Hacker News Reader

Comment by helterskelter | Hacker News Reader

You don't even need to go that far back to run into issues, when I read Pride and Prejudice, I think Mr. Darcy was one of the richest people in England at around £10,000/year, but if you to calculate his wealth in today's terms it wasn't some outrageous sum (Wikipedia is telling me ~£800,000/year). The thing is that the economy was totally different back then -- labor cost practically nothing, but goods like furniture for instance were really expensive and would be handed down for generations.

With £800K today, you may not even be able to afford the annual maintenance for his mansion and grounds. I knew somebody with a biggish yard in a small town and the garden was ~$40K/yr to maintain. Definitely not a Darcy estate either.

Thinking about it, an income of £800K is something like the interest on £10m.

View on HN

£10,000 per year for Mr Darcy is 10,000 gold sovereigns per year. A gold sovereign at spot price today is about $1,100. So that’s over 10 million dollars per year in gold-equivalent wealth. Plenty to maintain his estate with.

Alternatively, £10,000 is 200,000 sterling silver shillings per year (20 shillings per pound) for him. A sterling shilling today is about $13.50 at spot price. So that’s $2.7million per year in silver-equivalent wealth. Still plenty!

Newsflash, old antique furniture from around that time is still really expensive even today. It was a hand-crafted specialty product, not run-of-the-mill IKEA stuff. If you compare the prices of single consumer goods while adjusting for inflation, they generally check out at least wrt. the overall ballpark. The difference is that living standards (and real incomes) back then for the average person were a lot lower.

Inflation is by definition the change in prices of a general basket of goods. Some things will outrun the basket and some things will underrun it. In general consumer durables have underrun, things like TVs and yes, sofas, are way way cheaper now than ever before. I'm not really sure why you would exclude IKEA type furniture, in most cases it's probably as good or better than a really old hand crafted one. If back then you needed to get an ultra luxury sofa but now you can get an IKEA one for the same general quality then that's a massive win for affordability even if the ultra luxury category still exists.

~£800,000/year when compared to median value in current UK? Outrageous is relative sure, but for most people out there it should be no surprise they would feel that as an outrageously odd distribution of wealth.

https://en.wikipedia.org/wiki/Income_in_the_United_Kingdom

The point is that ~£800,000/year is high, even possibly "very high" but it is not "most wealthy man in Britain" high, and certainly nowhere near "hire as many people as worked for Darcy".

Its more like making 800k per year today in India, where a lot of people make much less so you can have servants

The big change is the end of any sort of backing in money. The Minneapolis Fed calculated consumer price index levels since 1800 here. [1] Of course that comes with all the asterisks we're speaking of here for data going back that far, but their numbers are probably at least quite reasonable. They found that from 1800 to 1950 the CPI never shifted more than 25 points from the starting base of 51, so it always stayed within +/- ~50% of that baseline. That's through the Civil War, both World Wars, Spanish Flu, and much more.

Then from 1971 (when the USD became completely unbacked) to present, it increased by more than 800 points, 1600% more than our baseline. And it's only increasing faster now. So the state of modern economics makes it completely incomparable to the past, because there's no precedent for what we're doing. But if you go back to just a bit before 1970, the economy would have of course grown much larger than it was in the past but still have been vaguely comparable to the past centuries.

And I always find it paradoxical. In basic economic terms we should all have much more, but when you look at the things that people could afford on a basic salary, that does not seem to be the case. Somebody in the 50s going to college, picking up a used car, and then having enough money squirreled away to afford the downpayment on their first home -- all on the back of a part time job was a thing. It sounds like make-believe but it's real, and certainly a big part of the reason boomers were so out of touch with economic realities. Now a days a part time job wouldn't even be able to cover tuition, which makes one wonder how it could be that labor cost practically nothing in the past, as you said. Which I'm not disputing - just pointing out the paradox.

https://www.minneapolisfed.org/about-us/monetary-policy/infl...

And yet the homeownership rate in 1950 was 53% (an all-time high up to that point) compared to 65% today: https://www.huduser.gov/portal/sites/default/files/pdf/Housi... Only 80% of units had private indoor toilets or showers.

It is notable that the median monthly rent was $35/month on a median income of $3000, so ~15% of income spent on rental housing. But it's interesting reading that report because a significant focus was on the overcrowding "problem". Housing was categorized by number of rooms, not number of bedrooms. The median number of rooms was 4, and the median number of occupants >4 per unit (or more than 1 person per room). I don't think it's a stretch to say that the amount of space and facilities you get for your money today is roughly equivalent. Yes, greater percentage of your income goes to housing, and yet we have far more creature comforts today then back in 1950--multiple TVs, cellphones, appliances, and endless amounts of other junk. We can buy many more goods (durable and non-durable) for a much lower percentage of our income.

There's no simple story here.

What an interesting paper you found! Home ownership stats in contemporary times are quite misleading because of debt. Most home owners now are still paying rent in the form of a mortgage to a bank. In the 50s most home owners genuinely owned their homes 'free and clear'. The exact rate was 56% in the 1951 per your paper (which was a local low), and now it's at 40% which is a local high. And the contemporary demographics are all messed up - it's largely driven by older to elderly individuals in non-urban low-income states.

As for number of occupants, the 50s had a sustainable fertility rate. That means, on average, every woman was having at least 2 kiddos. So a median 4 occupant house would be husband, wife, and 2 children living in a place with a master bedroom, kids room, a combined kitchen/dining room, and a living room. Bathrooms, oddly enough, did not count as rooms. So in modern parlance it'd mostly be a 2/2 for up to 14% of one person's median income, and 0% in most cases as most people 'really' owned their homes.

We definitely have lots more gizmos, but I feel like that's an exchange that relatively few people would make in hindsight.

I sometimes feel that the facts are all out there, but half the people pick one half the facts as causal and the other half pick the other half. Are home prices rising because people have fewer kids (and therefore more to spend on housing) or are people having fewer kids because house prices are rising (and therefore less to spend on kids)?

I suspect that it's a complex mixture of all possibilities, and you can only really look at trends and your own life - the one thing you can have something resembling understanding and control.

> Are home prices rising because people have fewer kids (and therefore more to spend on housing) or are people having fewer kids because house prices are rising (and therefore less to spend on kids)?

Maybe a false dichotomy? My suspicion is that home prices rise because more credit becomes available (and not only homes prices but the price of other assets). If you think about it in broader terms this explains what happens to the fruits of our increased productivity - lenders extend more credit as productivity rises thereby claiming the benefit for themselves. The working person is still stuck with a 40 hour week because despite being more productive they have more debt to service.

There's something there, definitely - reading "ordinary man's guide to the financial life" from different eras is informative; many of the older ones work really hard to convince you that a home loan is something worth getting and "you'll pay it off faster than you think" - now we have guides talking about "good debt" and "never pay it off".

I have a different take on it altogether. Religion previously worked as a sort of philosophical compass for life. It provided meaning and purpose, but as society has largely left religion behind, this left a void that was never really cleanly filled. So then in a post-religion society, what becomes the purpose in life? And I think for many, they simply have grabbed the lowest hanging fruit, even if subconsciously - wealth and materialism. And in this worldview there's not much room for children.

I think my little hypothesis here works to cleanly explain fertility crises much better than any other alternative. For instance the typical income:fertility hypothesis or education:fertility hypothesis both have endless glaring counter-examples like Thailand where the society is relatively poor with relatively low education, yet has a fertility rate now lower than even Japan.

It also explains the paradox of upper middle class couples claiming that they aren't having children because they don't have enough money, while lower income couples continue to have relatively healthy fertility rates, and it's for the same reason that extremely high income couples have relatively healthy fertility rates. Extremes of high and low income largely exclude one from materialism simply because there's no carrot to chase, whether because you can have it at any time you want, or simply because it's so far away that there's no hope of ever getting closer to it.

Reply on news.ycombinator.com