Monday, August 22, 2011

Not so sure of stagnation

Measured in terms of our material well-being, we are easily better off than ever.  Here is Steve Horwitz with some of the data.  Associated comparisons of what an hour of work buys these days vs. the past was pioneered by Cox and Alm, but elaborated since then.

In yesterday's NY Times, Tyler Cowen wrote about declining productivity in the U.S.  As in his The Great Stagnation, Cowen acknowledges the weaknesses in our productivity measures, but sticks to his case.

The "stagnation" thesis when combined with the material well-being comparisons constitute a riddle unless we go back to the idea that there is lots of cool new stuff that we have trouble measuring.

Here is one small example.  My wife and I subscribe to the Berliner Philharmoniker Digital Concert Hall.  For about $200 per year, we get access to all of their concerts, live (if we like) or recorded 24/7.  We watch and listen on our simple desktop equipment and get exquisite sound and visuals of one of the world's great orchestras and their starring guest performers.

When economists discuss substitutes, they note that the "good" and the "bad" substitutes are subjective judgements that are "in the eye of the beholder."  Live vs. digital, staying home vs. long-distance travel and hassle, $200 vs many thousands of dollars involve complex trade-offs that people can have fun arguing about.  But they will also vote with feet and wallets.

Suffice it to say that the experiences of subscribers to this package (as well as countless like it) add to the quality of our lives in significant ways that are not captured by standard productivity measures.