Whether it’s gay rights, rap, or the breakdown of marriage, culture plays a significant role in our lives. And many times it influences us economically, which is the focus of this article.
Dual income
Back in the 70s, one parent worked to support four to eight people. Now we have two working to support three or four. That’s a big change. Birth control coupled with the women’s movement and desire for smaller family sizes has lessened the importance of measuring individual income. Today, we focus more on what a family brings in.
Capital assets
Economies produce two kinds of outputs: capital assets and consumables. Goods and services that get used up within the year they’re made are consumables. They include food, cleaning services, and live entertainment. Capital assets last much longer—things like, roads, schools, hospitals, and power plants. Sure, capital assets still require annual maintenance, which is a consumable, but the initial output lasts a long time.
When a country experiences war, many of their capital assets get destroyed and must be rebuilt. But if a country doesn’t see war, their economic resources get spent on building new roads, new schools, new hospitals, and new power plants. This is a major reason why North America has experienced such prosperity.
Necessities
You can only do three things with money:
- spend on necessities
- spend on luxuries
- save to spend another day
Public opinion as to what constitutes a necessity has changed. Pets and fancy vacations, once considered luxuries, have now moved into basics—regardless of personal income. This new definition doesn’t just influence wage demands, it alters personal savings since the attraction behind keeping up with culture often wins out over the fear of going broke.
Inheritances
Family inheritances also affect the amount of money people save. Sure, we now live longer but most of us can expect to receive something substantial from mom and dad. And today’s larger nest eggs are divided among fewer kids.
Price watching
True capitalism expects consumers to play their part. People are supposed to watch over prices by supporting suppliers who deliver superior value. This way companies are forced into keeping prices down. But if you’re too busy to shop (say, for something like snow tires), the system breaks down and we all end up paying more.
Over-specialization of labour
Back in the 70s, whenever a homeowner requested a tradesperson provide a quote, they’d compare that price to doing the job themselves. And if they felt the premium was too high, they would do the job themselves. But when the average homeowner is void of such talents, this evaluation process becomes redundant and people wind up paying more. In the past, we were at the mercy of the accountant and the lawyer. Today, we’re at the mercy of trades.
Happiness
Economists define standard of living based on outputs. The more you consume, the better off you are. But shouldn’t happiness be part of the equation? In the 1970s, people lived in 1200 square foot bungalows, opened garage doors manually, called neighbours over to play cards, and ate mostly at home. They were moderately happy. Today we live in larger homes, have automatic switches for everything, enjoy copious forms of entertainment, and eat out with regularity—but we’re still only moderately happy. Why?
Because economies don’t generate happiness, they only create goods and services. Yes, extra goods and services make people happy in poorer countries but not in ones like ours. When we went from watching black and white to amazing HDTV, people didn’t get a happiness hit. That’s because somewhere along the line there was a social cost (not necessarily from the technology) that nullified the gain. Or, we simply got used to the new quality advancement and adjusted—just like people don’t jump up and down every time they see water coming out of a tap.
Summary
Economics is a social science—not a real one. So numbers don’t tell the whole story. In fact, numbers usually leave out the most important part. And because economies involve emotion-based participants (people), everything can’t be measured by levers and dials. That’s why on top of facts you also look at faces.