This has me thinking about one of Tyler Cowen's hypotheses in The Great Stagnation, that things like the internet entertain us immensely for so cheap that we're willing to live on less, need to work fewer hours, and we are therefore less productive (meaning slower GDP growth). This is partly why I frown on OWS-type railing against income inequality and calling for greater redistribution. A local Hebrew professor pointed out at church last week that Solomon's words in Ecclesiastes are backed up by economic studies of Richard Easterlin. Income, in and of itself, does little to predict or improve happiness. Relationships, access to health care, internet, etc. are more important.
One chart I like to share with my Principles of Microeconomics students is one displaying the real cost of various household items over time as Mark Perry often does on his blog. Items like microwaves and refrigerators haven't changed much over the years, they bring the same basic benefits. While median wage growth in real terms may have stagnated since the 1970s, the hours worked to obtain these items has decreased significantly as their prices have fallen:
"In other words, with the income earned working 121 hours, the typical consumer 45 years ago in 1965 would have only been able to purchase a single appliance - the electric oven pictured above, compared to the eight appliances that a typical consumer could purchase today with the income earned working 121 hours."In terms of appliances and internet speed, those in the top 1% aren't able to buy a whole lot of improvement with their money, and those in the bottom 1% are able to buy much more than they ever could per hours worked. I get an awful lot of free or 99 cent apps that do things that would have been unthinkable or really expensive (like calculators) a few decades ago.Couponing and thrifting gives us access to more items cheaply than ever before, and those don't show up well in official statistics.
Before I'm accused of predicting some type of Wall-E reality where nothing else needs to be produced and nobody works, it's obvious that there is more to be invented and discovered (teleportation, for example) and our quest for more and better innovations will continue to fuel economic growth. However, as Cowen projects, we could be in for a much slower period of growth as we substitute from hours worked into leisure. Those who become unemployed may choose to take longer to find a job, they can get by more easily on their savings and unemployment checks. A slower-growth economy with higher structural unemployment than before shouldn't shock us.
What items do you need to feel "content?" What level of income provides those items?