HN Theater @HNTheaterMonth

This talk by Elizabeth Warren, before she was a US Senator, talks a lot about this problem of essentials like housing, education, and healthcare going up much faster than, say, a new TV price: https://youtu.be/akVL7QY0S8A

> Single income households were a common occurrence, since dual income households competing for housing were not out competing single income houses. And I don't mean this in a crypto conservative way, even Elizabeth Warren wrote a book about it: https://en.wikipedia.org/wiki/The_Two-Income_Trap

I haven't read the book, but her speech a decade ago is really eye opening.

https://www.youtube.com/watch?v=akVL7QY0S8A

If you look at a chart of TV prices over 50-80 years, this has always been a trend [1]. Institutes using this as an argument for declining poverty are missing the point that while most goods have gone down in cost over the years, services (childcare) and things of value (education) have gone up substantially [2].

[1]: http://www.businessinsider.com/chart-of-the-day-the-incredib...

[2]: Elizabeth Warren's classic "Twin Income Trap" talk: https://www.youtube.com/watch?v=akVL7QY0S8A

⬐ mensetmanusman

I wish education was cheaper. All the college content I consumed is available for free now on the internet.

Our society needs to recognize that only a certain percentage of people ever want to go to college, and that is okay. No need to put people in debt and set them up for failure.

⬐ wincy

But how much cheaper is it to learn a profitable skill? In the 1980s I’d have had a much harder time learning to code. I learned essentially for free. A traditional, hand holding education is more expensive, but information is virtually free.

⬐ bsanr2

The problem today isn't access to information, it's access to time and focus. Because wages are so low and basic costs so high, it is very difficult for people who didn't manage to stay on the 1st-class career track to make way for development without jeopardizing their health, well-being, or job in the immediate future.

⬐ duelingjello

And yet most of those people have their consent manufactured, buying into scapegoating of slaves even worse off than them (homeless, foreigners, minorities, etc.), vote against their own interests and believe that socialism and welfare for anyone other than the very rich is as repugnant as pedophilia.

⬐ filmfact

Blooms 2 Sigma problem [1] suggests that while it is cheaper to get access to the material, you’ll do better if taught by an expert tutor.

[1] https://en.m.wikipedia.org/wiki/Bloom%27s_2_sigma_problem

⬐ ovi256

Wow, that effect size. I'm amazed that the implications haven't been pursued vigorously, as it's so rare to get such an effect size in a clean, non-controversial (compromised methodology) experiment. As far as I can see, there's not much controversy around this result.

⬐ kstenerud

I learned it from the K&R and Mapping the Amiga I checked out of the local library, and a Heathkit manual I had from somewhere.

Of course I didn't learn the programming discipline until college many years later, and it shows in my early code.

⬐ Joeboy

I learned to code well enough to get a job for free in the '90s and it was certainly much, much easier than it would be now.

⬐ erikstarck

That’s because you’re not actually paying for the education itself but access to the network of people who also can afford it plus the brand name of the institute.

⬐ ken

You picked one skill -- computer programming -- which just happens to be the one the internet is built on. It should come as no surprise that the internet is a great place to learn that for free.

The further you get from that, the worse teacher the internet is. There are many skills I've learned which are hard to find information about online, and a few which don't seem to exist on the internet at all.

Not every profession has someone who took the time to sit down and put all their knowledge on the internet for free. Some fields are just getting around to putting it in books.

⬐ mikekchar

This is true and cheese making is one of those things. However, I have learned an amazing amount about cheesemaking simply from reading wikipedia, learning chemistry from Kahn academy, reading patents, reading papers that are online. watching videos of tours of creameries on Youtube and asking questions to professional cheesemakers that happen to be available on social media. I reckon if I wanted to become a professional it would be within my reach if I was willing to put in enough effort (and had enough capital ;-) ). I doubt there are many professions that are not accessible (possibly making bamboo whisks for green tea ceremonies -- there are only 18 people in all of Japan who make them ;-) ). It's an incredible time to be alive.

⬐ ReptileMan

For every hobby now there is a least one big watering hole that the prosumers gather into and it is full of amazing info and how to tutorials. Right now you can become good enough in any skill with two week deliberate practice.

⬐ Kiro

> There are many skills I've learned which are hard to find information about online, and a few which don't seem to exist on the internet at all.

Do you have any examples? Sounds like an opportunity.

⬐ baddox

I think that very well may be true, but it definitely doesn’t match my own intuition based on what I’ve seen. I have seen extensive educational videos for free online about math, art (digital, painting, etc.), music (theory, composition, orchestration, specific instruments, production, etc.), writing, electronics, 3D printing, plumbing, construction and home repair, woodworking, language learning, aviation, filmmaking (visual effects, cinematography, acting, directing, screenwriting, etc.), marketing, entrepreneurship, investing and financial advice, etc.

⬐ DanBC

The difficulty is sorting out the terrible videos from the good videos.

There's plenty of content created by people who don't really know what they're doing, or who only have a rudimentary understanding.

I guess that's true of all education, but it feels like a bigger problem with free online content.

⬐ glouwbug

I find anything diy on YouTube to be of greater quality the worse quality the production is.

⬐ icebraining

Yes, having choice creates more problems with choosing :) previously you might just have been stuck with the terrible ones.

⬐ jquery

I think this is called "cost disease"[1].

To your examples, however, non-university education has gone down precipitously in price. I'm teaching myself machine learning and financial trading for essentially free, with tools and resources that significantly exceed what was available to people 20 years ago. I think the most useful skill today is "learning how to learn" and I don't think it's taught very well in our public education system. I know that hiring tutors and professionals and coaches is valuable and that self-education isn't a panacea, but we're certainly in a better spot than we were 30 years ago.

Childcare in San Francisco ranges from $1,000/month to $4,000/month. Was ye olde "cheap childcare" of days passed less expensive than $1000/month adjusting for inflation? I remember old childcare centers from the 1980s had significant problems compared to the relatively posh, highly regulated, childcare centers available today. Another big problem with childcare is the childcare tax credit which is a laughably small amount. From a government revenue-maximization perspective, it seems silly to discourage dual income households from continuing to stay dual income. But maybe the CBO has figured this all out and I'm completely wrong.

I certainly agree with you that certain things have gone up significantly in price (healthcare and housing come to mind), but I think it's at the very least debatable that standards of living have gone down.

[1]Scott Alexander has a very interesting blog post on the phenomenon of "cost disease": https://slatestarcodex.com/2017/02/09/considerations-on-cost...

⬐ FranOntanaya

I doubt it captures the change from TV being central in peoples' lifes to being a sideshow to internet. The value of owning a TV in the old times was much higher than now.

⬐ sturgill

I remember growing up in the 80s that there were only a handful of people in the entire community that had multiple TVs. In the 90s some teens in the upper middle class had a tv in their bedroom.

I remember buying my first tv as a married couple around 2007. We were still in undergrad and quite poor, but saved up and bought a 32” HDTV from Walmart for like $400.

Fast forward to today and you can get a 65” 4K tv from Best Buy for that same price [0]. Is it a good tv? No clue. But in 2007 a 32” tv seemed huge....

[0] https://www.bestbuy.com/site/promo/xl-tv-savings

⬐ tbyehl

What sucks is that the cycle of falling prices and models being replaced is so fast that they become not worth repairing -- or impossible to repair -- within a few years.

I trashed an otherwise perfectly good 4-5 y/o 49" television last year because something on the IR receiver board failed. What leads I could find for a replacement board (a) had them listed around 50% of what a comparable replacement television cost and (b) didn't actually have any to sell me.

Upside, now even my rarely-used guest bedroom rates a fairly cheap 55" 4K smart TV. This holiday season the same money buys their 65-inch model, next year it'll probably buy a 70.

⬐ ReptileMan

That would not be such a big issue if we had closed recycling loop.

⬐ lonelappde

Recycling is fundamentally impractical because the costs of doing the recycling a part at a time overwhelm the cost of mass production of new goods.

⬐ sneak

I have never understood the desire for anyone to have a television in their bedroom.

⬐ jquery

TVs keep getting so much cheaper so fast, I keep putting off purchasing a new one. I still have a 9-years-old 640p(ish) 42-inch TV mainly used to rotate through my photo collection. It's still "good enough" and I don't watch that much TV on the big screen anyway, although once my daughter gets older I'll probably finally bite the bullet and get a modern, high end TV.

If I want to watch something with high resolution and good color accuracy, my iPad has been fulfilling my needs just fine. Feels surprising to say that, considering a few years ago I was poo-pooing the iPad and people who watched tv/movies on them.

⬐ saiya-jin

Depending on the technology used in the TV (ie plasma vs LCD) it might have quite a big power draw when running for long times. Newer TVs have usually much lower consumption, so it might take financial sense to upgrade from this perspective as well

Elizabeth Warren gave a talk about this about a decade ago (before becoming a senator):

https://www.youtube.com/watch?v=akVL7QY0S8A

For a family of 4 compared 1975 to 2005, all inflation-adjusted:

Median housing went up by 76%, median number of rooms only went from 5.8 to 6.1 (5% increase), and the house is older.

74% increase in median health-care costs for a family of 4 with employer sponsored health-care.

52% increase in spending on cars, but cars are cheaper; many more families have 2+ cars.

Childcare went from the median family of 4 spending $0 to being a significant expense.

Tax liability went up by 21%

⬐ aaron-lebo

That's a remarkable criticism for someone who:

She earned about $165,300 from September 2010 through August 2011 as a special adviser to President Obama, setting up the consumer protection agency she helped establish.

Before that, she collected a total of $192,722 for leading the congressional panel that oversaw the US bank bailout. That government salary covered a period that began before her latest disclosure report, spanning from November 2008 through September 2010.

Elizabeth Warren, the Harvard Law School professor and consumer advocate challenging Republican Senator Scott Brown, took home more than $700,000 in compensation from teaching and consulting fees over a two-year period from 2010 to 2011, according to her most recent financial disclosure form.

I don't understand how you can in good conscience make criticisms like that while collecting millions of dollars serving the American people and working in academia.

https://www.bostonglobe.com/metro/2012/01/13/elizabeth-warre...

⬐ svantana

You're expressing an ad hominem sentiment that has become increasingly common in my experience, that policy advocates should "practice what they preach" -- this is, when you think about it, ridiculous. If a politician is in favour of a particular tax, should he pay said tax voluntarily until it becomes law? I feel we need more "don't hate the player, hate the game" thinking in society in general.

⬐ aaron-lebo

Why should politicians not practice what they preach?

If their job is to be a public servant, if their job is to convince people to do something, why would they not do that themselves?

I don't think it's hypocrisy because that's unfair and it's not intentional, but how do you justify taking 190k and 160k respectively "consulting" government before you are even holding office if you care so much about the poor? It wasn't a full time job because her full time job was at Harvard where she was making 400k.

Sure, those small amounts don't hurt anyone's bottom line but when everyone is doing it you end up in the financial situation we are discussing.

Maybe if politicians practiced what they preached people would believe what they are saying. You can keep "playing the game" like everyone else, but then the game is gonna remain and nothing changes.

⬐ tankenmate

Taking this argument to the extreme men who push for equality for women should become women?

I think legislators should be judged on what bills they author / sponsor, how much they are able to convince / cajole their legislative peers, what legislation they support / amend / reject in committees, and what legislation they vote for and against. That's their job.

⬐ onion2k

Her argument isn't that no one should be well paid, but that poor people shouldn't get screwed over. You don't have to be poor to recognise that poor people have a bad time and pay a disproportionate amount of the cost of running society.

⬐ mikeash

Who cares? If she's right, then she's right regardless of being a hypocrite. If she's wrong, then she's wrong regardless. Do you have an argument that involves the ideas, or just the person?

⬐ simonbyrne

> Elizabeth Warren gave a talk about this about a decade ago (before becoming a senator)

⬐ metaphorm

irrelevant, distorted, ad hominem attack.

⬐ mehwoot

“When I was poor and complained about inequality they said I was bitter; now that I'm rich and I complain about inequality they say I'm a hypocrite. I'm beginning to think they just don't want to talk about inequality.”

⬐ aaron-lebo

That would be a great retort except for the fact that there are people who care about inequality but aren't willing to take money from a system which is the very driver of inequality they preach against. Human beings are great at justification, no matter who they are.

Do as I say but not as I do? That seems to be a problem with politics as a whole. It'd be better if we didn't defend it.

⬐ eli_gottlieb

>That would be a great retort except for the fact that there are people who care about inequality but aren't willing to take money from a system which is the very driver of inequality they preach against.

You know, I don't think anyone has ever deliberately kept themselves at minimum wage to make a point about capitalism.

⬐ None

None

⬐ loeg

> You know, I don't think anyone has ever deliberately kept themselves at minimum wage to make a point about capitalism.

We have a crazy socialist local city council member who comes close: http://blog.seattlepi.com/seattlepolitics/2014/01/27/sawant-...

⬐ eli_gottlieb

I was under the impression she made a chunk of money at Microsoft, and so doesn't have to support herself off City Council work.

⬐ loeg

I guess it's possible. Wikipedia doesn't have any information on on her work between getting her Comp Sci B.Sc in 1994 and her economics PhD sometime around ~2003.

She didn't move to Seattle until 2006, unless that's missing from her 1994-2003 bio; after she had left the CS field. Maybe not Microsoft then, but still tech money.

⬐ yummyfajitas

Actually no, you're deeply confused. Not surprising, because Warren phrased her numbers to be deliberately misleading.

Health care costs increased by 74% - this means that in 2005 were 174% of what they were in 1975.

Car costs increased by 52% - this means that in 2005 people spent 152% of what they spent in 1975.

Taxes increased by 21% - this means that if the family spent X% of income in 1975 on taxes, they spent X+21% of income in 2005.

However, if you want to make an apples to apples comparison, taxes increased by 140% from 1975 to 2005.

https://www.wsj.com/articles/SB118705537958296783

http://volokh.com/2011/07/28/christopher-caldwell-falls-for-...

This 2008 talk by Elizabeth Warren shows how much more complicated the situation is than the picture you paint.

https://www.youtube.com/watch?v=akVL7QY0S8A

It's more complicated than that. You need to live in a cheap part of town to afford rent but your city is un-walkable and has poor public transportation? Buy or lease a car so you can reliably get to work on time. You have a family and want to send your children to the best (or even decent) public schools? Live in a more expensive area - you have to buy access to good schools in many places, and the monthly payment on a mortgage for a house is cheaper than renting. You want a college education? Pay up. You want health care? Better have good insurance.

There are many reasons that people have debt, and it's not all exorbitant spending. At the same time SOMEONE is profiting off that debt, and they have a vested interest in keeping that debt alive. This is a good talk that discusses nonintuitive pains the middle class is experiencing: https://www.youtube.com/watch?v=akVL7QY0S8A

⬐ wildmusings

The problem is that these measures leave out most people's most valuable asset, their future earning potential. There's nothing wrong with having a serviceable mortgage or car payment. I think you misinterpreted me.

Yes, people do profit from that debt. Good! Because otherwise you wouldn't be able to turn some of that future earning potential into buying power today. This ancient innovation, the loan, allows us to do that. If the lender didn't stand to profit from interest, he wouldn't lend. It's a triumph of capitalism.

⬐ heurist

I did not misinterpret you, I understand fully what you are trying to say. I disagree with you. You and I are in the fortunate positions of being able to service debt and even avoid it entirely. Many people are not. Lenders have the ability to take advantage of social and financial systems that require debt, and through the application of their profits can alter those systems so that more debt is required to survive. In my mind, that is capitalism's failure. Spending your future earning potential is fine, buy a boat or a house bigger than you need if you want to, but if you need to go into debt for employment, education, or health care as many in the U.S. do now then something is very wrong. Furthermore, servicing that debt can keep people stuck in debt or poverty and reducing their spending potential, which is destructive to the economy. All of these things can be fixed fairly cheaply but the solutions are being suppressed for the profit of a few.

⬐ wildmusings

I don't get your logic, that it's okay to go into debt for a boat but not your education, an investment in your future earning potential.

The problem with education loans is that they're not real loans. The government gives them distortionary financing that inflates tuition. Everytime the government raises the max loan amount, tuitions rise to match it. The college bureaucracies grow to match revenue. It's the same that happens with any bureaucracy that gets unearned money.

Everyone should pay the full price of their college education, either up front or in the future. That's the best way to keep college affordable.

Free markets work, why is there this presumption against them?

⬐ jessaustin

I've agreed with your general direction in this thread, but here you've tied yourself in a knot. If the un-"real loans" you cite weren't available, far fewer people would be willing to attend college, prices would fall, and far less would be loaned and spent on education. In other words, without the distortions introduced by lobbyists and politicians, all this wonderful education debt wouldn't exist. So we have indeed identified a case in which lenders "through the application of their profits can alter those systems so that more debt is required to survive."

⬐ vadym909

Germany has fully free college education and labor fully involved in management. It is a good example of capitalism that benefits the middle class rather than the US system that increasingly feels rigged against the common man. It is great that a smart poor man can become a billionaire- but what about the rest.

⬐ nitrogen

I think the other commenter may be suggesting that it's wrong for life's bare essentials to require large amounts of debt, but beyond essentials a well-informed person should have debt as an option.

https://youtu.be/akVL7QY0S8A?t=20m28s

⬐ harryh

She doesn't say that it's for equivalent sized housing. As I said square footage per person has increased DRAMATICALLY over the past 50 years.

⬐ foobarqux

She uses # rooms as equivalent, not sq-foot.

Maybe sq-footage has increased, but your data is about new housing across all economic classes and we are interested in median middle class housing. Besides the problem of data skew (richer people live in bigger houses), Warren claims that most of the middle class live in old homes, not new ones. She specifically says that new homes are being built for upper middle class and above.

⬐ harryh

The chart I linked to way above was for median housing.

⬐ foobarqux

It was median new housing developments. Not the housing of a median family, nor the housing of a median middle class family.

Again, Warren's claim is that median middle class families live in old homes. And even if they didn't median middle class homes are potentially smaller than median homes.

The reverse is true: there a more two income earners now but household income hasn't increased as much. Per person is flat.

http://youtu.be/akVL7QY0S8A?t=9m2s

⬐ seanflyon

> Per person is flat.

Median income for fully employed males is flat.

Middle class individual income have been stagnant since 1970.

https://www.youtube.com/watch?v=akVL7QY0S8A&t=9m3s

Housing. Health insurance. Second cars (because women now need to work).

http://www.youtube.com/watch?v=akVL7QY0S8A&t=15m40s

also http://www.youtube.com/watch?v=akVL7QY0S8A&t=9m15s

⬐ raldi

> Housing

Again, not if you're willing to live in a typical 1930 house (with one bathroom for the whole family, a small kitchen, no family room, one bedroom for the parents, one bedroom for ALL the kids, no air conditioning, no garage, no laundry room).

The average price of a house is so much more today in large part because people want a lot more square footage.

> Health insurance.

Today's standards for health coverage are much higher than they were in 1930. Life expectancy for American men was 58 years back then. Blue Cross didn't exist. Jimmy Carter was the first US President born in a hospital (in 1924).

If you're willing to lower your standards dramatically, and accept medical treatment that's as sucky as it was in 1930, it's a lot cheaper than what we would today consider to be acceptable.

> Second cars (because women now need to work).

They don't, though. If you're willing to live the low quality of life that was prevalent in 1930, you can do it with a single-earner household.

In fact, why does your household even need one car? In 1930, most American households got by with zero.

⬐ foobarqux

Maybe 1930 but certainly not 1970. Typical middle class families are worse off than 1970 as that video illustrates.

But even the reduction in work to live the 1930s lifestyle you describe is no where near commensurate with per capita GDP growth over the same period. I think that is the real thesis statement: Most people have captured only a small fraction of increases in productivity.

> It is unclear if there actually has been a enormous shift in incomes in the way it is being presented in the media.

It's pretty clear: http://www.youtube.com/watch?v=akVL7QY0S8A&t=6m30s

Elizabeth Warren has answers:

The Coming Collapse of the Middle Class with Elizabeth Warren https://www.youtube.com/watch?v=akVL7QY0S8A

Everyone should watch the video. She answers for the question of having more cars etc.

Also falling middle class incomes:

http://www.youtube.com/watch?v=akVL7QY0S8A#t=8m25s

Elizabeth Warren's research would be a good place to start.

http://www.youtube.com/watch?v=akVL7QY0S8A#t=8m25s

⬐ None

None

⬐ jl6

Sorry, I wish I had time to watch an hour-long YouTube video :( I was hoping that, if this claim were true, it would be easy to demonstrate with a graph or some numbers.

⬐ None

None

⬐ foobarqux

I linked to a relevant time stamp which has a graph and presumably "some numbers".

Are you sure you don't have that backwards?

http://en.wikipedia.org/wiki/Elizabeth_warren#Books_and_othe... http://www.youtube.com/watch?v=akVL7QY0S8A#t=8m25s

I'd advise giving this a watch. The data has surprised everyone, including the people researching it: http://www.youtube.com/watch?v=akVL7QY0S8A

This is very interesting.

I think it's also worth pointing out that the data tends to show that the use of personal bankruptcy to game the system is actually very low.

I find that when the subject is brought up in a political context, this distinction is often not made.

Here is a great lecture from Elizabeth Warren on the subject: http://www.youtube.com/watch?v=akVL7QY0S8A

⬐ anamax

> Here is a great lecture from Elizabeth Warren

I wouldn't put too much weight on Warren's work on bankruptcy.

See http://www.theatlantic.com/business/archive/2010/07/consider... .

⬐ patdennis

Call me elitist, but I hardly think that a single story from a blogger/editor at the Atlantic is enough to discount all of the work of one of the preeminent scholars of bankruptcy law in the United States.

Warren has successfully defended her conclusions in academic circles for years.

⬐ anamax

> Call me elitist

I'll call you overly impressed by irrelevant credentials. (She's not an economist or statistician.)

As for me, the validity of her conclusions don't depend on where she works, whether she was wrong about being part Native American, etc.

> Warren has successfully defended her conclusions in academic circles for years.

The Atlantic story contains cites to some academic eviscerations of Warren's work....

⬐ MichaelSalib

We could use a bit more elitism. If the best criticism of Warren's work one can find comes from an innumerate like McArdle [1], it's probably pretty sound.

[1] http://www.balloon-juice.com/2010/12/23/gastritis-broke-my-c...

⬐ tptacek

I wouldn't put any weight on an analysis by Megan McArdle either. I like Warren as a politician, am deeply ambivalent about her as a policymaker or regulator, have no idea about her credibility as an academic, and read McArdle long enough to know that her issue here is ideological, and that she's not particularly credible on issues that touch that ideology.

Preempting the obvious challenge to this comment: it's not that I'm going to point to any particular point in this particular blog post of hers and call BS on it (although I think it covertly lapses into subjectivity several times), but rather that her particular choices of papers and theses to take issue with aren't necessarily a fair representation of Warren, "scholar". Which is what her headline purports the post to be.

There was no way McArdle was going to be objective about Warren. That's a little bit like expecting Paul Krugman (not that I'm putting them on the same level!) to be objective about Paul Ryan.

⬐ anamax

> I wouldn't put any weight on an analysis by Megan McArdle either.

No one suggested "it's by McArdle, therefore it's good". (However, folks have suggested "It's Warren, therefore it's good".) Instead, let's look at the arguments offered.

⬐ patdennis

I didn't say "It's Warren, therefore it's good." I said it's Warren, and it is good.

Wait... is this Scott Brown??

⬐ Retric

I think it's also worth noting that Risk of bankruptcy enables similar accounting games even for healthy company's. Basically a bank that's leveraged 10x might as well leverage 50x because the upside keeps increasing linearly with more debt but the downside is practically fixed.

⬐ meric

That's why if you're lending a bank money, use covenants.

http://en.wikipedia.org/wiki/Loan_covenant

People already do this with bank deposits when there is no government guarantee leading to bank runs.

⬐ refurb

The upside would not keep increasing linearly. When leveraging, the current debt burden of the company would be used to determine the level of risk and thus the interest rate.

The level is risk is associated with the level of assets of the company (thus the ability to recover in case of default).

I would agree that a bailout creates a floor to loss, but then again a natural floor exists anyways (the net assets of the company).

This is a great point. Not to get political myself, but if you compare this talk to Elizabeth Warren's "The Coming Collapse of the Middle Class"[1] from a few years back, it's night and day. Before she made economic claims, she described her exhaustive process with government agencies to get reliable data; the ways she tested the data when it seemed implausible; the various theories she tested and rejected to explain the data ... it's gripping stuff, because she develops insights based on research and hard-nosed science. That's what TED should be about.

[1] http://www.youtube.com/watch?v=akVL7QY0S8A

The costs of living have been going down for the past 50 years at an incredible pace.

No it has not: http://www.youtube.com/watch?v=akVL7QY0S8A

Several points

The study looks at income, not wealth ("riches").

To maintain a middle class lifestyle, one must today make a proportionally far larger expenditure for housing, education and transportation.

In constant dollars, cost per square foot of housing has increased dramatically (even with the recent declines).

It is now necessary to pay for daycare (due to two-income households) and for college (high school used to be sufficient).

Most households now have two cars rather than one (due to two-income households).

Further, because two income households make commitments based on two incomes, they are not prepared for the loss of income from either spouse, whereas formerly, there was reserve income potential in the stay-at-home child rearing spouse.

The above is mostly summarised from a presentation by Elizabeth Warren here: http://www.youtube.com/watch?v=akVL7QY0S8A

⬐ Isamu

I'm very interested in some good data on the points you discussed. I'm googling Elizabeth Warren but I'm not seeing the research on which she bases her conclusions. Any help here?

I admit that I have more than a little skepticism about the collapse of the middle class in America ... but nothing that some good data can't cure!

⬐ yummyfajitas

If you want to quibble over the definition of "rich", be my guest.

To maintain a middle class lifestyle, one must today make a proportionally far larger expenditure for housing, education and transportation.

Only if you take a definition of middle class which has inflated faster than economic growth. I.e., if you are 60% richer (in terms of income) than your parents, but you define "middle class" to be 80% richer, indeed it is more difficult to be middle class. This does not change the fact that most people have higher income than their parents.

Also, you are misrepresenting Warren's data (admittedly, she presents it in a very confusing way). The primary necessity which reduces discretionary income is taxes, not housing, child care or automotive expenses.

In Warren's hypothetical, income increased 75%, mortgage expenses by 70% (for a 66% bigger house [1]), two cars in 2010 cost 55% more than 1 car in 1970, and health insurance increased 60%. The biggest increase in expenses was tax, which increased 140%. In dollar terms, the tax increase was larger than the cost increases in housing, automotive and health insurance expenses combined.

http://www.volokh.com/posts/1185883980.shtml

http://volokh.com/archives/archive_2008_04_27-2008_05_03.sht...

By the way, did you notice that Warren claims household wealth increased? I.e., the family has 66% more house and 100% more cars? (Not to mention better health care, an XBox, etc.)

[1] http://www.realtor.org/RMODaily.nsf/pages/News2007032701?Ope...

>I'm not sure that housing/medical/car are more expensive. I don't know about comparing 2010 to 1990, but I do know that if you compare roughly 2000 to 1970, all of those expenses went down.

... I'm fairly certain she showed that medical expenses + housing + need for a second vehicle accounted for the majority of the change in expenditures for the average nuclear family.

I haven't read the book yet, but I've watched her talk. This is where she talks about changes in expenses: http://www.youtube.com/watch?v=akVL7QY0S8A#t=15m0s

Edit: Skip to here if you can't spare four minutes extra for some exposition: http://www.youtube.com/watch?v=akVL7QY0S8A#t=19m30s

⬐ yummyfajitas

No she didn't.

According to her data, income rose 75%. Mortgage increased by 70%, but note that houses are bigger and have more amenities. Two cars in the early 2000's costs 55% more than 1 car in 1973. Health insurance increased 60% and pays for far more procedures and treatments than in 1973. Taxes increased 140%.

You are confused because she presents the numbers in a strange way.

She presents the increase in mortgage/car/health insurance as a percentage increase: [mortgage 2000 / mortgage 1973 - 1] x 100% = 70% increase.

She then presents the increase in taxes as a percentage of income: 33% of income in 2000 - 24% of income in 1973 = 9% of income.

Her raw data is great, but her presentation is really confusing. I'm rather leery of her conclusions - she is great at gathering data, but terrible at analysis.

[edit: really curious why a simple presentation of the data is getting downmodded.]

⬐ masterj

I'm not sure that housing/medical/car are more expensive.

She presents the increase in mortgage/car/health insurance as a percentage increase

According to her data, income rose 75%. Mortgage increased by 70%

Yes, they are more expensive for the same family in real terms. Essentially, the second income has gone to housing.

According to her data, income rose 75%

But with an additional person in the workforce.

Mortgage increased by 70%, but note that houses are bigger and have more amenities.

House size increased, but only marginally, an extra bathroom or bedroom.

Health insurance increased 60%, and pays for far more things than in 1973.

While I haven't read the book, she said the exact opposite in her talk. That hospitals are sending people home "quicker and sicker" and hospital stays or having a sick worker are much more dangerous and expensive for the modern family due to lack of coverage and the need for the second income. When a child or grandparent gets sick, someone needs to take care of them. In the past this was the stay at home parent, but now a worker must be out of work, but as we've already seen, they need the income in order to make the house payment.

She then presents the increase in taxes as a percentage of income: 33% of income in 2000 - 24% of income in 1973 = 9% of income.

Taxes increase because the second worker's income is taxed after the first worker's, at a higher rate.

And her main point, from what I understood it, is that the need for a second worker in the workforce to keep the same standard of living made the family much less stable and susceptable to tragedy, something presenting the costs as a percentage of family income fails to demonstrate.

⬐ yummyfajitas

How is a 60% increase in house size marginal (see my other post), but a 70% increase in cost non-marginal?

Health insurance in 1970 didn't pay for a huge amount of things that it now pays for. For example, MRIs, viagra, birth control, etc. Far more diseases are treatable. I'd love to see her evidence otherwise.

The problem her book raises is that many families take on a riskier financial profile in order to consume more (though given her poor data analysis/presentation skills, I'm obviously skeptical of her conclusions). Her opinion is that costs have risen.

Her data shows that costs (besides taxes) have increased less than income.

⬐ masterj

How is a 60% increase in house size marginal (see my other post)

I was quoting her presentation. This 60% increase in housing size is not what the video that I linked to says. All of my points come from this and other interviews I've seen her in. If they are nonrepresentational of her views and data, then that is why, however I sincerely doubt that she would be presenting the opposite views in a presentation of about a book that she presents in the book itself.

Health insurance in 1970 didn't pay for a huge amount of things that it now pays for. For example, MRIs, viagra, birth control, etc. Far more diseases are treatable. I'd love to see her evidence otherwise.

The specific example she gives is hospital stays for childbirth. I'm out of my element here, so I will say no more about health care.

The problem her book raises is that many families take on a riskier financial profile in order to consume more

This is the opposite of what she's tried to convey in every video I've seen of her. That people are making smart decisions such as buying houses closer to good schools, which drives up prices for parents with children. That the need for a second worker leads to a riskier financial profile. She says the idea that people are fiscally irresponsible and consuming more simply isn't true.

Her data shows that costs (besides taxes) have increased less than income.

I don't know why you keep harping on income, as it just isn't the point. The additional worker is. A family needs a second worker, earning a second income, taxed at a higher rate, leaving no one to take care of children or the sick, to have the same lifestyle their parents had with only one parent in the workforce. This need for two workers makes them twice as susceptible to lost income and serious illness.

Whether she is right or wrong, I feel you are misrepresenting her argument.

⬐ yummyfajitas

I'm not attempting to represent her argument at all - I'm only relying on her data (which seems reasonably solid). I believe her presentation is representational of her views, but I believe her views are contradicted by her data. I also believe her presentation of the data is misleading (and I explained why).

The 60% number I got from a quick google search, not from her book. I didn't watch her online videos, so I don't know what she claims there. I believe the claim she gives in her book is that houses today have 1 extra bedroom/bathroom, but I don't recall her quoting square footage (the book is at home, so I can't check).

Also, as she clearly shows in her book, a family needs a second worker to have a higher standard of living (bigger house, two cars, better medicine) than their parents.

Regarding her numbers on childbirth, I truly don't understand why she would look at duration of hospital stays. Maybe if hospitals were cutting corners and performing worse it would be a bad thing. But if fewer complications requiring a long hospital stay occur, that would be a good thing. The data on maternal death rates suggests the latter is more likely: in 1970, 25.7/100,000 women died in childbirth (14.3 in 1978), compared to 13.3/100,000 in 2006 [1].

That sort of thing is why I generally ignore her opinions/viewpoints. I'm sure the data point she cites is correct, but she seems to interpret it in a really strange way.

[1] http://www.ncbi.nlm.nih.gov/pubmed/7078850 http://en.wikipedia.org/wiki/Maternal_death

⬐ masterj

This is where she addresses the change in housing. She doesn't discuss square footage, rather number of rooms. http://www.youtube.com/watch?v=akVL7QY0S8A#t=20m30s

This is where she addresses health insurance: http://www.youtube.com/watch?v=akVL7QY0S8A#t=31m10s

And here the additional risk with needing to take off work for medical care: http://www.youtube.com/watch?v=akVL7QY0S8A#t=33m40s

Also, as she clearly shows in her book, a family needs a second worker to have a higher standard of living (bigger house, two cars, better medicine) than their parents.

This is not her view, nor what she argues with her data. You are certainly free and encouraged to interpret the data yourself, but it was unclear that you were giving your own view and not her's, which is what I found so confusing. This is why my approach to this conversation was one of correction, not discussion.

I tend to agree with her analysis of the data and feel that yours is misleading. I suspect that this arises from a difference in priorities or viewpoint that would be impossible to address in this space. You have, however, inspired me to read her book, so for that I thank you.

⬐ yummyfajitas

...but it was unclear that you were giving your own view and not her's,...

From my first post: "According to her data," [...] "(you need to read carefully, she plays down the tax numbers by presenting them in a confusing manner)."

From my second post: "Her raw data is great, but her presentation is really confusing. I'm rather leery of her conclusions - she is great at gathering data, but terrible at analysis."

Not sure how I could have been clearer that I was relying on her data rather than her opinion. If I cite her again, I'll be sure to use all caps.

I'm also not sure why you feel my comparisons of square footage, # of cars or maternal death rates are misleading.

In 2007, before the financial crisis and before becoming Chairman of the Congressional Oversight Panel investigating the Troubled Assets Relief Program, Dr. Elizabeth Warren gave a very interesting talk at UC Berkeley titled "The Coming Collapse of the Middle Class."

http://www.youtube.com/watch?v=akVL7QY0S8A

At the time I thought it was a little alarmist, but in view of recent developments I recommend watching it (58 minutes, sorry). It speaks directly to the point about wages and how middle class households employ revolving credit to make up the the difference. The graphs and data are interesting.

From March, 2007, this is Elizabeth Warren giving a fascinating talk at UC Berkeley. It's one of the best lectures I've seen in quite some time.

I'm a bit disappointed in all this "bah humbug, I can manage my credit cards" attitude.

That site is specifically for people who are struggling to manage their finances. I'm not really sold that their reasons for not accepting credit cards make sense (lack of fraud protection is the biggest problem). But it makes some psychological sense. You don't see a lot of AA meetings held in bars.

Also, complaining that the average yokel can't manage their credit is like complaining that users can't deal with a command-line interface. Sure the discipline to learn it would pay off, but most people aren't wired that way. Furthermore the credit system as we have it now is designed, by very talented professionals, to prey on common flaws in the human mammal's ability to assess risk and future obligation.

Everybody has something that they're irrational about. Don't make me ask you how much time you've spent on WoW this month.

Lastly, those of us on this board are probably lucky to have relatively high-paying jobs, even if we were less-than-perfect students or tried startup life for a while. The demand is just that great. But software is a huge anomaly in the North American economy. Wages for most people have been flat, relative to inflation, for decades. And furthermore, the risk of sudden and prolonged drops in income has been much higher since 1970 or so. For hackers that means okay, okay, I'll take the stupid J2EE job. For the average North American worker, it might mean accepting some stupid low wage service job.

Anyway, the point is, most families have been making up the difference with credit cards. They're not living extravagantly and still they're falling behind. See this lecture by Elizabeth Warren, "The Coming Collapse of the Middle Class". (http://www.youtube.com/watch?v=akVL7QY0S8A) that punctures some of the myths with hard stats.

⬐ yummyfajitas

Just a note, this idea that wages have been flat relative to inflation is true. But that doesn't mean quite what you think it means. Inflation (at least CPI inflation) measures the cost of a basket of goods in dollars. But that basket of goods has grown over time! So the same wage now buys more stuff.

Incidentally, Elizabeth Warren is a propaganda artist. She has "hard stats", but they often don't mean what you think they mean. Read Todd Zywicki's debunking of her to get a flavor for how she works:

http://volokh.com/posts/1108558247.shtml

http://volokh.com/archives/archive_2008_04_27-2008_05_03.sht...

I'm not claiming the video you cite is right or wrong (it's 57 minutes long, I'd rather just skim the paper), just suggesting that she deserves Michael Moore levels of skepticism.

⬐ talboito

Ooh, do I get to call Todd Zywicki a propaganda artist, just because I disagree with him too?

⬐ neilk

Thanks, I'll check it out.

But I do recommend watching the whole presentation if you have the time -- especially before you start calling people "propaganda artists". That implies deliberate deception and razzle-dazzle to con the unwary.

If she's really trying to foment unrest among the working classes she's kind of doing it wrong, with a rather unfashionable pantsuit and a series of dull charts and graphs. I get the sense she honestly believes in her data, but perhaps she is simply honestly mistaken? Anyway, something to think about.

⬐ yummyfajitas

I'm asserting that she does something along those lines.

I'll take one example from her medical bankruptcy study. This is the study, widely described by the media as asserting that 50% of bankruptcies are caused by medical bills or serious medical problems.

http://query.nytimes.com/gst/fullpage.html?res=9C0CE2DD133BF...

You need to actually read the study rather than listen to her talks to discover that "medical problems" includes "alcohol or drug addiction" and "uncontrolled gambling."

http://content.healthaffairs.org/cgi/content/abstract/hlthaf...

This is far from the only example where she plays games of this nature. Read Todd Zywicki's debunkings of her, she seems to make mistakes like this all the time.

I suspect that congress and the media, rather than the working classes, is her target.

⬐ neilk

Your assertion was correct but vacuous.

The study you and Warren cite does group alcoholism, drugs, and gambling under medical problems. But, even combined, they form just 3.7% of bankruptcies observed. Even if you threw these out, that wouldn't affect the main conclusions.

http://content.healthaffairs.org/content/vol0/issue2005/imag...

Now, I'm not saying that this study was flawless or Warren's use of it beyond criticism. But the criticism you made was indisputably worthless. It seems to be designed to inflame passions and exploit stereotypes in a few words, and to be difficult to refute without long explanation. You should go on FOX News.

Or perhaps you did not read the study, as you advised me to do, but merely quoted someone else's critique? If so, I suggest that you re-evaluate your sources.

⬐ yummyfajitas

Like I said, "I'll take one example". The study is utterly flawed even conceptually (1), but that flaw might just be a result of some law prof not understanding basic statistics.

The example I provided is merely the simplest and most egregious misrepresentation she makes.

(1) To estimate the number of bankruptcies caused by "medical reasons", you need to compare Pm = P(bankrupt | medical cause) to Pnm = P(bankrupt | no medical cause). The number of medically caused bankruptcies is then (Pm-Pnm) x (number of people with medical cause). She only measures Pm x (number of bankruptcies with medical cause).

⬐ Tichy

"Also, complaining that the average yokel can't manage their credit is like complaining that users can't deal with a command-line interface. Sure the discipline to learn it would pay off, but most people aren't wired that way."

That is a very, very scary statement. Basically it implies that most people are doomed to live a live in dependency and slavery, because they will always depend on the goodwill of other people to not screw them over. Maybe it even implies that in the long run communism is the only workable system. I can't imagine that the majority of people is THAT bad at maths :-/ I mean it is just basic addition and substraction. Even if you can only count to 5, you could get a rough idea of the state of your credit (number on bank account has less digits than number on credit card debt == bad).

⬐ neilk

Well... I agree that some people will always be more independent than others. I think you are overstating things when you take it all the way to communism, but in my experience, a more communitarian society simply works better.

Don't think of it like we're taking people's freedom away, think of it like someone pointing out the dangerous ice on the sidewalk, or better yet, cleaning it up before someone slips on it. It's just neighbourly. (Can you tell I'm Canadian?)

I'm not saying all of society has to be nerfed -- that would be totalitarian -- but a world where "caveat emptor" is the last word makes for a crappy and unsustainable society. It's about balance.

Want evidence? Just open any newspaper. In fact, because they refused even modest regulation, the USA is now going to have to get 1970s-style-socialist and probably nationalize a lot of the economy. Which I think is a terrible outcome.

⬐ gills

The problem is, it's not addition and subtraction. It's exponents and amortization and, sorry, most folks only think linearly. Beyond that they get frustrated and reach for the next beer.

⬐ Tichy

You don't need exponents if you never go further in debt than your bank account balance. Just pay off your credit card every month. I do, have done so for years, and it is not a rule that is very hard to remember.

So you just need the "count the digits" rule of thumb to decide if you can afford to buy something or not. If you can count to 10, you could even compare the first digit of each number (credit card debt vs bank account balance).

⬐ Tichy

I wonder if I should write a book: "Count to 10. The dead easy way to manage your finances and life a happy, healthy life."

⬐ rthomas6

Sure, people know that they shouldn't spend more than they make and --Oh look! There's a sale today at the mall; I have a credit card and it's a good deal, brb.

It's about discipline more than it is being good with numbers. Sometimes I would imagine it would be hard for people to look at their bank account and see enough money in it to purchase X, so they use their credit card to purchase X only to spend the money in their bank account on something like groceries later.

⬐ jerf

"Basically it implies that most people are doomed to live a live in dependency and slavery, because they will always depend on the goodwill of other people to not screw them over. Maybe it even implies that in the long run communism is the only workable system." - except that communism only makes it harder to survive without "other people", AKA "The Party", screwing you over. With capitalism, you can get out with programs like this and discipline. With communism, you have no such option.

(One of the things I never understand about communists spouting off about capitalistic exploitation... by the same standards you're accusing capitalism of exploiting me, communism only exploits me harder and with no hope of escape. Not progress. The answer to this paradox is that the communists always assume The Party is a magical fairyland group of people which, unlike every other group of people every formed, only has your best interests at heart, whereas they grant no such fairyland powers to anybody else.)

⬐ Tichy

I am definitely NOT a fan of communism. Just saying that the statement "people can't handle credit cards" seems to imply that people are unable to act for their own good. That in turn would imply that the majority of people needs a dictatorship or equivalent to get by.

⬐ GavinB

We don't need communism. Just basic protection from loan sharks, con artists, and the worst dishonest business practices.

Libertarians may hate it, but consumer protections make the lives of most people simpler, safer, and more free. They also reward honest businesspeople, rather than rewarding the con artists who are the least detectable.

⬐ Tichy

I'd like to point you to PG's recent article. Additional checks end up biting you in the back.

Also, how are consumer protections supposed to work? I think they would require a hypothetical "perfect" state employee who is 100% honest and 100% omniscient. Even if a few of such people would exist, I doubt that there would be enough of them to monitor ALL kinds of economical transactions.

Rather, I suspect the more regulation there is, the more corruption or hidden taxes will there and be a burden on society. Even today it almost feels as if one can't do anything without the protection of an army of lawyers. More regulations => this only gets worse. Lawyers will be leeching off us, with the support of the state.

Also the current crisis can not simply be blamed on crooks. Everybody was playing the game, down to the average "normal, honest" home owners. Plus, people will always act selfish, and in trades, try to get the better deal of the involved parties.

⬐ neilk

Additional checks end up biting you in the back.

I think what he said was that additional checks have a cost that must be weighed against the benefits.

Funny, you are the one who is touting himself as able to handle complexity. And yet in this debate you can only perceive black and white. If communism is bad, that means that ALL regulation is bad! And if some people need extra help or training to deal with credit, that means that they're SHEEP who will be the wards of the state forever!

I am sad that nobody has taken up the point that I was trying to make; that we all need some help from time to time. Hackers have an easy time bouncing back from rotten luck, illness, or poor life choices; things that would cause other people to eventually amass an unsustainable debt.

⬐ Tichy

I am all for helping people. I am just not sure who could be trusted - I don't necessarily trust the government to make the best choices for the people. And in this crisis, there is too much scapegoating going on for my taste. And calling for regulations seems to be an extension of that.

If you call for regulations, first tell me why the market failed to regulate itself (that is weed out the crooks, if the crooks are to blame)?

If you are calling for more transparency, maybe I can go with you. But I don't think complex rulesets about who should give credit and who should be allowed to get credit are the way to go forward.

I don't want to claim to understand what pg wrote, but my understanding would be he wrote among other things about something exactly like that: more regulations means it becomes more costly to give somebody credit. Therefore there will be less firms giving credit, and "smaller people" will have more problems getting credit because they are not worth the bother. In the end there will be a monopoly of a few big firms who handle credit.

Also, what if housing prices really would have risen forever, and regulations would have prevented people from gaining from it? Who is to say in advance what course of action is right? Or would you say everybody who took out a mortgage was a crook?

⬐ GavinB

I thought PG's article was pretty spot on. He wanted regulatory actions to be viewed in the broader context with an understanding of the net drag of all the regulations. If we could convince elected officials to do this sort of analysis, we might be able to weed out a lot of the unnecessary inefficiencies.

That said, the solution to an overabundance of regulations is not necessarily to utterly eliminate them, and the lack of perfection should never be an excuse for not performing an action when the consequences of inaction are worse.

I won't pretend to know what should or shouldn't have happened in the current financial crisis. My post was really directed more toward basic consumer protections -- things like truth in advertising, not selling rotten meat, being upfront about the terms of payday loans, etc.

> This is especially important in US because the cost of living is high

Cost of living in the US expensive? Have you traveled to Europe or Japan? Life is way more expensive in Europe, and in some European countries salaries are way lower than in the US.

It's raising kids what is more expensive in the US than in Europe:

* ‘Why Middle Class Mothers and Fathers Are Going Broke’ http://www.msnbc.msn.com/id/3079221/

* The Coming Collapse of the Middle Class http://www.youtube.com/watch?v=akVL7QY0S8A

* The Two-income Trap By Elizabeth Warren, Amelia Warren Tyagi http://books.google.com/books?hl=en&id=_IFTf-_9fSsC&...

Solution: Move to Europe. I did the opposite. I moved from Europe to the US, but that's because I don't have kids.

I was watching a video by Elizabeth Warren of Harvard Law School on the topic the other day. The gist of it is (I think) basically that housing and healthcare are taking up most of the money of the middle class. In the 1970-ties a single earner could bring in enough money to support the whole family. Now in the middle class both parents have to work, which doubles the financial risk for the family if one of them (for example) looses a job. If you are interested: the link is http://www.youtube.com/watch?v=akVL7QY0S8A