How Stagnant Are We? A Time Diary Self-Experiment

Though the request for data is nicely reminiscent of Mihaly Csikszentmihalyi’s happiness research method, I think I’ll forgo the work. Besides, I don’t need to: I do my job on modern computers and the Internet – my livelihood rests on it. It would not have been possible to do it as easily or as well in 1990 as I do it now. Every working hour is better than in 1990, and all because of technological progress.

Plus, I’m an avid iPad and iPod user, as well as a viewer of high definition movies and TV. The only thing that hasn’t changed in this manner is book reading — at least two thirds of the books I read are still paper stock, Gutenberg Era bound books. But one-third are ebooks, not an option in 1990. And this percentage will only increase.

Of course, I obtain much of the information necessary for my job via the Internet, in digital form. Further, I can do much of my day’s work on an iPad, if I’m away from my office. So this frees me up to take trips (especially day trips) that not only are directly pleasurable, but increase the value of my own work.

I’d guess that three-quarters of my waking life has been improved by technology change, most of it quite dramatically. I may be an outlier — the bulk of humanity may not be able to clearly see the improvements to their lives that new technology makes, but in my case it is quite apparent.

I have little doubt: Cowen is wrong; Caplan is right.

Your sample is biased toward people Tyler would call infovors. I spend all my time reading blogs, gaming online, listening to podcasts, and blogging. My result would be a yes to both questions “virtually” every single hour.

sorry,
Technology is not Freedom

If you read this blog, you are not representative of general population.

I agree with Pavel above. Almost everything we use on a daily basis is a product of incremental improvements on very early (relative to your time frame) developments. Computer science started in the late 19th century; vacuum tubes were the 1940’s. Obviously, the development of the transistor might be one of the most influential events in all of human history, but useful applications of them exploded since 1990.

Automobiles started in the 19th century, also; then there was Ford’s assembly line prior to your 1950 date. Air conditioning and electronic controls were 1950-1989, but significant fuel economy improvements have been realized since 1990.

Personally, I think any claim that we live in stagnation now is short-sighted. Any period since 1800 has been one of continual improvement for humans blessed enough to live in capitalist societies.

Of course, this test is going to be biased towards high frequency of use over high severity of use technologies. (i.e. micro processor vs. penicillin).

I do not need to do a time diary. I am retired and tend to repeat the same pattern every day.

I get my news over the Internet,
I engage in online discussions such as this.
I do personal writing using the workspace and library of my iPad.
I watch movies and streamed TV shows on BluRays and Netflix on TVs that cost one tenth what they did a decade ago, yet have ten times better quality
I play online third person shooter games on various fictional planets with people I know only online but live throughout the US
I swim or bike daily (only thing not improved in past ten years), and
I surf for two to three hours every third day or so on a modern technology short board which could not have been made ten years ago

The CPI is not sort of off for me. It is absolutely fictional. My standard of living is incomparably better due to recent technology. The variety, quality, and cost of life is improving faster now than ever before.

There’s something to this, though. I’m not sure what is meant by “better”, but technology has undoubtedly concentrated value into smaller physical packages. If this means less commodity use, then why wouldn’t our inflation measures – the price indices – be skewed?

I think you guys are talking past each other to a large extent. Bryan is right that traditional economic measures fail to capture all the ways the economy has allowed technology to improve our lives.

Tyler is right that by many traditional, and still meaningful, economic measures (like unemployment) this is a period of significant stagnation.

How all this affects Gross National Happiness is almost too subjective to deal with. How many people are unhappy that they don’t have the latest electronic gadget when they never worried about that a couple generations ago? People who are cured of painful medical conditions are happier than they would have been before new procedures were available. Others are unhappier because it is much harder than it used to be to pay for medical insurance. How have rates of depression and suicide changed?

I suspect that objective economic issues affect people’s satisfaction with life less than economists think – and indeed less than people themselves think. Psychologists tell us that people are notoriously bad at predicting what will make them happy.

At first blush, the judgments you are asking for seem very difficult to make. They are counterfactuals, which seem to require a super-human knowledge of the history of technology and the workings of society. But maybe they aren’t so difficult after all. Maybe almost every hour I spend is better than it would have been because of innovations from *both* periods. If somewhere along the line my life was saved by some innovation from either period, that would make the judgment easy with respect to that period. Even without that, the constant flow of new stuff is very important to all of us. Consider my enjoyment from reading Econlog: this would not exist but for the “innovation” of Jones’s and Henderson’s and your daily writing, and my revealed preference is that this is better than any of my alternatives (and the best alternatives probably also depend on *very* recent productions). If your daily writing doesn’t count as an “innovation,” I must ask for a definition of this term.

Bryan,

I’d like to see you address what I consider to be Tyler’s most devastating response, which is (my wording, not his):

“You may be right that CPI bias understates improvements in living conditions, but if so, it certainly understated them in the past as well. GIven all the improvements in the earlier part of the century, the CPI bias probably undercuts your argument by at least as much as it strengthens it, and probably more (i.e., on net, CPI bias makes the current stagnation appear even worse, not better).”

How do things like electric toasters and 400-thread count sheets count? They may have been introduced pre-1950s, but they’re far cheaper and thus more widespread now.

Or for that matter Gore-tex raincoats, which really only became widespread in NZ in the 1990s. Much more comfortable than a traditional raincoat.

I’ll add that the modern smartphone has one big advantage: one can breastfeed while reading a smart phone far more comfortably than while reading a book.

It’s a little difficult because I had PCs and even internet and email in the 1980s. There was no World Wide Web — that came later — but there were proprietary online communities in the 1980s (Compuserve, for example).

And digital audio and video? Compact discs were introduced to the market in the 80s. DVDs didn’t come until the 90s, but how much do we see that as an extension of VCR-based home video technology? I think I had my first (analog) cell-phone before 1990 as well. I didn’t get my first handheld GPS until the mid 1990s, but the military had been using it in the 70s and 80s. Hmmmm.

Define “noticeably better.”

I was born in a house without electricity in a remote part of Australia in 1963, so maybe my view is biased.

But consider this. Yeterday I downloaded an album from Amazon for $3. I remember the very first LP I bought with my own money in 1978 cost me $12. After adjusting for CPI it’s about a tenth of the price and it was delivered instantly to my home and I can listen to it on my phone, and in my car and in my house, and create a playlist and on and on. It’s the same product only better for a tenth of the price.

Or consider this. I remember in the late 80’s spending $200 a month on the telephone because my wife would call her mother in another city in the same country two or three times a week. Now we do video calls with our mothers on the other side of the world every few days for a cost of nothing.

Or this, I remember my family getting our first color TV in 1977. Now I watch HD television on a 50 inch screen. Including live coverage of major Australian sporting events. Five years ago I was watching them on the internet (with very small low res images.) Ten years ago I waited a week to find out the results.

Here’s one that benefits both producers and consumers. Earlier this year I published my first novel. Didn’t have to spend years being rejected by publishers. Just put it out there. You can read it for three bucks. Three bucks! I’ll make the same royalty on that $3 sale I would on a $20 book with a traditional publisher and it’s available instantly anywhere in the world and if you’re old and your eyesight is fading, you make the text bigger just like that.

Shall I continue? The first new car I bought in 1985 cost about the same in real terms as my current car. An AM radio was a costly option! My current car has ABS, air con, CD player, cruise control and a gazillion other things that make my driving safer and more comfortable and the damn thing NEVER breaks down and it’s a 2003 model clunker!

I don’t even have to get out of bed to know Bryan is right. Twenty years ago I had a clock radio that suddenly blasted me with noise. Now my “alarm clock” plays music from my iPod (see $3 album above) and starts out softly, gently increasing the volume until I get out of bed.

Or forget about material things and think about something as uplifting as knowledge. I remember my parents in the early 70’s spending what was probably several weeks of my father’s salary buying a set of encyclopedias for me and my sister. Now we have wikipedia for free. And it’s searchable!

This question is such a no brainer it’s not even funny. The only place we have stagnation is where government prevents the process of creative destruction from working its magic (healthcare and education being the two biggies). Or to paraphrase John Connor in T2, “there is no stagnation except what we create for ourselves”.

ezra abrams – yes, somethings do make me happier. Physical comfort is a big one – aloe-vera tissues are far nicer with a nasty cold than the plain sort. My nose always reacts to a cold by sprinting, and it’s been years since I’ve had that nasty sandpaper feeling.
Gore-tex raincoats another, the choice for rainwear used to be between being wet from the rain or wet from the condensation, and people wore raincoats because the condensation was warmer.
Long-haul flights are far better with individual controllable screens in each seat, the flight from Auckland-Los Angeles pre-that felt far longer than the flight from Auckland-London does now.

Bryan and I have had discussions about CPI bias before, in private conversations. I wish that he would think harder about the points I have raised with him. Disclaimer: I work for the BLS. The opinions in this comment are mine, and do not necessarily reflect the views or policies of the Bureau of Labor Statistics or the views of other BLS staff members.
1. I quote Bryan: “Merely bringing new inventions into existence typically has little economic benefit; the subsequent enhancement is where most of the value lies…. [periods of technological consolidation matter most for issues of CPI bias] … Flying home for the holidays or watching the latest episode of Glee isn’t as awe-inspiring as hearing about the first flight or watching television for the first time. But it’s the cumulative improvements that have transformed mere ideas into concrete progress.” Statistical agencies have a very hard time picking up goods immediately upon introduction. One has to make some pretty big assumptions about the value of a new good to actually incorporate that improvement, and you can easily get absurd estimates (e.g., Hausman’s Honeynut Cheerios estimate). But once a good enters the consumer price index (which it does once it becomes a standard consumer item), improvements and price decreases are all picked up – and indeed, the way item quality changes are actually estimated in the US CPI, one can easily argue that the bias is upwards (attributing too much of the price increase to quality) rather than too little. There is room for quibbling, but serious econometric estimates suggest very little bias.
2. But of course, CPIs measure the prices of goods. A free good is free. Inflation in that good is zero and its expenditure share is zero, but that doesn’t mean it does not contribute to welfare. By the same token, losses due to environmental changes (or to increased crime) or due to reduction in freedoms are also not included in CPIs. Has welfare changed a lot? I agree with Bryan that it has, more than you might conclude just looking at real incomes (i.e. income deflated by the CPI). Does that imply the CPI is biased? I don’t agree with Bryan there, but this is partly because the CPI is designed to do one thing (measure inflation) and people use it to do all sorts of things (like attempt to measure welfare).
3. I do not think the public is well-served by casting doubt on official statistics, and yes, I do fault the academic community for not doing its homework properly. If you want informed opinions, talk to Leonard Nakamura of the Philadelphia Fed, or David Lebow or Jeremy Rudd of the Fed Board of Governors (who wrote a JEL piece suggesting downward bias in the CPI), or Bob Gordon of Northwestern, or Matt Shapiro of U-Michigan, or Ernie Berndt or Roberto Rigobon of MIT. These authors are neutral parties and have written pieces that criticize various aspects of the CPI. The vast majority people who talk about the CPI, including academics, are underinformed. The informed academic community does *not* believe in large CPI bias.
4. Some other pertinent info about CPI bias or its lack can be found in this paper, http://www.bls.gov/opub/mlr/2008/08/art1full.pdf
5. If you are talking about long-run growth, it is true that the BLS missed the introduction of new goods historically. There is a competing tendency, however: rent growth was understated historically (see work of Leonard Nakamura of the Philadelphia Fed, and Bob Gordon). I refer you to a paper of Bob Gordon, “Apparel Prices and the Hulten/Bruegel Paradox.” The first part of the abstract reads:
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While the CPI may have overstated inflation in the mid-1990s by about one percent per year, as concluded by the Boskin Commission, it does not make sense to extrapolate that rate of bias backwards over long periods of time. The “Hulten-Bruegel paradox” shows that any such exercise in backward extrapolation yields levels of real consumption two or four centuries ago that are implausibly low, barely providing an average household with a pound of potatoes per day, with nothing left over for clothing or shelter. The paradox raises the possibility that at some point in the past price index bias, at least for some important products, may have been zero or negative rather than positive.
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In other words, big bias is not plausible over long periods.