Economics and the Fundamental Scarcity of Time: Part 2
Hey, you economists of the dismal science, you investors in doom, “what you think just ain’t so.”
Every year since 1986, the American Farm Bureau has compiled a survey of the price of a canonical US Thanksgiving dinner, with a 16-pound turkey and all the fixings, fillings, veggies, drinks, and deserts.
They find that the nominal price in dollars has risen 70.1%. Using all the usual apparatus to adjust for inflation, they calculate that the price has remained essentially flat.
Since the population has grown by 90 million, or around 37%, since 1986, this estimate suggests that even adjusted for “inflation,” the total collective cost of Thanksgiving for Americans has risen by 37%.
But our favorite economists, Gale Pooley and Marian Tupy, believe (as I do) that money is essentially time.
Measured by time-prices, these Farm Bureau estimates are all drastically erroneous.
You see, the real price of anything is not gauged by manipulated government money and sloppy political inflation adjustments. The real price is the amount of time it takes to earn the money to buy it, measured in hours and minutes.
Dividing the nominal money price by the hourly wage, Tupy and Pooley show that the price of a Thanksgiving dinner has dropped 29.7% for the unskilled and 31.5% for a blue-collar worker.
However, for any particular wage earner, even these numbers are deceptive. Unskilled workers do not typically remain unskilled throughout their careers. The vast majority ascends to the middle class.
So, assuming normal promotion and learning, a Thanksgiving dinner that used to cost 32.9 minutes to earn in 1986… now only costs 9.2 minutes for an unskilled worker who ascended to blue collar status. It has dropped more than 70%.
Why is this important? For Americans and the world, we are in the midst of a golden age.
Seven Myths About our Financial System
This time-price revolution will initially gratify conservatives. We will feel vindicated.
We can celebrate the fact that nowhere in these time-prices is any sign of a declining middle-class standard of living or diminishing purchasing power. Under Trump, all classes are doing better than ever. Any American decline is cultural and familial rather than economic.
However, whether economists or not, conservatives harbor other key assumptions that are also debunked by Pooley and Tupy’s findings – all indicating that America and the world are doing better than the media will have you believe.
Refuted are the following seven hypotheses:
- Globalization is bad for the United States but somehow good for China. Time-prices show both countries have benefited massively.
- World economic growth has been slowing since 1980. Time-prices offer no evidence of significantly slowing economic growth outside the Great Recession of 2008.
- Technological innovation is in a global decline. Time-prices combine the two dimensions of gains from innovation in one number – costs and incomes – and demonstrated a continuing rise of innovation.
- The trade gap has injured the US economy and middle class and needs to be drastically “corrected.” As the trade gap grew, time-prices plummeted, as the Thanksgiving dinner analysis shows.
- Low or negative real interest rates are causing economic and stock market “bubbles” and imbalances that need to be drastically corrected. Adjusted for money manipulation and chicanery by central banks, real interest rates remain at normal levels. Central banks cannot significantly affect real rates.
- The US deficit approaching a trillion dollars warns of a future economic crisis. US economic growth as manifested in time-prices remains robust. If it is not ended by trade wars, tax hikes, or socialism, this growth can sustain large deficits.
- A $250 trillion overhang of global debt is entirely unsustainable and at some point will lead to an inflationary blowout. Economic growth continues at a world rate of around 5.05%, doubling the economy every 14.07 years. If the US does not halt world trade growth or choke progress with high tax rates or overregulate its tech sector, the debt overhang is sustainable.
Pooley and Tupy show that expanding world trade and economic freedom has created a golden age for the world economy.
The lesson for Trump and the Democrats alike? If it ain’t broke, don’t fix it.
Editor, Gilder’s Daily Prophecy