 This is Mises Weekends with your host Jeff Deist. Ladies and gentlemen, welcome back once again to Mises Weekends. We are joined by our own Ryan MacMacon. Many of you, of course, are familiar with him as the editor of Mises.org and also the Austrian, our monthly publication. But he is first and foremost an economist and came to us as a former economist for the state of Colorado. So welcome, Ryan. You know, what I want to talk about this week is really a big picture question and that is whether we, meaning the West or more specifically America, are getting poorer. You wrote an article earlier this week on our site entitled Why California Has the Nation's Worst Poverty Rate. So I guess I'll throw it out there and start with this. Clearly we know that world poverty is shrinking rapidly. There was a famous Oxford University study, I think in 2013 maybe, that looked at some countries like Bangladesh and Rwanda. And clearly the poorest places on earth are rapidly becoming less poor. And maybe even within our lifetimes, extreme poverty will be largely eradicated. Well, and not only have some of the poorest places become a lot better off, but you're getting to the point even now where places that we regarded as extremely poor when we were little kids are feeling more and more middle class. In Latin America, with the exclusion of certain places, like places in Brazil and Venezuela overall, you go down there, they feel like more middle class places. They feel like maybe the US in the 1950s. And so there's still an overuse of terms like third world and stuff because it doesn't recognize that a lot of those places we think of is people just living in mud huts and stuff like that. It's a totally different situation now. And it's thanks to the spread of markets and free trade, it's federal freer trade, especially that those standards of living are rapidly increasing. But yeah, we're seeing a different trend there where there's much more improvement quickly than what we're seeing in the West right now. I wonder if any of our progressive friends would argue that this is a triumph of governance, that somehow we've managed our way into prosperity in what we now term, or what we term as a third world. Yeah, so much of what we enjoy today is a product of so much hard work in the 19th and the early half of the 20th century. Well, so the broad measure unfortunately from our perspective of the performance of an economy or the relative wealth of a country is GDP. Obviously, we think there are some problems with GDP. First and foremost, it includes government spending. It only considers retail or low-roader goods. It doesn't consider all of the various stages of production that precede that. And it considers net exports when a country that just imports could be quite wealthy. So talk about from an Austrian perspective what the problem is with GDP as a number. Well, as you stated, there's lots of technical problems with GDP in terms of how it's calculated. But even if it were calculated properly, there would still be problems with it because it's just the worst sort of aggregation in that it tells us how many goods and services are being produced in one giant economy. And that has some value if you're really wedded to the idea of tinkering with the economy and running numbers and all of that. But in terms of telling us how individual households and persons are doing, there's not very much useful information there. And even worse is that some people disregard the importance of per capita GDP when they talk about GDP. I mean, GDP overall, if you've got a country with a billion people, of course it's going to be huge. If those people are at all productive, China is just always going to have a huge GDP. But once you start to take per capita into account, right, then it starts to make more sense for a country like Switzerland that has only 8 million people, and then you should use that sort of thing to compare to a country like the U.S. that has 320 million people. So using GDP on its own is almost always pretty worthless unless you're talking about geopolitics because a country with a huge GDP is just going to be more powerful geopolitically. But if we're looking at things like poverty and household standard of living, GDP overall tells us almost nothing. I was looking at the IMF website recently, and they have some projections about which countries are going to have the largest GDP in future years, and of course China is projected to overtake the United States. India, of course, has a very large GDP. Brazil has a very large GDP. But what's interesting is that people aren't really clamoring to move to India from the west. But more importantly, we see in some of these countries where there's real extremes that you don't see in most of the west. Like in China, China is full of billionaires, and it also has some rural areas that are almost unbelievably poor in the sense that they still don't have electricity and running water and toilets. We had a scholar at AERC, our research conference last year from India, who said that half of Indians don't have indoor plumbing in toilets. So talk about misleading. I mean, it's a crazy thing to consider if we think about it that way. Well, let's say that India had a GDP equal to the United States, which it doesn't. It's still low. But let's say it was, well, keep in mind that India has three times as many people as the United States. So if it's got three times as many people and it's got a GDP that's equal, then the standard of living is a third of what it is in the United States. So you always got to do that quick back of the envelope sort of math anytime you're looking at GDP. You got to immediately think in terms of overall population. And so the fact that, of course, Norway's GDP is very small, they got 5 million people. Of course, they're not going to have a big GDP. However, once you look at the per capita GDP, it's quite high. So we should really just kind of stop looking at GDP in the context of poverty and standard of living. It's fine if you want to look at, oh, well, these are the markets that companies are going to most want to enter. Or these are the markets that are going to be able to throw their weight around globally. But in terms of the standard of living of the average Indian, there's not much useful info there. Well, there have been some Austrians who have used alternatives. The late Murray Rothbard and our own Joe Salerno worked on a measure called gross output. I know Mark Skousen has done some work in this area. What would be an alternative from a statistical or empirical approach? How should economists more accurately measure the wealth of an economy? Well, those other measures that look at a broader range of goods and services, maybe they could look at net worth. They're going to disregard perhaps government spending as being of equal value. And those are all steps in the right direction. I don't think they address what we're trying to address here, though. I mean, even if you had a good GDP that was measuring all of those other issues, you're still going to need issues. You're still going to need info like median household income. And to be sure, there are international organizations that look at issues like number of toilets per household, running water in households. How many bathrooms are specific to that housing unit? Because lots of people still live in parts of the world where you're in an apartment building, there's one bathroom per floor and that sort of stuff. So when we look at that, also the other issue is net worth. We were just looking at, last week, we ran on the Power Market blog, an article about the Fed and its research on net worth. So we're looking at debt in terms of debt compared to assets. All those things really tell us more about households than about just how much a whole country of half a billion people is producing. Well, I want to talk a little bit about the United States itself. Ryan and I are both ex-Californians, so we have more knowledge about the condition of the Golden State. I was just there visiting family a week or so ago, and as I'm sure you're aware, there's some very unsettling things happening out there. For people who know the Angels, the baseball team from Anaheim, the Big A is their famous stadium, and that's a confluence where about three different cities, including Anaheim, come together. There's a vast homeless camp that has arisen there along the Santa Ana River, miles and miles of people living on tents. I don't remember anything like that 30 years ago. So while we think of California as rich, it's also got some huge problems. Talk a little bit about your article. Well, this wasn't new data, but it came up again because the LA Times ran an opinion piece about it that had actually come out of a different think tank. But the reason I talked about it is because it produced a backlash on the left. Mother Jones came out with an article, Trashing the LA Times article, and this is kind of a black eye for California, because if you do look at this data that came out from the Census Bureau last year using their different, their new, their adjusted poverty measure, then it finds that California does in fact have the highest poverty raise 20%. So one in five Californians are living below this particular poverty line. Now this is an improvement because historically the Census Bureau has just used this, well, since the 60s, they've used this poverty line measure, but that doesn't make distinctions from place to place. It doesn't take into account the cost of living. So you've got this one measure for Arkansas, this one measure for New York, which just doesn't make any sense at all. That's okay for, I guess, measuring over time, but from place to place it's useless. And so they came up with this other measure and not shockingly, California because of its high cost of living has a much higher poverty rate. And so when you bring this up, of course, this is very problematic politically. So you're pointing out, hey, look at all these southern states, they've got all these high poverty rates. The difference, of course, is in a lot of those southern states the cost of living is much lower. And so when you take that sort of thing into account, well, suddenly now New York also and California move way up on that list. And as I did also on our side on another article, if you then take those median incomes by state also and adjust by the local cost of living, as you can do using federal data if you want, then that also brings down the median household incomes in places like California and New York. So those places are poorer than you think once you take into account the cost of living. So it's not shocking that there are these homeless issues there, although that's not mostly who we're talking about. We're talking mostly about people who live in their cars or live in trailers or live in very small houses with multiple other adults and family members. But that's just becoming more of an issue. A big driver of it is housing. Other issues are energy and just the cost of living in general is more expensive there. So it's very hard to quantify and measure. There's so many factors to all this. But there's a sense, there's a feeling in the United States that things aren't right, that a lot of people talk about real incomes have stagnated or even gone down in the past few decades, that Americans are getting poorer, that the middle class is being hollowed out. Is this correct from your perspective? What should we think about this? Well, you know, I don't want to be one of those people who, you know, one article comes out about declining median income or something and then we just declare everybody's poorer now. So we do try to look at that in a more nuanced way. But if you do look at median household income, median personal income, those sorts of trends, since the year 2000, there hasn't really been any movement. It was, of course, grew throughout the 90s. It peaked at a certain level and then there's the dot-com boom and then it went down. But then it exceeded that in 2007. But we have not recovered to that level yet when you're looking at those median income levels. And I'm talking about three different measures here. So you start to look at that. It starts to get convincing that median income really isn't going anywhere. And then going back to the net worth issue, when we look at that, net worth in adjusted dollars, again, we're always looking at this in terms of adjusted dollars. That's really gone nowhere since 1989 in terms of net worth. Now, that's an independent issue from income. But what it does show is that people are going more into debt. They're not saving. Even as they get higher incomes, they're just spending it away. So when I start to look at all that, I start to get fairly well convinced that, yes, people are not building wealth, that people are not having incomes, at least in dollar terms, that are matching what they had in, say, the late 1990s. And certainly not what they had at the height of the last housing bubble. Well, if we take assets minus liabilities, my suspicion is that most of us, let's say, baby boomers, Gen X, and millennials, whatever age we are on a pure balance sheet perspective, I suspect while most of us live better than our parents and grandparents did, in a material sense, that our net worth is lower at the same age. We don't have the savings propensity. Well, and that's why we look at some of those other measures too, right, is how many cars does a household have? That's certainly more now than there was in our parents or grandparents generation. How big are the houses? The average size of new construction and houses and then just houses in general continues to get bigger. And of course, in America, Canada, and Australia, housing is just so much bigger than the rest of the world, or that's just because there's more room. But yeah, people learn bigger houses, they got more cars. So when you look at those measures, yeah, I mean, the standard of living you got to admit in certain ways is higher. But this is all in spite of government not because of government. In other words, what we buy in the grocery today is from my memory, vastly better than the 70s cars are unbelievably better houses are nicer and fancier and better insulated. Virtually everything is better. Certainly medical care, consider going to the dentist, that sort of thing, what a dentist can do. What you can do today with a tiny arthroscopic surgery scar where you go in and put a scope and find the damage first. All of these things are so much better. I wouldn't go back to the 70s. I suspect you wouldn't. But our balance sheets maybe are lower. So what's going on here? Well, and of course, our critics might point at that and say, well, if everybody's living better, right, what's the problem? So, oh, we're saying, oh, people have less savings, but their standard of living is higher and has been getting higher. So everything's fine. The problem you encounter is then, well, all that stuff about median income and net worth that only holds up as long as of course you have income. It definitely impacts people who want to retire. And so we do hear issues of people who thought before the housing bust in 2007 who thought they were going to retire and do pretty well in 2007, 2008. They've never really made back that money. And we can see that in the net worth data. And so they really did have to adopt a lower standard of living. And so everything's, it's going to be fine as long as you've got large numbers of people who continue to earn money and have wages and can support those people as they retire and go and leave the wage-earning world. But that's not going to continue as these baby boomers retire and as they're not bringing income in anymore, they're going to need to be supported more and more. So what you're going to find is that income that's coming and all those cheaper goods that we're able to buy, that's going to have to be siphoned off to take care of people who are increasingly pensioners and are no longer producing themselves. So you are really going to encounter a real problem there. The fact that the current income data seems to be holding steady, that's fantastic for us right now in the present. But as we look to the future and there are fewer people to produce things, that can be a problem. One thing we see anecdotally is a lot of baby boomer PhD academics who won't retire because obviously we know a lot of 28-year-old PhDs who'd like them to retire so that they can get a job in a relatively fixed zero-sum environment like the number of professor slots in the Econ Department at State U. But let me ask you this. It seems like since the crash of 08 that the ability to get good jobs that provide benefits to obtain raises to put money aside, it seems like most Americans think that's harder now than it used to be. Do you think that's true or do you think that that's our own perception of our own failings? Well, it's harder because people want to spend more money and have a high standard of living as they see it. Now, it's just like you were pointing out though, if people's goal in life was to obtain the standard of living that their parents or grandparents had, then they could work a lot less or sock away a lot of money. And people I think also lose perspective. I've done research for the site looking at the number of hours people work. People imagine that 50 years ago everybody was working these 40-hour weeks that just there's no data to support that. That there were some people who were lucky enough to do that, certain union workers and stuff, but most people were working more than that. Also, a lot of people imagine there was once a time where wives always stayed home and didn't work outside the home. That was a small group of people who did that. That was hardly a working class thing. And so people kind of have a skewed view of the past. If they really wanted to do some real research and figure out, okay, I am going to attain the standard of living that my parents had 50 years ago, well, they've already attained it in most cases, even if they feel poor now. Part of the reason they feel poor is they watch too much TV and they're seeing all these things that they want to buy. And we go at $80,000 pickup trucks now. This is a thing, apparently. These aren't like for rich people. These are for people who as soon as you figure out that you can swing the monthly payment on your luxury pickup truck, you go out and buy it. And so then there's no saving done after that. And that brings us to the other big downside, of course, of this issue is people aren't saving as much because they want to have continual increases in their standard of living. And that is becoming somewhat easier because you're getting more luxurious goods at lower prices. But as, well, Frank Shostack especially has pointed out in a multitude of articles on the site is real economic growth, just in the, you know, slightly out from where we are right now. If you want future economic growth, that's produced from real saving. You have to not spend right now in order to build that foundation of capital that future growth is going to come out of. So we are shooting ourselves in the foot because we want to get and consume everything we can now. But if we consume everything now, we're not producing, we're not setting aside that capital that we need those goods cheaper and more widespread in the future. We are fortunate that we've got all these countries with cheap labor and access to capital in other parts of the world that are continuing to pour in cheaper goods into America. That's making things more affordable for now. But we shouldn't just assume that the current status quo is going to continue forever. It would be wise to set aside some money now that you're not going to spend so that there's capital in the future. Well, if we define a prosperous society or a wealthy society as one that accumulates capital and leaves capital for the future, even future generations, and if the saving rate in most Western countries is very low, in that sense maybe the West is getting poorer. In other words, we're eating the future, so to speak. We're enjoying ourselves today at the expense of tomorrow. Right. And so it depends a little bit there on how you're measuring wealth and standard of living. For me personally, my standard of living includes knowing I've got money in the bank, so in case I lose my job or there's a medical emergency, I can take care of it. Insurance guys always just say, well, I sell you peace of mind, right? Well, having money in the bank is peace of mind and that makes my life easier. I consider that part of a standard of living. That's not, I don't think, a common feeling for many people. I think when people talk standard of living, they mean buying stuff and not thinking about how soon they can retire, which also is important to me. And so how do you measure that though? You can measure it in part by net worth because people have a high net worth. They're going to be able to retire sooner. They're going to be able to deal with emergencies better. But it's not usually how we measure standard of living. But yeah, if you do measure it by that, I don't know if I could say that we're getting poorer based on the data, but I could say that no progress has been made in about 30 years looking at the data that Ed was running. Yeah. Well, but one thing that has changed in the past 30 years, of course, what central banks do, we're in pretty uncharted waters in terms of virtually zero or in some parts of Europe, negative interest rates. And in a certain sense, consumers and savers are acting rationally, aren't they? Saving is for chumps. You have to go out and chase yield through perhaps more exotic investments than our grandparents had to. They could just stick money in a savings account at their local bank and make whatever. So don't central banks play a role in this high time preference environment we find ourselves in where people don't save money and they spend money. Yeah, there's a couple of ways they do that one and one that has larger global implications is the issue of making interest rates so low. So, you know, we want to drive down interest rates. We want to make borrowing very cheap. But what that leads to is that it also makes it very difficult to save if you just want safe investments like a savings account or a CD or something like that. So that induces a lot of people to spend rather than save. And so what that means, then, though, is that once the global situation that it gets harder for the government to sell its debt, well then suddenly interest rates have to go up in order to attract investment and nobody has the savings then to pour into that. So there's a lot of steps here involved in this right so nobody's nobody's got nobody's got savings because spend everything because interest rates are so low. One day the government realizes nobody's buying its debt anymore and this could be we could be talking about Europe talking about the US. So then they realize oh well we better increase the interest rate for our debt and as an attempt to make sure and attract people so that we can continue to issue more debt to finance our humongous debts that all of our governments have. Well there's now no more backup savings so people can't just suddenly pour money into this debt. They've got to now just start saving a new in order to be able to afford that government debt in order to be able to finance that. So that means you've got to make the interest rates go higher and higher and that now means at the government level you've got to start paying out way more money into debt service. As Bob Murphy pointed out in his Florida talk recently right we're in a really good fortunate situation right now thanks to the central bank and thanks to foreign buyers of US government debt. We can send out this government debt at these rock bottom interest rates and that means only about 6% of the federal budget has to go to service that debt. That's much less than we spend on defense certainly less than we spend on social security things like that. However as he pointed out if you let interest rates go up just to where they were say in mid 90s. God forbid in the early 80s we're talking about 8, 9, 10, 11% those sorts of rates. Well then of course that's going to double triple maybe even quadruple then what you got to pay on debt service to pay for our just US debt. And so now suddenly you got to pull money out of social security out of Medicare out of defense in order to do that debt service or you just have to default on the debt. So now suddenly Americans are really going to feel poor in that situation because those pensioners I'm going to get those pensions are they're going to get them and deflated now values people on Medicaid and Medicare are going to be getting the service they could. So now you're in trouble. So you got two levels there you're sowing the seeds of government finance disaster, but you're also just creating a situation in general people aren't saving very much and they're not planning for the future because why bother. I've got to get like really risky investments like risky stocks or something that nobody's ever heard of hedge fund stuff in order to make money because because the savings account is basically worthless now. So when somebody like a David Stockman talks about this this fragility that the Congress is addicted to spending more than it brings in in taxes. People are addicted to paying less in taxes than they receive in governments do be a services but especially in entitlements that the Fed is in other central banks are crazy that the average guy or gal is in deep trouble in terms of their own personal finances. Do you think Stockman for example overstates this. Do you think that the United States economy is is reasonably healthy and resilient despite all of our Austrian naysaying or do you think that things from your in your opinion are very very iffy. Well there is there's always resilience there in the certain sense that the productivity of the American worker doesn't just disappear overnight and that you do have a lot of Americans were willing to work long hours in order to make ends meet. I think you would see a significant decline in terms of luxuries and the debt people are willing to go in. So there would be a decline of standard of living in that sense. And then I can't just go out and buy whatever I want to finance it now at any given moment if we have a recession of some kind. So people are going to have to cut back there but people are going to continue to go to work and put in a lot of hours. It's not like we're all going to be living in caves or something if the economy collapses but people are going to be definitely in a worse situation where then compared to where they were they're going to have a lot less stuff. The upside of that might be that they'll actually start to save money and that was surprisingly I don't think anybody expected to see this was when the you had the recession in 2008 2009 savings rates went up considerably because people had finally been kind of jarred out of their feeling that the housing prices always go up and everything's gonna be fine and the economy is always going to improve. And we've overcome the business cycle which is what economists mainstream economists were telling us like in the late 90s and such. So once once they got over that fantasy they started saving money again. And that was really good but now everybody's complacent again so now we're seeing the savings rates are hitting rock bottom levels. Again some of the lowest rates we've ever seen so people can adjust quickly and start to save again and start to rebuild. But I do think Stockman's correct in the sense of that that government debt issue continues to be a real big problem for the for the reasons of interest rates and debt service and the fact that there's not a cushion there now. Right there's there's not. Oh I've got savings I've got something to fall back on the only thing you're going to have to be able to fall back on when the next recession comes is your ability to labor and so you're going to labor a lot. And if you're a single household single income household now maybe you can become a second to income household so you could probably have a lot fewer spouses who stay at home now they're not going to be able to do that anymore. Maybe grandma will have to take care of the kids because you won't be able to afford childcare and that sort of thing so all those adjustments will be made. But we didn't have to be in a situation where we're going to have to start out from that low low level we could have had some actual savings where we would have been able to adjust much more easily. In that six months or year where we got to find a job. So we are going to see lots of foreclosures. We are going to see lots of people have to move in with a relative and that sort of thing again these aren't end of the world scenarios. But they are they do represent a real decline in the standard of living and so yeah Stockman's Stockman's right and that people are going to go through some pain. It's just not like 16th century sort of famine type of pain. I don't see that on the price. All right you heard you heard it hurt here ladies and gentlemen there won't be a 16th century famine in the U.S. predicts economists rhyming make it. But one thing I would like to mention though is that we don't you know maybe the police do a good job of hurting the huge homeless camp to a certain part of Orange County where where the happy shiny people by the coast don't have to see it food stamps which the usage of which went up precipitously during the Obama years and I assume is still going up. I haven't checked you know that those are this food stamp usage is equivalent to the bread lines of the Great Depression. In other words we we don't necessarily see how rough things are for people aren't so lucky to have a good job or or good prospects for a job that there's a lot of really desperate people out there and we're able to live our lives either you know virtually in social media or even where we logistically go during our days. Those of us who are lucky enough to be working and so we don't see it but Stockman is nonetheless correctly identifying a hollowing out of the lower end. Well yeah there's definitely something to the food stamp issue now to a certain extent food stamp usage increased significantly over the last 20 years because they lose into the requirements okay so easier to get food stamps. But when we do look at how median incomes aren't really going anywhere and did decline a lot during certain parts of that period that makes sense. And so yes there are there definitely more people on food stamps is not just because it's easier to get food stamps. Now those numbers have been declining in the last couple of years because we're we're in the peak time of a boom. And so people are coming off food stamps as their incomes go up. Nevertheless there's still a lot of maybe one in one in six or so Americans are still on food stamps. That's a lot. And so in terms of the how does that apply to the homeless issue I mean you do have a lot of people who are able to sustain themselves at these very low levels because food is so available and because there are a lot of programs of course this whole idea that in America is the social Darwinist place where you either work your hands to the bone or you're just on your own I mean that's a complete myth there are lots of programs and notice also that most of the people you see homeless on the street are usually single men, some women, but not many because states of course are very expansive in terms of Medicaid spending on children and there are lots of emergency shelters designed exactly for women battered women especially with children and they go into place like where I work the division of housing and they're set up with emergency housing fairly quickly. So those issues do get addressed a lot so you can't really look at the homeless population and see that as a one for one there's a lot so a lot more tolerance for people to just be homeless and be on the street. I think there would have been sweeps going through you know 50 years ago much more quickly just telling those people to move on, go away they're arrested put on buses and sent on their way and so on so you know you can just fill them parts of town where you don't have to see them from your front window and that sort of thing is how the more money people in those those neighborhoods think. But if it was easy to get a job and you could afford housing at a cheap level, those people would not live on the street living on the street is an unpleasant activity if for no other reason then you want somewhere to go to the bathroom and get a shower I mean. And so we do see some efforts in in towns where they're trying to create like really cheap, these like 500 square foot units and so on. But that brings us then to the issue of, of, of why does California have such a high poor poverty level, and why is there so many homeless, and part of the issue is that the cost of housing is really really high. Now, some of that's due to just supply and demand factors but a lot of it is due to government intervention in the past we ran an article for example on the disappearance of boarding houses and on residential hotels. Those are largely been zoned away and gotten rid of in the 19th century, people who are currently homeless would have just rented a cheap room in a boarding house or a residential hotel. Those options are no longer available to them or they're greatly restricted in where they are and how many of those units exist. And today we just see local governments all the time restricting the size of the unit in terms of minimum size. It's got to be a minimum size in terms of how good the housing looks and all of those issues that then feed into restricting housing and that just leads then that really does feed into the homeless issue. Do you think Americans are spending more as a percentage of their income on housing now than our parents and grandparents did? Obviously it differs if you're in California or New York or New Jersey or someplace in the middle of the country. But do you think overall Americans spend a disproportionate amount on housing? Well it depends on totally on where you are. In some cities, Omaha, Indianapolis, those non-coastal cities, you're not spending a ton on it. Especially if you want to attain the same amount of square footage that your grandparents have and you can find one of those smaller units you can live in there. I mean if we were trying to mimic our grandparents, you could rent a two bedroom house and put four kids in there. And I think specifically my grandparents where they had a two bedroom house, one bathroom, would they later added a second bathroom. But it's two bedrooms, one shared one room with three brothers and get this, the live in made. Now of course when I say live in made I don't mean like someone they paid a lot of money. I mean like someone like an older relative or a cousin who needed a place to live and make a living that was safe. And so it was a cousin or someone like that who lived there also. So those five people shared one room, of course the married couple got their own room. But they weren't poor. This was a middle class household. So when you ask are they spending more on housing as a percentage of income there are two factors there. One is in some cases yes because the housing is so expensive but in other cases they're spending more on housing just because they want more and better housing. So if you looked at the income that say my grandparents had who are these immigrant couples who had like a liquor store and they work six days a week and all that sort of thing. They had a fairly high income compared to their housing because they by choice bought this tiny amount of housing that they could squeeze everybody into so they had savings and could invest in other investments. And so you don't do that. You don't buy a two bedroom house so that you have more money to invest somewhere else or buy a second house. You might buy a second house but only after you're living very comfortable in your first house. And so there are those issues there. Well that's what's so interesting about this conversation and I want to wrap it up with this topic. It's hard sometimes to judge whether we're getting richer or poorer because we're sometimes comparing apples and oranges. I want to talk about how the role deflation plays in how rich we feel and then it's corollary which is technology and innovation. As we mentioned earlier offline a DVD player when that was a brand new thing in the late 80s early 90s used to cost three or four hundred dollars. Now you can get a little DVD player or more for 40 bucks if you still have any DVDs. Now that's not that's that's technology and supply and demand making a product cheap and available to virtually anyone. And you can see that across all kinds of consumer products. On the other on the other side of it cars have gotten more expensive in terms of percentage of income but they're so much better. They can last two or three hundred thousand miles if you maintain them they have airbags and the transmissions are 10 times better. They all have power windows and great air conditioning all these other things versus a Dodge dart in the 70s. So talk about how deflation makes us richer despite what most people think deflates is a good thing not a bad thing. And why do economists get deflation so wrong. Well one thing of course that's always important to keep in mind is that in the Austrian view the natural state of things is deflation. So as we we build up capital to become better at making things we become more knowledgeable society things become less expensive. So left on their own if you just weren't tinkering with the money supply things would become less expensive. However due to the what there would be price deflation so prices actual would go down. Now thanks to Central Bank intervention we've all become accustomed to the idea that prices always go up in most things. The exceptions though of course are as you know right certain technologies computers those are some of those prices are going down. Now Jeffrey Herbner has talked about this. It's hard to measure because the feds are always tinkering with the CPI and the CPI is problematic because it just matches so many different things together into one basket of goods. But if we looked at individual items like cars right like technology like TVs and all those sorts of things. There is deflation going on there even if those goods on the surface level seem to be going up. It's because as you point out they have so many more amenities contained within those products. So thanks to human ingenuity and the markets and free trade and all of that there is a lot of deflation going on out there. It's countered of course by real price inflation in housing and of course for a long time it was gasoline was it was impacted people a lot. And so there's really no one number we can point out and say oh look all these prices are going up it's because in some areas you are getting more value and more bang for your buck. So you always have to caution people when talking about price inflation we got to admit that in many places there is price deflation as well. And that's always a good thing right why would we celebrate and I always wonder why we celebrate home prices going up. That's good of course if you're a current homeowner but to the home ownership rates going down for one. And secondly if you're a first time home buyer that's never good. And it seems odd to celebrate that and of course we would always celebrate the price of food going down if we're reasonable people. So there's so many factors there we always I always at least in our articles try to be cautious and not make blanket statements about how well this shows that there's inflation. And that that's and that now people can afford those sorts of things it really kind of depends on the good and service but again going back again if all you wanted to get was like basic phone service and just one TV in your house and you wanted one reliable car and you wanted to have a roof over your head that wasn't extravagant. Well you don't have to work 60 70 hours a week to afford that sort of thing assuming that the government isn't supporting policies that result in small houses being bulldozed to be replaced by something else. Requiring minimum standards that drive the price of everything up like say safety features and cars and so on some cars are more expensive for because some things are voluntarily included that people love but at the same time they're also getting more expensive because of certain mandated features. So in order to make a judgment about the government's role on that we got to pull all that stuff apart and that's not easy to do. Well I think we're out of time right now leave with a couple points first and foremost the only way to really judge whether society's getting richer is on an individual level. If a particular individual is living better than they he or she was before and is not doing so as a result debt then he or she is better off. And second I think that this conversation shows that technology and innovation may oftentimes outpace rapacious governments and central banks and make us richer despite their depredations otherwise. So that said Ryan McMacon thanks so much for your time ladies and gentlemen have a great weekend.