A factor the author didn't really touch is housing. By 1973 many places in CA at least were starting to ban dingbat construction via ordinance against back out parking setups. We also see many cities in CA and elsewhere downzoned around that time. LA went from being zoned for over 10 million people in 1960 to being zoned for just 4.2 million and being built to almost 95% of its zoned capacity by the 2010s.
I'm not sure exactly the relationship between wage growth and restriction of housing growth but the fact that these phenomenon seemed to happen in lockstep merits some reflection. Prop 13 also came in 1973.
ty6853 · 4h ago
The most hilarious thing about housing in california is they had a chance to use ADUs to lower housing prices but of course they totally rigged the game by outlawing splitting off ADUs as a seperate property, meaning all they did was making housing even more expensive because the value of a plot now includes the additional value of the potential to be a landlord but no way to split that value into an economical individual home.
They managed to find the one fucking way to make additional housing make being a new homeowner even more expensive, and I believe it was not by accident.
onlyrealcuzzo · 3h ago
It is intended that all of the policies make land more expensive...
No politician wants more affordable housing in a place where >65% of voters are property owners...
Ericson2314 · 3h ago
It's good for land to become more valuable. We want land prices to go up, and housing prices to go down. All that means is density is increasing faster than land values.
Nothing against allowing lot splits, but this is the wrong reason to be for it. The reasoning in the previous to replies reaks of "homeownership is more virtuous than renting" which is not true. And besides, if you really want more homeownership, the most important path forward is condos, and thus condo defect liability reform.
ty6853 · 3h ago
On its own higher housing density should lower land prices. All else equal land prices are both cause and effect of housing access.
In the philosophical extreme, if zoning allowed infinite density you could stick a hong-kong style condo skyscraper for the entire population on 0.1 acres and the rest of the land would provide no additional housing utility pushing prices down to whatever the value it is as farmland/business/recreation. The housing value of surrounding land would plumet.
Low land prices are indicative of less restrictive zoning. In more restrictive zoning that punishes building houses on small plots, land becomes more valuable because the land is the license to build a house. i.e. where I live I had to buy more land than I needed because without it I could not build my house, which drives up land prices (increased demand).
The reason why california ADU increase parcel prices is because it prints an additional house license while being illegal to split it off. Otherwise you would be left with two cheaper parcels, although in sum they may be more expensive, but you would still pay less for enough land for license to print a house.
Ericson2314 · 3h ago
> On its own higher housing density should lower land prices. All else equal land prices are both cause and effect of housing access.
>
> In the philosophical extreme, if zoning allowed infinite density you could stick a hong-kong style condo skyscraper for the entire population on 0.1 acres and the rest of the land would provide no additional housing utility pushing prices down to whatever the value it is as farmland/business/recreation. The housing value of surrounding land would plumet.
No I mean the land value of where the density is / right next to it. In your example, the land with the crazy tower / right next to it would be incredibly valuable.
If other areas use land value, that's because the land value is being concentrated in/around the dense areas.
When we talk about upzoning, we want to not only do less sprawl, but also increase overall population (growth will attract population). The exurbs will loose land value, but the cities will gain immense land value, and the suburbs will gain some land value too.
ty6853 · 3h ago
At the time of creating the condo the 0.1 acres would be substantial cheaper. If I have thousands or millions of acres to choose from and I can pick whatever 0.1 acres I want my demand for housing is 0.1 acres and the supply is still all the available land. Pushed to the mathematical limit the housing value of the land approaches zero for the land you buy for your hong kong condo, since demand is now near zero and supply far outstrips it. That is, the cost of the 0.1 acres to the developer is about the same as all the worthless for housing land surrounding it.
Since a large portion housing is currently locked up in 30 year mortgages in a once in a lifetime COVID era near 0% loan that people will not give up for less than a king's ransom, we should be especially sensitive of price of land for new construction, and that will continue to be a dominant factor in rental costs and home prices.
bryanlarsen · 4h ago
Housing prices did not outpace inflation in 1973 - 1993. The periods of significant house price inflation (early 2000's, last 15 years) seem to correlate better with periods of wage increase rather than the periods of wage stagnation.
yonran · 4h ago
Proposition 13 was 1978 (99 years after the publication of Progress and Poverty).
asdff · 4h ago
Thanks for the correction
millipede · 4h ago
There's a great graph showing the wages stagnating compared to GDP growth. It looks like wage's haven't gone up. But, when adding back in employer provided health coverage and other benefits, the graphs align again. It just wasn't in dollars. TFA briefly mentions it but I think it should be front and center.
Buttons840 · 3h ago
What you've described is worse than flat wages.
The business-owner class benefits from the health system, because the business-owners are the gatekeepers of healthcare (typically, people get healthcare only through their employer). The worker class is less likely to benefit from the free part of the "free market" because their healthcare is tied to their employer; it's just harder to do anything except work a typical 9-to-5 for the benefit of a business-owner.
The healthcare industry also benefits because they get to suck up a large portion of the GDP; trillions of dollars.
So wages aren't only flat, but the wage growth that should have happened instead went into a corrupt system. Wages aren't honestly flat because of natural market forces, they are corruptly flat.
mbrumlow · 3h ago
> The business-owner class benefits from the health system,
That is a new argument, coming from health care is a right and good for society?
It’s kinda crazy you want to dismiss this simply because it benefits some group of people you don’t like.
In any se your argument is this is worse. And I argue this is good, fair and meritocratic , and sustainable.
While the USA has wealth, you can simply expand your idea beyond the walked garden of a single country and to the world stage. There is no way with today’s tech and cost of labor could we ever give free health care to everybody. World wide there are far more people who exist, than people who exist and contribute back to society.
The dream of unlimited free healthcare can only be archived once > 90% of humans are producing more than they consume, which war are no where near even in the richest of rich, the USA.
jeezfrk · 2h ago
That seems utterly disingenuous as nearly every single other advanced economy IN THE WORLD has near free health care.
archagon · 2h ago
How am I supposed to start a small business if I’m dependent on my big corpo job for healthcare?
Without a robust social safety net, only the rich and well-connected can afford to take economic risks. Eventually, this just results in a flat-out oligarchy.
username135 · 2h ago
you marry someone rich enough to allow you that freedom
/s
temp0826 · 3h ago
Without digging in to details that's an interesting thought. If modern american healthcare costs were to (magically) get under control, would wages become reasonable (per other living expenses) again?
SilasX · 3h ago
That feels like sleight-of-hand though.
Previously (example numbers): Median compensation is $55k + health insurance.
After: Median compensation is $55k + health insurance.
"So nothing changed?"
"Wrong! Health insurance costs more for the same benefits, so really, you got a raise!"
Yeah, sorry if I'm not celebrating.
JackYoustra · 3h ago
The point is that there's enormously different implications. If comp stagnates less than productivity then you have a huge bargaining problem.
If comp keeps pace with productivity but is all eaten up by healthcare costs, either something caused people to willingly spend much more of their money on healthcare costs than they'd do earlier (aging maybe? obesity maybe?) or something is going crazy with healthcare expenses.
I've heard persuasive evidence that if you control for obesity the costs look ok actually.
apercu · 3h ago
> "Wrong! Health insurance costs more for the same benefits, so really, you got a raise!"
It's even worse than that, health insurance costs more for less benefits.
notepad0x90 · 3h ago
I know this is being overly reductive, but I think it sort of boils down to not enough minimum wage workers that vote and everyone else either not caring about low-wage workers, being held hostage by "right to work" (means you can get fired any time for any reason) laws, or relying on job hopping for wage increase.
I have seen companies turn down good candidates for jobs too many times, as a result of speculating that the candidate is too good (they'll expect to get paid more). You don't even have to ask for high wages, you have to dumb down your resume and underplay yourself at some point if you want to be considered for a majority of non-junior roles these days, just so you get a shot at an actual interview and low-ball offer.
dfxm12 · 2h ago
not enough minimum wage workers that vote
There's a reason it's very hard to vote in some places, election day isn't a national holiday, etc.
mistrial9 · 3h ago
D-E-M-C-R-A.... oh forget it..
burnt-resistor · 52m ago
No mention of Robert Reich's work or the politizane infographics chart. [0] Sigh
> And theoretically speaking, women’s mass entry into the workforce shouldn’t produce an overall decline in wages. Just like immigration or a baby boom, women’s entry into the workforce is both a positive labor supply shock and also a positive labor demand shock at the same time — when women earn more, they spend most of what they earn, on things that require labor to produce.1 So we shouldn’t expect the addition of women to the workforce to hold down wages.
The reason that excess labor doesn't drive down wages is because they spend those wages on rolls dice labor intensive things? This makes no sense in any direction.
I'm reading through the beginning, which was a little sus, then jumped to the end and loathe to read most of this handwaving.
jollyllama · 3h ago
Well sure, finance rose uninterrupted since the end of WW2, but the 70s was when the real asset stripping began.
The article says, there are a few theories, but none of them really satisfies.
You're right to suggest it's really multiple reasons that need to be considered to get the full picture. They're interconnected. Gov policies weaken unions. Weak unions allow corporation to take advantage of workers, at the behest of wall street. Money gets concentrated, gov policies get bought. The cycle goes on. In this way, we can say the effect is systemic, and fixing the issue will take undoing most, if not all, of the causes.
mcphage · 2h ago
The article pushes against that kind of solution:
> But we should always be suspicious of complex, multi-factorial explanations for trend breaks on a chart. That wage stagnation started and ended suddenly enough that it cries out for a simple story. We just don’t have one yet.
Although I don't really understand that at all. It seems like simple singular solutions should be the ones we're suspicious of.
stevenwoo · 4h ago
I would only dissent in that it was prior to 1981, Lewis Powell laid the outline for the corporate world's reaction to consumers asserting nascent rights ala Nader https://en.wikipedia.org/wiki/Lewis_F._Powell_Jr.#Powell_Mem... and would later serve on the Supreme Court with a big influence for decades.
JackYoustra · 3h ago
if that's so, then why does comp track productivity?
libraryatnight · 4h ago
So in a reductionist view: greed.
aidenn0 · 3h ago
Are you suggesting greed was absent in the US prior to 1973?
sorcerer-mar · 1h ago
It was absolutely put on overdrive in 1970.
The dominant business philosophy from the late 40s to the 70s was stakeholder capitalism, then this asshat came along and said quite specifically: greed is not just a force we'll co-opt for pro-social purposes, it is not a mitigable downside of economic growth, it is actually the entire purpose of any commercial enterprise.https://en.wikipedia.org/wiki/Friedman_doctrine
It is shamefully antisocial and un-American. Today it's so baked-in that many young entrepreneurs don't even realize it's a goofy ass meme that only a moron could expect to yield good outcomes.
infogulch · 2h ago
Because wage stagnation is literally the Federal Reserve policy for the last 20 years.
The fed treats wage growth as a leading indicator inflation -- even though anyone with a brain knows that wages are the last thing to go up in an economic cycle, so if it's anything it must be a trailing indicator -- so when wages start to rise up the fed responds by increasing interest rates. Raising interest rates kills wage growth, as intended.
tl;dr: slam the economy every time wages start to go up for 20 years -> "why haven't wages gone up in 20 years" surprise pikachu face
mcphage · 2h ago
That doesn't match what the article is talking about, though. According to the article, the 20 years of wage stagnation was '73-'94—not the last 20 years.
timewizard · 4h ago
Monopolies.
Why would that be hard to understand? When companies don't need to compete for your labor they won't.
Also it's not just wages. The entire market is stagnant. Innovation has ground to a halt and billions are poured into wasteful deadend technologies.
JumpCrisscross · 4h ago
> Monopolies. Why would that be hard to understand?
Valid hypothesis. Needs to be substantiated, as the author has done, and explain the stagnation and real wage increases.
timewizard · 3h ago
> Needs to be substantiated
It is. I'm just not willing to do that here as I'm not writing an article just making a comment.
> as the author has done
Myself and the author have completely different aims with the use of our time.
> and explain the stagnation and real wage increases
Doesn't the article point out that most of these increases have only gone to the already wealthy? It seems that even with an explanation failing to contextualize it reduces the value of the explanation to zero. The author, while substantial, has missed this point staring them right in the face.
buckle8017 · 4h ago
The author states that globalization began in 1994 with NAFTA.
That seems either extremely naive or intentionally deceptive.
Globalization began in 1972 with the opening of China.
Which of course perfectly lines up with the stagnation of American wages.
That doesn't make much sense. Even allowing a few years for adjustment, the US only imported 158.3M from China in 1975. That's 0.007% of US GDP. (Not 0.7%, 0.007%.)
The US didn't have persistent trade deficits until 1982, and even that reversed by 1992. It was 1997-2006 that the trade deficit as a share of GDP exploded.
aaronbaugher · 3h ago
Right. When Ross Perot predicted the "giant sucking sound" in 1992, he was talking about NAFTA, which hadn't gone into effect yet. And that was small potatoes compared to the deficit with China that would come.
bryanlarsen · 4h ago
Globalization is generally considered to have begun in the 1700's, and was given a name and identified as a big deal in the 1920's.
Trade with China was insignificant before 2005; more often than not the US had a surplus with China. We sold them a lot of wheat.
bruce511 · 4h ago
Maybe your thought there exposes the root of the problem. You are measuring the trade in $ terms. But maybe that's not the right unit when measuring jobs.
Imagine country A makes a product (like say wheat) where the number of jobs needed to make that value is low; while country B makes a product like say, apples, which takes a lot of jobs to produce.
So country A sells say a $1mil load of wheat (10 jobs) and buys $2mil of apples (1000 jobs.)
If we're just measuring trade, the A buys more from B. If we're measuring jobs then B "buys" more than A.
So, maybe, instead of just measuring the value of yhe trade, we need to consider the labor cost of the trade?
I'm really starting to think that maybe national economics and it's relationship to global trade is, you know, complex, and not somehow magically "fixed" with simple stupid tarrif formulas....
abakker · 3h ago
you are describing a very useful economic term - comparative advantage. In the case above, we have a comparative advantage in wheat production. Obviously the full picture is something that economists DO think about, but since our government didn't really do any useful analysis in the formulation of our tariff structure, its unsurprising that they didn't really get it right.
Something to consider in your thought process - take two relatively recent stimulus efforts - 2008 and 2020 - the first was primarily quantitative easing - a classic trickle down effort since all the money went to bank balance sheets and trickled down to individuals, the QE stimulus had almost no impact on inflation. Vs Covid which was direct household stimulus and immediately led to inflationary pressure.
A link I don't see mentioned often is most central banks didn't start an inflation targeting policy until the 90s. Prior to that it was still an objective but managed much worse. https://www.richmondfed.org/publications/research/econ_focus.... this link contains a chart that looks at the inflation volatility over time.
I happen to think that a consequence of managed inflation, balanced against aggregate employment is consistent wage pressure. In essence, wage growth in my mental model on this is a consequence where upward inflation swings drive wage gains, while downward ones drive more unemployment. If inflation is managed closely to avoid volatility, then redistributive effects of volatility are limited.
bryanlarsen · 4h ago
$2mil of apples or 1000 jobs is insignificant compared to the $30T US economy or its 170 million jobs. Similarly, China trade was insignificant to the US economy prior to ~2005, no matter whether you measure it in dollars or jobs.
fuzzfactor · 53m ago
>Globalization is generally considered to have begun in the 1700's
Yup, because you can't have very extensive globalization without bigger ships than you had beforehand, and more of them.
And historically the ships have always needed to be welcome in ports around the globe more so than not.
When you think about it, the USA was founded by multi-national corporations for the benefit of multi-national corporations. They were the ones who could best afford to send ships this way consistently enough.
>maybe that's not the right unit when measuring jobs.
Yeah I think you still need to first measure cargo by the tonne. And then some. The jobs required are already completed by the time the vessel is loaded. What you really have is different cargoes in different amounts at different values in different currencies in disparate locations. The value earned by the manufacturer and trader may represent the work of a wildly different number of jobs or "equivalent" "man"-"hours" exchanged between global operators, even when the balance of trade is considered neutral by one party or another. Then further in some type of job-number terms, different numbers of jobs have different impact on different locations and at different times, even if the currency involved is agreeable to all parties over the long term. So there are a number of moving-target variables other than just dollars or any one currency, and beyond jobs or even absolute tonnage. One thing's sure, any one currency alone is not a very realistic measure of trade balance by long shot.
And different amounts of tonnage may benefit some locations more than others, while also not capable of being well-correlated with any currency value assigned, therefore difficult to account for using financial balance. You do have to also consider that all kinds of trades are made where at least one party is not actually getting their money's worth, sometimes all parties, and trades are still made willingly because they will all still make money in the end anyway, just maybe not as much as they had originally hoped for. Then how do you compare ship after ship of things that may be cheap and fly off the shelf in one currency but still not be worth the money and/or any hidden exchange deficit by far? Against return vessels of a full-value commodity at fair market prices, where everyone gets their money's worth almost every voyage? Time after time different things are bound to add up in different ways.
Now by 1973 the opportunities for prosperity were receding noticeably faster than the previous couple years and it looked like the dollar would be down to half its purchasing power like nobody ever dreamed and there was nothing that could be done about it. There did turn out to be no avoiding that milestone which was reached by about 1976, because basically under Nixon the fox had been in the henhouse longer than people were led to believe.
This set millions of working people back a decade or two, quite a few of them back a few generations. Plain & simple, if you could almost afford a car in 1971, by the time 1976 came around, you could almost afford half a car. If you were among the lucky ones to still have a job. Things were not only stagnant with fewer jobs for workers of all types, but there was no end in sight for anybody.
People just had to accept that nobody would be able to afford anything like they did before, especially employers offering decent-paying jobs, until things returned to normal. But years went by and there was still no sign that things would improve even for those who retained employment. Every year for the rest of the 1970's and well into the "belt-tightening of the '80's" people had to become accustomed to the fact that if "normal" was ever going to come back, it was so many years beyond the horizon that it would be difficult to know if you were really moving in that direction or not any more.
You think that was bad for working people? If you had a decent-paying career underway at the time earning about $40,000, and had to start over at entry-level of $20,000 that's only a $20,000 setback per year. Basically for the rest of your life but who's keeping score? However on a different scale if you had $100 million in liquid assets (regardless of whether there was any excess that was illiquid or not) you likely could barely make the purchases that merely cost $50 million only a few years earlier. That kind of $50 million loss of purchasing power as it nosedived along with everybody else was way beyond the scale suffered by average working people. So the very rich were "devastated" in a league of their own after much bigger dreams had been dashed than a working person can realistically muster no matter what. But at least they were still rich.
And realistically some of them were so well-heeled and so powerfully connected that they might be able to recover their lost purchasing power, if they pulled out all the stops in the most selfish and greedy way possible, most likely if it was at the expense of the greatest number of the financially weakest workers possible, and it still might not happen during the rich patriarch's remaining lifetime. But if everything went well, and if the earnings of capital from labor could be made more disproportionate, better in line with the mid-19th century for instance, they ought to be back at the top of their game by the 21st century at the latest. By that time it would surely require a significant multiple of what the "lost" $50 million would buy in 1971, which was already made impossible to calculate very realistically before the end of the '70's. Due to all the manipulation of sentiment over the years trying to stoke a consumer recovery which ended up existing only in the statistics but not on the ground. So the most financially powerful really had to pull out all the stops and not hold back ever since.
Anyway that's the vibe I got from the yachting community at the time.
And here we are.
mcphage · 2h ago
> I'm really starting to think that maybe national economics and it's relationship to global trade is, you know, complex, and not somehow magically "fixed" with simple stupid tarrif formulas....
Clean out your desk, you're fired!
evanjrowley · 4h ago
Popular commenters on that article are saying the overlooked factor is increases in labor supply driven by women, immigration, and baby boomers. Both increases in the labor supply and competition from China might be be significant forces for wage stagnation.
buckle8017 · 2h ago
So women, immigration, and baby boomers significantly changed the labor supply... not a billion people in China?
OK
rgreeko42 · 3h ago
I truly do not understand how Noah Smith, a truly vapid and frankly unintelligent writer, makes it to the front page of this website so often. His writing goes whichever way is soothing to those with money and power.
princealiiiii · 3h ago
On top of that, he has a deep hatred of Chinese, Russians, and Palestinians (basically anyone unaligned with US policy) that he likes to blame for everything - not just the governments, but the actual people of these countries.
jauntywundrkind · 3h ago
I wish we had better ways to build these cases. To collect the various anecdotes and whinges, to aggregate them them together. I want evidence, bona-fides, or a list of comments I've liked with people doing criticism on someone, to be able to drop down when bad people and bad outlets show up again in the feed.
Noah Smith definitely deserves this warning. All sorts of stories of ridiculous overconfidence & oversimplification in the the dumbest of reasonings, dating back for many many many years.
I'd assumed growing up others would also tend towards the ultra online, that the smart ones were pioneering a lifestyle of intelligence and consideration, of hunting for context to understand the tidbits er run across, to consider widely. I'd assumed networking would spawn & spread to help show the back stories of those who we read.
But today, the lack of social defense against bad and or incomeptent seems so so so resounding in the world.
readthenotes1 · 4h ago
Weird that the author doesn't talk about the expansion of the labor force with more women coming in in the 1970s, nor also the baby boom expansion that happened at the same time.
More workers vying for the same jobs--supply and demand driving down labor costs?
nativeit · 3h ago
I’m not arguing for/against the points being made, but:
> Update: Some people have been asking me if the wage stagnation of 1973-1994 might have been caused by the mass entry of women into the U.S. workforce. Here’s the employment rate (also called the “employment-population ratio”) for American women:
[see article for graph]
You can see that the first part of the timing doesn’t line up here. When the wage stagnation began, American women had already been entering the workforce at a steady clip for 25 years. (The labor force participation rate for women looks much the same). Also, empirical evidence suggests at most a small effect of female labor supply on male wages — and if you look at the breakdown for men and women, you see that the stagnation for men was worse than for women over 1973-1994.
And theoretically speaking, women’s mass entry into the workforce shouldn’t produce an overall decline in wages. Just like immigration or a baby boom, women’s entry into the workforce is both a positive labor supply shock and also a positive labor demand shock at the same time — when women earn more, they spend most of what they earn, on things that require labor to produce.1 So we shouldn’t expect the addition of women to the workforce to hold down wages.
Thus, this theory also doesn’t line up with the timing of the stagnation, and it’s not clear why we would expect it to be a major factor in the first place.
EOF
xienze · 3h ago
> when women earn more, they spend most of what they earn, on things that require labor to produce.
Uh, what happens if the labor to produce things costs pennies because it's all been shipped out to China?
xienze · 3h ago
... Or illegal immigrants undercutting American workers in construction and low-skill industries, or H1B workers undercutting American tech workers, or...
AndyNemmity · 3h ago
"The timing of America’s wage stagnation — roughly, 1973 through 1994 — just didn’t line up well with the era of globalization that began with NAFTA in"
The argument isn't that any of this began with NAFTA. The argument as I've always understood it was that it began as the Neoliberal project which started in the late 60s, and early 70s.
The 1973-1994 period wasn't before globalization. It was the period where the groundwork was laid to make labor vulnerable to the type of globalization that neoliberals wanted.
The threat of capital flight for example was already being used to attack workers.
The breakdown of the Bretton Woods system was the start which aligns perfectly with the time period.
Noam Chomsky on the topic
"Bretton Woods restrictions on finance were dismantled, finance was freed, speculation boomed, huge amounts of capital started going into speculation against currencies and other paper manipulations, and the entire economy became financialized.
The power of the economy shifted to the financial institutions, away from manufacturing. And since then, the majority of the population has had a very tough time; in fact it may be a unique period in American history. There’s no other period where real wages — wages adjusted for inflation — have more or less stagnated for so long for a majority of the population and where living standards have stagnated or declined." - https://chomsky.info/20090210/
So we start off with an flawed view of the world, and then we move forward with the argument to explain it through other means.
The 1973-1994 wage stagnation isn't a "mystery" caused by a patchwork of unrelated events. It's a direct consequence of a fundamental, politically driven shift in the economic regime, specifically the dismantling of the Bretton Woods system in the early 1970s and the subsequent financialization of the economy and deregulation.
aaroninsf · 4h ago
The broad answer is well known: governmental capture allowed via multiple mechanisms for the near-total capture of real productivity gains to be collected by the wealthy.
This as most here can imagine allowed via recurrent acceleration for the profound wealth inequality we experience today, and directly produced our current collapse of democracy into literal kelpto-oligarchy backed by overwhelmingly powerful surveillance.
The 1% perceived and perceive no self-interest in a rising tide.
Now that hunter-killer machines both online and soon off shall reliably keep what people are still needed at bay, why would they?
The dude tries to clown on the idea that ending the gold standard wrecked the economy, but his whole argument is just cherry-picked stats, strawman takes, and straight-up ignoring how money actually works.
First off, he mocks the divorce rate thing like "lol goldbugs think couples fight about monetary policy." Nah, fam. It's about how fiat money led to inflation, stagnant wages, and financial stress that actually strains marriages. No-fault divorce laws came after the economic chaos started, but he acts like they are the only factor. Weak.
Then he claims the wage-productivity gap didn’t start till the 1980s. Even the EPI data he cites shows the split beginning in the early '70s. And yeah, healthcare costs eat into wages, but that doesn’t explain why real compensation (including benefits) still lags behind productivity. Fiat money let corporations and Wall Street siphon off wealth while workers got screwed but he just shrugs like "idk, must be computers or something."
On inflation, he’s like "lol inflation just exists, stay mad." Nah, pre-1971, inflation was stable and low. Post-1971? Wild swings, 14% peaks, and a permanent erosion of purchasing power. He acts like floating currencies = stability, but the "Great Moderation" was just Volcker slamming the brakes with insane rates not some magic of fiat money.
Housing prices? He blames zoning (fair) but completely ignores how cheap credit from fiat money blew up the bubble. He admits low rates jack up home prices but then pretends it's got nothing to do with the Fed's endless money printer. Cognitive dissonance much?
Worst part? He compares the site to anti-vaxxers because "things went up since 1971." Bruh. The end of Bretton Woods was a structural break. Debt exploded, inequality skyrocketed, and financialization took over. That ain't random. But instead of offering an actual counter-theory, he just sneers and says "buy Bitcoin lol" like that's a dunk. All snark, no substance. Fiat money broke the economy, and this guy is just coping. Stay mad
bryanlarsen · 2h ago
I'm referring to the thousands of HN reader comments that tear apart both the "bad economics" article and the wtfhappened site.
It is ridiculous to dismiss the gold standard thing like it’s some fringe conspiracy, saying "mainstream economists" prefer blaming oil shocks or regulations. The 1971 move to fiat money wasn't just about ditching gold. It let the Fed print like crazy, inflating assets (stocks, real estate) while wages flatlined. Even guys like Krugman admit loose money screws workers. The charts don’t lie. Divergence started right in '71, not '73 when OPEC flexed. And if oil was the problem, why did Germany and Japan handle it without wrecking their middle class?
Then there's the "women flooded the workforce" excuse. Sure, more workers can lower wages, but productivity kept climbing but wages did NOT. That’s not supply and demand, that's corporations grabbing more power (thanks, dead unions). And "household income" rose? Only because families were grinding two jobs just to stay afloat. Not exactly winning.
China? Lol. In '71, China was still a backwater. Their real economic boom didn’t hit till the 1990s. And offshoring only worked because the fiat dollar let the U.S. run endless trade deficits without consequences. Try that on a gold standard. It would collapse in a WEEK.
Oh, and the EPA? Pollution regs saved lives, and the '80s proved deregulation didn’t fix wages it just let Wall Street go wild. The real issue? Money got fake, capital divorced from labor, and the 1% hoarded the gains.
Bottom line: The so called "rebuttals" from HN commenters are a mess of half-baked excuses. If oil, women, or China were the culprits, why did everything flip exactly post 1971? The gold standard's end is the smoking gun. And the "mainstream economists" pushing these weak takes? Same geniuses who missed 2008. Maybe time to stop trusting their playbook.
Some people at the time were better at math than others.
As we have seen, still true today.
JackYoustra · 3h ago
bad site
tejtm · 2h ago
Is that opinion meant to be a substantive rebuttal to verifiable data?
No comments yet
ty6853 · 4h ago
Technology and automation likely lead to the lion's share in productivity increase. Thus we have seen at least one mode of tech wages that focus on creating higher productivity systems staying strong while many other segments stagnate.
Meanwhile I don't see any evidence education in the past 20 years in the US has yielded a significantly higher quality and efficiency of candidate.
If you want more money all else equal you have to bring something more to the table. If all you bring to the table is being able to use a more efficient machine it's not clear why your wage would elevate rather than the value of the machine (capital) elevating. Merely having as good an education as the guy 20 years ago isn't going to cut it.
DangitBobby · 4h ago
I like to think if I employed people, I'd want them to make more money when the company makes more money. It's probably weird to think the entire point of companies, the economy, and society at large is to improve life, though. And I think I'm just slow because I need it spelled out for me how a CEO or the company itself "earned" the gains from automation and productivity tools (that they almost certainly didn't invent themselves) while the employees are just lucky to still be employed.
supportengineer · 4h ago
Regarding your last sentence - you're describing the "class war".
ty6853 · 4h ago
I think the problem is in a market, at least theoretically, both parties have to offer some mutually beneficial additional benefit in order to capture additional value. Otherwise one side will reject the agreement, because both parties have to be better off for an exchange to happen.
nathan_compton · 4h ago
But the agreement will be unfair in precise accord with the degree of power imbalance between the parties. Like if you know the president will call in the national guard to break your strike, you'll accept lower wages.
DangitBobby · 3h ago
I think it's safe to say there was a period of time where employees were expected to capture a larger proportion of the value from the technology they utilized in the course of their work than they do now, and they did so despite market forces.
ty6853 · 3h ago
Companies were definitely as greedy during the 'robber baron' days between the civil war and ~1913 when the market was way less restricted, during which workers saw much greater gains, even in the face of mass violence against worker mobilization.
Interesting situation indeed.
hnthrow90348765 · 4h ago
The lack of egalitarian ideals is strictly down to culture among the rich (that is, CEOs, politicians, etc.) and how the country is run.
Capitalism is about competition which inevitably leads to minimizing the cost of labor, and includes no inherent safe guards to protect workers other than what skills they might have. This is why unions had to be formed and is why there is the tension between workers rights and companies today.
nativeit · 3h ago
Capitalism loathes competition.
lotsofpulp · 1m ago
Humans, and probably all animals, loathe competition. Who wants to fight for resources if they don’t have to?
charcircuit · 4h ago
At least for public companies employees can buy stock in their company to get exposure to the gains.
marssaxman · 3h ago
Investing your capital into the same company which pays your salary is the opposite of diversification, no? The advice I've always read is to sell your ESPP shares immediately, thereby realizing the discount percentage, then put the money into VTSAX or some comparable fund.
charcircuit · 3h ago
I never said it would diversify. I said that you would be able to make more money when the company makes more money.
sanderjd · 3h ago
Not if they work for a private company. Arguably, employees should just avoid working for private companies that have no mechanism for employees to participate in their equity. But in practice this is unrealistic for lots of people.
IAmBroom · 4h ago
Now, thankfully, yes.
There used to be a high $ hurdle to opening investment accounts.
lotsofpulp · 4h ago
How would you compete with other businesses’s that either choose to lower prices or increase investment funding due to the equity’s higher ROI?
The market works because all actors are buyers and sellers, and when buying, you are seeking the lowest price, and when selling, you are seeking the highest price.
If you stop doing that, someone will outcompete you by allocating resources better (absent corruption). It even applies on a household level, where if you spend extra on charity or groceries or whatever, you will have a smaller downpayment to compete for the house you want.
Also, generally, employee pay is highly correlate with the employer’s profit margin (outside of healthcare due to heavy government involvement).
DangitBobby · 3h ago
If you have to compete then you have to compete. Let's not pretend that prudent reinvestment of hard-won gains in the face of fierce competition is how wealth inequality has managed to spiral out of control, though. There's econ 101 and then there's reality.
Edit: Also looking for how this market theory explains absurd CEO compensation packages in a world where they quite obviously are not worth the price tag.
Night_Thastus · 4h ago
I think you've missed the point. The issue isn't that people want more buying power for the same effort.
The issue is that everything they buy has gotten more expensive. When groceries, rent, cars, medical bills, etc all go up but wages are stagnant, people get crushed.
Some luxury goods have gone down over time, like electronics. But the essentials have all gotten worse.
I'm not sure exactly the relationship between wage growth and restriction of housing growth but the fact that these phenomenon seemed to happen in lockstep merits some reflection. Prop 13 also came in 1973.
They managed to find the one fucking way to make additional housing make being a new homeowner even more expensive, and I believe it was not by accident.
No politician wants more affordable housing in a place where >65% of voters are property owners...
Nothing against allowing lot splits, but this is the wrong reason to be for it. The reasoning in the previous to replies reaks of "homeownership is more virtuous than renting" which is not true. And besides, if you really want more homeownership, the most important path forward is condos, and thus condo defect liability reform.
In the philosophical extreme, if zoning allowed infinite density you could stick a hong-kong style condo skyscraper for the entire population on 0.1 acres and the rest of the land would provide no additional housing utility pushing prices down to whatever the value it is as farmland/business/recreation. The housing value of surrounding land would plumet.
Low land prices are indicative of less restrictive zoning. In more restrictive zoning that punishes building houses on small plots, land becomes more valuable because the land is the license to build a house. i.e. where I live I had to buy more land than I needed because without it I could not build my house, which drives up land prices (increased demand).
The reason why california ADU increase parcel prices is because it prints an additional house license while being illegal to split it off. Otherwise you would be left with two cheaper parcels, although in sum they may be more expensive, but you would still pay less for enough land for license to print a house.
No I mean the land value of where the density is / right next to it. In your example, the land with the crazy tower / right next to it would be incredibly valuable.
If other areas use land value, that's because the land value is being concentrated in/around the dense areas.
When we talk about upzoning, we want to not only do less sprawl, but also increase overall population (growth will attract population). The exurbs will loose land value, but the cities will gain immense land value, and the suburbs will gain some land value too.
Since a large portion housing is currently locked up in 30 year mortgages in a once in a lifetime COVID era near 0% loan that people will not give up for less than a king's ransom, we should be especially sensitive of price of land for new construction, and that will continue to be a dominant factor in rental costs and home prices.
The business-owner class benefits from the health system, because the business-owners are the gatekeepers of healthcare (typically, people get healthcare only through their employer). The worker class is less likely to benefit from the free part of the "free market" because their healthcare is tied to their employer; it's just harder to do anything except work a typical 9-to-5 for the benefit of a business-owner.
The healthcare industry also benefits because they get to suck up a large portion of the GDP; trillions of dollars.
So wages aren't only flat, but the wage growth that should have happened instead went into a corrupt system. Wages aren't honestly flat because of natural market forces, they are corruptly flat.
That is a new argument, coming from health care is a right and good for society?
It’s kinda crazy you want to dismiss this simply because it benefits some group of people you don’t like.
In any se your argument is this is worse. And I argue this is good, fair and meritocratic , and sustainable.
While the USA has wealth, you can simply expand your idea beyond the walked garden of a single country and to the world stage. There is no way with today’s tech and cost of labor could we ever give free health care to everybody. World wide there are far more people who exist, than people who exist and contribute back to society.
The dream of unlimited free healthcare can only be archived once > 90% of humans are producing more than they consume, which war are no where near even in the richest of rich, the USA.
Without a robust social safety net, only the rich and well-connected can afford to take economic risks. Eventually, this just results in a flat-out oligarchy.
Previously (example numbers): Median compensation is $55k + health insurance.
After: Median compensation is $55k + health insurance.
"So nothing changed?"
"Wrong! Health insurance costs more for the same benefits, so really, you got a raise!"
Yeah, sorry if I'm not celebrating.
If comp keeps pace with productivity but is all eaten up by healthcare costs, either something caused people to willingly spend much more of their money on healthcare costs than they'd do earlier (aging maybe? obesity maybe?) or something is going crazy with healthcare expenses.
I've heard persuasive evidence that if you control for obesity the costs look ok actually.
It's even worse than that, health insurance costs more for less benefits.
I have seen companies turn down good candidates for jobs too many times, as a result of speculating that the candidate is too good (they'll expect to get paid more). You don't even have to ask for high wages, you have to dumb down your resume and underplay yourself at some point if you want to be considered for a majority of non-junior roles these days, just so you get a shot at an actual interview and low-ball offer.
There's a reason it's very hard to vote in some places, election day isn't a national holiday, etc.
0. https://youtu.be/QPKKQnijnsM
The reason that excess labor doesn't drive down wages is because they spend those wages on rolls dice labor intensive things? This makes no sense in any direction.
I'm reading through the beginning, which was a little sus, then jumped to the end and loathe to read most of this handwaving.
Probably a coincidence
* Union Busting
* Wall Street pushing growth above profits
* US Gov policies since 1981
You're right to suggest it's really multiple reasons that need to be considered to get the full picture. They're interconnected. Gov policies weaken unions. Weak unions allow corporation to take advantage of workers, at the behest of wall street. Money gets concentrated, gov policies get bought. The cycle goes on. In this way, we can say the effect is systemic, and fixing the issue will take undoing most, if not all, of the causes.
> But we should always be suspicious of complex, multi-factorial explanations for trend breaks on a chart. That wage stagnation started and ended suddenly enough that it cries out for a simple story. We just don’t have one yet.
Although I don't really understand that at all. It seems like simple singular solutions should be the ones we're suspicious of.
The dominant business philosophy from the late 40s to the 70s was stakeholder capitalism, then this asshat came along and said quite specifically: greed is not just a force we'll co-opt for pro-social purposes, it is not a mitigable downside of economic growth, it is actually the entire purpose of any commercial enterprise. https://en.wikipedia.org/wiki/Friedman_doctrine
It is shamefully antisocial and un-American. Today it's so baked-in that many young entrepreneurs don't even realize it's a goofy ass meme that only a moron could expect to yield good outcomes.
The fed treats wage growth as a leading indicator inflation -- even though anyone with a brain knows that wages are the last thing to go up in an economic cycle, so if it's anything it must be a trailing indicator -- so when wages start to rise up the fed responds by increasing interest rates. Raising interest rates kills wage growth, as intended.
tl;dr: slam the economy every time wages start to go up for 20 years -> "why haven't wages gone up in 20 years" surprise pikachu face
Why would that be hard to understand? When companies don't need to compete for your labor they won't.
Also it's not just wages. The entire market is stagnant. Innovation has ground to a halt and billions are poured into wasteful deadend technologies.
Valid hypothesis. Needs to be substantiated, as the author has done, and explain the stagnation and real wage increases.
It is. I'm just not willing to do that here as I'm not writing an article just making a comment.
> as the author has done
Myself and the author have completely different aims with the use of our time.
> and explain the stagnation and real wage increases
Doesn't the article point out that most of these increases have only gone to the already wealthy? It seems that even with an explanation failing to contextualize it reduces the value of the explanation to zero. The author, while substantial, has missed this point staring them right in the face.
That seems either extremely naive or intentionally deceptive.
Globalization began in 1972 with the opening of China.
Which of course perfectly lines up with the stagnation of American wages.
https://en.m.wikipedia.org/wiki/1972_visit_by_Richard_Nixon_...
https://chinese-legal-studies.law.columbia.edu/sites/chinese...
The US didn't have persistent trade deficits until 1982, and even that reversed by 1992. It was 1997-2006 that the trade deficit as a share of GDP exploded.
Trade with China was insignificant before 2005; more often than not the US had a surplus with China. We sold them a lot of wheat.
Imagine country A makes a product (like say wheat) where the number of jobs needed to make that value is low; while country B makes a product like say, apples, which takes a lot of jobs to produce.
So country A sells say a $1mil load of wheat (10 jobs) and buys $2mil of apples (1000 jobs.)
If we're just measuring trade, the A buys more from B. If we're measuring jobs then B "buys" more than A.
So, maybe, instead of just measuring the value of yhe trade, we need to consider the labor cost of the trade?
I'm really starting to think that maybe national economics and it's relationship to global trade is, you know, complex, and not somehow magically "fixed" with simple stupid tarrif formulas....
Something to consider in your thought process - take two relatively recent stimulus efforts - 2008 and 2020 - the first was primarily quantitative easing - a classic trickle down effort since all the money went to bank balance sheets and trickled down to individuals, the QE stimulus had almost no impact on inflation. Vs Covid which was direct household stimulus and immediately led to inflationary pressure.
A link I don't see mentioned often is most central banks didn't start an inflation targeting policy until the 90s. Prior to that it was still an objective but managed much worse. https://www.richmondfed.org/publications/research/econ_focus.... this link contains a chart that looks at the inflation volatility over time.
I happen to think that a consequence of managed inflation, balanced against aggregate employment is consistent wage pressure. In essence, wage growth in my mental model on this is a consequence where upward inflation swings drive wage gains, while downward ones drive more unemployment. If inflation is managed closely to avoid volatility, then redistributive effects of volatility are limited.
Yup, because you can't have very extensive globalization without bigger ships than you had beforehand, and more of them.
And historically the ships have always needed to be welcome in ports around the globe more so than not.
When you think about it, the USA was founded by multi-national corporations for the benefit of multi-national corporations. They were the ones who could best afford to send ships this way consistently enough.
>maybe that's not the right unit when measuring jobs.
Yeah I think you still need to first measure cargo by the tonne. And then some. The jobs required are already completed by the time the vessel is loaded. What you really have is different cargoes in different amounts at different values in different currencies in disparate locations. The value earned by the manufacturer and trader may represent the work of a wildly different number of jobs or "equivalent" "man"-"hours" exchanged between global operators, even when the balance of trade is considered neutral by one party or another. Then further in some type of job-number terms, different numbers of jobs have different impact on different locations and at different times, even if the currency involved is agreeable to all parties over the long term. So there are a number of moving-target variables other than just dollars or any one currency, and beyond jobs or even absolute tonnage. One thing's sure, any one currency alone is not a very realistic measure of trade balance by long shot.
And different amounts of tonnage may benefit some locations more than others, while also not capable of being well-correlated with any currency value assigned, therefore difficult to account for using financial balance. You do have to also consider that all kinds of trades are made where at least one party is not actually getting their money's worth, sometimes all parties, and trades are still made willingly because they will all still make money in the end anyway, just maybe not as much as they had originally hoped for. Then how do you compare ship after ship of things that may be cheap and fly off the shelf in one currency but still not be worth the money and/or any hidden exchange deficit by far? Against return vessels of a full-value commodity at fair market prices, where everyone gets their money's worth almost every voyage? Time after time different things are bound to add up in different ways.
Now by 1973 the opportunities for prosperity were receding noticeably faster than the previous couple years and it looked like the dollar would be down to half its purchasing power like nobody ever dreamed and there was nothing that could be done about it. There did turn out to be no avoiding that milestone which was reached by about 1976, because basically under Nixon the fox had been in the henhouse longer than people were led to believe.
This set millions of working people back a decade or two, quite a few of them back a few generations. Plain & simple, if you could almost afford a car in 1971, by the time 1976 came around, you could almost afford half a car. If you were among the lucky ones to still have a job. Things were not only stagnant with fewer jobs for workers of all types, but there was no end in sight for anybody.
People just had to accept that nobody would be able to afford anything like they did before, especially employers offering decent-paying jobs, until things returned to normal. But years went by and there was still no sign that things would improve even for those who retained employment. Every year for the rest of the 1970's and well into the "belt-tightening of the '80's" people had to become accustomed to the fact that if "normal" was ever going to come back, it was so many years beyond the horizon that it would be difficult to know if you were really moving in that direction or not any more.
You think that was bad for working people? If you had a decent-paying career underway at the time earning about $40,000, and had to start over at entry-level of $20,000 that's only a $20,000 setback per year. Basically for the rest of your life but who's keeping score? However on a different scale if you had $100 million in liquid assets (regardless of whether there was any excess that was illiquid or not) you likely could barely make the purchases that merely cost $50 million only a few years earlier. That kind of $50 million loss of purchasing power as it nosedived along with everybody else was way beyond the scale suffered by average working people. So the very rich were "devastated" in a league of their own after much bigger dreams had been dashed than a working person can realistically muster no matter what. But at least they were still rich.
And realistically some of them were so well-heeled and so powerfully connected that they might be able to recover their lost purchasing power, if they pulled out all the stops in the most selfish and greedy way possible, most likely if it was at the expense of the greatest number of the financially weakest workers possible, and it still might not happen during the rich patriarch's remaining lifetime. But if everything went well, and if the earnings of capital from labor could be made more disproportionate, better in line with the mid-19th century for instance, they ought to be back at the top of their game by the 21st century at the latest. By that time it would surely require a significant multiple of what the "lost" $50 million would buy in 1971, which was already made impossible to calculate very realistically before the end of the '70's. Due to all the manipulation of sentiment over the years trying to stoke a consumer recovery which ended up existing only in the statistics but not on the ground. So the most financially powerful really had to pull out all the stops and not hold back ever since.
Anyway that's the vibe I got from the yachting community at the time.
And here we are.
Clean out your desk, you're fired!
OK
Noah Smith definitely deserves this warning. All sorts of stories of ridiculous overconfidence & oversimplification in the the dumbest of reasonings, dating back for many many many years.
I'd assumed growing up others would also tend towards the ultra online, that the smart ones were pioneering a lifestyle of intelligence and consideration, of hunting for context to understand the tidbits er run across, to consider widely. I'd assumed networking would spawn & spread to help show the back stories of those who we read.
But today, the lack of social defense against bad and or incomeptent seems so so so resounding in the world.
More workers vying for the same jobs--supply and demand driving down labor costs?
> Update: Some people have been asking me if the wage stagnation of 1973-1994 might have been caused by the mass entry of women into the U.S. workforce. Here’s the employment rate (also called the “employment-population ratio”) for American women:
[see article for graph]
You can see that the first part of the timing doesn’t line up here. When the wage stagnation began, American women had already been entering the workforce at a steady clip for 25 years. (The labor force participation rate for women looks much the same). Also, empirical evidence suggests at most a small effect of female labor supply on male wages — and if you look at the breakdown for men and women, you see that the stagnation for men was worse than for women over 1973-1994.
And theoretically speaking, women’s mass entry into the workforce shouldn’t produce an overall decline in wages. Just like immigration or a baby boom, women’s entry into the workforce is both a positive labor supply shock and also a positive labor demand shock at the same time — when women earn more, they spend most of what they earn, on things that require labor to produce.1 So we shouldn’t expect the addition of women to the workforce to hold down wages.
Thus, this theory also doesn’t line up with the timing of the stagnation, and it’s not clear why we would expect it to be a major factor in the first place.
EOF
Uh, what happens if the labor to produce things costs pennies because it's all been shipped out to China?
The argument isn't that any of this began with NAFTA. The argument as I've always understood it was that it began as the Neoliberal project which started in the late 60s, and early 70s.
The 1973-1994 period wasn't before globalization. It was the period where the groundwork was laid to make labor vulnerable to the type of globalization that neoliberals wanted.
The threat of capital flight for example was already being used to attack workers.
The breakdown of the Bretton Woods system was the start which aligns perfectly with the time period.
Noam Chomsky on the topic
"Bretton Woods restrictions on finance were dismantled, finance was freed, speculation boomed, huge amounts of capital started going into speculation against currencies and other paper manipulations, and the entire economy became financialized.
The power of the economy shifted to the financial institutions, away from manufacturing. And since then, the majority of the population has had a very tough time; in fact it may be a unique period in American history. There’s no other period where real wages — wages adjusted for inflation — have more or less stagnated for so long for a majority of the population and where living standards have stagnated or declined." - https://chomsky.info/20090210/
So we start off with an flawed view of the world, and then we move forward with the argument to explain it through other means.
The 1973-1994 wage stagnation isn't a "mystery" caused by a patchwork of unrelated events. It's a direct consequence of a fundamental, politically driven shift in the economic regime, specifically the dismantling of the Bretton Woods system in the early 1970s and the subsequent financialization of the economy and deregulation.
This as most here can imagine allowed via recurrent acceleration for the profound wealth inequality we experience today, and directly produced our current collapse of democracy into literal kelpto-oligarchy backed by overwhelmingly powerful surveillance.
The 1% perceived and perceive no self-interest in a rising tide.
Now that hunter-killer machines both online and soon off shall reliably keep what people are still needed at bay, why would they?
I wish this were hyperbolic.
Neither diagnosis nor prediction is.
https://singlelunch.com/2023/09/13/the-bad-economics-of-wtfh... is not a rebuttal but a dismissal by someone unwilling to engage with the evidence.
The dude tries to clown on the idea that ending the gold standard wrecked the economy, but his whole argument is just cherry-picked stats, strawman takes, and straight-up ignoring how money actually works.
First off, he mocks the divorce rate thing like "lol goldbugs think couples fight about monetary policy." Nah, fam. It's about how fiat money led to inflation, stagnant wages, and financial stress that actually strains marriages. No-fault divorce laws came after the economic chaos started, but he acts like they are the only factor. Weak.
Then he claims the wage-productivity gap didn’t start till the 1980s. Even the EPI data he cites shows the split beginning in the early '70s. And yeah, healthcare costs eat into wages, but that doesn’t explain why real compensation (including benefits) still lags behind productivity. Fiat money let corporations and Wall Street siphon off wealth while workers got screwed but he just shrugs like "idk, must be computers or something."
On inflation, he’s like "lol inflation just exists, stay mad." Nah, pre-1971, inflation was stable and low. Post-1971? Wild swings, 14% peaks, and a permanent erosion of purchasing power. He acts like floating currencies = stability, but the "Great Moderation" was just Volcker slamming the brakes with insane rates not some magic of fiat money.
Housing prices? He blames zoning (fair) but completely ignores how cheap credit from fiat money blew up the bubble. He admits low rates jack up home prices but then pretends it's got nothing to do with the Fed's endless money printer. Cognitive dissonance much?
Worst part? He compares the site to anti-vaxxers because "things went up since 1971." Bruh. The end of Bretton Woods was a structural break. Debt exploded, inequality skyrocketed, and financialization took over. That ain't random. But instead of offering an actual counter-theory, he just sneers and says "buy Bitcoin lol" like that's a dunk. All snark, no substance. Fiat money broke the economy, and this guy is just coping. Stay mad
It is ridiculous to dismiss the gold standard thing like it’s some fringe conspiracy, saying "mainstream economists" prefer blaming oil shocks or regulations. The 1971 move to fiat money wasn't just about ditching gold. It let the Fed print like crazy, inflating assets (stocks, real estate) while wages flatlined. Even guys like Krugman admit loose money screws workers. The charts don’t lie. Divergence started right in '71, not '73 when OPEC flexed. And if oil was the problem, why did Germany and Japan handle it without wrecking their middle class?
Then there's the "women flooded the workforce" excuse. Sure, more workers can lower wages, but productivity kept climbing but wages did NOT. That’s not supply and demand, that's corporations grabbing more power (thanks, dead unions). And "household income" rose? Only because families were grinding two jobs just to stay afloat. Not exactly winning.
China? Lol. In '71, China was still a backwater. Their real economic boom didn’t hit till the 1990s. And offshoring only worked because the fiat dollar let the U.S. run endless trade deficits without consequences. Try that on a gold standard. It would collapse in a WEEK.
Oh, and the EPA? Pollution regs saved lives, and the '80s proved deregulation didn’t fix wages it just let Wall Street go wild. The real issue? Money got fake, capital divorced from labor, and the 1% hoarded the gains.
Bottom line: The so called "rebuttals" from HN commenters are a mess of half-baked excuses. If oil, women, or China were the culprits, why did everything flip exactly post 1971? The gold standard's end is the smoking gun. And the "mainstream economists" pushing these weak takes? Same geniuses who missed 2008. Maybe time to stop trusting their playbook.
https://www.google.com/search?q=wtfhappenedin1971+site%3Anew...
As we have seen, still true today.
No comments yet
Meanwhile I don't see any evidence education in the past 20 years in the US has yielded a significantly higher quality and efficiency of candidate.
If you want more money all else equal you have to bring something more to the table. If all you bring to the table is being able to use a more efficient machine it's not clear why your wage would elevate rather than the value of the machine (capital) elevating. Merely having as good an education as the guy 20 years ago isn't going to cut it.
Interesting situation indeed.
Capitalism is about competition which inevitably leads to minimizing the cost of labor, and includes no inherent safe guards to protect workers other than what skills they might have. This is why unions had to be formed and is why there is the tension between workers rights and companies today.
There used to be a high $ hurdle to opening investment accounts.
The market works because all actors are buyers and sellers, and when buying, you are seeking the lowest price, and when selling, you are seeking the highest price.
If you stop doing that, someone will outcompete you by allocating resources better (absent corruption). It even applies on a household level, where if you spend extra on charity or groceries or whatever, you will have a smaller downpayment to compete for the house you want.
Also, generally, employee pay is highly correlate with the employer’s profit margin (outside of healthcare due to heavy government involvement).
Edit: Also looking for how this market theory explains absurd CEO compensation packages in a world where they quite obviously are not worth the price tag.
The issue is that everything they buy has gotten more expensive. When groceries, rent, cars, medical bills, etc all go up but wages are stagnant, people get crushed.
Some luxury goods have gone down over time, like electronics. But the essentials have all gotten worse.