Watch videos with subtitles in your language, upload your videos, create your own subtitles! Click here to learn more on "how to Dotsub"

Is the Cost of Living Really Rising?

0 (0 Likes / 0 Dislikes)
One contemporary economic myth is that cost of living has consistently rising over the last 100 years and has never been higher for most of Americans. At first glance this seems to be truth as the sticker price of most goods and services is higher than its have ever been. One thing we need to take into account - there is inflation, of course. But beyond inflation, the reality is that most goods and services have never been cheaper. The way to see this is to think about the cost of goods and services in terms of the amount of labour time it takes to purchase those at the average industrial wage. So for example when the average industrial wage is low, it takes a lot more labour hours to purchase the average good than it does when the average industrial wage is high. What we discover is the cost of pretty much everything is dramaticly cheaper then it was 100 years ago, or even a generation ago. For example, in 1920 the average private-sector wage was less than a dollar an hour. And the 3 lb chicken took about 2,5 hour of labour time to purchase. If we fast forward to ??? 21st century, when the average private-sector wage was about $12,50 an hour. that same 3 lb chicken took about 14 minutes worth of labour to purchase. If we think about other kinds of examples, in early 1960's one could have gone in appliance store and for $500 buy top of the line home stereo system. Today, that same $500 you can go into the store and buy two new iPODs. Not only that, the iPOD can carry all of your music with you anywhere you go, whereas the old stereo system had to stand at your home and can play only one thing at the time. More important if you think about that $500 that would someone spent to buy that system in early 1960's and then convert that all to labour hours and think what the same number of labour hours could buy today. What we find out is that could buy a ??? electronic products from LCD TVs, to Blu-Ray players, to home speaker system, to an iPOD, to a laptop, to digital camera, all of them. And all of them being of much higher quality than ever before. Some goods are actually more expensive then it used to be even if we calculate in terms of labour hours. One example of this are cars. Cars actually cost slightly more in terms of labour hours today than they did decades or even almost 100 years ago. One of the important thing to realise here is, what would we buying with our money is not quite the same. Cars of the early ??? on course were basicly four wheels ??? engine. Today, they're safer, and they last longer. Today if you don't get 100.000 miles out of your car you feel like you've been ripped off. To get 100.000 miles out of car in 1920 or 1950 was nearly a miracle. So even our cars cost a little bit more in terms of labour hours, what we getting from them is a lot more. The dramatic fall of cost of living over the course of 20th century, it was straight perfectly the power of market competition. As firms compete for consumers dollars they have the incentive to come out with new and better products that are continually cheaper. Firms have the incentive to innovate, to find more efficient ways to make those products and to make them available to more Americans. The result of all of this is that poor Americans today have more standard household appliances in their homes, such as microwave, refrigerators, freezers, air conditioners, even cars, than did the average American family a generation ago. So clearly over the course of the 20th century the cost of living has fallen, as most goods and services are cheaper in terms of labour time it takes to purchase them. And as result all Americans - poor, middle class, as well as upper class are living better than ever before.

Video Details

Duration: 3 minutes and 31 seconds
Country: Czech Republic
Language: English
Views: 102
Posted by: smtex on Sep 10, 2011

According to Prof. Steve Horwitz, one contemporary economic myth is that the cost of living has consistently risen for Americans over the past century. In fact, prices are higher today than they were 100 years ago. However, prices today have been heavily influenced by inflation. One way of avoiding inflationary distortions is to look at amount of labor hours required to make a purchase. Using this analysis, Prof. Horwitz finds that most goods and services have never been cheaper.

Caption and Translate

    Sign In/Register for Dotsub to translate this video.