4. Inflation and Buying power can be misleading --> people's demand for more creates a mirage of less buying power
There is a lot of calamity about how much less able the middle class and poor are able to live comfortably today vs 30 or so years ago. People often cite statistics about the cost of housing, college, food, and energy.
What if things only appeared
to be more expensive now? If I bought a car for 5000 real dollars in 1975, and payed 8000 real dollars today for a new car (numbers made up), am I really losing the value of my money? A new Car today likely has features that a new car in 1975 simply didnt: better gas mileage, better safety, more space, better performance etc. Thus, there is an illusion, that transportation has become more expensive, when in reality only our tastes have become more expensive.
The same applies to housing, food, energy and college.
Colleges didnt always provide nearly as much "extra stuff":
Are Frivolous Amenities Worth The Extra Tuition | myUsearch blog
Tuition rates are going up all over the place, but its not the education itself that’s pushing prices up, it’s the campus extras that are doing the deed.
Colleges claim they have to offer attractive amenities to stay competitive, but some colleges are taking extra amenities – and their tuition costs – to the next level. The question is, do students really care about these amenities or would they rather just have lower tuition?
“Then there is the burgeoning demand for luxury campus amenities, like the spanking new Academic Village at [Colorado State University], or the food courts, climbing walls, and exercise facilities our students seem to require. Some campuses even offer discounted massages and free Napster accounts. These amenities are, of course, ancillary to the quality of the education our universities provide. Yet provide them we must, or the students will not come. It’s a competitive market, you see.”
Houses, apartments and condos didnt always have as much square footage.
Behind the Ever-Expanding American Dream House : NPR
Originally Posted by NPR
The average American food bill has become a bigger burden. However, the average american eats out a lot more now. Some even erroneously think that its cheaper to eat out! This simply indicates that once again, American's tastes have gotten more expensive. If you buy meat, fruit, vegetables, eggs, bread and lunch meat, and know how to cook, it will generally be cheaper (unless you live in an overpriced metro like NYC) than eating out every meal.
Is eating out cheaper than cooking?
Originally Posted by MSN
The average American actually drives about twice as many miles than they did in 1977: http://pewresearch.org/pubs/?ChartID=147
Its little wonder that Americans claim that energy costs and gas bills are strangling them!
The over arching point is that middle class Americans actually have a lot more buying power than every before. When people make comparisons to the "golden years" of the American middle class, they have to be fair about it. If the middle class today lived in the houses of the 70s, drove the miles of the 70s, went to the colleges of the 70s, cooked like the 70s and refrained from such extraneous "2000s entertainment" expenses, then the fact is that Americans would actually have plenty of buying power compared with the golden years. Peoples tastes have gotten more expensive. they demand more for each unit of product, yet the price of actual needed utility hasn't changed that much. This then creates the illusion that the middle class has lost buying power, because the middle class is overpaying for what utility they actually need