Free Market Institute Blog

“Dad,” I asked, when I was about 10, “how much do you earn?”

My dad told me it was none of my business, though since he worked for the Post Office, I suppose I could have looked up that information. I confess that I have always been a bit preoccupied with money, partly because I have always loved numbers—the real ones like GDP statistics, demographic percentages, average snowfalls. I could never correctly imagine imaginary numbers.

My childhood hobby of collecting postage stamps (philately, anyone? ANYONE?) introduced me to history. Apparently people are still obsessed with money, will tolerate history, but have pretty much forgotten what postage stamps are.

In our fast-paced and confusing world, it’s good to get some perspective, and it’s certainly tempting to look for wisdom from smart people. 

Sometimes, though, that doesn’t work, when smart people give dumb advice, or shallow suggestions, particularly about economics. 

Don’t get me wrong. Unqualified people also say all sorts of nonsense. Part of the modern age (let’s say, after 1900), is the rise of the mass man. As described by Spanish philosopher Jose Ortega de Gassett in 1932, this “mass” person prides himself on his ability to opine despite his lack of any real effort or genuine expertise. We no longer defer to what Gassett called “minorities” in our hyper democracy. Why? After all, we have the internet. Cervantes once wrote that “the road is better than the inn,” but many people are content with Motel 6. Many of us, Gassett claimed, are “mere buoys floating on the waves” who think they have “the right to impose and give force of law to notions born in the cafe.” 

Perhaps he anticipated Starbucks?

What do college tuition, health care, and housing have in common? 

For decades, their prices have risen faster—much faster—than the general price level. Why?

Because each of them is too cheap.

One of my first post high school jobs was the midnight to 8 am shift at the Grand Rapids, MI, YMCA, which had over 100 residents. We rented small, clean rooms with a single bed, desk, sink, weekly housekeeping, and communal baths–all for about $9 a night. I checked in men who were having marital problems, the occasional misfit, and some single men who were merely frugal and in between housing choices.

That sort of Spartan housing option has faded away over the past few decades; meanwhile, home prices have skyrocketed and homelessness has exploded.

Today, nearly 20% of millennials assume they will never be able to afford a home. Between higher home prices and mortgage rates rising from under 3% to over 7%, the average monthly home mortgage in the USA is now over $2300, and nearly $4000 in places like California.

What went wrong? Is this the market’s fault?

A 2004 study showed that for every inch taller a person is, they gain about $800 (specifically, $789) in income, per year. And that adds up: a six footer earns a cool $224,000 more than a person who is 5’5” in a 40 year career…and that was nearly 20 years ago. It is likely more now, with the 60% increase in prices since then. 

Why is this? Do a few hundred project runway models and basketball stars skew income that much? No. Height may have helped give people advantages in distant history—assuming tall people could run a bit faster, reach a bit further for an apple or a jaw in a fist fight. But I doubt that is relevant today. We don’t quite know the real reason, but we can make some educated guesses.

And it’s okay. Sort of.

Admit it: you and I are ignorant about all sorts of stuff. I don’t know about the mating habits of Tse Tse flies, and I don’t want to know. I could, of course. That’s what the internet is for. But my time is valuable, and hence costly, so I cheerfully live my life without knowing that, or…

Each May, as temperatures rose and attentions flagged, I gave my economics students laminated cards with ten financial tips, and several of those concern debt, with rules like these:

and my favorite,

The last rule helps fatten your wallet and thin your belly.

“A recession,” President Reagan once famously said, “is when your neighbor loses his job; a depression is when you lose your job.”

Certainly no one “wants” a depression; who would want a recession? 

I might, at least in the sense that I might embrace a sneezing fit after breathing in a roomful of dust.

Classically defined as something like a half year of declining GDP (or incomes…same difference), recessions are typically connected with rising unemployment, declining production, and, well, misery.