Here’s a letter to a long-time correspondent.
Larry:
Thanks for your email in response to this post about the myth of middle-class stagnation. (In that post, I failed to recommend also Norbert Michel’s wonderful 2025 book, Crushing Capitalism: How Populist Policies are Threatening the American Dream.)
You identify two of the three categories of things that Americans regularly buy that haven’t much gone down in real price over the past half-century: housing and post-secondary education. (The third is health care.) About these two things, you write:
When I try to explain to my liberal friends that the middle class hasn’t actually stagnated I’m always hit with “yeah, but how do you explain the price of houses and a college education?” Those two things alone are enough to make people feel like things have gotten worse and I never know how to counter that argument.
An obvious response for you to your liberal – more accurately, progressive – friends would be to say “Yeah, and the industries that supply those two things are distorted by unusual amounts of government intervention. With housing, government artificially restricts the supply of new units; with college education, government artificially increases the demand for enrollment. Both moves push prices upward.” (With health care, government both artificially restricts its supply and artificially increases its demand.) You could justifiably leave your response at that.
But you can also say more.
While the real cost of housing has indeed risen, so, too, has its quality. Here’s a Census Bureau report from 2015. It shows that in 2015 the median square footage of a newly built single-family house in the United States was 2,467 – or 62 percent larger than was the median square footage of a newly built single-family house in 1973 (when it was 1,525). (See page 345.) Also, in 1973, more than half (51%) of these homes had no air-conditioning; in 2024, this figure is down to 2 percent. Further, in 1973, 40 percent of newly built single-family homes had 1.5 bathrooms or fewer, and the number that had 3 or more bathrooms was too small to register. In 2024, only 5 percent of newly built single-family homes have 1.5 bathrooms or fewer, while 31 percent have 3 or more bathrooms.
These facts are especially impressive given that the number of persons, on average, per household fell from 3.01 in 1973 to 2.5 in 2023. The result is that the average square-footage of household living space per occupant of a newly built single-family home in the U.S. rose from 507 in 1973 to 987 today – an increase of 95 percent!
The quality of housing has risen in other ways as well.
I’m rambling on for too long, so I’ll not say much about post-secondary education or health care. Have these services also, like housing, increased in quality by enough to noticeably dampen informed complaints about their rising costs? I have serious doubts that there’s been any real improvement in the quality of my industry’s output: college education. But I’m confident that, although the real cost of health care is today much higher than it was a half-century ago, so, too, is the quality. I’m also confident that, had there been less government involvement in health care, its costs today would be lower and its quality even higher.
A closing thought: Housing, health care, and college education all have what economists call “luxury-good” properties. Luxury goods are goods (or services) the demands for which not only rise when consumers’ incomes rise, but rise by a larger percentage than the rise in incomes. As we become richer (and we have indeed become richer), we demand especially more housing, health care, and education. Therefore, even if there were no government distortions of the markets for these outputs, the prices of these outputs would plausibly have risen relative to the prices of other goods and services and, perhaps, also in terms of the amount of time required to work to earn enough income to purchase these particular outputs. Yet this latter outcome – especially when quality improvements are taken into account – would be evidence of economic progress rather than of economic problems.
Sincerely,
Don
