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“Young adults are poor despite every metric which suggests otherwise” link
This is trending on Twitter so might as well discuss it here anonymously.
I know more than a few people say it’s just vibes and the data is good but I think this article makes a strong point that a real loss of social capital has actually made younger people poorer. And I believe this links into the fertility debate because the goods that you could buy before with social capital are especially needed with children. Having kids has gotten very expensive. I think everyone knows education, housing, and health care have boomed in costs. Being single means you don’t need to take on these costs. You can have kids if you are poor and live off government resources or you can have kids if you are rich but it’s a financial disaster for the upper middle class.
I largely come down to diversity (mass migration) and the Great Migration killing American social capital that the boomers had. Before these things occurred we had cheap urban housing because people weren’t afraid of their neighbors and cheap public schools. And homogenous urban environments have a lot of social capital for their residents. Also you had cheap babysitters because your neighbors were like you and you trusted them. Your kids could just go to the park alone. So childcare was free. I feel comfortable blaming diversity on rising housing costs (zoning the poor away from good communities) and for rising educational costs (falling public school quality).
So yes I think today’s generation is poorer in a lot of ways that really matter due to less social capital (but richer in other ways). And I do think the ways we are poorer today are especially bad for fertility where you now need to buy those goods in the market but they were free before.
The triumvirate of childcare, housing, and healthcare is the problem. This is pretty clear to me. These are all affected by genuine Baumol effects, but they are also severely compounded by government intervention.
Welfare makes everything more expensive for everyone who isn't getting welfare. Not only do we pay taxes (or inflation) for it, but also people who previously wouldnt have competed for a good, mainly those three + food, now compete and bid up the price of those goods. Heck, unemployed people now often have new SUVs via some magic. The working poor is basically extinct. They simply dont work. The stockers at my local grocery store make enough money to afford everything a person needs. A trustable babysitter for me to go see a movie with my wife is either several hundred dollars or its my in laws doing a favor. People who should be doing childcare and other trusty work now do crappy work because the crappy people just leech off the system and dont work at all. And we subsidize that, heavily.
Immigration also changed housing, of course. Along with your social trust points.
Crime changed things. Crime is now statistically quite low, but its more random. I have had my car burgled twice for, in absolute terms, basically nothing. They stole my quarters and my kids car candy. But, it feels unsafe to have kids in a place where people break into cars. So I had to move. Now my housing is more expensive and all my neighbors have ring cameras, I might pony up for one if it happens in the new place.
And I think affirmative action (and related, student VISAs/H1B) changed a lot of this too. In a world prior to it, me and all my siblings probably all get good deals to go to local universities. I certainly should have been offered a full ride scholarship to the flagship state school instead of having to forum shop the whole country given the fact I had a crazy good ACT and SAT and won the state chemistry competition. Instead they insisted I pay full freight. Same happened to my siblings, so now we live in 3 different states, because we went to schools in 3 separate states. My parents moved to where my sister lives(did she is moving). In a less manipulated world we probably stay together, at least in part. Perhaps one of us gets into an Ivy and takes a decade to move back to the area, or maybe never, but its still probably the one who left staying where their partner's home base is. A familial home base is awesome and now increasingly rare.
Lastly, for me, for now, is the just dumb things. I can populate this section with many things I think are just dumb, like most humanitarian aid (which I feel many people here are in favor of and will defend my position if questioned). But again its a tax. I will respond to any random program you think is good and tell you if I think it is also good or why I think it is not.
Two of your three cost disease categories are basically just the two income trap; healthcare is its own little world.
A nitpick as it's not his central point but, neoclassical economics is fantastical pseudoscience. There is no evidence for so-called «Baumol effects.» They exist as the result of a facile equation made out of thin air by an arrogant academic in the 1960s, not as the result of a real science. Childcare is not that expensive, people who have children just consume more of it because of dual income, housing is more expensive because of mass immigration, medicine is more expensive because of the selfishness of the doctor's guild and boomers overconsuming it. To really understand the situation, you have to understand why old people go to the doctor so much, why Western democracies politically choose demographic replacement, why feminism has progressed to the point of practically forcing dual income. None of these questions can be answer neoclassically. There are no pretty little neutral human-nature free Name Effects that give you an out from reasoning about human nature.
This particular example feels like it's a function of rising income expectations:
you have to pay the helpYour daycare costs more than a few bucks a day for very foreseeable reasons. Childcare workers expect to be paid minimum wages (citation needed), and mandated child-to-caretaker ratios make the cost of infant childcare about a quarter of a minimum wage salary before even considering benefits, rent, or other business costs, which are probably nontrivial additions.People's time is expensive, especially as living standards grow: it's perhaps not obvious, but why wouldn't worker-efficiency-capped services rise in cost at pace with (or more than!) average incomes?
Strictly speaking, this is a pseudoscientific attitude. The burden of proof is on economists to show that this is a law, and that burden is not met by some facile equations lacking data, which don't model human behavior properly anyway.
Speaking less strictly, obviously Baumol effects became popular as a concept despite the terrible technique behind them, because they sound plausible. I'm not denying that. Most of neoclassical economics is like that. It has to be, since it's not a science. If it's not plausible-sounding, who will buy it?
I am making a mostly technical critique here, which is why I said it's a nitpick. But more substantively, I think there are subtle but important effects of this reframing. First, we reduce «Baumol effects» to «Baumol's hypothesis.». Because it is merely a hypothesis. With this we recognize the plausibility of something like it happening, without dogmatically assuming that it is the entire story, or that the details of Baumol's original writing were particularly correct.
Now that we can think freely, I will say it seems to me that if a hypothetical Baumol mechanism were to happen somewhere, I don't see why the price of worker efficiency capped services should rise systematically faster than average income. Causal inference and probability are the future of economics, alongside integration with human behavioral biology. So let's think under that framework. What should be the causal effect of productivity improvement in some sectors of employment on the average cost of the services across all the other sectors? It seems to me the causal effect should not be greater than the total increase in average productivity, although I don't know for sure. In fact I think only part of the productivity increase should trickle down, so I hypothesize it should be strictly less than than the average productivity improvement. In other words, I expect the services to get somewhat cheaper at least, although not as cheap as they would be if wages were capped and workers were forced to remain in the field.
But as scientists, this is just a hypothesis, and we should have a causal inference study to know for sure. Still, if the services get more expensive than the productivity gain, I start to look for exogenous shocks. In this case there are some obvious candidates for that, but it's controversial to talk about. What isn't controversial is blank-slate neoclassicism. The exogenous shocks I'm thinking of are controversial because they aren't blank-slate.
Do you have a suggestion for how an above-board business that requires one employee per four paying customers (well, per infant the customers are paying for) can cost less than a quarter of a minimum employee salary for that duration? I was suggesting it as a pretty obvious bound from a business perspective, absent subsidies (which have their own bounds).
Nobody seems to be seriously considering AI and robotics to let a single human watch more than four infants at once, and frankly I'm not really sure I would either. But without that, the bounds apply.
I don't like how you sidestepped the entire substance of what I wrote. So I will just say I answered your question somewhere in the text above. Was I unclear at any point?
I wasn't expressing an opinion on Baumol more broadly than the one specific example, which I think has plenty of logic to show exists.
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