Richer than Rockefeller?
I gave a talk late yesterday afternoon at the branch of the Osher Lifelong Learning Institute operated by California State University, Monterey Bay. Thanks to Michele Crompton and her very competent aide, Leslie.
The topic was Economic Inequality: Popular Misconceptions and Important Facts. It was an only slightly tweaked version of this talk I gave at Baylor University last year.
Drawing on work by Brad DeLong and Donald Boudreaux, I addressed the issue of how much better off we are than people a century ago were. (Parenthetically, the piece by DeLong, titled “Cornucopia: The Pace of Economic Growth in the Twentieth Century,” is my favorite piece of his work. I tried to get Brad to do a shorter version of it for my Concise Encyclopedia but he declined.)
In that part of the talk, I said something like what I said at a talk at UNC Wilmington:
Think about what you have that Rockefeller didn’t. He couldn’t watch TV, play video games, surf the Internet, or send e-mail. During the summer, he didn’t have air conditioning. For most of his life, he couldn’t travel by airplane. He didn’t even have a 1G cell phone. [Here I held up my cell phone.] And here’s the big one. If he got sick, he couldn’t use many medicines, including penicillin. [This is adapted from Greg Mankiw’s economics textbook.]
To drive that last point home, I noted that while Calvin Coolidge was president, his son, after developing a blister while playing tennis, died, and that would be extremely unlikely to happen today because now virtually every American has access to antibiotics.
I wasn’t going to write this up, because I’ve already written it up. By the way, the discussion at the link just noted is one of the best discussions we’ve had on EconLog, both in civility and in content. My favorite comment–and I had to choose from many, including those that disagreed with me–was this one from frequent commenter Jon Murphy:
I think the biggest lesson here is that value is subjective.
Even though people, even the poorest, are generally better off economically than the wealthiest of yesteryear, some would still prefer to be worse off but enjoy some non-physical benefits.
I totally get the “respect” answer. That makes 100% sense.
Jon Murphy’s conclusion caused me to change my view. Who am I to say we’re richer than Rockefeller? I’m richer than Rockefeller. You may not be.
So, given that I’ve already posted, what caused me to write it up? Here’s what. When I googled “Richer than Rockefeller,” this piece by Barry Ritholz came up. In it, Ritholz debunks or, more accurately, thinks he debunks, this piece by Don Boudreaux.
What’s his argument? Here are the two key paragraphs:
There are any number of ways to expose the fallacy of this claim, but I really want to focus on one of them: the role of luck in personal success or failure.
Wealth, as we have observed before, is a relative concept. We measure our economic well being by looking at our peers, not at different eras in time or geographies far away from us. The second point is that we can measure wealth in a variety of ways that are not simply based on income or financial assets: health, education, leisure time, lifespan and personal security.
See what he did? “Wealth, as we have observed before, is a relative concept. We measure our economic well being by looking at our peers, not at different eras in time or geographies far away from us.”
Says who? Says Ritholz. For him, I gather, wealth is a relative concept. It is so for many people, as the discussion on my earlier post brought out. Interestingly, the people for whom it’s a relative concept seem to be less than a majority of the population. But, as Jon Murphy noted in the quote above, values are subjective. That’s Pillar of Economic Wisdom Number 7.
Notice what else Ritholz did. By insisting that “We measure our economic well being by looking at our peers,” he dismissed the whole exercise.
Now maybe Ritholz could have made his point by emphasizing “leisure time, lifespan and personal security.” But he didn’t really pursue that. Re personal security, by the way, although it’s clearly the case that many people today probably have less personal security than Rockefeller had, I’m pretty sure I have more. And it’s precisely because Rockefeller had so much more wealth than those around him. Just as the wealthy Henry Clay Frick was almost murdered by Emma Goldman‘s lover, Alexander Berkman, in part because of his wealth, so Rockefeller had many enemies and probably among them were those who wanted to murder him. I’m guessing that Rockefeller, therefore, surrounded himself by security guards. I, by contrast, am not wealthy by many people’s standards (although I am by my standards–growing up on the cold Canadian prairies, I didn’t think I would ever own a really nice house in coastal California or that my wife and I would have two nice cars and be able to fly a couple of times a year to wherever we want.) So I’m pretty sure that there aren’t people out there plotting to kill me.