Median illusions?

From Brad DeLong:

In the past couple of months I have gone pretty much every place I ever went between when I was 15 in 1975 and when I was 25 in 1985. Every place–every place–looks a lot better, richer, a lot busier now than it looked then. How can this be if it really is the case that media and living standards of stagnated since the early 1970s? They are not all 1% or even 10% places, not now and especially not then.

One answer is that between 1975 and 1985 I never went to Scranton or Detroit–but instead to places like Dupont Circle, Adams Morgan, Cambridge, Virginia Beach, greater Orlando, Park Slope, the Lower East Side, the Upper West Side, Jackson Hole, and other places some of which are top 1% places and the others of which are all urban edge Renaissance places benefiting mightily from increased congestion.

Another answer is that not just average income but density of economic activity matters–more dense places look more prosperous because there are more choices. But then shouldn’t the number of choices be factored into our estimates of the median?

But the answer I prefer right now is that our assessment of the prosperity of a place depends on the median dollar spent there rather than on the well-being of the median person there. And practically everywhere the median dollar today is being spent by somebody much richer with much richer tastes than the median dollar some 32 years ago was.

Or perhaps our estimate of economic growth are undershooting reality–even given that you see few signs of the computer and communications revolution out there on the street…

He and I share the same preferred answer.   I would add that, when walking around, we don’t “see” the higher prices for medical care and education in the same manner that we see the new plenty of electronics and espresso shops.


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