My "Keeping up with the Joneses" Theory for Why People Think the Economy Sucks
I’ll admit that I live in a bubble.
Most people I interact with don’t stress too much about money. But if they do - they mostly keep it to themselves or express their frustrations online. Like this guy on Reddit commenting on why after 40 years the economy isn’t like anything he thought it would be.
I’ll point out one obvious error here: while this guy is lamenting about how “Fifty thou a year will buy a lot of beer” - his own $24K in 1986 is about $70K in 2023 dollars. So there’s one reason why $100K doesn’t feel anything like he thought it would be. Inflation is hard to deal with.
But if you peruse more in the comments section and watch the video they’re discussing, there’s definitely a negative perception of the economy even as the stock market hits historical highs. And while inflation can explain some of it - a lot of it is centered around the core frustration of income not keeping up with prices.
Nate Silver has a good take on why everyone thinks the economy sucks. He’s concluding that people are actually spending more in real terms. They just can’t realize it.
The point is simply this: it’s very easy to spend a lot more these days on fast food in ways that don’t necessarily show up in inflation data. Three years ago, I might have walked down the block and ordered a Super Duper Double Cheeseburger, fries and a Diet Coke for $9.67 before tax. Now, because Uber Eats and the restaurant have correctly determined that I’m lazy and they can price-discriminate against me and I fell for their viral marketing campaign, I’ll have them deliver me a Triple Super Duper Cheeseburger Deluxe with grilled onions, plus fries and a Diet Coke — at a price of $24.25 before tax.
I like his article a lot and everyone should read it. My own addendum on this is that besides the fact that people clearly can’t wrap their heads around inflation, we simply also can’t ever quantify the slow increases to our quality of life as we get older.
My own expenses have doubled
As I’m writing this piece, I’m sitting at dining table in front of three beautiful bay windows looking out at the sunrise. I can see the top of the DeYoung museum in Golden Gate Park and the sunlight shining through the trees make for perfect afternoon walks through the neighborhood. And my rent is also now $3300/mo including utilities and parking.
If you told me I would be paying that much 10 years ago - I would’ve been shocked. In 2014 I was renting a room in a 3bed / 1 bath in the university district of Seattle for ~$550/month. My roommates and I didn’t have a living room because the apartment was originally the attic in a single family home before it was converted into multi-unit housing. The only way we hung out was by placing our desk chairs in a circle in the kitchen and smoking joints.
So my quality of life is at a surface level a lot better now than before. Am I happier now than when I was living in an attic with two other roommates? When we had to arrange rides with people with cars and navigate buses rather than take Ubers? When there was no ChatGPT to complete my essays? I don’t think so.
There’s less money stress now because I have more money and I’m not in college, but my baseline day to day happiness is mostly the same. In college I had a close knit community, school stress that wore me down (but now that’s just work stress), and a general high aspiration for life.
Which is why I think there’s some clear hindsight bias in a lot of people’s situations. Yes we can look data to observe how rent is outpacing inflation or how home prices now are unaffordable, yet most people don’t realize the median homes is now 3x bigger than they were in the 1960s and 180% larger than in the 80s.
We don’t remember the feeling of not being able to order Uber Eats or groceries from our couch. But it’s much easier to feel frustrated when you can quantifiably see the food and grocery bill increase.
Our expectations grow as we also do. But turns out that as a society we also have higher expectations for our standard of living than we did before as well. And the costs here are mostly invisible to our own eye. For example, did we really care about getting the newest iPhone every year before iPhone’s existed? I’m not so sure.
The fact is that we’re not just keeping up with the Joneses next door. We’re also having to keep up with a lot of expenses that are determined as baseline necessities that were technological marvels decades ago.
How to spend money in 2024
Which brings me to my last point. I think people have valid concerns about the rising costs of everything. But tangibly something to take away is to think about how to be smarter with your own spending in the new year.
I’ve been conflicted about it myself. On one hand - I feel like turning 30 was a symbolic milestone in realizing life is short and it’s worth worrying less and less about spending as confidence in making money gets strengthened.
But I see the value in being continuously frugal. Mr. Money Mustache likens saving money as a skillset like lifting bigger and bigger weights. In another way it’s also like practicing minimalism and understanding you don’t need THAT much in life. He has a Google Pixel phone that costs <$400. He also uses Mint Mobile for his phone plan for $15/month. And I’d bet you more than anything that he spends less money than most people in the Reddit comments section.
So there’s a tradeoff to both - and part of the journey is figuring out what to do. I’d love to hear from anyone else on how they might be thinking about the economy, finances, or anything else in 2024!