Why Everything Feels More Expensive (hedonic adaptation)

Middle-class Americans have more income than they did 50 years ago, but the squeeze is real

By Roland Fryer. He is a professor of economics at Harvard. Excerpts: 

"Before indicting the economy, consider what 50 years of growth actually delivered. The car in your driveway is far less likely to kill you than its 1975 counterpart—traffic fatalities per mile driven have fallen by roughly 62%. The average American reaching 65 today can expect to live 3.6 more years than in 1975. The air is 79% cleaner by the Environmental Protection Agency’s measure. Researchers at the Massachusetts Institute of Technology estimate that Americans value access to search engines, email and digital maps at roughly $30,000 a year, none of which shows up in income statistics.

The 1975 middle-class family may have had more cash left at the end of the month. But they also faced higher risks of violent crime, breathed dirtier air, and waited for the evening news to learn what was happening in the world. The progress is real—it just doesn’t pay the daycare bill."

"When a larger share of income is committed to fixed costs, even similar disposable income feels more constrained. For many families, that means the reserve is gone."

"The middle class is simultaneously better off and more financially strained than it has been in decades. The services that define 21st-century middle-class life—healthcare, child care, education—have risen two to three times as fast as overall consumer prices since 2000. This is the structural consequence of an economy that became extraordinarily productive at making goods but not at raising children or treating the sick. Meanwhile the gains—safer cars, cleaner air, longer lives—have quietly disappeared into what we consider normal. Psychologists call this hedonic adaptation: the tendency to absorb improvements into our baseline until they no longer feel like gains."