Are American Families Poorer Today than in the 1970s?
3 December 2006
Editor, The Boston Globe
Dear Editor:
Peter Orszag reports that "According to Yale's Jacob Hacker, the average family had a 7 percent chance in the early 1970s of seeing its income drop by half or more. By 2002, that probability rose to nearly 17 percent" ("Cool-headed, warm-hearted economics," Dec. 3).
This change might (as both Orszag and Hacker believe) be evidence that the typical American family's economic lot is worsening. But it might instead be evidence that its lot is improving. If the typical family's absolute standard of living - its ability to consume - has increased over time, then the consequences of any given fall in its income are less dire than in the past. And if suffering a fall in income brings less-dire results, more families than in the past might rationally make choices, such as quitting unpleasant jobs, that slash their money incomes for extend periods of time.
This latter possibility is not far-fetched. Economist Diana Furchgott-Roth, for example, recently found that the poorest Americans are today spending significantly more than in years past.
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Boston Globe
Dear Editor:
Peter Orszag reports that "According to Yale's Jacob Hacker, the average family had a 7 percent chance in the early 1970s of seeing its income drop by half or more. By 2002, that probability rose to nearly 17 percent" ("Cool-headed, warm-hearted economics," Dec. 3).
This change might (as both Orszag and Hacker believe) be evidence that the typical American family's economic lot is worsening. But it might instead be evidence that its lot is improving. If the typical family's absolute standard of living - its ability to consume - has increased over time, then the consequences of any given fall in its income are less dire than in the past. And if suffering a fall in income brings less-dire results, more families than in the past might rationally make choices, such as quitting unpleasant jobs, that slash their money incomes for extend periods of time.
This latter possibility is not far-fetched. Economist Diana Furchgott-Roth, for example, recently found that the poorest Americans are today spending significantly more than in years past.
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Thursday August 16, 2007 at 1:24pm