1.) We spend half as much of our income (percentage-wise) today than we did 100 years ago. In 1900, 72% of our money went into buying the absolute basic necessities while today, only 36% is reserved for that. Therefore, we can say that we are twice as rich today as we were 100 years ago. All this freed-up wealth allows us to spend money on other things (ex: defense, education, health spending).
2.) The actual extent and magnitude of economic growth is actually understated. Total income does not present the whole picture and every year, economic growth is underestimated by about 1.4%.
3.) Even though today's money can buy a little extra if we were sent back 20-30 years, consider the fact that at that time consumer goods that we recognize today as being very widespread (due to product proliferation) were very primitive back then. Since there were fewer of these products in circulation then, the prices were higher. Not to mention, back then only 4% of families made $100K a year while today, more than 20% make $100K a year.
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