According to Ben Bernanke and Peter Olsen at The Brookings Institution,
Economically speaking, are we better off than we were ten years ago? Twenty years ago? When asked such questions, Americans seem undecided, almost schizophrenic, with large majorities saying the country is heading “in the wrong direction,” even as they tell pollsters that they are optimistic about their personal financial situations and the medium-term economic outlook.
While thinking about the question, we came across a recently published article by Charles Jones and Peter Klenow, which proposes an interesting new measure of economic welfare. While by no means perfect, it is considerably more comprehensive than median income, taking into account not only growth in per capita consumption but also changes in working time, life expectancy, and inequality. Moreover, as the authors demonstrate, it can be used to assess economic performance both across countries and over time. In this post we’ll report some of their results, and extend part of their analysis (which ends before the Great Recession) through 2015.
The bottom line: According to this metric, Americans enjoy a high level of economic welfare relative to most other countries, and the level of Americans’ well-being has continued to improve over the past few decades despite the severe disruptions of the last one.
This couldn’t be any clearer. America does not need to be made great again. It is still great, by nearly all measures of economic welfare and getting better. The article ends with an additional caveat that tips even further in favor of increased prosperity,
Methodologically, the lesson from Jones and Klenow’s research is that economic welfare is multi-dimensional. Their approach is flexible enough that in principle other important quality-of-life changes could be incorporated—for example, the 63% decrease in total emissions of six of the most common pollutants from 1980 to 2014 and the decline in crime rates. We need better measures of how well Americans are being served by the economy, and frameworks such as this one are a promising direction.
Do read the whole article for more insight and numbers.