The Affordability of Gas:

Nominal prices of gasoline are at post-WWII highs. Even in real terms, gasoline prices are high -- higher than the peaks of the early 1980s. Yet gasoline is actually more affordable than ever, according to Indur Goklany. In this post on The Commons Blog, Goklany notes that:

Relative to 1978, the price of regular gasoline has increased by 260 percent in nominal terms and 47 percent in real terms. However the price-to-income ratio has declined by 17 percent, i.e., it is more affordable today.

Related Posts (on one page):

- Energy Policy Follies
- Gasoline Affordability Revisited:
- The Affordability of Gas:

"Happiness" has far more to do with expectation than achievement.

As I live in a city where mass transit is a better way to get to work than driving, I don't have a clue how this breaks out for most people in this country.

>One problem with this measure is that the income disparity between rich and poor has increased dramatically since 1978.<

A serious understatement. As illustrated by David Cay Johnston and others (and not to my knowledge disputed) gains in income over the last 30 or 40 years have been almost exlusively among the extremely rich. So yes, Bill Gates is doing better, but that doesn't mean anybody else is. In fact, they're not.

From one of Johnston's columns (he slices the data in a hundred different ways):

If the average family is spending 50% more on housing than they were in the 1970s, the available income is much less than total income.But if the average family is spending 50% more on housing in inflation-adjusted terms than it was in the 1970s, but average family income in inflation-adjusted terms has risen more than 50%, available income after paying for housing has risen. I don't know whether inflation-adjusted income has increased by more than 50% since the 1970s (it might well depend on where in the 1970s we start), but it very well might have. If, for example, average family income in nominal terms had increased at an annual rate that is 1.25% greater than inflation, average family income in inflation-adjusted terms would have increased 54.4% between 1971 and 2006.

One problem with this measure is that the income disparity between rich and poor has increased dramatically since 1978. In my opinion, a more useful comparison would be ratio between price and the income excluding the top quartile.Do you have a source to support your contention that the income disparity has increased dramatically? Would the source include quartiles of income?

Table 682 of the 2006 Statistical Abstract of the United States shows median family income in constant dollars, i.e., adjusted for inflation as $44,452 in 1980 and $62,281 in 2003. That's a 40.1% increase, and let me emphasize that we're dealing with the median, not the average. 50% of families reporting had a family income greater than or equal to those numbers.

And, what was the index used to account for inflation? CPI. If it was, I suggest you do some research on the reliability of CPI as a measure of true inflation.... Start with a google search on "hedonic adjustment".

I'm pretty sure you read the table wrong. $44,452 represents the median income for all families in 1980 in constant dollars. The corresponding number for 2003 is $52,680, not $62,281. The growth, thus, is slightly less than half your number: I believe 18.5%. There tables are available here.

Guess what else, though? The figure for "Male house-holder, no wife present" had a pretty different growth: $37,042 in 1980 to a whopping $38,032 in 2003. By my math, that's a growth of about 2.6% over 23 years.

I don't know the details of Johnston's methodology, but this seems pretty strongly corroborative. Seems to suggest pretty strongly that 1). we have a lot more dual-working households, but 2). the median income has barely budged at all. In fact, it seems to prove the point quite nicely: comparing the rise in gas price to average income growth gives an entirely false picture of how the average family is actually doing.

It looks like my data was in 1980 dollars; $65k is the median in nominal $. Irrespective of that, I think that you need to incorporate fixed costs into the analysis of % of "disposable" income.

You are correct that I read the table wrong. The number is $52,680, rather than $62,281, which was the number in the adjoining column. Thank you for the correction.

1. Family/household size/structure have changed dramatically. E.g., far fewer fams with 5-6 kids, more 1s and 2s. Also, tons more seniors, and every Grandma in an apartment is a whole "household." Yes, pills can get expensive, but running that one-person household is not as pricey as running the Brady Bunch.

2. Many goods that we buy now, especially housing, are not comparable to their 1974 equivalents. Look up the data on square footage of houses, for example. It's not just the McMansions. Many median-income, and below-median families are mortgaging themselves to the hilt to buy houses that are 50% or 100% bigger than what people in their relative income range once lived in.

And leisure and vacations! Check out the data on what percent of folks ever flew at all in 1972. I know many blue-collar families who consider the Disney trip to be a constitutional right. And in 1975, the family vacation may have been driving in the wood-paneled station wagon two states over to stay with an aunt and uncle and sleep on the floor.

At the end of the day, the hedonic question may be whether many or most of us measure our happpiness RELATIVE to (1) our expectations or (2) our surroundings, with the surroundings largely shaping many expectations. Having the only Geo Prizm in town, when everyone else has a bicycle, might be pretty cool. Having the only Geo, while everyone else has a Lexus, might not be.

Me? I'm feeling rich today - I have a broadband link to the VC. Woo hoo!