Nostalgia is a heckuva drug. (I know, I am one of those suffering from the addiction.) But we should never confuse dreams and reality. This tweet caught my eye:
I suppose you could argue that 1950s California was a middle class paradise. If so, that’s even more true today. Back when I was born, Orange County had about 400,000 people, mostly living in small ranch houses and bungalows. Today it has over 3.1 million, most of whom live in homes built after 1955. These newer homes are typically much larger and more lavishly furnished than the homes of our grandparents. The residents drive far better cars, which are much less polluting. They have access to technology our ancestors couldn’t even imagine. So yeah, we are far better off in material terms and there are far more of us. Are we any happier? Who’s to say?
It’s often said that average people can no longer afford to live in California, in which case it must be true that California contains 39 million very above average Americans.
Those who wish to argue that we are worse off than back in 1955 often point to highly unrepresentative examples. They don’t show towns in Appalachia or the Deep South full of shacks lacking indoor plumbing and electricity. Instead, they find an unrepresentative upper middle class area that has recently become super trendy, and hence unaffordable for the class of people that formerly lived in that area. Such as northwestern Santa Monica.
When I began graduate work at the University of Chicago, my professor (Deirdre McCloskey) began the semester with a long list of forbidden words. I don’t recall the entire list, but do recall that “afford” was one of the forbidden words. This term is so vague as to be almost useless.
When thinking about living standards, don’t think about what you believe people can or cannot “afford”, think about what people actually consume. And in purely material terms, we consume far more than we did back in 1955.
Now you might argue that we work harder for that consumption than we did back in the 1950s, but I don’t believe that’s true. The truly difficult jobs (like underground coal mining) are mostly gone. Many office workers now spend part of their day surfing the web, doing online shopping.
California does have a housing problem, but it’s a problem of success, not failure. Although we have 39 million people, the state is so desirable that far more people would choose to live here if the housing stock were larger. I’d rather have this problem than the problems faced by cities such as Detroit (lots of empty houses that no one wishes to inhabit.) We need to loosen our zoning laws so that millions more people can enjoy what Ross Douthat calls the California middle class paradise.
PS. I can go back to my hometown (Madison) and morn the loss of a certain way of living, such as “free range kids”. But that nostalgia for the past tells us precisely nothing about how the economy has changed over the past 60 years. In purely material terms, Madison is much richer than before, even though if my dad were still alive he could no longer “afford” the house we once lived in, partly because a subsequent addition has doubled its size from 2000 sq. feet to 4000 sq. feet.
Many houses in coastal areas of California have been extensively upgraded, and are no longer the same house that they were back in 1955.
READER COMMENTS
Ahmed Fares
Jan 9 2024 at 8:24pm
Yes, but we’re not as happy. The following explains why (selected quotes):
https://marginalrevolution.com/marginalrevolution/2023/06/the-harried-leisure-class.html
Rick
Jan 10 2024 at 1:13pm
That’s a nice quote, but it doesn’t explain why (or even make the case that) we are not as happy in our modern, high productivity world. No one is forcing anyone to eat fast food or avoid reading. And I, for one, would very much prefer to read my books and consume my leisurely meals in a world of higher productivity. It doesn’t bother me if others make a different use of their time; I think it’s great that they have the option.
Dylan
Jan 9 2024 at 9:18pm
I won’t argue that things were better on some kind of aggregate level in the past, but the tweet does highlight a sector that is pretty zero sum. In my younger days, my family was pretty poor and we moved frequently, but many of my early homes were right on the water in uncrowded neighborhoods. Even though I’m much richer than they were in those days on any kind of absolute basis, I doubt that I will ever be able to afford (excuse me, consume) a waterfront place anywhere I’d want to live.
Funnily enough, just a couple of days ago I happened to be looking at some old neighborhoods I used to live in on Zillow. All developments from the 1960s and early 1970s. Two things stood out 1) none of the houses appeared to have been updated since I moved out in the mid 90s, 2) every single house in this solidly middle class suburb was estimated to be worth over a million. (Maybe a bigger surprise was the price differential from a close by neighborhood full of more modern lakefront houses on much bigger lots had shrunk, from about 5x difference to more like 3x)
BS
Jan 10 2024 at 11:39am
Perhaps a niggle, but I suspect the properties are worth the money, not the houses.
robc
Jan 10 2024 at 12:21pm
Yep, houses are like cars, they start decreasing in value the moment you drive them off the lot/finish construction. Just much slower with a house. The only way to keep the value up is to pump money into it.
Land, on the other hand….
Dylan
Jan 10 2024 at 4:17pm
Oh yeah, definitely the land value. But, I wanted to make sure to state that upfront, since Scott mentioned the vast majority living in houses that were built later than 1955 (and ours was to, if memory serves it was built in 1965, but might have been a couple years later than that). And the lots were on the small side, so no room for an addition.
I guess I’ve gotten used to hearing stories like this for places in the inner ring suburbs, but hadn’t really seen it in the older suburbs that were built in the unincorporated parts of the county. And there’s still huge variation. A friend lived about a mile and a half from me, their neighborhood was definitely poorer, but had much bigger lots, more greenery, and better access to the city (without being right next to a freeway). Those places have hardly appreciated at all. I’m sure there’s a reason for that if you dig into it (I think they were on septic for instance). Still, seemed weird to me.
Matthias
Jan 11 2024 at 8:47am
That’s because you’ve upped your standards.
You could still afford the kind of bad neighbourhoods that you used to live in. But you wouldn’t want to live there anymore.
(And the physical neighbourhoods that you used to live on have transformed into much better, but also more expansive places.)
Dylan
Jan 11 2024 at 12:56pm
Eh…I don’t think I’ve upped my standards much, but the world might have upped their standards to be incompatible with mine. Even when I was in college and rented a full house on a lake, my dream was to be the guy next door with an Airstream. That’s still pretty much the dream.
Trina Halppe
Jan 11 2024 at 8:42pm
You’re standard seems to be waterfront, uncrowded neighbourhood, and you don’t mind having poor people as neighbours, in other words, a poor area. I can’t make a specific recommendation but it sounds like it should be possible to find many places like that. The U.S. has a lot of coast. You didn’t say that a requirement is to be near a city.
If you do need to be near a major population center, just search further out where middle income people are living. If that city will keep growing, wait 70 years and it might be worth a lifetime’s income in today’s money. So put it together… waterfront, uncrowded, poor area, part of an urban area that likely will grow fast over the next 70 years. Problem solved? You would have to get past the feeling that it is a less than desirable place today just like the poor people of the past had to make compromises.
Trina Halppe
Jan 11 2024 at 8:47pm
Correction… that should be lower income (rather than middle income). I was confusing Douthat’s Santa Monica Beach story with Dylan’s story.
Dylan
Jan 12 2024 at 9:07am
I’ll admit, I haven’t done any kind of comprehensive search, but the anecdotal evidence from areas I’m familiar with doesn’t match that reality. I’ve got family in Eastern Washington and Northern Idaho. Far from major cities, and far from even mid-tier cities. Lots and lots of lakes and rivers though. And homes on them are expensive! Like $1m is the entry level, even for places where it takes you 45 minutes to get a grocery store and where there isn’t even access by road in the winter. My dad likes to look at places in the UP, and things are marginally cheaper there, although still well out of my price range. And, those lakes are cold!
There are probably places in the Ozarks or Appalachia or Nebraska that I’m not familiar with that would be affordable. Although a friend’s parents moved down to rural western NC a few years back and bought a townhouse, not on the water, built in the 70s, and not renovated, and I think it was still close to $300K.
This comes off as if I’m complaining or that I think this suggests something is fundamentally broken with the economy. I don’t. All I meant to say is that there are some parts of the economy that seem pretty close to zero sum, and waterfront property is up there.
Stan Greer
Jan 9 2024 at 9:30pm
Sumner seems to have forgotten that for several years CA’s population has been shrinking, not growing, and that from 2010 to 2020 CA’s population grew considerably more slowly than the national average. So I don’t think high demand is a good explanation for high housing costs in CA, It is an explanation one would expect from a politician like Gavin Newsom, not from a talented economist, though Sumner certainly is one, That leads me to suspect Sumner has a soft spot in his heart for Newsom, because he isn’t Trump or Biden. True, but I don’t think Newsom has anything else going for him, unless, like Sumner, support for unlimited abortion is your number one issue.
Scott Sumner
Jan 10 2024 at 2:02am
The population has stagnated due to NIMBY policies. The prices in California are extremely high because the demand to live here is extremely high. Given that you clearly don’t understand even the most basic concepts in economics, you might want to rethink your decision to comment here.
Matthias
Jan 12 2024 at 8:06am
Never reason from a population change?
Jeff
Jan 10 2024 at 3:54am
Interestingly, there are typically still quite a few middle class people in almost all of these expensive neighborhoods who are living in much the same way as yesteryear provided they locked in their property taxes last century. The interplay of California’s unique tax policy with its status as the epicenter of various tech and media ecosystems would seem to have had peculiar (mostly very positive) effects on land rents over the past half century. I think that is a much bigger part of the story here than the size of houses—many of which are still in fact quite small and rundown compared to comparably rich neighborhoods one might find on the East coast.
MarkW
Jan 10 2024 at 10:25am
One of the biggest differences between now and 1955 is that the population of the US has increased by a factor of 2.5 and California population has tripled, so of course there is much more competition for land now than there was then. But three times as many people are enjoying their lives, and those lives — apart from cheap houses near the beach — are wealthier in almost every other respect (comfort, convenience, entertainment, health care, travel, food, and on and on).
Also a comment wrt to Detroit. The shrinking of Detroit and the recent shrinking of CA cities and the state as a whole are not unrelated. The Detroit metro area is much more populous than it was when the central city was at its peak. There is no general epidemic of empty houses in the suburbs and exurbs. Houses (and commercial buildings) in the central city sit empty because of local government failures (high tax rates, high crime, lousy schools, mediocre services, etc). Without these factors, there wouldn’t be any empty buildings in the central city of Detroit either. In both places, people have left or are leaving due to bad government policies.
TGGP
Jan 10 2024 at 10:58am
In terms of net insterstate migration, California has been negative for a while.
Scott Sumner
Jan 10 2024 at 12:32pm
Yes. That’s partly NIMBYism and partly international migrants replacing locals.
mira
Jan 10 2024 at 11:34am
I grew up in many urban cities in the US in the early 00s. It is definitely true that the amount of real debt you need to go into to afford a coastal urban home is much much more expensive than it was during my parents era. The problem for me is that it seems that white flight has decidedly reversed in my lifetime and now all coastal cities are the trendy places people want to live.
I suspect that many with a similar problem to me also underestimate how much they have fallen in relative income compared to their parents (ie. they are more downwardly mobile than they realize.)
Scott Sumner
Jan 10 2024 at 12:33pm
Most Americans are much better off than their parents.
SK
Jan 10 2024 at 2:59pm
Way too much noise that mutes the signal of so much being better today than in the past.
David Seltzer
Jan 10 2024 at 5:38pm
Scott, I grew up in a NW Indiana steel town. We lived in a small home that sweltered in the summer. My father was inventive. To combat the stagnating summer heat, he would place large blocks of ice in tubs and place large fans next to them thus creating something akin to air-conditioning. Today, I can adjust the temperature in our home to any setting on my phone. I’m certainly better off and far more comfortable trading securities with my computer in my temperature controlled loft.
mira
Jan 11 2024 at 10:23am
I do not disagree, I am just specifically talking about younger Americans who want to live in coastal America, and the new costs associated there. Overall, of course our life is obviously better than that of our parents.
https://www.crews.bank/blog/real-estate-prices-vs.-income
MarkW
Jan 10 2024 at 1:35pm
This country is full of people (myself included) whose ancestors moved halfway across the world because they weren’t able to afford their own land in crowded European countries. But their descendants can’t now be bothered to move to less trendy, more affordable cities with better housing policies? Can’t afford New York or San Francisco but you want to live in a big city? So move to Chicago or any one of a number of cities that have grown up dramatically during the last few decades (Atlanta, Dallas, Phoenix, Salt Lake, Charlotte, Las Vegas, Nashville, etc)
Dylan
Jan 10 2024 at 4:23pm
Meh…as one of the beneficiaries of a negative sum policy (thanks rent control!) I can’t afford to move out of NYC.
David Seltzer
Jan 10 2024 at 5:28pm
Mark, we left Chicago 27 years ago to live in Atlanta. I’m dug in and will never leave!
steve
Jan 10 2024 at 12:50pm
I am always struck by how people want to especially complain about the costs of property right on the water. You have a fixed amount of that highly desirable land and the population triples but they expect the cost to stay steady.
Steve
Dylan
Jan 10 2024 at 4:32pm
I wouldn’t say I expect the cost to stay steady, even back then people talked about waterfront property as a great investment. Still, I grew up in a world where a cabin on a lake and a ski boat were the signs of only moderate affluence. Even my 2nd grade teacher had a place on the lake that she took us to.
Now I can’t even afford to rent that for the weekend. A few years ago I wanted to try and go water skiing again and rent a place and a boat. Cheapest I could find was $1000 a day for the boat. (admittedly, waterfront property rentals were more reasonable, plenty of places around $150 a night)
MarkW
Jan 11 2024 at 7:40pm
The percentage of Americans owning second homes has never been very high, and is not high now. Vacation homes only make up about 5% of the housing stock and are concentrated in a few states — warm southern states with ‘snowbird’ second homes, mountain states with their ski cabins, and northern Great Lakes and New England states with summer cottages. It’s never been common for grade-school teachers to own second homes, let alone ones bought with their teaching salaries.
Dylan
Jan 12 2024 at 9:23am
Well, I didn’t say 2nd home, I think for most of the people I was talking about the lake cabin was their primary home. Not sure if that was the case for my 2nd grade teacher at the time, it would have been quite the commute and particularly difficult in the winter. (But, it does appear to be her primary residence now, my dad ran into her son when he was out that way last summer)
I’m sure there is selection bias going on, but I grew up pumping boat gas during the summers, and while there were for sure rich people mixed in, the bulk of our customers were teachers and other middle class folks, many of them with a 2nd home, cabin, trailer, or just an empty lot they would pitch tents on near the lake. These days, that is not the case at all. The lake is full of $100,000 speedboats going to $5m mansions.
David S
Jan 10 2024 at 8:56pm
I think that the myth of the 1950’s is rooted more strongly in rustbelt cities and suburbs of the Midwest than California. The decline of those places, which reached into the suburbs as well as impacting urban cores, was more “real.” California has always had good weather going for it.
You comment that “Many office workers now spend part of their day surfing the web, doing online shopping”
A more accurate statement would be “Most office workers now spend nearly the entire day surfing the web and accomplishing nothing.” A brave new world with such people in it.
john hare
Jan 11 2024 at 4:31am
You comment that “Many office workers now spend part of their day surfing the web, doing online shopping”A more accurate statement would be “Most office workers now spend nearly the entire day surfing the web and accomplishing nothing.” A brave new world with such people in it.
That is one of the indicators of our current wealth. A company couldn’t have afforded that level of nonproductive time of employees back in the 1950s. Or, the productive sectors are so much more productive that carrying drones is possible.
Dylan
Jan 11 2024 at 7:56am
It does make me question the relationship between marginal productivity and wage though.
Jose Pablo
Jan 13 2024 at 7:18pm
But the relevant discussion is not whether we are better or not than in 1950, is it?
If the goal is not getting worse the bar would be placed too low.
How far are we (in prosperity / consupmtion terms) from the place we could be with an optimal use of our resources?
That’s a way more interesting (and difficult) question.
Is really not getting worse the best we can do?
Jose Pablo
Jan 14 2024 at 11:22am
What seems to be true, though, is that California has grown less than the average state in the US. And since the feeling or being (or not being) better off is a relative one this could explain why Californians could feel this way.
From 1950 to 1999 (certainly the data could use an update) per capita personal income in California has grown at an annual rate of 5.8% (this should be “nominal”) compare with an average of 6.2% for the US and, for instance, 6.4% for Florida or 6.7% for Virginia
https://apps.bea.gov/scb/pdf/2001/06june/0601cspi.pdf
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