Saturday, 28.03.2020 – The Cost Of Thriving

Link of the day: The cost of thriving (German). Also this article on Vox for the counterarguments and a full report

My friend Jan alerted me to this piece about the inflation and the cost of living and I found it quite interesting. The basic simplyfied argument is this: Inflation doesn’t capture the true rise in costs, because it doesn’t reflect what you actually need to have a decent living standard. A TV that is 3 times as good and twice as expensive than the TV 10 years ago would be treated as cheaper according to the ordinary inflation rationale, but it is still more expensive. Same goes for example for cars. They have become much better, but also more expensive. If your car is better, but you can’t get a cheap but slightly worse car, you still end up paying more. Critics respond by pointing out that the second hand market makes sure you can actually attain goods for a lower price than ever before. Instead of buying a new car for 20k, you can also buy a used one for 5k and therefore profiting from the overall improvement in price per unit of quality.

Still, this is quite interesting, because it factors psychological concerns in. If the current living standard demands you own a smartphone, you have a car, you have a new TV and you send your kids to college, then you end up paying more and struggling more. In the 90s, Homer Simpson was a lower middle class guy that people could make fun of. Homer had no college degree or special education. And yet he was able to financially support a family of five on his own and guarantee them a decent standard of living in their own house. Today, that would be considered quite an achievement.

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