Affordability, Part II

A deeper look into what affordability means for the average American

In last week’s primer I showed that the media’s usual story — that Americans have been impoverished by the surge in inflation that began in 2021 — isn’t right. In fact, according to the conventional measure that economists use to gauge purchasing power – real income – the purchasing power of most Americans is higher today than it was before the 2000 pandemic. But in last week’s primer I also argued that looking only at income divided by the Consumer Price Index (CPI) means that we miss some important ways in which the current economy is worse than the conventional measures indicate. In particular, I emphasized the adverse effects of high borrowing costs and low hiring, which aren’t included in the CPI.

Beyond that, I also argued our general sense of affordability encompasses more than just purchasing power. We also care about economic inclusion, security, and fairness.

Beyond the paywall I’ll explain these concepts and how they help explain Americans’ economic dissatisfaction. Specifically, I’ll address the following:

1. Why life doesn’t feel affordable when people aren’t able to buy those goods and services that make them feel that they are full members of society.

2. Why life doesn’t feel affordable unless people feel assured that a stretch of bad luck won’t lead to financial disaster

3. Why it’s important to people that prices reflect their sense of fair play, and that they don’t see themselves being taken advantage of by those in positions of privilege and power.