Joined: Jul 04, 2007 Posts: 2039 Location: The U.S.S.A
Posted: Wed Mar 12, 2008 11:55 am Post subject: stupid economic question
If the CPI has double since 1983 when the last sample period was taken, doesn't that mean the the buying power of the american people is now 1/2 of what it was in 1983?
I have an econ professor who is spouting some garbage that a doubling of the cpi is actually contributing to the growth of the economy.
Let me know if I am right in thinking this guy shouldn't be teaching or just let me know if I am retarded.
Joined: Sep 25, 2004 Posts: 4542 Location: Boston, MA
Posted: Wed Mar 12, 2008 1:53 pm Post subject: Re: stupid economic question
jasonraymondson wrote:
If the CPI has double since 1983 when the last sample period was taken, doesn't that mean the the buying power of the american people is now 1/2 of what it was in 1983?
I have an econ professor who is spouting some garbage that a doubling of the cpi is actually contributing to the growth of the economy.
Let me know if I am right in thinking this guy shouldn't be teaching or just let me know if I am retarded.
There's your answer.
We've lost half of our purchasing power since 1983...but we're also earning more than twice as much money.
Overall, we're somewhat better off (depending on what metric you want to use).
We are certainly not substantially worse off. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Joined: Jul 04, 2007 Posts: 2039 Location: The U.S.S.A
Posted: Wed Mar 12, 2008 3:13 pm Post subject: Re: stupid economic question
Tyler_JC wrote:
jasonraymondson wrote:
If the CPI has double since 1983 when the last sample period was taken, doesn't that mean the the buying power of the american people is now 1/2 of what it was in 1983?
I have an econ professor who is spouting some garbage that a doubling of the cpi is actually contributing to the growth of the economy.
Let me know if I am right in thinking this guy shouldn't be teaching or just let me know if I am retarded.
There's your answer.
We've lost half of our purchasing power since 1983...but we're also earning more than twice as much money.
Overall, we're somewhat better off (depending on what metric you want to use).
We are certainly not substantially worse off.
Okay, thanks. I guess I was just misunderstanding how everything fit together.
Joined: Sep 25, 2004 Posts: 4542 Location: Boston, MA
Posted: Wed Mar 12, 2008 4:43 pm Post subject: Re: stupid economic question
Another key thing to remember is that the above chart is a measure of average income.
There is a gap between average and median income because the people at the top are extremely rich. The people at the bottom are poor but they aren't poor enough to counteract the extremely high incomes of the super rich.
Think of it like this, we have 100 people in the country.
5 person earn 10 million dollars a year and live in gold-plated airships. 50 people earn $50,000 a year and live in normal houses. 45 people are homeless and earn $1,000 per year.
The median income is $50,000 but the average is more than $525,000 a year!
I'm using an extreme example but it illustrates the point. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Joined: Oct 15, 2005 Posts: 31 Location: Chicago Suburbs/Grand Rapids Area
Posted: Wed Mar 12, 2008 7:46 pm Post subject: Re: stupid economic question
The problem with a lot of conventional economic analysis is that utilitarian "on the whole/on average/net" approach is taking, ignoring stuff like income distribution. Things like free trade are advocated because, on the whole, there is theoretical analysis that there should be net gains, but this ignores adjustment periods and who exactly is receiving the gains to trade.
Joined: Oct 15, 2005 Posts: 31 Location: Chicago Suburbs/Grand Rapids Area
Posted: Wed Mar 12, 2008 7:59 pm Post subject: Re: stupid economic question
jasonraymondson wrote:
I was just thinking but, when I was born in 1978 the average cost of a home was 62,000 now the average price is 250,000
I just don't believe that the buying power for those middle class and under is the same as it was in 1978.
Well, I don't believe housing is directly factored into CPI. Also, are you really comparing the same 'product' with the average home in 1978 and the average home today? My guess is the size has increased among other changes.
Joined: Sep 25, 2004 Posts: 4542 Location: Boston, MA
Posted: Wed Mar 12, 2008 8:05 pm Post subject: Re: stupid economic question
KaiserCesar06 wrote:
jasonraymondson wrote:
I was just thinking but, when I was born in 1978 the average cost of a home was 62,000 now the average price is 250,000
I just don't believe that the buying power for those middle class and under is the same as it was in 1978.
Well, I don't believe housing is directly factored into CPI. Also, are you really comparing the same 'product' with the average home in 1978 and the average home today? My guess is the size has increased among other changes.
In 1979, an average house was $58,500 and the average income was $17,500.
Keeping the same ratio of house price to income, a house would cost around $180,000 today. Moreover, houses are at least another 25% larger than they were in 1979 so the fair price is $225,000.
That's roughly what the median house costs today.
I think we'll dip down a lot further in some markets that were overheated (San Diego, Las Vegas, and Miami) but the rest of the country is not dramatically more expensive than the historical norm when you factor in the increase in quality of the housing.
(Quality as determined by floor size) _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Joined: Jul 04, 2007 Posts: 2039 Location: The U.S.S.A
Posted: Wed Mar 12, 2008 9:50 pm Post subject: Re: stupid economic question
I suppose you are all right.
Then nothing has really changed.
The us just has more debt
Prices are staying about the same
So, maybe I just don't get it. Maybe all the rest of this hype is just the changing times. Perhaps we are in nothing more than a transition period. I don't know. I realize as I get older that I know less and less and wonder how much I won't know or understand tomorrow.
I just wonder if all of the things we worry about are just blown out of proportion due to easy access to data and to communities of like minded people who just want to watch the world burn, because we are lashing out a world that doesn't accept us the way we are. There have always been 'doom sayers', but I think before the advent of the Internet most had the common sense to keep their mouths shut, and the few that did not were always proven wrong.
Peak Oil has already come, but really, whats different. Sure we are heading into a recession, but we have seen quite a few of those.
Are we going to be sitting on these boards 10 years from now still predicting a collapse that may or may never come?
We are just heading towards a new shift in energy and world politics. I am starting to think that maybe things will be rough, but I am starting to feel like a cornucopian. I think maybe we just need to put up with a few wallet pinching years and then we will continue up the growth ladder.
Imagine how may people during the 60's discussed what we do, but they just didn't have the access that we have now to talk with other paranoid wingnuts.
Joined: Aug 03, 2006 Posts: 4302 Location: Graceland
Posted: Wed Mar 12, 2008 10:45 pm Post subject: Re: stupid economic question
jasonraymondson wrote:
I suppose you are all right.
Then nothing has really changed.
The us just has more debt
Prices are staying about the same
So, maybe I just don't get it. Maybe all the rest of this hype is just the changing times. Perhaps we are in nothing more than a transition period. I don't know. I realize as I get older that I know less and less and wonder how much I won't know or understand tomorrow.
I just wonder if all of the things we worry about are just blown out of proportion due to easy access to data and to communities of like minded people who just want to watch the world burn, because we are lashing out a world that doesn't accept us the way we are. There have always been 'doom sayers', but I think before the advent of the Internet most had the common sense to keep their mouths shut, and the few that did not were always proven wrong.
Peak Oil has already come, but really, whats different. Sure we are heading into a recession, but we have seen quite a few of those.
Are we going to be sitting on these boards 10 years from now still predicting a collapse that may or may never come?
We are just heading towards a new shift in energy and world politics. I am starting to think that maybe things will be rough, but I am starting to feel like a cornucopian. I think maybe we just need to put up with a few wallet pinching years and then we will continue up the growth ladder.
Imagine how may people during the 60's discussed what we do, but they just didn't have the access that we have now to talk with other paranoid wingnuts.
Who knows? I don't
Most people have to work more to make the same number of inflation adjusted dollars as well. Also, the decline of labor unions and the decline in job security in white collar professions has also made people more UNCERTAIN all the while they are working more hours to make the same inflation adjusted number of dollars.
THE MAN has been screwing with us a little.
The only consolation, I suppose, is that you can't beat the Walmart price. _________________
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