Reason Magazine - Staff

Off the Books

wm.cox@dal.frb.org (W. Michael Cox) rgalm@aol.com (Richard Alm) — Thu, 01 Aug 2002 00:00:00 EDT

America's consumer culture is all around us. It's along our highways, studded with shopping malls, fast food joints, and flashy neon signs. It's in our homes, filled with gadgets, furnishings, toys, and closets of clothes. It permeates the media, where ads tell us happiness and sex appeal are as close as the nearest store. It's even within us, at least to the extent that we tie status and identity to the cars we drive, the clothes we wear, and the food we eat.

That's our reputation: a consumer-driven, somewhat crass, shop-'til-you-drop society. As the world's wealthiest nation, we I consume a lot, but the portrait of Americans as consumption crazed misses as much as it captures. We're not working just to acquire more goods and services. Most of us strive for something broader: a balanced life.

Consumption is part of that, of course. We buy myriad things: Chevrolet cars, Sony TV sets, Levi's jeans, Nike sneakers, McDonald's hamburgers, Dell computers. But our wish list doesn't stop there. We also want leisure time, a respite to enjoy life. We want pleasant working conditions and good jobs, so earning a living isn't too arduous. We want safety and security, so we don't live in fear. We want variety, the spice of life. We want convenience, which makes everyday life a little easier. We want a cleaner environment, which enhances health and recreation.

A full description of a balanced life would entail much more, with considerations for family and friends, perhaps even spirituality. Here we want to focus on the components of happiness that clearly depend on the market but are not reflected in the gross domestic product (GDP). Our free enterprise system provides much more than the goods and services we consume; it furnishes ingredients of a balanced life that are often overlooked in discussions of economic performance.

Capitalism creates wealth. During the last two centuries, the United States became the world's richest nation as it embraced an economic system that promotes growth, efficiency, and innovation. Real GDP per capita tripled from 1900 to 1950; then it tripled again from 1950 to 2000, reaching $35,970.

The wealth didn't benefit just a few. It spread throughout society. For many people, owning a home defines the American Dream, and 68 percent of families now do -- the highest percentage on record. Three-quarters of Americans drive their own cars. The vast majority of households possess color televisions (98 percent), videocassette recorders (94 percent), microwave ovens (90 percent), frost-free refrigerators (87 percent), washing machines (83 percent), and clothes dryers (75 percent). In the past decade or so, computers and cell phones have become commonplace.

As people become wealthier, they continue to consume more, but they also look to take care of other needs and wants. They typically choose to forgo at least some additional goods and services, taking a portion of their new wealth in other forms.

Consider a nation that rapidly increases its productive capacity with each passing generation. Workers could toil the same number of hours, taking all of the gains as consumption. They may choose to do so for a while, but eventually they will give up some potential material gains for better working conditions or additional leisure. Hours of work shrink. Workplaces become more comfortable. In the same way, we give up consumption in favor of safety, security, variety, convenience, and a cleaner environment.

>Less Work, More Play

In the early years of the Industrial Revolution, most Americans were poor, and they wanted, above all, more goods and services. These factory workers sharply improved their lives as consumers, even though for most of them it meant long hours of toil in surroundings we'd consider abominable today. As America grew richer, what workers wanted began to change, and leisure became a higher priority.

Few of us want to dedicate every waking hour to earning money. Free time allows us to relax and enjoy ourselves, spend time with family and friends. Higher pay means that each hour of work yields more consumption -- in essence, the price for an hour of leisure is going up -- but we're still choosing to work less than ever before. According to economists' estimates and Department of Labor figures, the average workweek shrank from 59 hours in 1890 to 40 hours in 1950. Although today we hear stories about harried, overworked Americans who never seem to have enough time, the proportion of time spent on the job has continued to fall. Average weekly hours for production workers dropped from 39 in 1960 to 34 in 2001.

Since 1950 time off for holidays has doubled, to an average of 12 days a year. We've added an average of four vacation days a year. Compared to previous generations, today's Americans are starting work later in life, spending less time on chores at home, and living longer after retirement. All told, 70 percent of a typical American's waking lifetime hours are available for leisure, up from 55 percent in 1950.

Even at work, Americans aren't always doing the boss's bidding. According to University of Michigan time diary studies, the average worker spends more than an hour a day engaged in something other than assigned work while on the job. Employees run errands, socialize with colleagues, make personal telephone calls, send e-mail, and surf the Internet. More than a third of American workers, a total of 42 million, access the Internet during working hours. The peak hours for submitting bids on eBay, the popular online auction site, come between noon and 6 p.m., when most Americans are supposedly hard at work.

With added leisure, the United States has turned arts, entertainment, and recreation into a huge industry. Since 1970, attendance per 100,000 people has risen for symphonies, operas, and theaters as well as for national parks and big-league sporting events. The annual Communications Industry Forecast, compiled by New York�based Veronis, Suhler & Associates, indicates that we watch an average of 58 hours of movies at home each year. Yet Americans go out to an average of 5.4 movies a year, up from 4.5 three decades ago.

The number of amusement parks has increased from 362 in 1970 to 1,164 today. The number of health and fitness facilities has more than doubled, to 11,241. Adjusted for inflation, per capita spending on recreation nearly quadrupled in the last three decades. Leisure and recreation are even important enough to have become an academic subject: 350 colleges and universities offer degree programs in it.

The explosion of leisure spending and activities confirms the addition of more free time to our lives. If we hadn't reduced our hours of work, we couldn't spend as much time and money as we do on entertainment and recreation. Americans may find themselves pressed for time, but it's not because we're working harder than we used to. We're busy having fun.

Better Work Too

As the Industrial Revolution arrived in the 19th century, workers migrated from family farms to factories, from the Old World to the New World. They saw their paychecks rise but became, like Charlie Chaplin's character in Modern Times, mere cogs in a vast engine of mass production. Work was often brutal. Early factories were noisy, smelly, and dirty; they were cold in the winter and hot in the summer. The labor itself was repetitive, physically exhausting, and often dangerous. It was a time of mind-numbing repetition, standing on assembly lines, nose to the conveyor belt. To eke out a meager living, employees toiled an average of 10 hours a day, Monday through Friday, plus another half-day on the weekend. Breaks were few and far between. Work rules were draconian: no talking, no eating or drinking, not a minute late punching the time clock.

We've come a long way since then. For the most part, modern work takes place in a clean, well-lit, and air conditioned environment. A growing number of modern workplaces offer on-the-job amenities previous generations didn't even contemplate, such as on-site day care for children, exercise facilities, and concierge services. More and more employees are getting paternity leave, stock options, personal days off, and paid sabbaticals.

Jeans, sport shirts, and slacks are in. Ties and pantyhose are out. A July 2000 survey by the catalog retailer Land's End found that dress had become more casual in the previous five years at more than 80 percent of Fortune 500 firms.

More Americans than ever are free to choose the time and place for work, as long as the job gets done. In 1997, 28 percent of American workers were on flexible schedules, double the percentage in 1985. With laptop computers, cell phones, fax machines, electronic mail, and the Internet, fewer employees are tethered to the office. Telecommuting began with a handful of workers three decades ago. By 2001, 29 million Americans worked at least part of the time away from their companies' places of business.

Work isn't just more pleasant. It's also safer. Occupational injuries and illnesses, as tallied by the National Safety Council, are at an all-time low of 63 per 1,000 workers. The number of Americans killed on the job has fallen to a record low of 38 per million workers, down from 87 in 1990 and 214 in 1960.

Safer workplaces come in part from fewer accidents in such dangerous occupations as construction and manufacturing. At the same time, our economic base is shifting toward services, where jobs are less risky. The nature of the work we do is changing too. For most Americans in past generations, long days on the job involved tasks that were repetitive, physically exhausting, and often dangerous. Modern work is more likely to require analytical and interpersonal skills. Fewer employees make their livings with their backs and hands.

Jobs Rated Almanac 2001 provides a handy database of 300 occupations, ranked from best to worst. To focus on working conditions rather than pay, wages are taken out of the equation. Once that's done, it's clear our employment base is shifting in a positive direction. Since 1970 the 30 best jobs -- including computer scientist, legal assistant, and engineer -- have risen from 9 percent to 13 percent of total employment. At the same time, the 30 worst occupations -- from logger to textile mill worker -- have declined from 13 percent to 9 percent of all jobs. The trend toward better jobs is likely to continue. The Bureau of Labor Statistics estimates that the 10 best jobs will grow by 27 percent through 2008, while the 30 worst jobs will expand by just 7 percent.

Making workplaces more pleasant takes money. The added expense figures, along with wages, into the overall bill for labor. Companies pay it to attract new workers and retain those already on board. Employers shouldn't care whether the money goes for wages, time off, or working conditions. By their decisions on where to work, employees reveal their preferences.

Safer Lives

Although concerns about security have come to the fore since September 11, we shouldn't forget how far the United States has already come in making life safer. The toll of death and disease has been steadily reduced. Annual deaths per 1 million people are at an all-time low. The age-adjusted death rate has fallen by two-thirds since 1900. Fatalities from nearly all major diseases, tracked by the U.S. Centers for Disease Control and Prevention, have declined sharply from their peak rates. The rate of fatalities per 100,000 due to natural causes has fallen from 767 in 1950 to 422 in 1998, the most recent year for which data are available. The incidence of accidental deaths, both at home and on the job, is declining. So are fatalities associated with floods, tornadoes, and hurricanes.

Gains in transportation safety have been dramatic. In the five-year period ending in 2000, according to the Federal Highway Administration, annual deaths on American roads averaged 16 per billion miles driven, compared with 53 in the five years ending in 1970 and 83 for the post�World War II years. The Air Transportation Association reports that deaths per billion passenger miles flown fell from 16.7 a year in 1946�50 to 1.3 in 1966�70 to 0.14 in 1996�2000.

As a wealthy nation, we can afford to spend time and money to reduce life's risks. We can buy alarms for our homes and cars. We can buy insurance on our property and our lives. We can reduce the financial risks of illness and old age by taking part of our pay in health benefits and retirement savings.

We can also shift resources to the military to create an even more fearsome fighting force. During World War II, defense spending per capita averaged $3,475 a year in today's dollars, or 29 percent of total output. Today, each American's share of the defense budget comes to $1,079, just 3 percent of GDP.

Making America a safer place owes much to advances in engineering and technology. Divided highways, better roads, anti-lock brakes, radial tires, and air bags are reducing the highway death toll. More-sophisticated weather forecasting gear provides warnings of severe weather, so we can take refuge in time.

New medicines and treatments have reduced the incidence of fatal diseases. More are probably on the way. The stock market values the nation's 10 largest pharmaceutical companies at more than $1 trillion, an indication that we expect their sales to grow from future advances in health.

Greater safety and security didn't come about by accident. It's what we, as a people, wanted. We put a high value on our lives and physical well-being, and we're willing to pay the costs of protecting ourselves against the sometimes unpleasant facts of life.

Life is inherently risky, and protecting ourselves must be weighed against the considerations of cost and convenience. We'll never achieve a perfect safety record. In an uncertain world, we possess the wealth to afford more safety and security and the know-how to provide it, if that's what we decide we want.

Convenience and Variety

By introducing industrial efficiency to his factories, Henry Ford brought the automobile within the reach of an emerging middle class. The miracle of mass production delivered the goods but didn't adapt easily, so all Model T's looked alike. Ford's attitude can be summed up in what he reputedly said about the car's paint: "The consumer can have any color he wants, as long as it's black." Ford's company still makes black cars for drivers who want them, but it now offers a rainbow of colors: red, green, aquamarine, white, silver, purple.

The U.S. marketplace teems with variety. Just since the early 1970s, there's been an explosion of choice: The number of car models is up from 140 to 239, soft drinks from 50 to more than 450, toothpaste brands from four to 35, over-the-counter pain relievers from two to 41.

The market offers 7,563 prescription drugs, 3,000 beers, 340 kinds of breakfast cereal, 50 brands of bottled water. Plain milk sits on the supermarket shelf beside skim milk, 0.5-percent-fat milk, 1-percent-fat milk, 2-percent-fat milk, lactose-reduced milk, hormone-free milk, chocolate milk, buttermilk, and milk with a shelf life of six months. Not long ago, the typical TV viewer had access to little more than NBC, CBS, ABC, and PBS. Today, more than 400 channels target virtually every consumer interest -- science, history, women's issues, Congress, travel, animals, foreign news, and more.

Like variety, convenience has emerged as a hallmark of our times. Companies compete for business by putting their products and services within easy reach of their customers.

In 1970 the nation's lone automated teller machine was at the main office of the Chemical Bank in New York. Now ATMs are ubiquitous -- not just at banks but at supermarkets, service stations, workplaces, sports facilities, and airports. All told, 273,000 machines offer access to cash 24 hours a day.

Remote controls are proliferating, the newest models incorporating voice-activated technology. Computers and digital devices go with us everywhere. A cell phone is no longer a pricey luxury: The average bill fell from $150 a month in 1988 to $45 in 2001 in constant dollars. No wonder 135 million Americans now own mobile telephones. The number will continue to rise as prices continue to decline and more of us seek the peace of mind and convenience that come with communications in the pocket or purse.

Convenience stores are in nearly every neighborhood. Just one firm, industry leader 7-Eleven, has increased its locations from 3,734 in 1970 to 21,142 today. The Internet may be the ultimate convenience store, bringing shopping into the home. We're buying music, clothing, software, shoes, toys, flowers, and other products with a click of the mouse. Last year, a third of all computers and a fifth of all peripherals were sold online. Thirty-three million buyers ordered books on the Internet, accounting for $1 of every $8 spent in that category.

Convenience and variety aren't trivial extravagances. They're a wealthy, sophisticated society's way of improving consumers' lot. The more choices, the easier access to goods and services, the better. A wide selection of goods and services increases the chance that each of us will find, somewhere among all the shelves, showrooms, and Web sites, products that meet our requirements. Convenience allows us to economize on the valuable commodity of time, getting what we want more quickly and easily.

A Cleaner Environment

The environment presents a textbook case for tradeoffs between consumption and other aspects of life. Traditionally, economists teach that markets undervalue clean air, fresh water, pristine vistas, and endangered species because they aren't owned, like factories, houses, or other private property. Without clear title and market prices, there's little economic incentive to reduce pollution or husband resources. The nation's natural assets end up underpriced and overexploited.

Our desire for a balanced life mitigates the classic dilemma of market failure and the environment. A wealthier nation possesses the time, money, and inclination to shift the balance from exploiting the environment to preserving it. We want clean air and water for reasons of health, recreation, and aesthetics. We've developed a sense of moral obligation toward lesser species. We find unspoiled nature pleasant -- although we tend to want clean linens and good food along with it.

Our desires have had a dramatic effect in recent decades. Levels of such major air pollutants as particulate matter, sulfur oxides, volatile organic compounds, carbon monoxide, and lead were at their peaks in 1970 or earlier. Levels of nitrogen oxides peaked in 1980. Water quality has improved since the 1960s, when authorities banned fishing in Lake Erie. Through government and private foundations, we're spending billions of dollars every year to preserve natural areas from development and save threatened species from extinction.

Capitalism's penchant for innovation is helping us act on our concern for the environment. We've developed less polluting gases for air conditioning systems, so we can stay cool at a lower cost to air quality. Fish farms are creating another compromise, providing salmon for our dinner tables while reducing fishing for wild species.

Taking better care of the environment is a natural extension of economic progress. At one time, the air in Pittsburgh was very dirty. It was the price we were willing to pay for all those consumer goods the industrial age offered. It wasn't that we liked pollution; it was just that the price of cleaner air was too high. Today, having grown richer, we can afford the pollution controls that have made Pittsburgh's air sweeter than an ocean breeze. Exploitation of the environment is worst in poor countries, where the economic imperative lies in producing the food, goods, and services needed for daily life. Wealthier countries possess the means and motive for a balanced life, and they do a better job of taking care of their surroundings.

Beyond Statistics

The statistics that measure our economy are reasonably good at counting the value of the cars, clothing, food, sports gear, jewelry, and other goods and services we buy. When we choose an additional hour off over additional income, though, GDP shrinks with the loss of the hour's income and output. We don't count leisure as an economic benefit because we haven't assigned a dollar value to it, even though we opt for time off because it improves our lives.

When it comes to many aspects of a balanced life, our economic barometers come up short. Safety and security are all about preventing bad things from happening. Increased spending on highway safety registers in GDP, but we don't track how much better off we are because of the accidents, injuries, and deaths we avoid. If investing in prevention works, it can actually reduce total output, at least the way we measure it, because less money is spent treating the sick and injured, repairing damage, and replacing lost property.

Variety makes products more valuable by giving us the designs, colors, and features that fit our preferences, but the statistics count everything as plain vanilla. How conveniently our wants and needs are fulfilled doesn't matter to GDP. A cleaner environment makes for a better country, but it may come at the cost of economic growth.

Inflation-adjusted GDP figures indicate economic growth at an annual average of 3 percent during the last two decades. GDP may be entirely accurate as a tally of how much our farms, factories, and offices produce, but it's increasingly inadequate as a measure of how well the economy provides us with what we want. Our ability to choose a balanced life is one of the market's most important success stories.

Some may argue that it isn't the market that makes a balanced life possible. They might concede that our economy produces abundant goods and services, but they credit government agencies, with their regulations, and unions and pressure groups, with their advocacy, for everything else. History tells us government and advocates play their roles, but they aren't the ultimate source of progress. They don't foot the bill for the choices we make to gain a balanced life. Whatever we want must be paid for, and money ultimately comes from the economy.

Companies improve working conditions because they can afford to, not simply because workers, unions, or government agencies demand it. The dismal work environments in now-defunct socialist nations -- all supposedly designed to benefit the worker and eradicate the capitalist -- provide a powerful testament to the fact that good intentions are hollow without the ability to pay.

The main role of collective action has been to act as a voice for what we want. Environmental groups formed as the result of our desire for cleaner air and water. When we take our preferences for leisure and better working conditions to unions or elected officials, they help create consensus among employees and lower the cost of communicating these desires to employers.

In the long run, we cannot afford any component of a balanced life -- be it consumption, leisure, easier workdays, safety and security, variety and convenience, or environmental cleanup -- that we don't earn by becoming more productive. When counting our blessings, we should first thank the economic system. Not federal agencies, not advocacy groups, not unions.

Our quest for a balanced life will never end. The U.S. economy, now recovering from its first recession in a decade, will make our society wealthier in the years ahead. We'll take some of our gains in goods and services, but we will also continue to satisfy our desires for the less tangible aspects of life.

Buying Time

wm.cox@dal.frb.org (W. Michael Cox) rgalm@aol.com (Richard Alm) — Sat, 01 Aug 1998 00:00:00 EDT

Americans often put off buying a new computer or cellular phone--not necessarily because we can't afford one but because we're expecting prices to fall. In a conversation about some trendy new gadget, someone's apt to say, "I'm waiting until the price comes down before I buy one." Such a statement shows that declining prices are commonplace, and that many of us are aware of that fact.

Even so, falling prices aren't what Americans usually see. We often lament that the cost of living keeps going up, that it's harder and harder to stretch a paycheck. The hand-wringing about rising prices shows that Americans--even those who wait for bargains--are failing
to recognize one of the basic economic realities of our times. Just about everything we buy gets cheaper and cheaper when expressed in prices that really matter: the amount of work time required to make a purchase.

For the overwhelming majority of goods and services, real prices fall. That's the history of American capitalism in a nutshell. In 1908, Henry Ford offered his first Model T for $850--the equivalent of more than two years' wages for an average factory worker at the time. Given that cost, it's not surprising that the automaker found a limited market, selling a mere 2,500 cars in the first year. Today, autos are more affordable: An average worker has to toil only about eight months to buy Ford's latest best seller, the Taurus.

Even better, modern consumers are getting a lot more for their money. The cars we drive are incomparably superior to a crank-starting, bumpy-riding Model T. They're more comfortable, with roomier interiors, air conditioning, power seats, and adjustable steering columns. They include such extras as power windows, sunroofs, tinted glass, cruise control, and compact disc players. They're safer, equipped with impact-absorbing "crumple zones" and antilock brakes. They last longer and require less maintenance, with some models traveling 100,000 miles before the first tune-up.

With some important, complicated exceptions such as medical care and college educations (which we'll discuss later), declining real prices are the rule. When long-distance telephone service first became available in 1915, a three-minute call from New York to San Francisco cost $20.70. Only the rich could pay the toll for ringing up friends and family. Earning an average hourly wage of less than 23 cents, the typical factory worker of the day would have had to labor more than 90 hours to make a call. Today, of course, nearly all of us are "rich" enough to afford long-distance calls. A three-minute coast-to-coast connection costs less than 50 cents, or a scant two minutes of work at the average wage.

In 1919, earning enough to buy a three-pound chicken required two hours, 37 minutes of work. Today, it's down to 14 minutes--cheap enough to make quaint Herbert Hoover's famous nirvana of "a chicken in every pot." A fuzzy, 12-inch color television required three months of work in 1954. Now, 25-inch models with crystal-clear pictures and remote control take just three days on the job. A 1970 IBM mainframe sold for $4.7 million, a price only a government or big corporation could pay. The average worker would have to work an entire lifetime--actually, several lifetimes--to pay for enough power to do a million calculations a second. Today, personal computers capable of operating 13 times faster than that IBM mainframe sell for less than $1,000. In average work time, the cost of today's computing is down to 19 minutes for a million calculations per second--a price likely to continue falling.

As we enter the 21st century, Americans take for granted our ability to afford the trappings of the world's most envied middle-class lifestyle. It's the result of the decline of real prices in a dynamic economy, played out over and over. Most goods and services go through a cycle of falling prices and improving quality as companies ratchet up to large-scale production, as markets expand, as competition arrives in the marketplace, and as goods and services move from luxuries to everyday conveniences. The falling real cost of living shows up in such everyday necessities as housing, food, gasoline, and electricity. It also applies to manufactured goods--clothing, home appliances, and the modern age's myriad electronic marvels. Year after year, it takes less work time to afford entertainment and services--movies, haircuts, airline tickets, dry cleaning, and the like.

Time Is Money

The best way to measure the cost of goods and services is in terms of a standard that doesn't change--time at work, or real prices. Ultimately, the real cost of living isn't measured in dollars and cents but in the hours and minutes we must work to live. As Henry David Thoreau put it in Walden, "The cost of a thing is the amount of...life which is required to be exchanged for it, immediately or in the long run."

The shortcoming of money prices lies in their inability to take into account what we can afford. A pair of stockings cost just 25 cents a century ago. This sounds wonderful until we learn that the average worker of the era earned only 14.8 cents an hour. So paying for the stockings took 1 hour, 41 minutes of work. Today, a pair requires only about 18 minutes of work. Put another way, stockings cost the worker a century ago the equivalent of $22, whereas now a worker pays only about $4.00. If contemporary Americans had to work as hard as their forebears did for everyday products, they'd be in a continual state of sticker shock --$67 scissors, $913 baby carriages, $2,222 bicycles, $1,202 telephones.

In appraising our nation's cost of living, it's best to focus on what the average American can afford. The calculations of the work time needed to buy goods and services in this article use the average hourly wage for production and nonsupervisory workers in manufacturing. A century ago this figure was less than 15 cents an hour. By 1997, it had risen to a record $13.18, a livable wage but nothing worthy of Lifestyles of the Rich and Famous. What's most important about this wage is that it represents what's earned by the great bulk of American society.

In calculating the cost of living in terms of time on the job, a good place to start is with the basics--food and shelter. For example, the cost of a half-gallon of milk fell from 39 minutes in 1919 to 16 minutes in 1950 to 10 minutes in 1975 to seven minutes in 1997. A sample of a dozen staples--a market basket big enough to provide three square meals a day--costs only 1.6 hours, down from 9.5 hours in 1919 and 3.5 hours in 1950.

There's no doubt that buying a home costs a lot more than it once did in nominal dollars. In 1920, the median price of a new house was $4,700. Forty years ago, as America moved to the suburbs, a typical family paid $14,500 for a new house. Today, the median price is $140,000--and, by all accounts, rising. Housing inflation has outstripped the rise in wages, so the comfort of a roof overhead must be getting more expensive, right? Not really. Today's homes are more expensive, but they're also a lot bigger, so for comparison purposes their price must be expressed in cost per square foot. By that measure, the work-time cost of new homes fell from 7.8 hours in 1920 to 6.5 hours in 1956 and five hours in 1970.

From 1970 to 1996, the work-time cost of a square foot of housing rose by more than one half-hour. It's a mistake, however, to jump to the conclusion that the trend toward greater value in housing ended a generation ago. These days, we're getting more home for our money. Today's new homes are more likely to come with central heat and air conditioning, major kitchen appliances, a garage, an extra bathroom or two, ample insulation, storm windows, and many other extras. The basic price of today's new homes includes these amenities, so it's impossible to calculate exactly what's happened to the real cost of housing. But it's a safe bet that the added features more than offset an extra 10 percent of work time. What's more, families have continued to get smaller over the past quarter century. Taking into account the shrinkage in average household size, an individual's housing cost, expressed in work time, is actually 6 percent cheaper today than in 1970.

Most of what's in our homes is getting cheaper, too. Over just the past 27 years, consumers have benefited from work-time declines of 60 percent for dishwashers, 56 percent for vacuum cleaners, 40 percent for refrigerators, and 39 percent for lawn mowers. The cost of a twin mattress and box spring fell from 161 hours in 1929 to 78 hours in 1957, 42 hours in 1970, and 24 hours in 1997. A window-style air conditioner now costs less than four hours of work for each 1,000 BTUs, down from 7.5 hours in 1970 and more than 40 hours when first introduced in 1952.

There are bargains in the closet as well. After aviator Charles Lindbergh became the toast of two continents by flying solo from New York to France in 1927, he toured the United States in a Hart Schaffner & Marx suit that cost $42.95. It would have taken an average Joe 79 hours to buy that outfit. Today, the same company sells comparable suits for $525, the equivalent of 40 hours of work. Over the past century, the work-time cost of a pair of Levi's jeans has fallen by nearly seven hours, to three hours and 24 minutes.

Car Talk

So many products becoming more and more affordable can't be simply dumb luck. To the contrary, we owe it to the routine workings of our free enterprise economy. In the labor market, the system spurs the increases in productivity that raise wages. In the product market, it provides incentives to innovate and the discipline to increase efficiency. The benefits flow to American consumers in the form of greater value--more for our money and more money for our time.

The story of how the car came to be the signature product of America's consumer culture illustrates how economic forces work to the consumer's benefit. In the early 1900s, Ford's critics dismissed the automobile as just a "rich man's toy," beyond the means of the workers who built it. Early automakers built each vehicle to order, an expensive, time-consuming enterprise. Ford revolutionized the industry by perfecting the assembly line, a key to efficient mass production. He standardized parts and developed a network of suppliers. Ford took advantage of the gains from specialization, which increases efficiency by allowing workers and companies to do what they do best. Over the years, the automobile industry expanded, spreading overhead costs over longer production runs.

Just as important, the industry has continued to invest in and appropriate new technology. The development of plastics after World War II, for example, led to lighter, less expensive parts. By the 1990s, robots had taken on routine jobs on the assembly line. Computers are leading the latest assaults on production costs. A frontal crash test performed for $60,000 in 1985 can now be simulated in cyberspace for $200. A three-dimensional object printer has slashed the cost of some prototype parts from $20,000 to $20. Just as important were process innova-tions, such as just-in-time inventory and the once-inconceivable "single-minute exchange of dies" originally developed by Toyota.

As this last example suggests, companies don't reduce real prices out of civic duty; they do it to in response to competition. In recent decades, America's Big Three automakers--General Motors, Ford, and Chrysler--have been pushed to the limits by imports, particularly from the Japanese. But competition in the auto industry has always been fierce. In 1920, the United States had more than 360 car manufacturers, all sensing a fast-growing industry, all vying in a race that had no clear-cut winners. The companies that emerged from that fracas were those offering the highest quality at the lowest price. Hundreds dropped out of the market, but their efforts didn't go to waste. Good ideas--the automatic transmission, for example--turned up in the products offered by industry survivors. Automakers are still trying to capture customers by adding new features: power steering and air conditioning in the 1960s, sunroofs and tinted glass in the 1970s, antilock brakes and airbags in the 1980s, 24-hour roadside assistance and satellite navigation devices in the 1990s. Competition, then, has a double effect: It drives down costs while improving quality.

At Ford and other automobile companies, the rigorous application of industrial technologies increases productivity--more output from each worker. Productivity is the vital element in more affordable products. As each worker's output rises, the cost of production falls. Greater productivity, moreover, leads to higher pay for workers and bigger profits for shareholders, allowing them to consume more. The automobile industry wasn't alone in adopting modern methods of production. Increased productivity across the economy, from agriculture and services to mining and manufacturing, has pushed wages up decade after decade, allowing more Americans to slip behind the steering wheel. Today, more than 90 percent of American households own a car--and 60 percent have two or more. Within a few years, the United States probably will become the first country to have more vehicles than people.

Catch a Falling Price

The mechanism of falling real prices points us toward an important but neglected aspect of America's economic system--the role of the rich in driving progress forward. A relatively small number of consumers--for the most part, the wealthy--are the first to acquire new products. They're in a position to create new markets simply because they've got money to buy new products and services, even at what for most of us are prohibitive prices. But few entrepreneurs get rich selling only to the rich; the big money lies in bringing products within the reach of the masses. Henry Ford knew that. So does Bill Gates.

Over time, wealthy Americans' free spending spurs a great democracy of consumption because it starts the process of lowering prices. It's as if we're all standing in line, joining in the consumption of goods and services as they come within our budget. Many of us wait for what we want, and our compensation lies in eventually getting a better product for less money.

The economics of this process is straightforward. Virtually every new product requires an often sizable (and risky) up-front investment to cover the cost of getting started. Whether innovation springs from startups or established companies, it requires money for research and development, as well as for the physical plant, machinery, equipment, and labor needed to launch production. The cost of reaching just the first customer can range from a few thousand dollars for a mom-and-pop enterprise to billions of dollars for Fortune 500 companies.

Producers, enjoying an exclusive niche in the marketplace and eager to recoup their up-front investment, charge high prices at first, usually knowing full well that only a few consumers will possess the wherewithal to buy. As sales increase and competitors enter the market, fixed costs are spread over more and more customers. Larger production runs mean lower per-unit costs as economies of scale take hold. Success attracts even more competitors, kicking off a race to see which company can offer the best product at the lowest cost. Companies must slash prices to stay in business. They must improve quality to hang onto their customers.

In nurturing infant industries and product lines, the rich pay most of the early fixed costs of new industries. Over the years, they financed the emergence of the automobile, long-distance telephone service, color televisions, computers, and many other goods that are all now readily available to the masses in America. As goods and services filter down to the rest of us, prices more nearly reflect companies' added cost of making one more copy of a product--in economists' jargon, the marginal cost.

The ratio between fixed and marginal costs varies from one type of product to another, which helps explain why some goods and services show steep price reductions and others go through the process more gradually. Big declines usually occur where fixed costs are high: computers, electronics, pharmaceuticals. When fixed costs aren't overwhelming, companies start out charging prices closer to marginal cost--a pattern that fits food and personal services.

Capitalism's critics, especially those who sing the praises of equality above all else, fret that the economy works to the benefit of the wealthy at the expense of the poor. But nothing could be more wrong: Without the rich, fewer new goods and services would find their way to the rest of us. In effect, economic progress emerges from a system of price discrimination--against the wealthy, not against the working classes. In most economic systems, the rich take advantage of the masses. Under capitalism, it's the masses who benefit at the expense of the rich. By harnessing the natural power of unequal income distribution, free markets have routinely brought the great mass of Americans products once beyond the reach even of kings.

As the economist Joseph Schumpeter wrote in his great Capitalism, Socialism, and Democracy (1943), "Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort." Using the wealthy to pull the rest of us along is a very effective redistribution mechanism. No government-sponsored welfare system could deliver anywhere near the benefits that free markets routinely confer on American consumers.

Attention, Bargain Shoppers

The Ford Taurus sells for 70 percent less than the Model T did. That's not the end of the good news on America's highways and byways. Drivers may grumble when they pull into a service station, but a gallon of gasoline required just 5.4 minutes of work in 1997, compared with 6.6 minutes in 1970, three years before the Arab oil embargo caused prices to surge. If we consider the 60 percent increase in average miles per gallon since 1970, the work time to drive a typical car 100 miles has been nearly halved over the past quarter-century--from 49 minutes in 1970 to 28 minutes today. The price of an automobile tire has risen from $13 in the 1930s to about $75 today. However, today's steel-belted radials last more than 42,000 miles, a big increase from the 16,000 miles for the nylon tires of the 1950s or the 2,000 miles for the cotton-lined tires of the early 1920s. Based on work time per 1,000 miles, tires are now cheaper than ever.

Much of today's consumption centers on leisure. What helps make the good times good is the declining real cost of life's pleasures--little and big. The price of a movie declined from 28 work minutes in 1970 to 19 minutes in 1997. Compared with a generation ago, each 1,000 miles of air travel now requires 61 hours less work. A seven-day Caribbean cruise slipped from 51 hours in 1972 to 45 hours in 1997. It's even getting cheaper to look our best: Work time for dry cleaning a dress is half what it was in 1946, and a woman's haircut is down 27 percent since 1950. Soft contact lenses have plummeted from more than 95 hours' wages in 1971 to less than four today--and the latest versions can be worn longer.

We're a nation on the go, grabbing fast food and snacks. Americans may be eating more of these foods because they're getting cheaper. Buying a large pepperoni pizza costs an eighth less work time than in 1958--and today we can get it delivered to our door. The price of a 6.5-ounce bottle of Coca-Cola has declined from 5.5 minutes in 1920 to 3.5 minutes in 1970 and 1.5 minutes today. In 1940 Californians paid 30 cents--nearly half an hour's wages--for the McDonald brothers' first burger, containing just one-eighth pound of ground beef. Today's one-fifth-pound Big Mac costs $1.89, the equivalent of just 8.6 minutes' work. The price of a Hershey's chocolate bar has risen from 10 cents to 45 cents over the past 23 years; still, its price in work time is a mere 2 minutes, one-tenth of what it cost at the turn of the century.

For many newer products, even money prices are falling, so the consumer gets a double shot of the power of free enterprise. A hand-held calculator too bulky to fit easily into a pocket or purse sold for $120 in 1972. A quarter-century later, true pocket calculators sell for $10--cheaper than a slide rule was in 1952. In terms of time on the job, the calculator's price plummeted from 31 hours in 1972 to 46 minutes today, less time than it takes for lunch. Videocassette recorders entered the mainstream market at $985 in 1978. Twenty years later, VCRs offering surer picture tracking, on-screen programming, and other features cost less than $200. VCRs now sell for 15 work hours, or almost 90 percent less than in 1978. Cellular phones sold for $4,195 in 1984; they're available for $120 or less today. Over the past 13 years, the work time required to buy a cell phone has declined 98 percent. Better yet, the phones are often free for the price of monthly service, which itself has fallen to about half what it was a decade ago.

Over the past generation, the sticker prices for microwave ovens, camcorders, and many other items have fallen in nominal dollars as well as time costs. It took an average worker more than 176 hours on the job to buy a microwave oven in 1967; now it's 15 hours. Dear Old Dad had to work 57 hours in 1960 to buy a camera to take home movies--a Bell & Howell model that used Kodak film (which needed to be developed at additional cost) and required a specialized projector and screen. Today, 42 hours of work will buy a camcorder that preserves our memories on a handy cassette that slips into the family VCR.

Of course, Americans do work longer to buy some goods and services. For instance, paying for medical care and higher education requires more hours of work than it used to. Tuition and fees at public colleges, where about 80 percent of students enroll, have doubled in work time since the mid-1970s. Inflation has been even steeper at America's private institutions. But simple straight-up comparisons are misleading. Few of us would deny that medical care is better than it used to be: The past quarter-century has brought a wealth of new diagnostic tools and drugs to treat ailments that range from cancer to depression. With college tuition, the increased costs reflect the increased value the economy puts on a sheepskin: Workers with a bachelor's degree earn an average of $16,504 a year more than high school graduates today, up from $10,488 more in 1979.

Extended Forecast: Sunny

Falling real prices bring the good life within the grasp of Main Street America. Prices cannot continue to tumble forever, of course. We won't be earning enough in a morning of work to buy a Taurus on our lunch break, and the bill for a coast-to-coast phone call will probably never sink to zero.

In fact, most of the good news on real prices comes early on, then slows as products permeate the marketplace. In minutes of work, prices for oranges fell 63 percent from 1919 to 1938. It took another 60 years to match that decline. The work time required to buy a pack of Wrigley's chewing gum fell an average of 7 percent a year in the first two decades of the 20th century but less than 2 percent a year after 1920. The real price of a gallon of gasoline halved in the 21 years from 1920 to 1941; it took another 45 years to equal that reduction. As markets mature, it simply becomes more difficult to wring new efficiencies out of the production process, and companies aren't able to cut prices as much.

Even so, consumers will still benefit as new products come onto the market, starting out with high prices that are bound to come down. Within a free enterprise system, the future will continue to bring new generations of products that will repeat the pattern of falling prices. Later this year, for example, manufacturers will begin offering high-definition television, a technology that promises to deliver super-sharp images into American living rooms. When HDTV sets hit the market, they will cost as much as a good used car--about $5,000 to $10,000. Within a few years, the televisions will doubtlessly sell for a quarter or even one-tenth of that in nominal dollars. The hours of work required to own one, of course, will fall even faster.

Working less for what we consume helps explain the gains in Americans' well-being in the 20th century. It's only because the real cost of living has been going down decade by decade that everyday Americans can, on average, own bigger houses, drive more and better cars, cram their dwellings with every imaginable appliance and electronic gizmo, indulge in luxuries once reserved for the upper crust, and enjoy more leisure activities. Today, nearly every household possesses a wide range of modern conveniences that, when introduced, were the province of the rich. The personal computer and the cellular phone, both gadgets of relatively recent vintage, are rapidly heading toward the same universal consumption the country earlier achieved with electricity and telephones.

The true test of an economic system is how productive it is with its resources. None is more precious than people's time. The majority of us aren't born with big bank accounts, but we are born with time. Time is the real currency of life, and the value of our time--what we can acquire for its exchange--is our most important asset. Capitalism has consistently raised the value of our hours and minutes, making most goods and services affordable for the average worker.

The Good Old Days Are Now

wm.cox@dal.frb.org (W. Michael Cox) rgalm@aol.com (Richard Alm) — Fri, 01 Dec 1995 00:00:00 EST

Draw a six-inch line on a piece of paper. Make a dot at the right end, and label it Knowledge. Make another dot two inches from the line's other end. Label that point Ignorance. What's to the left of that dot might be called Mythology. It's what we think we know but what isn't really so.

Often the biggest stumbling block to accurate perceptions of our world is getting beyond the glib notions that nearly everyone takes for granted. We spend an awful lot of time stumbling about in the realm of mythology:

· U.S. living standards are falling, and Americans aren't as well off as they were 25 years ago.

· These days, it requires two workers for a typical family to maintain a middle-class lifestyle.

· Today's children are likely to become the first generation that won't live as well as their parents.

· The United States, once the world's undisputed leader, is falling behind as other nations grow faster.

These are the myths that plague discussion of what's happening to U.S. living standards. They have been repeated so often, and by such respected authorities, that few Americans even question the proposition that the economy is failing them. The message pours out of Washington, where Labor Secretary Robert Reich frets that American workers are getting stiffed by greedy corporations. It's the central theme of leading academics and think tanks, including Ray Marshall at the University of Texas, Frank Levy at the Massachusetts Institute of Technology, and the Progressive Policy Institute in Washington, D.C. Downward mobility has emerged as a staple of big-city newsrooms, where hard-luck stories make good copy.

Anecdotes, of course, can only illustrate, not prove. In good times and bad, individuals and families will move up and down in the social pecking order for a variety of reasons. Making the case, then, for slipping American living standards demands broad-based evidence. More often than not, the negativists point to falling real wages as their smoking gun.

And the trends do seem decidedly grim: After adjusting for inflation, average hourly wages rose by 2.1 percent a year from 1953 to 1973. After that, wages stagnated and then began a long slide, with an average annual decline of 0.8 percent since 1978. (See Figure 1.) If Americans are making less, it stands to reason they're not going to be able to maintain their living standards.

The pessimists bolster their argument with other trends that seem to show lost dynamism: lackluster economic growth, less-than-stellar productivity gains, widening trade deficits, fewer manufacturing jobs, an inability to match the growth rates of Asia's fast-growing nations. All told, these statistics make for a rather bleak view of the U.S. economy. To make matters worse, the country seems plagued by crime, pollution, insecurity, homelessness, cynicism, and a host of other social pathologies always in a downward spiral toward deeper crisis.

In a society that's addicted to hand-wringing, in a country that accentuates the negative, all this gets plenty of repetition. There are problems in these United Statesno doubt about itbut the conclusion that we're not living as well as we once did is pure mythology. There's abundant evidence, easily obtained but largely ignored, showing that economic progress is still on track in the United States. Today's Americans aren't orphans of history. Far from it, they are experiencing what previous generations worked so hard to achieverising living standards.

In fact, Americans never had it so good.

Consuming Confidence

At best, real wages and the other evidence of a faltering economy are indirect barometers of living standards. It's curious that the declinists spend so much time examining a bunch of proxies but can spare so little energy for direct measures of what's been happening to Americans' well-being. The government's statistical mills and industry groups churn out boatloads of num bers, touching on nearly every aspect of American life. The diligent researcher can look up how many cars we own, how many hours we spend on housework, and how many music buffs attend symphony concerts. All that and much more.

Living standards are best measured by what we consume, not by our earnings or income. Looked at this way, the available numbers don't lend any support to the view that the country isn't doing as well as it once did. Comparisons to the early 1970s are particularly relevant. After all, no one doubts that Americans are living better today than they did a century ago, or even 50 years ago. The past quarter century is when the declinists contend the country's living standards started to slip.

But many numbers say it isn't so. On average, for instance, Americans now live in bigger and better houses. From 1970 to 1992, a typical new home increased in size by the equivalent of two 15-foot by 20-foot rooms. While home ownership rates have remained roughly constant over the past two decades, the average age at which Americans buy their first home has moved by roughly three yearsfrom 27.9 in 1970 to 31.0 in 1992. Doomsayers, of course, have been quick to chalk this up to deteriorating economic conditions, ignoring the marked change in Americans' lifestyles. The median age at which we first marry (an event that often precedes home buying) has increased from 21.5 in 1970 to 24.7 in 1992again roughly three years. And nearly 12 percent more of us today also decide never to marry. Add to this the fact that the average number of children per family has declinedfrom 1.09 in 1970 to 0.67 todayand the story clearly changes from deteriorating economic conditions to lifestyle changes.

Then there are the homes themselves. New houses are much more likely to have central air conditioning and garages. About 45 percent of homes now have dishwashers, up from 26 percent two decades ago. Clothes washers were in three-quarters of homes in 1990, up from less than two-thirds in 1970. At the same time, households with dryers jumped from 45 percent to almost 70 percent. The average number of televisions in a household rose from 1.4 in 1970 to 2.1 in 1990. Comparing 1970 and 1990, the typical U.S. family owned 4.5 times more in audio and video equipment, 50 percent more in kitchen appliances, and 30 percent more in furniture. For fun and games, the household has twice as much gear for sports and hobbies.

Among those 15 years and older, passenger vehicles per 100,000 people increased from 61,400 in 1970 to 73,000 in 1991. Americans are enjoying more luxuries, too. The average amount spent on jewelry and watches, after adjusting for higher prices, more than doubled from 1970 to 1991. Per capita spending on overseas travel and tourism is three times greater than in the early 1970s.

Of course, we could be paying for our consumption by depleting our savings. The evi dence, however, suggests it isn't so. Although Americans may not set aside as much as people in many other countries, the average American still has managed to gain net worth. Median real wealth per capita rose by 2 percent a year from 1970 to 1990. The Dow Jones Industrial Average jumped sixfold since the early 1970s. The nation has had the best of two worlds: consuming more in the present and setting aside more for the futurenot a bad standard for "better off."

No catalog of higher living standards would be complete without products that didn't even exist for past generations. Twenty years ago, only a lucky few could show movies at home. Now, two of every three households own videocassette recorders. When Elvis was king of rock 'n' roll, records succumbed to warps and scratches. Today's practically unbreakable compact discs offer concert-hall quality sound. Microwave ovens, answering machines, food processors, camcorders, home computers, exercise equipment, cable TV, Rollerblades, fax machines, and soft contact lenses are staples of the 1990s lifestyles. As important, many products, from computers to cloth ing, have been getting higher in quality even as they drop in price. (See Figure 2.)

A decade ago, most motorists had to search out a pay telephone to make a call. Now, cellular technology has put a phone in millions of cars. Companies served 11 million subscribers in 1992, up from 92,000 in 1984. The past 20 years brought many medical breakthroughsnew drugs, new treatments, and new diagnostic toolsto enhance and prolong our lives. Today's cars go farther on a gallon of gas. They've been improved with anti-lock brakes, airbags, fuel injec tors, turbochargers, cruise control, and sound systems that outperform even the best home stereos of 1970. Today's youth may gripe, but they're already benefiting from products their parents didn't get until later in life. What's more, there's a huge inventory of even more world-shaking technologies that will create new waves of convenient, innovative consumer products.

The first test of national well-being, the one that makes the most common sense, should be the material facts of life. If the average consumer owns more of everything, plus the bonus of new products, then it's hard to fathom how a nation could have lost ground over the past 20 years. (See Figure 3.)

Wistful As We Work?

At least some declinists will concede that Americans have more material goods than ever, but they contend that it's only because we're working harder. The two-income family, with both husband and wife holding jobs, is all that keeps the country from the consequences of the weak ening of the economy.

What conclusion could be more backward? Both adults have always worked. Running a household entails a daunting list of chorescooking, cleaning, gardening, child care, shopping, washing and ironing, financial management, ferrying family members to ballet lessons and soccer practice. The average workweek of yesterday's housewife, the stay-at-home mom of the 1950s, was 52 hours, a more exhausting schedule than the 39.8 hours typically put in at the office.

The idea that people at home don't work isn't just insulting to women, who do most of the housework. It also misses how specialization contributes to higher and higher living standards. At one time, both adults worked exclusively at home. The man constructed buildings, tilled the land, raised livestock. The woman prepared meals, preserved food, looked after the children. Living standards rarely rose above the subsistence level.

Over time, household tasks were turned over to the market. At first, only one adult went to work outside the home, gaining specialized skills and earning an income that allowed the family to buy what it didn't have the time, energy, or ability to make at home. When men went to work outside the home, living standards rose. Why do we insist that the same transition for women results in a squeezing of the household's possibilities? What's good for the gander is good for the goose. It's more efficient for workers to spend time earning money doing what they do best on the job and then pay others to perform at least some household chores. It makes no sense to suggest that the economic rules flip-flop when a second adult takes a job. Working women make families better off.

As the United States grows richer, tasks once done by family members continue to move out of the home and into the market. To the extent they can afford it, households hire profession als to clean, paint, tend the yard, figure taxes, care for clothing, and perform other responsibili ties once assigned to family members. In getting their daily bread, Americans are finding ways to ease the burden of cooking at home. In 1993, restaurants received 43 percent of the country's spending on food, a big gain from the 33 percent of 1972. Eating out, once an occasional luxury, has become a way of life. And, even when we eat at home, we often rely more on market goodsheat-and-serve products, microwave meals, and carry-out items.

The data show that home productionthe market of all housework and related choresfell steadily from 45 percent of GNP at the end of World War II to 33 percent in 1973. Since then, it has drifted slightly lower, and it's likely to continue a gradual ebbing. Turning to the marketplace for many of the time-consuming, dull chores of maintaining a household frees time for more valuable pursuits. A job is one of them. Another is the pursuit of pleasure.

Killing Time

In the 1990s, Americans aren't just enjoying the plenty of bigger houses, better cars, and more electronics. As people get wealthier, they are likely to want more time off work, trading higher income for additional leisure. Today's lickety-split lifestyles leave many people breath less, but there's plenty of evidence that a typical American spends less time than ever at work either at home or on the job. (See Figure 4.)

Additional free time comes from the confluence of several trends. Americans are starting work later in life. On average, the age of initial employment has been pushed back seven months in the past 20 years. Once at work, Americans are putting in fewer hours because of shorter weeks, more holidays, and longer vacations. In the past two decades, there's been a gain of the equivalent of 23 days off a year. At home, Americans on average are devoting 18 minutes less a day to chores. Over the course of a year, that adds up to an extra four days of leisure. Toward the end of life, Americans are retiring earlier and living longer. As a result, a typical retirement grew by four years since 1973.

When it's all added up, the results are mind-boggling: Workers have added the equivalent of nearly five years of waking leisure to their lives since 1973. The typical employee spends less than a third of all non-sleeping hours on the jobthat's better than any generation in U.S. his tory.

There's indirect confirmation that Americans have more free time these days: We're partici pating in more recreational activities and spending more money on leisure activities. Ownership rates more than doubled for vacation homes and rose 50 percent for recreational boats. Pleasure trips per capita rose from 1.5 a year in 1980 to 1.8 in 1991. Americans took 4.4 million cruises in 1994, compared with 500,000 in 1970 and 1.4 million as recently as 1980.

Increased leisure has fueled a sports boom. Attendance at National Football League games rose from 10 million in 1970 to 15 million in 1994. A fan backlash over last year's strike is keeping baseball attendance down, but hockey, basketball, golf, car racing, and other sports are drawing bigger crowdsin person and on television.

Participatory sports are booming, too. From 1970 to 1991, Americans who play golf regu larly doubled to 11 percent of the population. In 1970, a quarter of Americans bowled; now, a third of them do. Even after adjusting for population growth, the number of adult softball teams jumped sixfold in two decades. Growing up, few of us ever imagined rock climbing, bungee jumping, or Rollerblading. These are now regular activities for millions of Americans.

Cultural activities haven't been short-changed. Per capita attendance at symphonies and operas doubled from 1970 to 1991. Movies, pop-music concerts, and television fare are prolifer ating. We're even buying more books: Annual sales rose from 6.6 per person in 1974 to 8.1 in 1991. The much-bemoaned overcrowding of national parks bespeaks the arrival of a great de mocracy in free time, with the masses enjoying what was once possible for only a privileged few.

Money tells the same story. Total recreational spending, adjusted for inflation, jumped from $91.3 billion in 1970 to $257.3 billion in 1990, an average annual gain of 9.1 percent that well outstrips population growth of 1 percent a year. During the 1980s alone, outlays rose from $1.2 billion to $4.1 billion for recreational vehicles, $2.7 billion to $7.6 billion for pleasure boats, and $17 billion to $44 billion for sporting goods. Over the past 20 years, money allocated to recreation increased from 5 percent of consumer spending to nearly 8 percent.

One of the advantages of statistics is they reduce subjectivity. In polls, Americans will swear life is more hectic than it used to be, that there's not enough time anymore. What's crowd ing their lives, though, isn't necessarily more work or more chores. It is the relentless chasing after the myriad leisure opportunities of a society that has more free time and more money to spend.

Real Intangibles

The preferences of richer countries extend beyond additional consumption and leisure. The better off a country is, the more citizens will value non-material aspects of living standards: better health and safety, more pleasant working conditions, a cleaner environment. All of us could add other considerations we regard as important.

Intangibles, by their very nature, aren't as easy to count as television sets or hours of work. Yet, there are some numbers that counter fears that the United States is losing ground in most of what might be loosely called the quality of life.

In fact, longevity may be the most important measure of well-being in a modern society. The data show that an average American's life expectancy at birth has risen decade after decade. As might be expected, the biggest gains came in the first half of the 20th century, but the upward trend continues into the 1990s. Over the past 10 years, the life expectancy increased by more than one year and eight months.

What's more, the populace reports that it feels healthier. Surveys by the U.S. Department of Health and Human Services show a steady drop in the proportion of Americans who rate their health as "fair or poor"from 12.2 percent in 1975 to 9.3 percent in 1991. Infant mortality rates fell from 20 deaths per 1,000 live births in 1970 to fewer than nine in 1991. The death rate from natural causes fell by 27 percent from 1970 to 1990, with most of the progress coming in com batting diseases of the heart. The portion of the adult population with high cholesterol fell sharply over the past two decades. What once was fatal can in many cases now be treated. Heart, liver, and lung transplants, experimental to theoretical in the early 1970s, are increasingly com mon today.

But the country isn't just healthier; in many respects, it's also safer. Accidental deaths have declined in every category, especially since 1970. In 1991, 88,000 Americans died in accidents, the lowest figure since 1962. Highway deaths totaled 43,500 in 1991, the best since 1962. Even more encouraging, the death rate per 100 million miles traveled on the nation's roads fell from 3.0 in 1975 to 1.8 in 1990. The incidence of death from crashes of scheduled airliners is just a fraction of what it was 20 years ago. Safety at work is improving, too. Accidental deaths on the job have declined steadily since at least 1945. Job-related injuries are well below what they were in previous decades.

Americans are also making progress on improving the environment. Levels of such major air pollutants as particulate matter, sulfur oxides, volatile organic compounds, carbon monoxide, and lead hit their peaks in 1970 or before. Levels of nitrogen oxides have been declining since 1980. Overall, air quality is better now than at any time since data collection began in 1940. Water quality has improved since the 1960s, when authorities banned fishing in Lake Erie and fires erupted on the polluted Cuyahoga River as it passed through Cleveland. The U.S. Geologi cal Survey, examining trends since 1980, found that fecal coliform bacteria and phosphorus have decreased substantially in many parts of the country. Other indicators of water qualitydis solved oxygen, dissolved solids, nitrate, and suspended sedimentshaven't been getting any worse.

We live in a complex, contradictory world. Not in this era, nor in any other, should we expect the country to get better by every measure. The general gains in health are clouded by the AIDS epidemic. Air and water may be getting cleaner overall, but they still aren't pristine. Environmentalists warn of global warming, deforestation, hazardous waste dumping, and the loss of endangered species. Working conditions may be improving for most Americans, but at least some workers, displaced by corporate downsizing, may have new jobs that aren't as good as the ones they lost, or they may have no job at all. Even among the 120 million employed in the United States, reports of widespread layoffs are likely to cause anxiety about job security.

We are even more alarmed about the increasing incidence of crime and violence. In many surveys, crime ranks first among Americans' worries. The data indicate why. Crime remains high, even though there hasn't really been a big surge in crime in the past 20 years. Statistically, the increase in reported offenses came earlierfrom 1960 to the mid-1970s.

Disease, pollution, unemployment, and crime are but a few of the threats in the modern world, but we shouldn't let them overshadow two decades of progress in so many other aspects of our living standards.

Wage Discrimination

A wealth of data makes a case for rising U.S. living standards. Even so, there's the pesky problem of the falling real wages the declinists bring up so often. Common sense seems to dictate that smaller paychecks are simply incompatible with a society being better off.

The data on rising consumption, plus additional leisure, suggest that the decline in real wages isn't the best indicator of what's happening to the country's economic prospects.

And, it turns out, there are better ways to show how the typical American is doing. The most straightforward alternative to real hourly wages is per capita income. One of its virtues is simplicity: divide total output by the number of people. This computation isn't skewed by changes in the way we work, the way we live, how we're paid, or what we produce. When we look at per capita personal income, the historical trend shows no monumental sign of a decline during the postWorld War II era. It rose by an annual average of 1.7 percent since 1974, com pared with 2.0 percent in the 1950s and 1960s. (Figure 5.)

Statistics on average hourly wages suffer from one glaring omissionfringe benefits. Over the past two decades, as tax rates and income have risen, these non-wage benefits have surged. Workers have chosen to take more compensation in the form of additional health care, contribu tions to retirement savings, or employee assistance programs. Overall, non-monetary benefits as a percentage of payroll increased by a third since 1970. Compared with a generation ago, more employers are providing eye care, dental benefits, paid maternity leave, and stock-purchase plans. Today's most progressive companies are starting to offer day care and paternity leave both unheard of in the early 1970s.

When fringe benefits are included, there is indeed a slowdown in the rate of growth for total compensation in the past 20 years. But even so, the average American worker is still better off than his counterpart in the early 1970s, with a total gain of almost 15 percent.

Part of this relates to a change in the distribution of wages throughout the economy. Since 1973, the gap has widened between income and compensation. This trend tells us that the share of income paid for production and nonsupervisory work is declining, while the share paid else whereto professionals, supervisors, managers, and ownersis growing.

One explanation appears to be the rising return to human capital. In an increasingly infor mation- and service-oriented economy, business capital has come to encompass not just plant and machinery, but, more and more, intellectual capital as well. As Figure 6 shows, the workers reaping most of the economic gains have been those at the higher end of the education spectrum. The income premium to education is substantial and has grown markedly over the past two decades. In 1992, college graduates made an average of 82 percent more than high school gradu ates, up from only 43 percent in 1972. The really big returns to education these days come with advanced degreesPh.D.s, M.D.s, J.D.s, M.B.A.s, etc. In 1972, people with advanced degrees made 72 percent more income than high school graduates. By 1992, they made 2.5 times more. Today, high school dropouts earn scarcely half as much as high school grads, and the split is growing.

Contrary to what declinists might argue, the reallocation of wealth to more-educated people doesn't mean that some people necessarily get left behind. Declinists like to use data that breaks income down into quintiles; they then point to growing disparities between quintile levels as proof that the rich get richer while everyone else gets poorer.

The problem with using quintile data to track individuals' income experience is that exactly who is in each of the quintiles changes over time. A young woman working at McDonald's may appear in the lowest income quintile while working to pay her way through college, but two years later move up to the second or third income quintile as she lands her first job, then advance further through the economy's income distribution as she accumulates valuable job experience, gets promoted, or completes her M.B.A. at night school. So, comparing the income of today's quintiles to yesterday's just makes no good sense.

To see the fortunes of actual people we have to track actual people. A 1992 study by the U.S. Department of Treasury, based on 14,351 income tax returns filed from 1979 through 1988, showed that 86 percent of those in the bottom income quintile in 1979 had managed to raise their incomes by enough to move to a higher quintile; 20.7 percent of those in the bottom moved to the second quintile, 25.0 to the middle, 25.3 to the next-to-highest income quintile, and 14.7 percent moved all the way up to the top quintile. More moved from the bottom all the way to the top than stayed in the bottom.

Per capita income and total compensation don't exhibit the downturn that's so unsettling in the statistics for real wages. To the contrary, they maintain an upward thrust up through the most recent data. More to the point, these measures of earning power square with the other evidence showing that Americans are better off than they used to be.

Us Versus Them

In the declinist view, Americans should be worried not only about the country's ability to keep pace with its own past but also about a failure to grow as fast as many other nations.

The numbers are fairly familiar. From 1973 to 1990, per capita GNP in the United States grew by an average of 1.5 percent a year. By contrast, average annual gains were 3.1 percent for Japan and 2 percent for Germany. While the United States seemed to crawl along, such developing countries as Korea, Taiwan, Thailand, and, most recently, China managed to post strong growth rates.

Is this a sign of U.S. failure? Not if you understand the dynamics of how economies move forward. Envision an explorer wielding a machete to cut a path through a dense jungle. He goes slowly, hacking his way forward, destination not really known. Those who come behind him have a much easier time of it. They see the path. They know where they're going. They can move faster, gaining ground on the trailblazer. That's just what happens with economies. The most advanced nations open the way for others by pioneering industries, markets, technologies, business systems, and infrastructurein effect, creating a successful model. Less-developed countries can quickly adopt what works and exploit existing markets. In short, catching up takes less effort.

As other nations move closer to the U.S. level of development, their growth rates will slow and converge toward the American performance. Take Japan, for example. Its annual growth rate outdid that of the United States by 6.9 percentage points in the 1960s, by 2.3 percentage points in the 1970s, and by 1.7 percentage points in the 1980s. So far in this decade, the United States is growing much faster than Japan. Among the major industrial nations, the United States' lead in per capita income dwindled over the past 45 years. Even so, the United States still hasn't lost its leadand it's not likely to. (See Figure 7.)

To some Americans, faster growth abroad is viewed as a threat. Nothing could be further from the truth. What's important is absolute standard of living, not relative well-being. The United States doesn't benefit when other countries' economies stumble. To the contrary, prosper ity abroad provides opportunities for U.S. exports and business deals.

Down Syndrome

There's plenty of good, hard data refuting the notion that American living standards are in decline. We're enjoying more of almost all material goods. We're taking more leisure. We're healthier. We're making gains on other measures of well-being. We're making daily life easier by paying others to do what we once did for ourselves. We've got no reason to be alarmed by the evolution of two-income households, or the faster growth rates of other countries.

So why aren't we happier? Why can't we see the progress that continues to make the American dream into an everyday reality?

Many do, of course. Public opinion polls yield a telling schizophrenia. Asked where the country is going, respondents lean toward doom and gloom. When contemplating their own prospects, however, a majority expects to be better off in the future. The first question rests on the dispiriting reports people hear and read, the second reflects their personal experiences.

The poll data, with its dichotomy between societal and personal prospects, suggests that being better informed might not produce peace of mind. These days, with the intrusion of so many media, it's almost impossible to be blissfully ignorant of the seamier sides of society. We're overwhelmed by the negative, including a steady drumbeat of reports that living standards are declining. That message sounds loud and clear, drowning out all the evidence and experience.

For one thing, bad news sells. A report on the plight of workers with diminished prospects, or some disconcerting analysis of an ebbing of U.S. competitiveness, makes the front page of TheNew York Times. A book called The Great Depression of 1990 can become a bestseller. Advocacy groups and politicians concentrate on the country's problems, not its strengths. This is a society deluged by information. The sensational, the extreme, and the garish compete for attention. Realistic assessments of the American economy and its prospects don't make much of a splash in this marketplace.

What's more, among many opinion leaders, there's an anti-capitalist mentality that seizes on signs that the U.S. economy isn't performing the way it should. Their motives are obscure, their scholarship often biased, but they play up the failures of this economy. They diminish the evidence of progress and play up the black marks, such as real wages. More important, they ignore the fact that many of today's unpleasant transitions are nothing new, ominous, or unex pected. For example, jobs are always routinely created and destroyed. No society moves forward unless the jobs of the past give way to the jobs of the future. The churn of jobs can be unsettling, but it's what makes free market economies succeed. And no other economic model works as well.

Clearly, many Americans are buying the myth of declining U.S. living standards. Explaining the resonance of negativism in today's world moves beyond the precision of economic principles and the Statistical Abstract of the United States. Even so, it's possible to take a few speculative stabs.

Part of it may lie in human nature. Today's imperfections are confirmed by daily trials and tribulations at home and at work, or the media's latest reports of murder and mayhem. Many of us forget the turbulence of the past -- the wars, recessions, scandals, crimes, and human failings that come with every age. We remember the past in a hazy glow of good feelings. In the 1990s there's a nostalgia for the 1950s and 1960s as more peaceful and prosperous times. Yet those eras had plenty of horrors -- the threat of nuclear annihilation, an unpopluar war in Vietnam, racial strife that erupted into rioting, assassinations, and political hanky-panky.

Demographics might have something to do with it, too. The baby boom generation, that bulge in population that significantly sways cultural and social trends, now shoulders the burdens of middle age. To to three decades ago, the boomers were in their 20s, with few demands on their time and money. Now,these people are at a time in life where they are running in place to provide for children, maintain a good living standard, save for retirement, and acre for their aging parents. Over the next decade or two, the boomers will move into a less hectic time of life. Perhaps then, the negativism will begin to fade.

To be sure, economic changes are coming fast and furious. Many of us grew up in an era where workers could take a job and expect to keep it until retirement. Those entering the labor force today might have as many as four different jobs during their lifetimes -- and three of them haven't been invented yet. In addition, there's an unsettling shift from a national economy to an international one, and all the new Information Age technology that changes the way we live and work. Transitions are hard on humans. The arrival of the Industrial Revolution created similar upheavals, though. Over time, people will get used to the new environment, make the necessary adjustments, and look back to wonder how they could have lived in the previous age.

The United States has its economic problems, no doubt about it. Budget deficits are too big. Too many people are still poor. Workers need skills to match today's technology -- and tomorrow's. So, with real problems at hand, we shouldn't spend our time on phony ones. Being distracted by the myth of declining living standards isn't getting us anywhere. The evidence is overwhelming. On average, Americans are better off than ever before.