“Many Americans think they are richer than they are.”
The credit for this insight goes to Tyler Cowen, author of The Great Stagnation. Or rather to Cowen and the NY Times’ David Brooks, whose column riffs off of Cowen’s popular e-book.
In the column, Brooks explores how and why the economy and work life have changed over the past century with the assistance of two prototypical imaginary consumers: Sam, a hardworking member of the Greatest Generation (born 1900, died 1974), and his grandson, Jared (born 1978). Why is the latter so much more likely than the former to live beyond his means? Brooks writes:
For Sam, income and living standards were synonymous. But for Jared, wealth and living standards have diverged. He is more interested in the latter than the former. This means that Jared has some rich and meaningful experiences, but it has also led to problems. Every few months, new gizmos come out. Jared feels his life is getting better. Because he doesn’t fully grasp the increasingly important distinction between wealth and standard of living, he has the impression that he is also getting richer. As a result, he lives beyond his means. As Cowen notes, many of our recent difficulties stem from the fact that many Americans think they are richer than they are.