Myths of Rich and Poor: Why We're Better Off Than We Think

There are two main problems I see with "Myths of Rich and Poor: Why We're Better Off Than We Think", and I might as well get those out of the way, so that my review ends on a high note. First, the book was published in 1999, and written most likely a year or so earlier. Although it covers the 1973-1997 years, it is possible that the data it uses is biased in reflection of the then splendor of the dotcom economy. How many of the conclusions reached stand up to scrutiny today 10 years later? I do not know. Second, the authors appear to have set out to prove a point, and they looked only at the data that support that point: that the USA is not doing as bad as others tell us it is. This approach raises questions about the analytical balance and usefulness of the results. Nonetheless, based on the data available at the time it was written, this book is incredibly good! In two broad sections of approximately the same length, it addresses two myths: (a) the myth that incomes and the standard of living of Americans are falling, and (b) the myth that Americans are losing their jobs, left and right. The authors devote five chapters to "dismantling" the first myth, and four chapters to quelling the second myth. Given the state of employment today, it is not so clear if the book has succeeded in the second instance. It is very clear that it make a very good case. For this reviewer the first myth was put to sleep beautifully, and a number of tables and figures throughout the book present a high mountain of evidence. Take a few examples. It is true that average hourly wages in the USA have fallen between 1973 and 1997. This reflects structural changes in the economy that have allowed low skilled migrant workers to do hourly wage jobs, and skilled workers to get salaries and other forms of compensation. In the end, per capita income and total compensation have risen even as wages have fallen. On the other hand, not only is the hourly wage a mismeasure of worker income, income itself is a poor proxy for wealth. The wealth of Americans has "skyrocketed" in almost all categories. For example, in 1970 the median size of a house was less than 1450 sq. ft., and had no central heating or air-conditioning. By 1995, the median size of a house had climbed to 1950 sq. ft, and a typical house comes equipped with central heating and air-conditioning, dishwasher, two or more bathrooms, private garage, just to mention a few standard features. In addition, the cars Americans drive, and the highways they drive on, are all modern and inexpensive by historical standards. "Even the poor are better off" today than they were in 1970: more cars, PCs, TVs, and so on - see Table 1.2, p. 15. Compared to the past, products and services Americans consume now are new and improved. These new and improved products and services require fewer minutes to produce than before. In 1970, you needed 56 minutes of work to buy a half-gallon of milk; by the 1990s, you needed no more than 9 minutes

Like Will Rogers said: "It ain't what you don't know that hurts you. Its what you know that just ain't so that will hurt you." Or words to that effect. Like Ben Wattenberg's earlier book (whose title I used for this review), Myths of Rich and Poor explains that much of what you have been led to believe about wealth and poverty is simply incorrect.The authors drill down into census data, the basic "facts" of American life, to show that we are not getting poorer. Our homes are bigger, food is cheaper, gas is less expensive, many 'poor' people enjoy home and car ownership, air conditioning, cable television, and an entire collection of things that most truly poor people would never even dream they could own.Like David Landes' Wealth and Poverty of Nations and the best-selling Millionaire Next Door, this book does a better job of really reading and analyzing what is right -- and wrong -- about the American market economy.All of these books show that finishing high school, staying married, and getting a job are th best poverty prevention strategies available and that the American market facilitates these things better than any other system. There are no guarantees and much of it is up to the individual. You just have to have the desire, direction and discipline to win your share of the American dream.

Review from AWL News, the monthly newsletter of All Ways Learning of Silicon Valley.Shattering Modern Economic FablesThe media bombards us daily with stories about economic hardship: corporate layoffs, trade deficits, homelessness, minimum wage battles, families in poverty. Bad news sells newspapers and increases television ratings - it's ironic that the media's own economic interest is served by trumpeting economic disaster.These messages have been repeated so often they've been exalted to the position of Conventional Wisdom. Everyone knows by now that the poor are getting poorer while the rich are getting richer, that we've become a nation of hamburger flippers, that both parents need to work in order to support a family, and that our children are the first generation in our history who will not be better off than their parents.Enter Michael Cox, an economist with the Federal Reserve, and Richard Alm, a business journalist. As they state in Myths of Rich & Poor, "these statements of America's economic failure are not just wrong, but, in each and every instance, spectacularly wrong." A combination of statistics and elegant methodologies are the tools they use to shatter these modern economic fables. The clarity of their writing doesn't hurt either.It's impossible to read this book without realizing that we are winning the war on poverty. Today's average "poor" families have goods and services that rival yesterday's middle class families: 60% have microwaves, 50% have air conditioners, 93% have color televisions, and 60% have videocassette recorders.More impressive is the income mobility within our economy. Most poor families don't stay poor. Over the sixteen year period tracked by one study, 95% of the families in the lowest income quintile climbed the economic ladder to higher quintiles. Over 80% moved to the top three quintiles, qualifying them as middle class or better. As Cox and Alm repeatedly demonstrate, "the rich may have gotten a little richer, but the poor have gotten much richer."In another enjoyable section, Cox and Alm deftly reverse the perception that we are becoming a "nation of hamburger flippers." Fast-food jobs supposedly represent the shift of our economy to low-paying service sector jobs. But Cox and Alm point out that everyone from brain surgeons to computer programmers are considered part of the service sector.Reading this book gives you a perspective you would not otherwise get from the mainstream media. With their relentless daily focus on bad economic news, the media completely miss the big picture - the American Dream is being realized by more people than ever before. As we prepare our children to participate in this economic miracle, it's good to know that boundless opportunities lie ahead for them.

For anyone who has heard or read the gloom and doom analysis of the U.S., this is a must read. For anyone who has read of the, presumed, stagnant, greedy "me" decade of Ronald Reagan, this is a must read. As a professor of economics, I have to deal with the myths presented in this book frequently. Students enter the university with ideas obtained from the general media and, of course, their high school teachers. The misconceptions about the nature of our economy, particularly in terms of its performance, are abundant. This book effectively puts all of the pessimistic views of the U.S. economy away by pointing out the partial nature of each criticism of the economy's performance. There is some grain of truth in every so-called shortcoming of the U.S. economy, but each criticism is based on selective data and selective interpretation. This book provides a complete look at most criticisms of the economy. Not only are the partial, or selective, nature of the problems explained, the reader is provided with a complete explanation, including data. Whether the problem is declinine income (not true), or that only minimum wage jobs are being created in the service sector (not true), or the idea that our children will not be as well off as we are (not true), or that the manufacturing sectors is declining (not true), the authors give a clear and understandable explanation. At times the authors tend to overdo the cheerleading for the efficiency of the economy. But, it the data idicates optimism, I suppose one must go with it. It would have been nice if the authors had provided a detailed examiniatiion of the increased charitable activity by U.S. citizens and corporations when compared to the recent past (last 30-40 years). But no book can do everything. In summary, this book is an excellent book for those that want a more complete view of the U.S. economy than one finds in the general media. In addition, one can learn more about how to examine data (statistics) for its drawbacks and shortcomings.

This book is the much-needed antidote to the often-repeated myth that the average American is today no better off -- or only slightly better off -- than was the typical American of 1973. The authors shatter this myth. There is nothing at all left to this myth when Cox and Alm are done with it. Anyone who from now on repeats this myth can justly be accused either of inexcusable ignorance or of willful misreading of the facts. The book is well written, and the authors obviously thought deeply about how to present empirical data clearly. They succeeded marvelously! The tables and charts alone are worth the price of the book. Read this book before you attend another cocktail party -- and then disabuse nearly everyone you meet of the atrocious falsehood that American living standards are stagnating.