Tuesday, February 21, 2017

The Rising Price Of Cars In A Pedestrian Wasteland And The Complexity Of Measuring Well-Being

This week I am visiting family in one of those places in the United States where you really have to have a car to get around -- not because it's like rural farmland or anything, but just because everything is sprawly and spread out and there isn't much in the way of pubic transport.

I am fortunate enough to be able to rent a car (and to be able to know how to drive, for that matter), but when I'm here I often think about how the landscape illustrates something important about how economic quality of life is something that transcends simple measures like "how much money you have."

Because to have a job, a family, or even a life at all here, you pretty much have to have access to a car. And "access to a car," while it sounds like something sort of straightforward is actually one of those things that is complicated and very contextual.

It's complicated and contextual, I think, because cars are one of those things where there's a minimum buy-in price -- and it's a price that is relative to the context. It's amazing how expensive cars have become, and how the effect of that has trickled down so that buying used cars is expensive and fixing cars is expensive.

As is often pointed out, cars have gotten expensive for reasons: modern cars are typically way safer than cars of the past, and they are more energy efficient, and they have more features and so on and so forth. So it's not just inflation, and it's not that cars just happened to get expensive. It's that cars got better. But cars got better in a kind of March of the Penguins kind of way -- that is, they got better all at the same time -- options to buy a cheap, less safe, less good car just disappear as time goes on.

If you look at the landscape in terms of how much money people have, it might look like they're doing pretty well. People who own these cars, after all, own something that not only costs a lot, but also has a lot of value. They own something that is genuinely worth something.

But if you look at the landscape in terms of how much people are able to do the things they need to do, it might look very different. A family with two adults and two grown children and one car, for example, owns something of great value -- and yet that family would be seriously constrained with respect to doing things. It would be hard to more than one of them to work, and maybe impossible for two of them to work, and even if they drive each other around and pick each other up, it'd be impossible for them to do all kinds of other things.

Obviously they don't have the scaling-down option that people often, unthinkingly, associate with constrained economic circumstances. It's easy to think that in a modern consumer economy that offers a lot of choices and options, people can sort of ratchet down their quality of life to fit their economic situation. If you can't afford beef, at least you can have pasta. If you can't afford Nikes, at least you can get some knock-offs at T. J. Maxx.

But with somethings, and especially electronics and appliances and large scale items, this isn't always the case. Sometimes they all improve at the same time, and if you can't afford the expensive version, you're just screwed.

For example, years ago my mother needed a new TV. A few months before, I had noticed the price of TV's falling dramatically, and I thought: no problem. I'd seen a medium-sized tube TV for sale for like 75 dollars. But when we went out shopping, there were no tube TVs. Now all TVs were flat screen, and the cheapest medium-sized one was like 250 dollars. If you're the person whose TV budged was 75 dollars -- well, you just got screwed, TV-wise.

And it's the same thing with cars. Once they all improve, the old ones go away. Sure -- you can buy a used car. But even fixing a car has become astronomically expensive. What you can't do is go back to the old fashioned car that someone could fix in their garage with cast off parts and a manual.

If you live in a place where cars are a necessity, this is a big, big, deal.

I guess the moral of the story is that when you're evaluating how people are doing, you can't just count money. Of course, that's long been known, and a related idea forms the cornerstone of the "capabilities approach": that you have to look not only at what people have but also at what they are enabled to do. I think that's right, but I also think the parable of the rising costs of cars shows that you don't need to take on board any fancy theoretical apparatus to see that measuring well-being is actually very complicated.


Gerry Callaghan said...

I wonder if the reluctance to talk about compensation doesn't have something to do with the prevalence supply-side economics and the mythical "trickle-down" effect associated with it. If, as the story goes, making the rich richer--through, e.g., tax breaks--has the effect of leaking wealth into the economy as a whole, then the thinking remains in the area of Pareto optimality--i.e., everybody's better off when the rich get richer. Nobody has to discuss compensating the losers because they're lumped in with all the other "beneficiaries" of the general scheme, which doesn't really envision real losers in the first place.

Gerry Callahan said...

Sorry, my other comment was meant to go with the previous post "Economic Policies Have Losers and Winners...". Not quite sure how I managed to mess that up.