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“Traditional measures of economic growth ignore some of the largest gains in living standards and thus downplay the importance of economic progress.”
-William Nordhaus
In 1906, Upton Sinclair went undercover to Chicago’s meatpacking plants to reveal the brutal realities of poverty he depicted in his book. the forest: Families living in squalid, overcrowded conditions, children working in dangerous and inhumane factories, and workers disfigured and ignored by industrial capitalism with no safety net at all.
In 2025, we have a new kind of data-driven whistleblower: Michael W. Green, the asset manager, whose courageous discovery that American families making less than $140,000 live in poverty has gone viral.
One can only wonder how these families survive on such a meager six-figure income! According to Greene’s logic, two-thirds of Americans should qualify for food stamps.
Unlike Sinclair, Green does not appear to have spent any time with the families he champions. If he had, he might have felt that his spreadsheet was leading him astray.
Economists who are more adept at interpreting data appear to be unanimous in Green’s assessment Viral thesis.
Scott Winship Calls It is “the worst analysis of poverty I have ever seen.”
Tyler Quinn finds Green’s study “is all wrong. The basic concepts are wrong, the details are wrong, and the use of evidence is misleading.”
Jeremy Horbedal He says “It is ridiculous to use $140,000 as a measure of poverty.”
Noah Smith He says Green “completely gets his numbers wrong” and that his conclusions are “absolutely ridiculous.”
Green responds to some of these criticisms hereBut maybe you don’t need to be a certified economist to feel that the critics are right — because surely no one making $139,000 a year is going hungry?
Admittedly, Green’s argument is more nuanced than that.
He cites, for example, MIT’s “Cost of Prosperity” index which estimates that it took the average man 30 weeks of earnings to live a good life in 1985 versus 63 weeks now.
I’m not an economist, and I wouldn’t have even been waitlisted at MIT. But since I was alive in 1985, I can confidently say that things are easier and better now than they were then – economically at least.
(TV shows, movies, music, fashion, and celebrities were much better in the 1980s, of course. Not to mention the blissful lack of both cell phones and adult supervision.)
But cars, appliances, power tools, video games, and beer? Almost anything you can buy to make your life better is better today than it was then.
In almost all cases it is also cheaper, when adjusted for quality.
And even housing.
“Housing costs are rising, Green points out, but Americans today have more living space on average than ever before, and live side by side with fewer people,” Quinn writes.
And health care!
“The general trend in health care has been deflationary, not inflationary — or, as economics speaks, that the cost of purchasing an additional expected year of life has been falling rather than rising,” Quinn explains.
More intuitively, Cowen simply says: “I would rather have today’s health care at current prices than 1972 health care at 1972 prices.”
Me too: I’d rather have a stream anything At current prices from 1985 anything at 1985 prices.
This intuition—that the statistics Green looks at miss massive improvements in what our dollars actually buy us—is more than just anti-nostalgia, if that’s a word. (presentism? currentism?)
William Nordhaus demonstrated this systematically by measuring the cost of lighting in lumens. By tracking lumen-hour costs across technologies such as candles, kerosene, and electric lamps, Nordhaus has shown how ignoring quality change (more light per unit input, in the case of lighting) dramatically understates historical assessments of economic growth.
The cost of lighting a room for three hours – which in 1800 took about three hours of work – now requires only a fraction of a second of work: an almost 43,000-fold improvement that official statistics have almost entirely missed.
Nordhaus thus demonstrated the larger point that because technological change is not fully reflected in GDP statistics, we tend to underestimate the extent to which our standard of living has improved.
The flip side is that failing to take these changes into account can lead to some ridiculous conclusions about the cost of living, as expressed in this classic book. tweet:
The joke is that someone who stuck with buying 19th century lighting technology at 19th century costs would actually be poor because they wouldn’t have anything left to spend on modern healthcare, housing, or smartphones.
Green appears to be making the same statistical error: he looks at modern households spending on superior goods and services without taking into account the extremely superior value they receive.
“There is a major conceptual flaw in Greene’s focus on high prices,” Quinn concludes. “Prices are high in large part because of high demand, which can only happen because many more Americans are able to afford things.”
$140,000 a year buys a lot of stuff.
Let’s check the charts.
Moving forward:
The middle class in the United States was shrinking, but only because the upper class was expanding. In 1967, 5.2% of American households earned more than $150,000 (inflation-adjusted) versus roughly 34% now.
People have moved into the middle class too:
The proportion of Americans whose income exceeds 200% of the federal poverty line (about $60,000 for a family of four) has increased by about 8.5 percentage points since 1975.
Poverty, however measured, is declining:
This chart is from Economic Strategy Group It shows that poverty has fallen by almost half according to income-based measures, and by more than 80% using consumption-based measures – in both cases, more than government statistics indicate.
Consumption rises:
that Academic study The “Consumption Poverty” (green) and “After-Tax Poverty” (red) reports show that the official poverty measure based on the CPI fails to capture decades of improvement.
More food:
Americans consume about 3,800 calories per day, 15% more than we did in 1985 and about 50% more than we’re supposed to.
More health care:
8.2% of Americans were uninsured in 2024, down from 16% in 2010.
Candles were once a luxury item:
This is a reminder that until 1800, candles were so expensive that it was economical for people to venture out into the oceans and risk their lives hunting whales.
Luminous:
One million lumen hours is roughly the amount of light you get from a regular household light bulb that has been on continuously for about two months. In 1300, that would have cost the equivalent $52,000. OK.
In terms of Nordhaus:
William Nordhaus made economic progress more realistic by calculating the “time price” of light. In 1830, you had to work Three hours To withstand one hour of candlelight. Today, the same hour gains light in a thirteenth of a second.
Have a great weekend, Upperclass readers.
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