Friday, January 01, 2010

A great decade: Microwaves, VCRs and PCs, oh my! 

In thinking about wealth, income and poverty over the last week I found myself coming back to a blog post I had clipped by Steven Horwitz about the ubiquity of appliances in the households of the poor. (Clipped because it will make part of a lecture in my freshman economics and citizenship class this spring.) Horwitz's data is to compare the share of families living below the poverty line over time and with all families in terms of whether they own a refrigerator, a dishwasher, a color TV, etc. It reminded me of the 1993 Dallas Fed Annual Report by Michael Cox and Richard Alm, but with much newer data.

One thing that jumped off the table to me was the microwave. I have posted about microwaves before. They are a great invention, and were a rarity in 1971. They save time for me. I had one in grad school, when my income was below the poverty line. I lived on nuked potatoes, mac and cheese and hot dogs. It saved time and money. My last year in grad school was 1984, and in that year only 12.5% of families below the poverty line had them. In 2005, 91.2% of poor families do.

When I posted about income and poverty earlier this week, I wasn't as clear as I want to be on what it is we mean by poverty. I find the data Horwitz provides very persuasive -- the poor are much better off than they were 30 years ago -- but most critics will not be concerned with absolute levels of poverty. What they care about is relative measures, the gap between rich and poor. Seeing someone else doing better than you are, even when both your life situations are improving, seems to make some people unhappy. (Maybe that explains this relationship between happiness and red/blue states that Allysia Finley wrote about this morning.) I don't admire jealousy, though, and when I see my children succumbing to that vice I try to correct it. Correcting it seldom means taking toys from my son and giving them to my daughter. Markets, though, by bringing down costs, remove one by one the sources of jealousy.

And it's more than microwaves. What the microwave is in the 1970s, the VCR is for the 1980s and the personal computer in the 1990s. Horwitz's table shows how market economies have allowed these inventions to spread. I recall marveling at a Kaypro "portable computer" in an economist's home in 1984. Now 42.4% of families living in poverty have a PC far more powerful than that dinosaur. That Kaypro cost that economist about 80 hours of his labor in 1984 (estimating his income at that time; his Kaypro II cost $1595 in 1983.) On the wage I got when I first came to SCSU, it would have cost me 122 hours of work. The MacBook I am working on right now cost me 33.2. It would cost someone making minimum wage about 133 hours, but they can buy a PC for half the price of my Mac, and it won't weigh 26 pounds and it will get on that information superhighway.

I looked for an emergency cellphone for Mrs, who almost never uses one but should have one in her car. With 300 minutes. Cost? $30. What was this option to cost me a decade ago. 48.3% of those below the poverty line have cell phones in 2005 according to Horwitz' table. (As I mentioned in China, the share of people using them must be higher. Our cell phone industry is ineffective in reducing prices ... and yet ...)

So, what will be the item that spreads down -- in the homes of the well-to-do now but commonplace to the poor in a generation? Better question: Will any not become commonplace?