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Monday, June 29, 2015

Lies, Damn Lies, and Government Statistics: Part III

The concept that a single inflation rate can describe how everybody feels the effects of price changes over decades in basically absurd. The economist Arnold Kling has an interesting example:
In 1965, the St. Louis Cardinals played their home games in Sportsman’s Park (aka Busch Stadium I). The most expensive seat in the ballpark, a box seat, cost $3.50. A blue-collar worker, who earned about $2 an hour at the time, could treat a family of four to a game in these most expensive seats for less than one day’s pay.
These days, the Cards play at the new stadium, Busch Stadium III. A typical blue-collar worker makes something like $20 an hour The cheapest seat in the stadium still costs less than an hour’s pay. But the most expensive seats cost somewhere north of $800. It would take a month for a blue collar worker to earn enough to treat a family of four to the best seats in the ballpark.
In 1965, my family would've thought nothing of buying the most expensive seats. Now, there's no way I could afford them.

What's really gotten expensive, and is too heavily weighted in the Consumer Price Index when considering how the middle and lower classes are faring, is the cost of exclusion: things like caviar, high-end wines, and exclusive seats at the stadium. Imitation crab, Two-buck Chuck (Charles Shaw wines), and general admission at the ballpark, have had a far, far lower inflation rate than exclusive items.

To me, wine inflation is the most interesting. The cheapest bottle of wine in the mid-1970s was made by Boone's Farm. It was $1.79 a bottle. It was really terrible, but hey, it got you drunk if you could choke it down. The Two-buck Chuck Chardonnay is $2.99 a bottle, 40 years later. We California wine snobs disparage it, but really, it compares quite favorably with the very best wines I had during the 1970s, and once in a great while, I happily drink it. According to CPI inflation calculators, $1.79 in 1975 is equivalent to $7.81 in 2015, so the quality is up and the relative price for good low end wines is down.

I'm not sure what the most expensive bottle of exclusive wine in 1975 was. But it doesn't matter, because we can be sure it was orders of magnitude less than the £122,380 (about $180,000) a bottle folks paid for Chateau Margaux 2009. And there's quite a number of wines that push $10,000 a bottle.

It's become really expensive to live the high life.

45 comments:

Harry Eagar said...

The typical blue collar worker makes $20?

Bret said...

I provided a link. I'll let you argue directly with the economist who picked that number.

On the other hand, you can pick any plausible number you like and it doesn't change the gist of the post one bit.

erp said...

In the 60's and 70's when the three kids were young, we used to attend Knicks basketball games regularly and as a treat went to Horn & Hardart's for dinner beforehand. We also went to a lot of Mets games during which they consumed copious amounts of hot dogs and soda. We also took them to Broadway shows, the ballet (for those who were willing), the circus, etc. all on an income of less than $20,000 which translates to about $125,000 in 2015 dollars.

No way would that cover those activities today.

Peter said...

Bret, do you think this phenomenon is one to worry about? Is it a predictable consequence of prosperity or a sign that all is not right?

Clovis e Adri said...

As I understand, this is just capitalism as it should be.

As Skipper stated the other day, companies should charge the maximum they can, delivering the minimum possible for that product/service/whatever.

Erp's generation was way more modest and, if Knicks were charing tickets too high, they just wouldn't go. Nowadays there is a far larger amount of people who would pay whatever they charge, so they charge it. Why shouldn't they?

Erp can still pay for lots of cheap and good fast food for her grandchildren, I am sure. And as Bret recognized, some cheap wines today can be better material than some expensive stuff of past.

In "absolute" (if there is such a thing) all the products above got cheaper - you can have wine, the hotdogs and watch NBA at TV with Ultra High Definition for little dollars.

Of course, in "relative luxury", as in "set the price high enough so the ones paying will feel special", the more a society gets richer, the higher luxury will cost.

IOW, it is all very standard economics, isn't it?

erp said...

Clovis, businesses should charge whatever they can get and if people like us can't take their kids to certain entertainments, they'll find alternate things to do. I wasn't complaining about it, only expanding on Bret's post.

Point of correction: Neither my grandchildren or anybody else eats fast food junk under my eye except the "old man" who is incorrigible and over the years has paid the price for it with worsening health problems.

You youngsters take note.

erp said...
This comment has been removed by the author.
Clovis e Adri said...

So hot dogs aren't fast food in your dictionary? Interesting, neither in mine, nor hamburguers or pizzas, I think they are all very healthy :-)

erp said...

Hot dogs at the ballgame aren't fast food as anyone who's ever stood on line at a ballpark food stand can attest. They, like cotton candy, etc. are a ritual and treat and not to be confused with food. :-)

Bret said...

Peter asks: "...do you think this phenomenon is one to worry about?"

There is more than one phenomenon here. The exclusivity phenomenon is as old as complex life, where the biggest lion gets the lionesses exclusively, and within the realm of homo sapiens, the king/nobility get exclusive stuff, the politburo gets exclusive stuff, and the very rich get exclusive stuff. I don't think that phenomenon is much worth worrying about. If exclusivity isn't bought with money, it will be bought with power, and always will be.

The phenomenon I'm identifying in this post is the distortion in reporting how typical (median) people are doing materially. If exclusive stuff like high-end wines are included in the calculations (which they are), it makes it seem like the middle class and poor are doing much worse than they actually are relative to the past. But that doesn't make sense, since they have more living space with more amenities (such as air-conditioning), more transportation, more calories, more entertainment, and more products and services. And relative to the near-rich, they've made more material progress over the last several decades, since the near-rich generally had more hope of achieving some level of exclusivity.

Hey Skipper said...

[Clovis:] As I understand, this is just capitalism as it should be.

As Skipper stated the other day, companies should charge the maximum they can, delivering the minimum possible for that product/service/whatever.


Exactly. Econ 101 stuff. Except for marxists, who never get that far.

I said that in response to this: [Harry:] erp I don't get packages timely because FedEx loses money on me and -- following its business model of 'least service at highest price' ...

What was missing, glaringly so, is that somehow FedEx doesn't offer nothing and charge an infinite amount for it. The answer is so obvious that you'd expect even a marxist to figure it out: UPS. DHL. TNT. etc ...

Of course FedEx isn't going to deliver to Harry's house, because unlike the USPS, FedEx can't jam its hand into your pocket and remove a stack of twenties whenever it feels like it.

[OP:] The most expensive seat in the ballpark, a box seat, cost $3.50.... But the most expensive seats cost somewhere north of $800.

That is an unfair comparison. There were no luxury box seats back in the day. I just looked at LA Dodgers tickets for July 6 -- darn good seats cost $100.

Past that detail, which probably doesn't change your point much in any event, the question is why tickets have gotten so much more expensive.

Two words: Free Agency.

Which, if memory serves, came about in the mid-1970s, and vaulted professional athletes from well-off to wealthy. In turn, that means the upper 1% got wealthier, by definition. And also, by definition, it substantially contributed to the inequality that has progressives and Picketty so excercised.

[Peter:] And relative to the near-rich, they've made more material progress over the last several decades, since the near-rich generally had more hope of achieving some level of exclusivity.

Exactly. Consumption has flattened. There is almost nothing the rich have that the far less well off do not.


Peter said...

As I understand, this is just capitalism as it should be.

Exactly so, Clovis. It's called "He who dies with the most toys wins".

I don't disagree with Bret and Skipper, but I have to wonder whether all that private charity and folks taking care of one another that erp claims will cover our social needs will happen before or after the rich buy that $10,000.00 bottle of wine. Sometimes it's worth remembering that, while Protestantism facilitated capitalism by coupling virtue and the acquisition of wealth, it didn't couple virtue and spending it ostentatiously.

erp said...

Peter, you have the wrong tense -- erp claims will should read erp claims did. She also claims the poor were far better off before fascism for all the reasons already mentioned.

BTW - the rest of us didn't know what the "rich" did with their money until they became celebrities and had TV shows made about their life styles and had their comings and goings breathlessly recorded in magazines and other media and truth be told, it's none of our business how they spend their money -- same as it's nobody's business how we spend ours.

Clovis e Adri said...

Bret,

---
There is more than one phenomenon here.
---
I disagree with that. There is only one phenomenon, but it can be described in a continuum instead of zero or one.

---
If exclusive stuff like high-end wines are included in the calculations (which they are), it makes it seem like the middle class and poor are doing much worse than they actually are relative to the past.
---
That's not necessarily true. More important than what enters into the calculation is the weight it enters with.

So what if high-end wines are there? If people spend only a very small amount of their income with wines (which I suppose to be true), it makes a blip of a difference in the end.

---
And relative to the near-rich, they've made more material progress over the last several decades, since the near-rich generally had more hope of achieving some level of exclusivity.
---
I hope you do realize you are comparing something objective with another entirely subjective. Apples and oranges. In my view, the near-rich are just not as near-rich as they thought if they did not achieve that exclusivity.



Skipper,

---
Exactly. Consumption has flattened. There is almost nothing the rich have that the far less well off do not.
---
Let's just make it clear that, if it is true, it's only in your world. All that affluence is not true down here, I can tell you.

Bret said...

Peter wrote: "...before or after the rich buy that $10,000.00 bottle of wine..."

Yeah, I'm not sure whether the guy wrote that $400 million check to Harvard before or after he drank the $10,000 bottle of wine. Good question.

Peter said...

LOL. Well-played. Lucky for Harvard he doesn't follow Great Guys Weblog on the benefits of a university education.

Harry Eagar said...

'What was missing, glaringly so, is that somehow FedEx doesn't offer nothing and charge an infinite amount for it.'

Pretty close, though. And if you think that doesn't happen, then I'd like to introduce you to my friend, the widow of the former financial director of the Nigerian Oil Ministry.

Also, I wish you would quit spreading the falsehood that the post office gets a subsidy. It doesn't.

Bret said...

Harry wrote: "I wish you would quit spreading the falsehood that the post office gets a subsidy. It doesn't."

What do you call this?

American taxpayers give an $18 billion gift to the post office every year

Harry Eagar said...

Oh, you mean like the 'recreational benefits' used to justify damming rivers in the west?

erp said...

The reason California is out of water is precisely because the really really nutso lefties out there refused to damn the rivers.

Harry Eagar said...

They did dam them -- not damn them -- but don't let actual facts get in your way.

Bret, are you alleging that any private operator has ever wanted to compete with what the post office does -- deliver to every address all the time?

Of course not. The law was to protect the social, civic service from antisocial predators (Skipper works for one of the most antisocial corporations, which is saying something, considering the competition for that honor).

I have been saying and saying that free marketeers do not understand the value of networks. Your link is as good proof as I could ask for.

Hey Skipper said...

[Hey Skipper:] 'What was missing, glaringly so, is that somehow FedEx doesn't offer nothing and charge an infinite amount for it.'

[Harry:] Pretty close, though.


FedEx profit margin

You said you were a business reporter. Really?

Bret, are you alleging that any private operator has ever wanted to compete with what the post office does -- deliver to every address all the time?

No, I'm pretty certain Bret specifically said that your assertion the USPS doesn't get an $18B subsidy to be in collision with the facts.

I have been saying and saying that free marketeers do not understand the value of networks.

And repetition doesn't make it any less vacuous.

So please tell us, what is the value of the USPS monopoly on first class mail delivery?

erp said...

IMO it's pretty certain that if the post office hadn't been taken over by a public service union, it probably would have modernized and by now the model of a post-person carrying a heavy leather bag on his/her shoulder and popping paper envelopes in a slit in individual doors would be as quaint as the buggy whip.

Harry Eagar said...

Everybody gets mail.

Yes, Skipper, Bret copied an allegation that a monopoly exists, but the reason it exists you have already told us: private business cannot match the Post Office -- and will never try, although your jerk employer did try to destroy the post office to enhance his personal fortune.

Destroy, not substitute for.

It s against 'fireproof hotel' predators like FedEx that government must regulate.

Bret said...

Harry wrote: "Bret copied an allegation that a monopoly exists, but the reason it exists you have already told us: private business cannot match the Post Office..."

Not only does the Post Office fleece the taxpayer (or more accurately fleeces me so you can live the good life in Hawaii and have me pay for your shipping), but, by law, nobody is allowed to compete with it: "the postal monopoly ... has been in place for over a hundred years. It consists of two parts: the Private Express Statutes (PES) and the mailbox access rule. The PES refers to the Postal Service's monopoly on the delivery of letters..."

In other words, not only is mail hugely subsidized, no private organization is allowed to compete with it. Of course, even without it being illegal to compete with USPS for first class mail, it probably would be touch for "private business [to] match the Post Office" because of the subsidies.

Yes, government can always beat free markets by fleecing the taxpayer and/or making it illegal to compete against the government organization.

Hey Skipper said...

[Harry:] Everybody gets mail.

Is not an answer to

Hey Skipper:] So please tell us, what is the value of the USPS monopoly on first class mail delivery?

In fact, it is a perfect tautology.

So how about trying again?

Harry Eagar said...

Actually, it is an answer, because the alternative is that your granma who still lives on the farm outside Minot, North Dakota, doesn't get mail. That everybody gets mail is a social good, as well as politically desirable.

That a handful of socially irresponsible men should get rich by destroying an important social good is not desirable.

Because we have a public mail system, everybody gets mail. Because we do not have a pubic transportation system, poorer or unfortunate people who live outside cities have no way of getting outside their home areas. The private delivery system -- even with the assistance of a system of public highways -- will not provide service.

Last week someone I know had a medical emergency while traveling through Havasu City, Arizona. He was soon out of the hospital but told not to drive.

While Havasu City is far from other places, it is not isolated -- it is on a main route. But if you do not have a car the only way in or out is to walk, or perhaps depend upon the kindness of strangers. It's a long hot walk in July.

Clovis e Adri said...

Don't they have cabs in Arizona?

erp said...

Harry, obviously even if there were public transportation available in Havasu, it wouldn't be door-to-door, so some arrangement would need to be made to cart the old party to the bus or train.

Rather than build a hugely expensive public transportation system that nobody including old lefties like yourself prefer to the convenience of their own cars, why not just put unfortunates like your friend in centrally located warehouses where their pathetic needs can be conveniently disposed of by purveyors of Obama insurance -- the media really needs to stop calling it Obamacare since the ridiculously complicated and convoluted plan has nothing to do with medicine or health.

We live in a place full of retired people and absolutely nothing at all resembling public transportation is available within 25 plus miles and after over 25 years in the area, I haven't ever seen a geezer thumbing a ride or lying dead by the side of the road.

People taking care of people. There's a wonderful group of volunteers using their own cars and gas who pick up people and take them to and fro medical appointments -- then there are friends and neighbors, and taxis....

The county has a jitney bus that will come by to take people to various places around the area -- courtesy of county taxpayers.

Really. It works without a bunch bureaucrats showing us the way. I somehow doubt Havasu City has different kinds of people. So if your friend is unable to get to the doctor, perhaps he/she should stop looking for handouts and start he checking out what's available and if nothing is, start a volunteer service.

Hey Skipper said...

Actually, it is an answer, because the alternative is that your granma who still lives on the farm outside Minot, North Dakota, doesn't get mail.

Oh what a load of bull crap. It was not an answer because it was perfectly circular: it is valuable because it is valuable. Being a marxist requires a great deal of sloppy thinking, but this is over the top, even by that standard. The word "valuable" has a meaning, one you are apparently not familiar with.

That's bad enough. The moment you start trafficking in waffle like "social good", then all reasoning goes by the board. Why is it a social good to me that other people pay a considerable amount of money so you can get your mail? Which is more valuable, $18B a year spent on something else, or every place there is getting mail everyday?

Oh, BTW, that is as false a dichotomy as I have ever seen. You insist, with every bit as much rigor as every other assertion on this thread, that the alternative to a USPS monopoly is people in outlying areas not getting mail.

Bollocks. I can think, without spending a great deal of time, of at least a couple ways to square that circle. Your inability to do so is no brake on reality.

But your sloppy thinking doesn't stop there. You accuse FedEx of gouging you, but even a superficial glance at its profit margin, something you'd think a business reporter would do as a matter of course, clearly demonstrates that FedEx is charging you what it costs; what you demand is charity.

Caution: your entitlement mentality is showing.

Because we do not have a pubic transportation system, poorer or unfortunate people who live outside cities have no way of getting outside their home areas.

...

While Havasu City is far from other places, it is not isolated -- it is on a main route. But if you do not have a car the only way in or out is to walk, or perhaps depend upon the kindness of strangers.


Harry, does it ever occur to you that your utterances aren't necessarily true simply because you spewed them?

I now live in a place with an extensive public transportation system. In a densely populated urban area, that makes sense. We only use our car anymore to go on trips.

But it isn't cheap. And outside urban areas, even here in Germany, valuable isn't free.

Harry Eagar said...

No bureaucracy involved but there's a county jitney. Skipper, I think you need to direct your lexicographical musings at erp.

As for Fedex, it took Fidelity's money to deliver mail to me and didn't deliver it. Gouging in my lexicon.

I'll just take it as read that having a popular government requires that all its members -- we're a collective, a fact that was celebrated (in a nicely coordinated fashion) all over yesterday -- be in contact with one another. Until the rise of the Tea Party, this was never a controversial notion.

Harry Eagar said...

BTW, Skipper, if I follow your link, I discover that there is no bus service to Havasu City. The closest stop is 66 miles way -- a hot walk in July.

Peter said...

Here's a tip for your friend for next time, Harry.

I'll just take it as read that having a popular government requires that all its members...be in contact with one another

Bizarre than anyone would take to the Internet to argue that means the Post Office.

erp said...

Harry, our little county providing jitney service for elderly and disabled residents isn't a bureaucracy. It provides a wanted service at practically no cost. Also, I think the drivers are volunteers who have valid chauffeurs' licenses.

It hardly deserves comparison with the multi-billion dollar public transportation system your cohort want that is and will be nothing but a boondoogle and leech taxpayers money.

This is small service we taxpayer provide on the same scale as the local library or other niceties like the skateboard park a bunch of volunteers put in at the local park or firemen getting a cat down out of a tree.

It's what living in the U.S. was all about.

Bret said...

Peter wrote: "Bizarre than anyone would take to the Internet to argue that means the Post Office."

LOL.

Harry Eagar said...

Not everyone has access to the Internet. Probably you don't know anyone who doesn't, but I meet them every day.

The Internet has not been a net positive for information exchange, since it is based on theft and destroyed newspapers without replacing the service they provided.

If you follow Skipper's link you will immediately discover a flaw in the Internet. The top hit shows a bus station in Havasu City, but there isn't one. The yp algorithm generated imaginary information, and even so worldly a traveler as Skipper fell for it.

It would be far more costly to get a newspaper -- particularly a local newspaper -- to manufacture nonsense that way.

Clovis, to answer your question, no, there do not appear to be any taxis in Havasu City. If you are there, you can charter a limo or a bus to come get you from a distant town, and perhaps take a shuttle but then only to certain destinations where you may not wish to go. The poor can walk.

erp said...

How did the "poor" get to Havasu?

Bret said...

Harry Eagar wrote: "Not everyone has access to the Internet. Probably you don't know anyone who doesn't, but I meet them every day."

Really? How is that possible given that there are 6 public libraries in Maui with free Internet access for Residents? Or by access do you really mean they don't have broadband access from every nook and cranny in their home? Note that my business doesn't have USPS pickup/delivery directly to the office (we have to walk a ways to get to a conglomeration of mailboxes), so USPS doesn't deliver everywhere either. Of course, FedEx, UPS, and others deliver directly to our office.

Harry Eagar wrote: "...since it is based on theft and destroyed newspapers without replacing the service they provided."

And I guess the automobile industry is based on theft since they destroyed the horse and buggy industry without replacing their rustic value.

Harry Eagar wrote: "...The top hit shows a bus station in Havasu City, but there isn't one..."

Do you mean Lake Havasu City? I can't find a Havasu City in Arizona (or anywhere else). If you mean Lake Havasu City, there is a city transit services building that, looking at pictures from google earth, shows about 50 buses parked. What do you suppose they do with those buses? If you don't mean Lake Havasu City, please give me the GPS coordinates so I can find the town you're talking about.

Lake Havasu City does have taxis, Uber, and Lyft. The difficult to find "Havasu City" apparently doesn't have anything at all, including people.

Hey Skipper said...

[Harry:] As for Fedex, it took Fidelity's money to deliver mail to me and didn't deliver it. Gouging in my lexicon.

Which is a sure sign that in everyone else's lexicon, another word is required.

If FedEx took the mail from Fidelity, and was responsible to take it to your door, then Fidelity will get its money back -- FedEx has a service guaranty. On the other hand, if FedEx took mail from the USPS in the US to move it to Hawaii, and then the USPS was responsible for moving it to you, then there are a whole lot of places it could have gone wrong.

In the first case, not gouging. In the second, well, you don't even know what the second case is, do you?

The even more glaring question is: why the heck are you getting dead tree mail from Fidelity?

Peter said...

Neither snow nor rain nor heat nor gloom of night stays these couriers from getting me my tax notices, charity appeals and all manner of unwanted commercial crap.

Harry's dogged defense of the Post Office and his weird argument about democracy hanging on everybody being in contact with everybody else is a great example of how reactionary today's left can be. Many of them see the 60s or 70s as a golden age and consider that history has taken a wrong turn ever since. Like someone calling for public income support for blacksmiths after the car was invented, they're searching for a way to claw back time. I know a very bright leftist whose economic criticisms of market fundamentalism can be informed, well thought-out and at times devastating. I take him seriously and like to think I am not so ideologically smug I can ignore him. But when he moves into prescriptive mode, he can go all loopy and come out for things like government support for family-run corner bakeries 'cause their products are just so delicious and healthy.

Harry, here is the deal. The Post Office was once a necessity and there was a strong argument that private interests simply couldn't offer the necessary universal service for a number of technological, communications and demographic reasons. Then there was a transportation and communications revolution that completely changed both demand and the cost of supply. Folks got a little tired of being held to ransom by postal strikes, so they naturally began looking for alternatives, and they found them. Especially those nerds who did clever things with computers in their garages. With all due respect, I'm skeptical your real concern is some computerless recluse in the remote regions of Maui (who we all really want and need to keep in touch with). I think you are fronting for the postal union.

Harry Eagar said...

The libraries are not open every day and have only a few public terminals. They are far apart and not easily reachable for many (but more so now that we have some limited public buses).

It is amusing to hear people who don't miss newspapers. Probably they did not read them when they were still an important source of news, so they don't know what is missing. It is missing. (RtO recently supplied an illustration of how that works.)

Skipper, there is a third possibility. I explained it earlier.

erp said...

Perhaps the reason people don't miss newspapers is they are no longer purveyors of news, but propaganda outlets for the left.

Harry Eagar said...

How would you know? You don't read them or so you say.

PS: I saw a coffle of oldsters condemned by a death panel being herded off to a camp in Ft Pierce the other day. Why isn't this being reported?

erp said...

I started reading newspapers and everything else I could get my hand on 75 years ago when they were worth the couple of coppers they cost.

It's been down hill from there.

Harry, I'm getting suspicious that you no longer live on the side of that mountain in Maui. Ft Pierce must be quite a bummer.

Reporting on the coffle's journey won't help get Hillary elected or move the narrative forward, so it's not on the fourth estate's radar.

Hey Skipper said...

[Harry:] Skipper, there is a third possibility. I explained it earlier.

Since, by my latest count, you have refrained from explanations in preference to prununciamentos, I doubt it. But I could be wrong, so by all means quote yourself.

PS: I saw a coffle of oldsters condemned by a death panel being herded off to a camp in Ft Pierce the other day. Why isn't this being reported?

Link?