Rare is the public policy panel where someone does not bring up the fading grandeur of America’s middle class, and when they do, rare is the participant who does not sorrowfully nod and agree that yes, living standards are bad and getting worse, and today’s children are the first generation in our nation’s history that cannot expect to be better off than their parents.  Perhaps a techno-libertarian will pop up to note that we have immensely powerful computers in our pockets, a seemingly infinite wealth of information and entertainment available on demand, and an array of other technological marvels, like self-driving cars, coming down the pike. Then the argument over whether living standards are rising or falling will rage for a few moments. But no one will ask what seems to me to be the most obvious question: what does that even mean?

The generation that fought the Civil War paid an incredible price: one in four soldiers never returned home, and one in thirteen of those who did were missing one or more limbs. Were they better off than their parents’ generation? What about the generation that lived through the Great Depression, many of whom graduated into World War II? Does a new refrigerator and a Chevrolet in the driveway make up for decades and lives lost to the march of history?  Or for the rapid increase in crime and civic disorder that marked the postwar boom? Then again, what about African Americans, who saw massive improvements in both their personal liberty and their personal income?

We should never pooh-pooh economic progress. As P.J. O’Rourke once remarked, I have one word for people who think that we live in a degenerate era fallen from a blessed past full of bounty and ease, and that word is “dentistry.” On the other hand, we should not reduce standard of living to (appropriately inflation adjusted) GDP numbers either.  Living standards are complicated, and the tools we have to measure what is happening to them are almost absurdly crude.  I certainly won’t achieve a satisfying measure in this brief essay. But we can, I think, begin to sketch the major ways in which things are better and worse for this generation. Hopefully we can also zero in on what makes the current era feel so deprived, and our distribution of income so worrisome.

My grandfather worked as a grocery boy until he was 26 years old. He married my grandmother on Thanksgiving because that was the only day he could get off. Their honeymoon consisted of a weekend visiting relatives , during which they shared their nuptial bed with their host’s toddler. They came home to a room in his parents’ house—for which they paid monthly rent. Every time I hear that marriage is collapsing because the economy is so bad, I think of their story.

By the standards of today, my grandparents were living in wrenching poverty. Some of this, of course, involves technologies that didn’t exist—as a young couple in the 1930s my grandparents had less access to health care than the most  neglected homeless person in modern America, simply because most of the treatments we now have had not yet been invented. That is not the whole story, however. Many of the things we now have already existed; my grandparents simply couldn’t afford them.  With some exceptions, such as microwave ovens and computers, most of the modern miracles that transformed 20^th century domestic life already existed in some form by 1939. But they were out of the financial reach of most people.

If America today discovered a young couple where the husband had to drop out of high school to help his father clean tons of unsold, rotted produce out of their farm’s silos, and now worked a low-wage, low-skilled job, was living in a single room with no central heating and a single bathroom to share for two families, who had no refrigerator and scrubbed their clothes by hand in a washtub, who had serious conversations in low voices over whether they should replace or mend torn clothes, who had to share a single elderly vehicle or make the eight-mile walk to town  … that family would be the subject of a three-part Pulitzer prizewinning series on Poverty in America.

But in their time and place, my grandparents were a boring bourgeois couple, struggling to make ends meet as everyone did, but never missing a meal or a Sunday at church. They were excited about the indoor plumbing and electricity which had just been installed on his parents’ farm, and they were not too young to marvel at their amazing good fortune in owning an automobile. In some sense they were incredibly deprived, but there are millions of people in America today who are incomparably better off materially, and yet whose lives strike us (and them) as somehow objectively more difficult.

My grandmother will turn 100 next month. Let’s look at some of the major changes her life has seen to living standards, from the obvious to the less tangible:

Automobiles. Let us bypass the boring arguments about to pros and cons of suburbanization, and consider what the automobile meant to farm wives who were trapped long miles from town unless their husband could spare the horses from farm work. What getting all that manure off the streets did to urban air quality. How it changed the lives of families who could now travel thirty miles in any direction in an hour, rather than a day. And how much better cars have gotten since the first Model T rolled off the line: faster, more comfortable, safer, easier to drive.

Diet. We have a tendency to romanticize “the good old days” of fresh foods and home cooked meals. Yet when you look at what the majority of people were actually eating on an average day in 1930, it looks considerably less appealing: fresh vegetables in season, yes, but the rest of the year it was grain, milk, more grain, beans, and cuts of meat, like salt pork and calf’s liver, that most Americans won’t touch today. Bread and milk was an actual meal that many people ate for supper, and not because it was homey and charming, but because most people could not afford the rich diet of the modern American.

In 1901, the average “urban wage earner” spent nearly half their family budget just on the raw ingredients for their meals. They ate less, and less appealingly. Meat, eggs, and fats and oils were precious and expensive, so they economized on them to what now seems a ridiculous degree—old cookbooks praise one-egg cakes not by saying they are good, but on the grounds that they are “economical.” We’ve all read the articles on the obesity epidemic, but in the first half of the twentieth century, similarly worried pundits were obsessing about the high percentage of draftees who showed up too malnourished to qualify for service, with diseases like rickets and pellagra that are now seen only in extreme cases of child neglect.

Food processing. And without the much-reviled modern American food processing industry, the average American housewife spent more than thirty hours a week preparing those meals: plucking birds, grinding coffee, shelling nuts. Her raw materials were also inferior to what is now available: if fresh produce wasn’t in season, or she didn’t feel like cooking, canned goods were her only alternative. Frozen produce didn’t arrive until after World War II, and it wasn’t until late in the twentieth century that trade liberalization and container shipping made a variety of produce and fresh meats widely and cheaply available year round. Today families with less than $5,000 in annual income still only spend about 16% of their budget on food. It’s not surprising that we’re fatter; what’s surprising is that we aren’t all perfect spheres.

Household appliances.  If you do not think that we are living in miraculous times, I suggest you go read these old instructions for doing laundry. But I don’t suggest that you try them, as they involve hydrochloric acid and lye. Laundry is perhaps the worst job that has been automated, in the process changing from backbreaking labor into a slightly tedious chore. But of course we also have clean-burning stoves that don’t require constant tending of a fire, refrigerators that keep our food safe and refreshingly cold, vacuum cleaners that keep our carpets vastly cleaner without hours of beating, mixers that save our aching arms, drip coffee makers that make our favorite beverage better, faster, and with much less work … the list is potentially endless, but the general results are the same: our homes are cleaner, and our food requires a few hours a week to buy and prepare, instead of most of a housewife’s day.

Homes. A 1,000 square foot home in the first Levittown was an aspirational goal for people who had grown up cramming large families into smaller quarters.  Now the average new home is over 2,500 square feet, well insulated, stuffed with bathrooms and closet space, and of course, climate controlled year round.  We are fooled into thinking that our ancestors had huge and lovely homes because most of the homes that survive from earlier eras are the houses built by the prosperous; the ugly, tiny, unventilated spaces that most previous generations grew up in have been long ago torn down and replaced with something else.

Entertainment. This is a good candidate for the greatest transformation of the twentieth century. Ubiquitous entertainment, available 24 hours a day to even the poorest family, would have seemed like a miracle—did seem like a miracle—to previous generations. People living in cities had plays and music, of course, but these were special treats, not something you used to pass the time during your commute, or settled down for every night after the dishes were done. Radio and television meant that the average person had a higher variety of entertainment available to them than J.P. Morgan did in 1895.

Travel.  The idea of a regular weeklong vacation where you go to another city would have amazed most of our ancestors. They didn’t have vacations, and if they had, they wouldn’t have diverted precious money from food and clothes just to stay somewhere else. Of course, even ordinary people did travel occasionally, but these were major events, not an annual ritual. The rise of the airplane, and then the tremendous decline in airfares thanks to deregulation and falling oil prices, have now made travel ubiquitous, rather than a special treat that an ordinary person might enjoy only a few times in their life.

Clothes.  Anyone who lives in an old house has bemoaned the tiny size of the closets, but few of them think about why: people, even affluent people who could afford big, centrally located homes, simply didn’t have a lot of clothes. Global trade networks, and modern materials science, have made clothing absurdly cheap by historical standards, and we have responded by assembling wardrobes of a size that would only have been available to 19^th century tycoons.

But what about quality? Well, that’s a complicated question. Because clothes are cheap, and fewer people do heavy manual labor, we don’t choose our clothes for durability—instead, we prize attractiveness and comfort. We’re not willing to wear scratchy wool or stiff new denim that still has a lot of wear in it, but that looks funny and kind of chafes for the first year or so. And we wash our clothes a lot more, wearing them out as we do. That 1900 laundry manual recommends washing every week if you can, but it accepts that some people will only be able to manage every two weeks.  This for clothing that was probably worn daily, or near daily, as most people did not have seven days worth of fresh clothing in their closet.

Liberty. Life is a lot better than it was in 1930 if you’re black. Or gay. Or a woman who wants to work outside the home. Or mentally ill. Or pregnant. Or cohabiting. Or accused of a crime. Many categories of people who previously suffered brutal punishment—legal or social—have had their lives immeasurably improved. Are we a perfectly equal and free society? No. But many groups of people have immensely more freedom and opportunity than they used to.

Pollution. If you’ve ever wondered why women in old novels seem to spend so much time dusting, here’s your answer: burning wood or coal produces fine particulate matter that gets into everything. Including your lungs, where it can kill you. (Millions in developing countries still die of these sorts of diseases every year.) Whether or not you think we should do more for the environment, it’s beyond dispute that our environment today is vastly cleaner and safer than it was a few decades ago.

Computers. I hardly need to tell you how great these are, or how much they have changed our lives, since you are now reading an article in a journal that did not exist a decade ago, on a technology that did not exist when I graduated college.

But wait, many of you are thinking. What about health care and education? You’re just focusing on the things that have gotten cheaper and better. What about the things that have gotten more expensive?

Well, let’s look at health care. In the 1950s, when the president of the United States had a heart attack, he got the absolute state of the art treatment from some of the top doctors in the country: blood thinners, painkillers, and bed rest. Today, he would have had an array of scans and blood tests to diagnose his problem, and then his physicians would have been able to choose from an array of treatments—stents, coronary bypass, balloon angioplasty—to prevent future heart attacks. And thanks to epidemiology, public health campaigns, and an array of smoking cessation aids, he probably wouldn’t have had a four-pack-a-day cigarette habit, either.

1950s health care isn’t expensive; this same regimen would be a bargain at today’s prices. What’s expensive is things that didn’t exist in 1950. You can say that “health care” has gotten more expensive—or you can say that the declining cost of other things has allowed us to pour a lot more resources into exciting new health products that give us both longer and healthier lives.

Which is not to say that everything has gotten better in every way, all the time. There are areas in which things have gotten broadly worse, though some of those seem to be improving lately: 

• A college degree is increasingly the entry price to a stable career, and perhaps because of that, its cost has soared over the last few decades. Crime spiked up in the middle of the 20^th century, and is still well above where it was in the 1930s. Substance abuse, and the police response to it, has devastated both urban and rural communities. 
• Divorce broke up millions of families, and while the college educated class seems to have found a new equilibrium of stable and happy later marriages, marriage is collapsing among the majority who do not have a college degree, leaving millions of children in unstable family situations where fathers are often absent from the home, and their attention and financial resources are divided between multiple children with multiple women. 
• Communities are much less cohesive than they used to be, and while the educated elite may have found substitutes online, the rest of the country is “bowling alone” more and more often—which is not merely lonely, but also means they have fewer social supports when they find themselves in trouble.
• A weekly wage packet may buy more than it did sixty years ago, but the stability of manufacturing jobs is increasingly being replaced by contingent and unreliable shift work that is made doubly and triply difficult by the instability of the families that tend to do these jobs. The inability to plan your life or work in turn makes it hard to form a family, and stressful to keep one together.
• Mass incarceration rips millions of men out of the workforce and away from already fragile families, destroys their employment prospects, and of course, inflicts considerable misery on the men themselves.
• Widespread credit has democratized large purchases like furniture and cars. It has also enabled many people, particularly financially marginal people, to get into serious trouble.  Debt magnifies your life experience: when things are going relatively well, it gives you more options, but when things are going badly, it can turn a setback into a catastrophe—as many, many families found out in 2008.

Like I say, it’s complicated.

This list illustrates why public policy seems to be struggling to come up with a plan of attack against our current insecurities. The welfare state is relatively good at giving people money: you collect the taxes, write a check, and now people have money. The welfare state has proven very bad at giving people stable jobs and stable families, a vibrant community life, promising career tracks, or a cure for their drug addiction. No wonder so many hopes now seem to be pinned on early childhood education, far in excess of the evidence to support them: it is the only thing we have not already tried and failed at.

But I think this list illustrates the poverty of trying to measure living standards by staring at median wages. Many of the changes of the last century show up in that statistic, but others, like the time no longer spent plucking chickens, or the joys of banishing lye from the pantry, appear nowhere.  Nor do the changes in job and family structure that have made the lives of people who are indisputably vastly materially richer than my young grandparents were, nonetheless feel much more precarious. We look into the numbers and think we’re seeing hard facts. But in fact, like someone reading tea leaves, we are projecting our intangible impressions onto an ambiguous picture.

As the comedian Louis C. K. put it, “Everything’s amazing and nobody’s happy.” Despite the obvious march of technological progress, there is a widespread sense that living standards for ordinary Americans have been falling during recent decades – and that prospects for the future look even worse.

In her lead essay, Megan McArdle does an admirable job of confronting this riddle. On the one hand, she catalogues many ways in which the material conditions of life have improved dramatically since her grandmother’s day. But she also notes a number of important ways in which things have gotten worse. As to the bottom line, she’s equivocal: “Like I say, it’s complicated.”

I can’t really find anything in her essay to argue with, so let me simply add a few more facts, figures, and thoughts to fill in the muddled picture a bit more. My own historical focus will be narrower than Megan’s: stories of falling wages and rising inequality usually start from a baseline in the early 1970s, so I will look at trends over just the past four decades or so.

Megan is correct that the performance of “real” or inflation-adjusted incomes isn’t the final word on what’s happening with living standards. But it’s an obvious and sensible place to start. And the real income data tell a pretty unambiguous story of improving material welfare: according to the Pew Charitable Trusts, 84 percent of Americans enjoy higher family incomes than their parents did at the same age. And the percentages are even higher for Americans below the top income quintile.

If that’s a rosier picture than you were expecting, consider further that real income data unavoidably understate the extent of improvement. Real incomes are adjusted for inflation – that is, for changes in the overall price level. But there’s really no way to adjust for the introduction of new goods and services that previously weren’t available at any price. Over sufficiently long periods of time, the changes in what people use their money to buy become so dramatic as to make comparisons of real incomes meaningless. This is obvious if we extend our gaze back far enough. According to conventional calculations, the buying power of a dollar in 1800 was about 14 times greater than today. Since the median annual household income today is about $54,000, it follows that the equivalent in 1800 dollars is around $3,900. Does anybody seriously believe that the 1800 family making $3,900 and the 2014 family making $54,000 enjoyed equivalent standards of living?

This problem is less severe for comparisons across four decades than for those across two centuries, but it’s still daunting. So to get an accurate picture of material living standards over time, your best bet is to use a dashboard of different physical indicators. And it’s really difficult to find measures of physical wellbeing that haven’t improved significantly since the 1970s. Life expectancy is up. And people aren’t just living longer, they’re healthier longer too. People spend more years in school on average. In many cases, the healthcare available to everybody today is superior to what anyone could have purchased back then (the dysfunctions of how healthcare is paid for are another matter but not relevant here). Homes are bigger and filled with more appliances; closets are bigger and filled with more clothes. People travel abroad more. Our skies, lakes, and rivers are cleaner. And, of course, we now have microwave ovens, ibuprofen, ATMs, the Internet, GPS, flat screen TVs, and suitcases with wheels on them (why did that one take so long?). Violent crime did go way up, but now it’s back to where it was. Traffic congestion has gotten progressively worse – that’s pretty much it for the bad news on strictly material welfare.

But enough with the happy talk – now for the other side of the story. First, although family incomes may be up for most, that is because of good news for women. Since the 1970s women’s earnings, educational attainment, and labor force participation have all risen smartly (although the last of these is down from its 2000 peak). For men, however, it is a different story. Based on calculations supplied by the Manhattan Institute’s Scott Winship, median hourly real wages for men with less than a high school education were actually 11 percent lower in 2012 than they were back in 1973, while those for high school grads were up by a measly 4 percent over 40 years. Scott is well known for arguing that most estimates of wage growth are too pessimistic because they use improper adjustments for inflation, so his numbers represent the most optimistic take on what’s been happening. Admittedly, these figures don’t include health insurance or other benefits, but it is unlikely that high school dropouts have jobs with many benefits.

The deterioration or stagnation in many men’s earning power is part of a larger economic transformation: a secular decline in the relative demand for less skilled labor as imports, offshoring, and especially automation substitute for American muscle. Over the past couple of decades, this phenomenon has been exacerbated by a growing polarization of the occupational structure. As MIT economist David Autor has done so much to document, growth in middle-skill jobs has fallen behind that for high- and low-skill jobs; consequently, middle-skill positions are accounting for a shrinking percentage of total jobs. Since middle-skill jobs represent the top of the career ladder for many non-college-educated workers, this means that opportunities for advancement are narrowing. And since workers forced out of those jobs aren’t qualified to compete for high-skill positions, they are forced to seek lower-skill jobs, putting further downward pressure on those wages.

As a result of these developments, there has been a growing economic cleavage between the highly skilled and everybody else. The wage premium for earning a college degree has doubled since 1980, and “90-50 inequality” – the gap between incomes at the 90thpercentile and those at the 50th percentile – has been growing steadily since the ’70s.

Consequently, even though most Americans have enjoyed absolute income gains over the past generation, they have simultaneously experienced relative losses. They may be better off than their parents, but they are falling farther and farther behind their more skilled contemporaries.

This is a very real sense in which most Americans are worse off than before, and it’s no good to pretend otherwise. For most people, paid employment is their primary means of participating in the larger society around them; working and earning their own way as productive members of their community provide the bedrock of their self-respect. When the relative value of your work is in long-term decline, and when the opportunities for doing anything better are slipping away with every passing year, your access to material goods may be improving, but your social status is falling.

Yes, the concept of “living standards” may be centered on material welfare, but it commonly extends beyond that to include some broader conception of overall wellbeing. And when we talk about overall wellbeing, we know that, for animals as highly social as human beings, the quality of one’s relationships with others will generally matter much more than the quantity of stuff one has amassed. Accordingly, the declining status of less skilled work – and the diminution in social standing from not being brainy in a knowledge economy– counts as a setback in living standards for roughly two-thirds of American society.

Connected to this relative economic decline are more serious breakdowns. They amount to an alarming deterioration in attachments to both work and family throughout the ranks of the non-college-educated. In contemporary society, paid employment along with marriage and childrearing are far and away the most important social relationships we have. They ground our personal identities and imbue our lives with meaning and purpose. Yet these vital interpersonal connections are now fraying badly.

Among “prime-age” males aged 25-54, the labor force participation rate has declined from 96 percent in 1969 to 88 percent today. This drop-off has been concentrated among the less skilled, as an absence of attractive job opportunities and the resulting demoralization are driving “working-class” men out of the workforce. Between 1969 and 1999, when overall U.S. labor force participation was reaching its all-time peak, the participation rate for prime-age white males with college degrees dipped slightly from 98 to 96 percent, while the rate for their black counterparts slipped from 94 to 92 percent. For prime-age male high school dropouts, by contrast, the participation rate fell from 95 to 83 percent for whites and from 91 percent to 61 percent for blacks. So most of the attrition wasn’t people graduating from the workforce into early retirement, but rather people dropping out of the job market because of slim pickings. And note that this decline was well underway before the labor market troubles of the 21st century.

Meanwhile, the breakdown of the two-parent family has spread from the underclass throughout the working class. Back in 1969, only about 10 percent of children were born to single moms; now the figure stands above 40 percent. The growing economic cleavage along educational lines is mirrored by a widening disparity in family stability. In 2011, 87 percent of kids who had at least one parent with a college degree were living with both their parents. For the children of high school dropouts and high school grads, the corresponding figures were 53 and 47 percent, respectively.

All of these negative trends reinforce each other. The declining status and work attachment of less skilled males exacerbate the trend toward single-parent families by reducing the supply of marriageable men. In turn, being raised by a single mom has especially negative consequences for boys, which means another generation of low-skill men.

How then to summarize what has been happening with American living standards over the past few decades? On the one hand, continuing broad-based improvements in material welfare; on the other hand, economic marginalization and increasingly widespread social breakdown among the less educated majority. Like Megan said, it’s complicated.

Megan McArdle asks an age-old question: what do we mean by “living standards”? The fact that it’s age-old suggests it’s unanswerable, which in itself is interesting. Many of us throw the term around, and one comes away from her essay reminded that we should be clear about what it is we mean when we talk about living standards.

She herself doesn’t answer the question. That’s not a critique—she wisely doesn’t try to. Instead, she lists a few pages worth of ways in which progress—mostly technological, though there’s one particularly important exception I highlight below—has made us better off compared to earlier cohorts. We’ve got better cars, food, appliances, homes, and so on. McArdle recognizes that there’s a distribution of these goods—she’s not saying poor people have homes that are as nice as those of the rich. She’s saying that the homes, cars, computers, smart phones, and entertainment options of today’s poor are a lot better than those of yesterday’s poor.

That’s all surely true. Every generation is better off in this sense than those that came before. As she says, “we should never pooh-pooh economic progress.”

The question is as follows: what do we learn from these observations? McArdle correctly warns that any given statistic, like median wages or GDP, doesn’t tell the whole story. But again, that’s not news, nor should we dismiss such measures as unimportant, simply because they fail to capture all the nuances of living standards.

Her essay thus left me with three questions that I’ll try to answer. First, what reference point do people tend to use when they think about all of this progress? Second, given the context McArdle provides, what is the proper interpretation of important trends like stagnant median earnings or rising inequality? Third, especially since this series is being hosted by the libertarian Cato Institute, it seems important to look at the role played by government in much of the progress McArdle documents.

While I enjoyed and appreciated McArdle’s brief review, she devotes too little space to a critical factor: our reference points. To whom do we compare ourselves when evaluating the progress she documents? Let me explain by way of one example that I think she gets wrong: liberty.

McArdle argues “life is a lot better than it was in 1930 if you’re black” or gay or a woman who wants to work in the paid labor market. Of course, there’s no question that discrimination and violence against such groups is much diminished from the 1930s and even more so—far more so for blacks, many of whom were enslaved—if we were to go back to 1830.

But what contemporary black person (or gay person, woman, etc.) would take solace in this comparison? Their reference point is not 1830 or 1930. It’s not even today. It’s the liberty enjoyed by white people and non-gay people and men today. Under what system of justice is discrimination acceptable relative to the level of discrimination 100, or even 10, years ago? Should we not compare it to the standard of those who do not suffer discrimination today? People do and should compare the extent to which they are “liberated” relative to those who do not face discrimination today.

McArdle is thus wrong to discount this more relevant comparison for liberty. I’m less sure about the proper frame for economic comparisons, but I also suspect that the most commonly applied reference point for today’s poor is not yesterday’s poor but today’s middle class and wealthy. Those living in substandard housing by today’s standards likely take little comfort in the fact that they live in a mansion compared to a century ago.

One bit of evidence in support of my suspicion comes from subjective poverty measures. As economist Rebecca Blank shows here (see her Figure 4), if you ask people what it takes to get by in their community, they reference amounts that track about half the median, leading Blank to conclude “…that people think about economic need in relative rather than absolute terms.”

Thus, whether it’s liberty or household appliances, while we should appreciate that there’s been significant progress over time, our living standards are surely also a function of the resources and liberty we enjoy relative to our present day peers.

An interesting wrinkle here comes from recent economic analysis on productivity growth. In their reductionist way, many economists consider productivity—output per hour—to be a proxy for living standards. And in fact, many of the gains McArdle references show up in the productivity accounts. Computer prices, for example, which are adjusted for all the cool things they can do now that they couldn’t do before, have fallen by half in the national accounts just in the last decade, significantly boosting output and productivity.

But a real concern among economists is that productivity growth has slowed considerably in recent years, implying that while living standards by this metric are still improving, they are doing so at a slower pace.

How does this productivity slowdown relate to McArdle’s piece? Economist Robert Gordon argues that the really important living-standard improvements are in fact all behind us. We would never trade, he argues, plumbing, running water, and air conditioning for Twitter. “Invention since 2000 has centered on entertainment and communication devices that are smaller, smarter, and more capable, but do not fundamentally change labor productivity or the standard of living in the way that electric light, motor cars, or indoor plumbing changed it.” Gordon worries that productivity will continue to grow at historically slow rates, as we’ve already harvested the living-standards game changers.

That conclusion sounds pessimistic to me, but it is true that unless our measurement is seriously biased downward (and I know of no good evidence to support that claim), productivity has grown by 1.3% per year since 2004, compared to 2.5% 1996-2004. Even while I’m with McArdle that productivity and “living standards” are not synonymous, they’re surely intimately related, and historically slow productivity growth potentially bodes ill for her generally upbeat story.

Next, McArdle argues that her evidence of broad progress “…illustrates the poverty of trying to measure living standards by staring at median wages.” How so? Labor income represents about 80 percent of middle-class incomes for working families. The hourly wage is the fundamental building block of that income, and the increase in income inequality means that the median is now a more representative statistic of middle-class household income than is the average.

The fact that, according to the Economic Policy Institute, the real median hourly wage is up only 6% since 1979—0.2% per year—does not of course paint the full picture of living standards. But it does tell you that in order to be able to get ahead, more family members will need to work for more hours per week and more weeks per year (gender breakdowns show that women’s real median wages rose 22% over these years while men’s fell 9%).

Moreover, in a forthcoming paper for the Peterson Foundation, Ben Spielberg and I show solid linkages between inequality of outcomes—stagnant earnings and incomes amidst growing GDP – and the opportunities available to children in families on the wrong side of the inequality divide, including worse educational, health, and, later in life, employment and earnings outcomes. Again, no parent I know would take solace by being reassured that even though these wage problems meant her kid won’t go as far as her capacity could take her, she’ll still do much better than a far more affluent kid from an earlier time period.

Because the stakes are so high in today’s terms, which is the reference point for people’s actually lived experiences, it’s not time to stop staring at stagnating real median wages and the growing gap between worker compensation and productivity. Instead, we must figure out how to reconnect productivity gains with median income growth, and, in so doing, reconnect the economic well-being of large swaths of working families to growth in the overall economy.

Finally, McArdle’s essay raises an interesting question for our host, the Cato Institute: how does an institute that advocates for much less government in our economy think about the fact that government’s fingerprints are all over the advances she celebrates? Al Gore may not have invented the Internet, but like so many of these advances, the key research in its development took place in government (DoD) labs (as Brookings’ Kemal Dervis points out, the government accounted for at least 31% of R&D spending in the US in 2012). The progress in liberty that has occurred, and it has been significant, has crucially depended on federal preemption of local prejudices. Progress against pollution, also cited by McArdle, has largely occurred due to government regulations to “internalize an externality”—to make polluters pay for the price of the damage they inflict on the environment (and, of course, there’s much more to be done here). The increase in travel McArdle cites depends on public infrastructure.

Arguably, if Cato had its way, McArdle and the rest of us might have less to crow about!

In 1997, Tony Blair’s British Labour Party swept to power against the soundtrack of chosen campaign song “Things Can Only Get Better,” by the Northern Irish band D: REAM (yes, they really are called that). It is an absurdly catchy tune, lodged in the musical memory of every British person of a certain age.

The track title also suffices as a summary of trends in material welfare, as summarized by Megan McArdle in her opening essay. It is a small overstatement to say that things can only get better. But it is a perfectly reasonable suggestion that most things will, since most things have, for most people, during the modern era. While there are arguments to be had about real trends in median male earnings, as Jared Bernstein’s contribution makes clear, nobody can sensibly deny that over the long term, living standards measured in material terms have risen.

Progress is old news, but just as old is a lament for the good old days. Here is one such cry: “The world is passing through troubled times. The young people have no reverence for their parents: they are impatient of all restraint; they talk as if they alone know everything, and what passes for wisdom is foolishness for them.” That was Peter the Hermit – 1,000 years ago. But you can pick any decade of any century, and find eloquent pleas for a return to better, safer days – usually from old men.

At an individual and societal level, a process called habituation takes place: we become used a new living standard, bank it, and then expect more. At one level, the fact that dissatisfaction keeps pace with material progress is good news, since it spurs a drive for further improvements for nations as well as individuals. Yesterday’s stunning breakthrough in health care or technology or entertainment quickly becomes today’s everyday norm. A few decades ago, an air-conditioned home represented opulence and luxury, and an air-conditioned car was the stuff of science fiction. Now most poor families – as captured by the Federal Government official poverty line – have an air-conditioned home. This allows some on the political right to claim that such people are not “really” poor, just as those with running water were not “really” poor in the 1940s. But poverty is, by and large, a relative concept. Any attempt to determine any “absolute” poverty line will be defeated by progress. Against a global or historical standard, it seems almost offensive to compare the poverty of the American without air conditioning or a room of their own to the poverty of the African without food or a home. But it is in fact equally offensive to claim that poverty has been eradicated in advanced economies, just because they have advanced.

But as Brink Lindsey points out, a richer conception of the standard of living would include not just the hard facts of material welfare, but also the softer facets of human flourishing, including purpose, status, and prospects. Here, as both he and Jared point out, relative comparisons may count for a great deal. The extent to which our life is going well has to be judged in large part by how it is going compared to those around us. Perhaps the most worrying trend from this perspective is the pulling away of the elite from the pack. As Robert Putnam’s new book, Our Kids – The American Dream in Crisis shows, on almost every dimension ­– skills, education, income, wealth, neighborhoods, parenting, marriages, civic engagement – the top tier of American society is separating. This does not mean that ordinary folk are actually worse off, of course: simply that the rate of improvement in their quality of life is lagging behind the leaders. “What’s wrong, mom?” asks Dorothy Boyd’s son during a plane ride in the movie Jerry Maguire. Her answer: “First class is what’s wrong. It used to be a better meal. Now it’s a better life.”

There is a danger that deep inequalities justified on meritocratic grounds become self-perpetuating, as the children of the elite inherit their parents’ social status. One of the most striking findings highlighted by Putnam is that poor kids with high test scores are now slightly less likely to get a college degree than rich kids with low test scores (28% v 30%).

In his book The End of Equality, Mickey Kaus worried that the growing physical and social separation of different classes would end up becoming self-replicating:

Give the affluent two more decades to grow comfortable in their gated suburbs, two more decades to revile the underclass and avoid the cities as if they were a dangerous foreign country, two decades to isolate their “gifted” children from their supposed inferiors, two decades of “symbolic analysts” and assortative mating, and we might wake up to discover that Americans aren’t such egalitarians at all any more.

Here’s the thing: Kaus wrote that more than two decades ago, in 1992. As it turns out, many of America’s inner cities have undergone a revival, with falling crime and prospering public spaces. But the rest of his prediction was pretty much on the money. Which means his question is at hand: are Americans such egalitarians any more? The reaction to the attempt by the president to raise the taxes of the affluent – by eliminating the deeply regressive tax breaks in 529 college savings plans – does not bode well.

So: even against a general rise in material living standards, certain forms of inequality can cause a loss of welfare in other, less material, domains – as well as potentially reducing the rate of material gain among the less fortunate.

But I wonder if there is something even deeper going on here. Modern advanced economies have tended to loosen the grip of social institutions on the lives led by individuals. Families, churches, and communities all count for a good deal, of course. But they count for less than they did even just a few decades ago. Modern societies have progressively placed the question “what is a good life?” into the hands of individual men and women. The resulting kaleidoscope of life choices and lifestyles available today would have bewildered our grandparents, and indeed may bewilder some of us.

When conservatives of both left and right yearn for “the good old days,” they typically mean a world in which individuals were more certain of their roles and their places in the order of things. Greater freedom to depart from narrower but more certain lives has come at a price, most obviously in terms of family instability, community disengagement, and much greater insecurity. It is, in my view anyway, a price worth paying: the steady shift of power from institutions to individuals has been massively liberating, perhaps above all for women. But we should not kid ourselves that the greater individual freedoms offered by modern society have come without a cost. Some of our apparent discontent in the midst of plenty may stem from our sometimes contradictory desires for security and freedom.

More of us have now been granted what the philosopher Isaiah Berlin described as “the painful privilege of choosing.” It is obvious that choice is a privilege, perhaps less so that it can cause pain, too.

My initial essay on how living standards have changed has drawn three responses, from Brink Lindsey, Richard Reeves, and Jared Bernstein. All three are valuable expansions upon the question of what it means to say that living standards have changed. But since Bernstein is the most critical, I’ll start by responding to his points.

Bernstein primarily takes issue with two aspects of my essay: the implication he detects that therefore we should not care about inequality; and my assertion that median income statistics are a fairly impoverished measure of overall well-being. On the first, I can only plead that, while I have no doubt he read that implication in my essay, the writer did not write it. It is true, however, that I have written in the past that I do not care about inequality qua inequality; it does not bother me at all whether a billionaire has a private jet, if the poor have all the opportunities they need for a high-quality life, and conversely, I would not be satisfied with a society that had perfectly equal distribution of long working hours and substantial misery.

Ah, inequality wonks will say, but this is disingenuous. The object is not the equal distribution of misery, but the equal distribution of plenty, and it is unconscionable that poor children drop out of high school while our billionaire rides around his plane. On this I would be inclined to agree, if the two were somehow causally linked. But I have not been shown any compelling evidence that they are.

Whenever someone brings up the wide and growing quantity of material possessions available even to the poor, it is inevitable that someone else will say “But poor people cannot buy a house in a safe neighborhood with a good school district! Few of them go to college! They have worse health outcomes!” Access to high quality food like fresh produce used to also appear on this list, until it turned out that food deserts weren’t actually so barren, and the proximity of supermarkets had no measurable impact on obesity.

I am not going to argue that the poor and near-poor actually have it really great. They don’t. They are, as Orwell wrote of coal miners in 1930s Britain, “harassed, bored, and miserable.” I am going to argue, rather, that the numbers do not tell the tale; for that, you have to look at particulars. By the numbers, the Duggars were undoubtedly living in poverty before they got their hit television show, with three bedrooms for fourteen children. By the numbers, many religious families like them are still living below the poverty line. But no one, except perhaps Planned Parenthood, is going to view this as a social problem in urgent need of a policy solution, because despite their low level of consumption and lack of access to good public schools, their lives have always conspicuously lacked all the things we think are bad about being poor. Or as an academic friend likes to joke, he spent years living in a brutalist building filled with families below the poverty line, and singles whose employment prospects were completely unknown—but he never minded, because really, graduate student housing is a good place to meet people.

It is impossible to list all the ways in which poor people have it worse than the middle class, but here are the ones I think are most salient:

1. The benefits bureaucracy controls their lives. Middle class people have smiling HR reps to make sure they fill out their insurance and direct deposit paperwork correctly. The poor have an overwhelmed and frequently indifferent bureaucracy in which no one is really accountable for mistakes. Those who subsist entirely or partially on benefits are constant supplicants to the bureaucrats who liberally festoon their lives with red tape.
2. High crime. The poor live in high-crime neighborhoods, and are therefore at higher risk than the middle class of having what little they own taken away from them by criminals. They’re also at higher risk of violent assault.
3. The schools are terrible. Graduation rates for high-poverty schools are dismal, and the kids who attend consequently have sharply limited prospects for employment.
4. The ever-present risk of financial crisis. When your budget is very tight, small emergencies can balloon into big disasters. An unexpected car repair may mean the electricity is turned off. Those who have access to credit to cover the shortfalls frequently find themselves trapped in a vicious cycle of high-interest loans.
5. Their work is unstable, unpleasant, physically demanding, and heavily monitored. Go to an inner-city hospital, or another facility that provides service to the poor and working class, and you’ll see a lot of people asking for doctor’s notes, including people who are there for conditions that don’t actually require any treatment beyond bed rest, because their employer requires that they prove they were actually sick. A middle class person whose employer demanded documentary proof that he really had the flu would be outraged.
6. Fragile families. Single motherhood is the dominant family pattern among high-school dropouts, and it is becoming dominant among every demographic group except the college educated. One hardly needs to enumerate all the reasons this makes the lives of the poor harder: it divides earnings across two households, rather than concentrating it on one; it means parents are stretched tight; and means that children are competing for resources with their father’s other children by different women. The hopeful notion that some sort of alternative family structure might be arranged around extended families was always pretty naïve—two-parent households also have extended families, and in fact they have two of them. But at this point, those decades of hope have been fairly obviously dashed.
7. Incarceration is concentrated among the poor. Incarceration shatters those already troubled families, depriving children of parents, and adults of spouses, siblings, and children. It leaves less money for kids, and makes it hard to find decent employment once you get out. And we haven’t even counted the horrors of prison itself.
8. The police as a menacing presence. This is particularly true of minorities living in cities, of course, but poor people of all races are more likely to experience the police as a hostile force aimed at keeping them in line, or exploiting them for petty fines, rather than the nice folks in blue who protect them.
9. Neighborhoods. The homes of the poor have all the modern conveniences—toilets and hot water taps, central heating and electricity, refrigerators and stoves and microwaves. But they are located in places with few amenities, the aforementioned high crime and terrible schools, and all sorts of minor nuisances that decrease quality of life for the residents, from litter to graffiti.
10.  Transportation. Cheap cars are unreliable, and in a country that is mostly car-dependent, this means that the poor often end up with higher repair bills than the more affluent (unless those people were crazy enough to buy a sporty-looking luxury car).
11. Social exclusion. As Bernstein aptly notes, we do not compare ourselves to far-off people outside our society, which is why you do not feel wealthy beyond dreams of avarice, despite the fact that you enjoy many times the wealth and opportunity available to a Tanzanian subsistence farmer. Adam Smith summed this up very well more than two centuries ago: “A linen shirt … is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.” The lower relative quality of their material possessions lowers their status in the eyes of others, and the poor are very well aware of this. So even if they have very good things by any objective standard, the fact that those things are not as nice or plentiful as the things most other Americans have makes them unhappy.
12. Health care. Obamacare extended Medicaid to millions, but many doctors refuse to take it because of the low reimbursements. Moreover, even a small medical or dental bill can be catastrophic if you have very little income. And of course, many people still do not have Medicaid, either because they live in states that turned down the expansion, or because they are illegal immigrants.

All of these things are indisputably true. What I think is disputable is whether we can make them better by forcing our billionaire to sell his jet.

Imagine that we sold the jet. What would we do with the money? Improve the schools? Oceans of money have been poured into poor urban school districts without showing up in the form of higher graduation rates. Lower crime? The only way we know how to do that through direct spending is by putting more police on the streets, which would decrease crime, but also increase the feeling of being besieged by the police. More pay for the same unpleasant job would still leave you with an unpleasant job. Higher pay will not fix broken families. Nor does it seem likely that our process-oriented legal system is going to eliminate the bureaucratic red tape at any time in the near future.

A simple transfer, or expenditure on higher social services, would solve a few of the problems on this list: it would buy better transportation, certainly, and ease some of the budget crises. But even something that seems relatively easy, like improving health care outcomes, turns out to be harder than it looks, because socioeconomic status is correlated with health care outcomes even in places, like the British Civil Service, where everyone gets their health care from the same program.

It seems unlikely that any feasible system is going to make the poor indistinguishable from the middle class; status is conveyed by a thousand signals, and East African Plains Apes, primates that we are, will probably continue to avidly look for those signals.

If I may pull back to 30,000 feet for a moment (pun not necessarily intended, but not much regretted, either), the Problem of the Jet is that what works for an individual does not work for a society. You frequently see this in discussions of trade, where people inappropriately generalize from the household (if I’m selling more than I consume, that’s a great thing!) to the level of a nation (… and therefore, we should always want to run trade surpluses).

At an individual level we absolutely can use money to fix most of these problems. If we sold the jet, and gave the money to, say, 100 people, those people would suddenly be able to afford homes in better neighborhoods with better schools, use the best doctors in their city, bump up their consumption to a higher status level, escape the government bureaucracy, and so forth.

But at a social level, the calculation is much different. If we raise the incomes of the bottom 20%, while reducing the incomes of the top 20%, but do not increase the supply of housing, then the bottom 20% will still be living in much the same neighborhoods with much the same problems. (I know what you’re going to say, but surprisingly, crime is not actually as correlated with employment, or by implication absolute income, as you’d think.) They cannot all go to see the best doctors in the city, a privilege which would probably remain largely to the upper middle class, since even in a socialized system “having doctors in your social circle” helps determine which doctors you can see. The people at the bottom of the income and employment scale are still going to have the worst jobs, the least stuff, and the lowest social status.

As we found in the 1960s, government is pretty good at solving simple “stuff deficits.” When people are in absolute rather than relative want of goods, taking money from the well off and giving it to those who are going without will basically fix the problem, which is why America no longer has a problem with malnourishment. Unless you weirdly try to redefine the term to include eating too much.

To put it another way, in the 1960s, we were frequently trying to solve problems in which goods were abundant, but the distribution left some people without enough. Now we’re often trying to solve a very different problem—the major issue with housing for the poor is not that it is virtually uninhabitable, but that it’s in a bad location. Unless we increase the number of houses in good locations, redistribution won’t actually change anything. Relative wants, rather than absolute wants, are hard to fix by flattening the inequality curve.

This is not to say that the problems of financially strapped Americans are not problems, or that we should not try to fix them. What I am saying is that these problems are not caused by private jets and billionaires buying islands. They are caused by some combination of insufficient social capital and by bad policy.

The bad policy we can and should fix. We should focus on the kind of crime-reduction policies that Mark Kleiman talks about in his brilliant book, When Brute Force Fails, including exploring alternatives to incarceration and looking for ways to make people with felony convictions more employable. We should be using the power of randomized controlled trials to improve the educational system. We should change the zoning laws that herd the poor into high-poverty neighborhoods, often far from the best employment opportunities. We should make sure that no child is too hungry or sick to learn. We should have a health care system that preserves market incentives while shielding people from total financial catastrophe. If we can find an early childhood education program that actually scales, we should offer it to kids whose parents are unable to provide the sort of high-intensity parenting offered by the middle class. We should emphatically not use the law enforcement system as a piggy-bank for cash-strapped local governments.

We should of course also make sure that kids who could benefit from a college education can get one. But we should also think hard about the steady rise of credentialing barriers to good employment and entrepreneurship—Cato readers will have already heard much about the insidious creep of occupational licensing, but I’d also like some attention paid to the increasing insistence on college degrees for jobs, public and private, that used to be capably performed by people whose education stopped at high school. These function as unnecessary, and expensive, hurdles for people who are good workers, but bad at sitting still in a classroom for eight hours a day.

I submit that these policy changes are far more important than any change we could conceivably make by taking away all the private jets in the country. The problem is that they are harder to talk about. They require, at least in my case, a 2,500 word essay to elaborate, rather than a simple chart.

Jared Bernstein raises an important question: when judging our economic wellbeing, what reference point do we use?[1] Jared gives two alternatives – how others in the past did, and how others in the present are doing – and then argues that comparisons to the latter benchmark count for more in most people’s minds. For example, he writes: “Those living in substandard housing by today’s standards likely take little comfort in the fact that they live in a mansion compared to a century ago.”

I agree with Jared that most people don’t get a lot of joy from the fact that they are much better off than people of generations past. It’s a pallid abstraction to most of us. But there’s another axis of comparison that Jared ignores, one that is highly salient for most people: their own past experiences. People regularly derive great satisfaction from advancing in their careers, or from enjoying a standard of living higher than what they experienced as kids. And when incomes generally are rising smartly, people notice and approve heartily.

At the individual level, the relative salience of comparisons to one’s past or to others’ present varies from person to person. Some people can’t stop thinking about the Joneses no matter how good they have it, while others will figure out a way to count their blessings even in the direst situation.

But as the economist Benjamin Friedman has argued persuasively in The Moral Consequences of Economic Growth, there is a clear pattern to which reference point dominates in society generally. When growth is robust and prosperity widely shared, people tend to focus on the fact that they are doing better than in the past. They feel well off even if others are doing better. And, according to Friedman, society is more open and tolerant and generous as a result.

When growth slows down and incomes fail to rise, however, the only way to feel better off is by comparing ourselves to less fortunate others. And so the zero-sum jockeying for relative income and status intensifies, and social conflicts tend to grow nastier and more rancorous.

How does Friedman’s hypothesis fit with what’s been going on in the United States? Pretty well, I’d say. Growth in real incomes has slowed or stopped for most people in America, the status of less-skilled work (i.e., the kind of work most Americans do) is falling, and the future prospects for getting ahead with relatively modest skills are dimming. So even if, as Megan and I argue, strictly material wellbeing has continued to improve for most people, it’s understandable that more and more people feel like they are at best treading water. And, just as Friedman might predict, we’re spending a lot more time these days talking and worrying about how the top one percent are doing.

What’s the takeaway message from this? For me, it’s one more reason to conclude that stagnation in the middle is a much bigger issue than rapid gains at the top. Most of the concern about the latter really boils down to displaced concern about the former.