1900s American --> 44% spent on food, 72% on necessities (new: transportation, medical care)
2005 American--> 14% spent on food, 36% on necessities (new: education, savings)
-incomes increased by a factor of 7
Chart Analysis: We are 2x as rich as 100 years ago
-Less difficult to buy necessities --> Spend $$ on other things
1) Risk; being poor isn't about the amount of stuff, it's really living on the edge
-People starve; in 1790 HAVE to focus on food--> bad when food prices double
-Now if food prices rise, few people starve...or notice.
2) More Slices: Spend $ on other stuff
-WW II did not help us out of crisis: the amount of $ for food increased
-Healthcare on the Rise: 1960 5.1%, 2008:17.6%
Income Elasticity of Demand
-"'Freed Up' Wealth buys bureaucrats, bombs and bailouts"
--> U.S. Gov't = world's largest employer; 1 in 7 Amer.
-$700 bill spent on defense
--> Doesn't include energy, veterans
-->$1.2 trillon...our defense should be 12th largest country in the world.
-Richest 5% of Indians earn less than/equal to poorest 5% of Americans
-Poorest 5% of Amer. are richer than nearly 70% of other people in the world
Reflecting Divergence
1) Income seriously understate the extent & magnitude of economic growth
2) Commodities themsevles do not matter, it is the services provided by the consumption of them
3) Real economic growth is underestimated by up to 1.4% per year (why don't we just adjust for that?)
4) Is happiness a Red Herring? Is Health Care a good deal today?
-->answer, no,
What Our Living Standards Measures Miss
-Availability of goods
-Capability of goods (services)
-We are richer; can budget for more
-Quality of goods
-Convenience of goods (same as the first point?)
-Safety of goods/services
Increase high income / Decrease amnt of familiies w/ low income
-->We are safer! (kids, automobiles, natural disasters)
Human liberty is tied into trade!
