Tyler Cowen is asked a good question: are there any goods someone on a median income can afford which are the very best of their kind? The answer, as Tyler shows, is plenty – including some important ones such as books and recorded music. To this we might add that even where the very best goods are unaffordable, the median income earner can afford pretty decent ones, such as cars, TVs and sound systems.
Which poses the question: if someone on a median income can afford such a luxurious cornucopia, what can’t he buy?
The obvious answer, in the UK, is a decent house. The average house costs over £208,000, equivalent to 7.5 times median annual earnings. Given that the best schools tend to be in the most expensive areas, this means that our median earner can’t afford the best education for his kids either.
However, I suspect that most of the best things that the median income-earner can’t buy are non-material goods.
One is financial security. 49% of people, and most 35-44 year-olds live in households with less than £5000 of net financial wealth (pdf). They are only a pay cheque or two away from trouble.
Another is status. Our wages are related to our sense of worth – which is one reason why most people would prefer (pdf) a lower but above-average income to a higher but below-average one. A median income, by definition doesn’t provide much status.
You might reply that this problem would be solved if we could shake off envy. Not entirely. Status is one mechanism whereby income leads to political power: as Adam Smith said, “we frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous*.” Partly for this reason, therefore, a median income doesn’t buy a proportionate share of political power. As Martin Gilens and Benjamin Page say (pdf):
economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.
Pablo Jimenez shows that a similar thing is true in other countries.
Another thing our median earner can’t buy is workplace autonomy: she is more likely to be the victim of workplace coercion than the beneficiary of it. And even if she isn’t, she probably lacks the satisfying work which the better-paid sometimes enjoy. And she is tied to work for years, because she lacks the savings to retire early. Warren Buffett might dance to work every day, but most people on £25,000 a year do not.
Now, none of this is to deny that things have improved; workers today enjoy better conditions and shorter hours than their 19th century ancestors. But it seems to me that what median earners lack are the goods which are higher up the hierarchy of needs.
Which brings me to a paradox. The people who should be most concerned by this should be those who most value real freedom and self-actualization – that is, those who claim to be libertarians. And yet it is these who seem keen to celebrate capitalism’s material success whilst overlooking its inabilities (so far?) to provide higher, non-material goods for all. As I’ve said, most “libertarians” are hypocrites and it is we Marxists who are the true lovers of freedom.
* Theory of Moral Sentiments, I.III.29