both convergence among Asian nations and the pro-growth policies of Thatcher and Reagan.

 

The relationship was still there, albeit not as strong, in the first decade of this century. 

 

At this point, we’re probably looking at a few examples of anti-convergence.

And we’re definitely looking at more evidence that small government is the best way to deliver more prosperity. And to deliver better results for the less fortunate members of society.

That’s the good news. The bad news is that average growth rates for everyone are lower, which is almost surely due to the fact that public policy has moved in the wrong direction this century."

The Growth of Family Income Isn’t Primarily Explained by the Rise of Dual-Income Families

By Jeremy Horpedahl. Excerpts:

"most of the growth of high-income families can not be explained by the rise of dual-income families. The basic reason is that the growth in dual-income families had mostly already occurred by the 1980s or 1990s (depending on the measure). So the tremendous growth since about 1990, when just about 15 percent of families were above $150,000 (in 2024 dollars), is better explained by rising prosperity, not a trick of more earners."

"You can see this in a number of ways. First, here is the share of married couples where both spouses are working. I have presented the data including all married couples (blue line), as well as only married couples with some earners (gold line), since the aging of the population is biasing the blue-line downwards over time."

 

Two trends are clear in this first chart: dual-income families do rise from the 1960s (and likely before that if we had data), but the rise is complete by the late 1980s or so: the figures for 2019 are almost identical to about 1987. There is some business cycle effect, especially with the blue line, but there is no upward trend. In fact, overall by 2019 (pre-pandemic, I include 2020 but it’s probably unreliable), these figures were noticeably lower than the late 1990s. Among couples with earners (that is, primarily excluding retirees), the majority of married couples were dual-income families as early as 1973.

The data in the first chart comes from a BLS report on women in the labor force, but they haven’t updated it with comparable data since 2020 (so far as I can tell). But we can use a related series from BLS in their “Employment Characteristics of Families” report. Although it only goes back to the early 1990s, we can see the same pattern of not much increase since then. This report allows us to look specifically at married couples with children at home. Admittedly, this is a subset of all families, but it is probably exactly the kind of family people envision when they think of rising dual-income families.

 

Dual-income parents peaked in the late 1990s (as a share of married couples with children), declined during each of the three recessions since then, and post-COVID have recovered and exceeded the late 1990s peaks. But only about 2 percentage points. And notice also that this was already clearly the majority situation as far back as BLS calculated it, as it was over 60 percent in 1992"

"We can see this a few other ways too. For example, in a great paper by Kevin Corinth and Jeff Larrimore (I wrote about it here), they show that total hours worked in the household by married couples did indeed rise from the Greatest Generation and the Silent Generation through the Boomers, but after the Boomers there is no increase. In fact, by their late 30s, Boomers were working slightly more hours (the combined couple hours) than the next two generations! The median Boomer is in their late 30s right around — you guessed it — 1990."

 

"while women are working more hours, total hours haven’t changed much since about 1990. That means that male working hours must have decreased slightly. This factor alone would push family income in the other direction: women earn, on average, less than men! We won’t get into the very detailed literature on why this is so today, but as more of the family market labor is from women, this alone would cause family income to fall (recall though that when we include non-market work, women have always worked more than men). So given that change in full-time wife employment, combined with flat family working hours, the increase in total family income is even more impressive."

"the share of US families with over $150,000 of income (in 2024 inflation-adjusted dollars) was 5.2% in 1967, 15.4% in 1990, and 33.8% in 2024. The change from 1967 to 1990 is impressive, with share tripling, though some of this is likely explained by the rise of dual-income families. But the increase from 1990 to 2024 is even more impressive: while it’s just a little more than a doubling, it is a growth over 18 percentage points!" 

One-Third of US Families Earn Over $150,000

From Alex Tabarrok.

"It’s astonishing that the richest country in world history could convince itself that it was plundered by immigrants and trade. Truly astonishing.

From Jeremy Horpedahl who notes:

This is from the latest Census release of CPS ASEC data, updated through 2024 (see Table F-23 at this link).

In 1967, only 5 percent of US families earned over $150,000 (inflation adjusted).

  

And even though it says so in the chart and in the text let me say it again, this is inflation adjusted and so yes it’s real and no the fact that housing has gone up in price doesn’t negate this, it’s built in. We would have done even better had NIMBYs not reduced the supply of housing.

See also Asness and Strain.

Addendum: Note it isn’t the rise of dual-earner households which haven’t increased for over 30 years."