"Product quantity stays the same; product quality stays the same; product variety stays the same."
That was not my sense of spending time in South America and visiting the homes of natives who lived there on what would be below poverty-level wages in the U.S. but were solidly middle-class there. They had all of the usual modern gadgets (flat screen TVs, video game consoles, smart phones, Internet, streaming services, etc). But they had weekly deliveries of grill-sized propane gas tanks to fuel their stoves and heaters. I'm a well-off American, but my wife and I watch a 10-year old 4K TV. Would a more recent TV be 'mind blowing' in comparison? Looking at the latest TVs, the difference would be trivial at most. Our cars are not particularly 'cool' either. We've driven developing country rentals (a Dacia Duster, a Toyota Hilux) and found them to be perfectly acceptable. The cars we drive here are nicer, yes, but the difference is also far from mind blowing (at they aren't to us).
In any case, my sense is that the modern economy has delivered 'more than good enough' products developing nations at affordable prices, and that has narrowed consumption gap tremendously in recent decades. The upgrade from a normal to a luxury TV or auto just doesn't offer that much more utility. We seem well into the zone of diminishing returns.
Your argument is more credible if you are talking about middle income countries, and especially the top 50% of those in those countries. And Bryan at least partly acknowledges this
Still doesn’t apply for billions of the poor around the world, most of whom don’t have most of the things you’re describing.
"The overwhelming factor, in my view, is hedonic adaptation. Materially, Americans are far better off than they were during my childhood in the 1980s. Yet hardly anyone appreciates the wonderful new and improved products they’ve received.*"
Not to toot my own horn but I *often* find myself marveling at how technological progress has transformed the hobbies I enjoyed 20 years ago and still enjoy to this day.
This sentence at the end: P.S. If we’re so rich, why aren’t we happy?
Seems to be the opposite of Brian's concluding paragraph . . .
( CPI effect undoes the Penn effect ) and "naive estimates of the income gap between the First and Third Worlds are actually accurate. Or even understated."
Over the decades, society has grown much more atomized. People are lonelier, and find it harder make friends and romantic partners. We have smaller families and fewer people to rely on during the toughest times. I think that's the biggest reason why the West's happiness doesn't match its prosperity. I don't have any good solution.
I'm going to strongly disagree that we overstate inflation; if anything, I expect we understate it, possibly quite considerably. We're not just improving on quality, we're also improving on efficiency. If inflation doubles the nominal cost of inputs, but efficiency improvements reduce the number of inputs by a half, then the product appears to remain exactly the same price - insofar as we use a given product to evaluate the rate of inflation, and insofar as efficiency offsets inflation, any measurement of inflation using that product will be greatly undercounted. Insofar as the reduction in demand in the precursor products causes their prices to drop, and insofar as we count the precursor products in our inflation estimates, high inflation could even be read as deflation.
The question of how CPI bias applies to rich vs. poor countries is good, but I'm not sure which way it cuts. To be sure, most of people's incomes in Haiti are spent on non-innovative goods. But when you shift from a radio to a TV, or from no-electricity to electricity, or an outhouse to indoor plumbing, that's a big increase in welfare switching from one good to another. Being able to play fancier videogames because todays computer is better than yesterday's is not such a big deal.
It would be great interesting to update this post using the notion of time prices developed by Gail Pooley and Marian Tupy in their book Superabundance.
"Product quantity stays the same; product quality stays the same; product variety stays the same."
That was not my sense of spending time in South America and visiting the homes of natives who lived there on what would be below poverty-level wages in the U.S. but were solidly middle-class there. They had all of the usual modern gadgets (flat screen TVs, video game consoles, smart phones, Internet, streaming services, etc). But they had weekly deliveries of grill-sized propane gas tanks to fuel their stoves and heaters. I'm a well-off American, but my wife and I watch a 10-year old 4K TV. Would a more recent TV be 'mind blowing' in comparison? Looking at the latest TVs, the difference would be trivial at most. Our cars are not particularly 'cool' either. We've driven developing country rentals (a Dacia Duster, a Toyota Hilux) and found them to be perfectly acceptable. The cars we drive here are nicer, yes, but the difference is also far from mind blowing (at they aren't to us).
In any case, my sense is that the modern economy has delivered 'more than good enough' products developing nations at affordable prices, and that has narrowed consumption gap tremendously in recent decades. The upgrade from a normal to a luxury TV or auto just doesn't offer that much more utility. We seem well into the zone of diminishing returns.
Your argument is more credible if you are talking about middle income countries, and especially the top 50% of those in those countries. And Bryan at least partly acknowledges this
Still doesn’t apply for billions of the poor around the world, most of whom don’t have most of the things you’re describing.
From your other post:
"The overwhelming factor, in my view, is hedonic adaptation. Materially, Americans are far better off than they were during my childhood in the 1980s. Yet hardly anyone appreciates the wonderful new and improved products they’ve received.*"
Not to toot my own horn but I *often* find myself marveling at how technological progress has transformed the hobbies I enjoyed 20 years ago and still enjoy to this day.
I need help here . . .
This sentence at the end: P.S. If we’re so rich, why aren’t we happy?
Seems to be the opposite of Brian's concluding paragraph . . .
( CPI effect undoes the Penn effect ) and "naive estimates of the income gap between the First and Third Worlds are actually accurate. Or even understated."
Over the decades, society has grown much more atomized. People are lonelier, and find it harder make friends and romantic partners. We have smaller families and fewer people to rely on during the toughest times. I think that's the biggest reason why the West's happiness doesn't match its prosperity. I don't have any good solution.
HAVE CHILDREN. Yes, you can even do this without friends and, yes, romantic partners, if you must. Well, women certainly can, anyway.
HAVE CHILDREN.
I was going to say, men tend to get in trouble when they try to acquire children without romantic partners involved... :)
I'm going to strongly disagree that we overstate inflation; if anything, I expect we understate it, possibly quite considerably. We're not just improving on quality, we're also improving on efficiency. If inflation doubles the nominal cost of inputs, but efficiency improvements reduce the number of inputs by a half, then the product appears to remain exactly the same price - insofar as we use a given product to evaluate the rate of inflation, and insofar as efficiency offsets inflation, any measurement of inflation using that product will be greatly undercounted. Insofar as the reduction in demand in the precursor products causes their prices to drop, and insofar as we count the precursor products in our inflation estimates, high inflation could even be read as deflation.
The question of how CPI bias applies to rich vs. poor countries is good, but I'm not sure which way it cuts. To be sure, most of people's incomes in Haiti are spent on non-innovative goods. But when you shift from a radio to a TV, or from no-electricity to electricity, or an outhouse to indoor plumbing, that's a big increase in welfare switching from one good to another. Being able to play fancier videogames because todays computer is better than yesterday's is not such a big deal.
It would be great interesting to update this post using the notion of time prices developed by Gail Pooley and Marian Tupy in their book Superabundance.