6 ms·

The Bad Economics of Wtfhappenedin1971

40 points by novia 3y ago

King1st 3y ago
WTFHappendin1971 & this article both practice bad economics and make gross assumptions. Is like the writer took every point made and picked the exact opposite take while missing the correct answer in the middle every time.
- andai 3y ago
  I think you've elegantly summed up the entire history of human thought.
- atq2119 3y ago
  Enlighten us? At least one or two concrete examples should be possible, lest people take the more natural conclusion that you're engaging in false equivalence.
jdksmdbtbdnmsm 3y ago
>This is why… uh… people started divorcing more? Yes. Divorce rates inversely correlate with wealth and income measurements. Poor people divorce a lot more than rich people, which is just common sense for any serious person interested in these things. In my experience, Marxists are the only ones who reliably make these obvious connections. I think it's just because they are so concerned with the stranglehold that ecoonomics places on basic societal wellbeing. Almost nobody else seems to take these things seriously. https://www.forbes.com/advisor/legal/divorce/divorce-statistics/ https://www.forbes.com/advisor/legal/divorce/divorce-statist...
- kipchak 3y ago
  I don't think he would qualify as a Marxist, but you might find some of the Structural-demographic theory work interesting, in terms of considering economic factors as a determinant of well being. For example the double spiral[1] of well being and elite overproduction is a pretty compelling chart. It also in a way addresses a lot of the same ground as wtfhappenedin1971 in terms of changes in trend. [1] https://peterturchin.com/age-of-discord/ https://peterturchin.com/age-of-discord/
  - jdksmdbtbdnmsm 3y ago
    I read Ages of Dischord! I think Peter Turchin has a lot of very valuable insights. Big fan! Also a great book for HN readers. :)
    - kipchak 3y ago
      Oh nice, glad you liked it! End Times came out fairly recently and is largely a continuation of Ages of Discord, might be worth a read.
bryanlarsen 3y ago
WTF happened in the early 70's? IMO by far the biggest thing was the Arab oil embargo, which ended a 10,000 year trend where the price of energy got steadily cheaper.
- BoiledCabbage 3y ago
  Energy is probably the most important determinant of your economy - or at minimum top 3. The oil embargo is what happened and completely re-wrote the economic path. Everything else is secondary.
  - deleted 3y ago
    [deleted]
- 7thaccount 3y ago
  It's referring to Nixon taking us off the gold standard, which allows the central bank to essentially inflate our money supply like crazy. I don't necessarily agree with their argument, but there are grains of truth to it. Assuming a giant horde of Smaug level gold isn't found, it keeps things in check fairly well.
  - dragontamer 3y ago
    The problem is that we honestly were off the gold standard in 1930s, when gold became illegal to hold. It's turtles all the way down. The economic base in the 1950s, 1960s were NOT backed by gold at all.
    - 7thaccount 3y ago
      I assume even though it became illegal for people to hold gold, that the dollars held by foreign countries were still convertible to gold and thus the standard still worked to a degree. I'm sure things may have changed in WW2, but that's a special case. Still, I appreciate you bringing up your point.
      - 3y ago
deleted 3y ago
[deleted]
7thaccount 3y ago
This quote below is gold (no pun intended). >"Let’s knock this one out of the way now: despite what people at the mises institute would have you think, not a lot of couples divorce because of bitter arguments on the convertibility of the dollar to gold." I share a lot of libertarian views, but can't go all in as it's followers have such a black & white view on things that are inherently grey. I agree that the government is inefficient at best and corrupt/murderous at worst (i.e. innocents given the death penalty), but getting rid of everything (e.g. EPA, FDA, USDA...etc) isn't the best thing either as firms will pollute and take health shortcuts as much as possible absent any laws which prevent it. Mainstream economics points out that monopolies are bad because there is no competition, so you either break them up or regulate them. Libertarians frequently adhere to Austrian economics and you have folks like Milei saying a market failure cannot occur and there is nothing wrong with monopolies. There are valid concerns regarding ineffective regulators and those captured by industry too. Unfortunately, neither a full market based anarchy (i.e. government is there to basically only protect your property rights) or extreme regulations (immeasurable beauracracy)are the way to go IMO. What you want is something in between the two extremes. The question becomes where to draw the line (if this is familiar...it's the same argument as the Laffer curve for taxes). Progressives think it needs to shift one way and Conservatives the opposite. The true answer IMO is that some things need a lot more regulation and some things a lot less. A balanced view doesn't make for good sound bites though.
- phpisthebest 3y ago
  Well the libertarian position is the "Bad" or Exploitive Monopolies, (True Monopolies not "monopolies" like when people say Apple or Amazon are monopolies) only really happen when government protects them, or "regulates" the market to where no competition is possible.
  - AnimalMuppet 3y ago
    They say that, but they're wrong. Monopolies happen when one company has enough money to buy out the competition, when one company has enough leverage to lock out the competition, or when it's a "natural monopoly" (and maybe some other situations). None of those requires government protection to create; all require government intervention to avoid and/or control.
ren_engineer 3y ago
>people want to live in cities no, a ton of jobs outside the cities got outsourced or automated, leaving people with no choice. The number of people who left cities when remote work gave them the chance should make that obvious
- bestekov 3y ago
  > The number of people who left cities when remote work gave them the chance should make that obvious The number of people who left cities is a remarkably small part of the US population and many of them just left high-cost cities for other lower-cost cities. The steady increase in % of the US population who live in cities (83% in 2023 up from 70% in 2022) [https://www.macrotrends.net/countries/USA/united-states/urban-population https://www.macrotrends.net/countries/USA/united-states/urba...] suggests that yes, Americans do in fact want to live in cities.
  - drewcoo 3y ago
    https://www.census.gov/newsroom/press-releases/2022/urban-rural-populations.html https://www.census.gov/newsroom/press-releases/2022/urban-ru... > Despite the increase in the urban population, urban areas, defined as densely developed residential, commercial, and other nonresidential areas, now account for 80.0% of the U.S. population, down from 80.7% in 2010.
    - enterprise_cog 3y ago
      Not sure why you left this part out. > This small decline was largely the result of changes to the criteria for defining urban areas implemented by the Census Bureau, including raising the minimum population threshold for qualification from 2,500 to 5,000.
- Reubend 3y ago
  But even if someone wants to move for economic opportunity, they still want to move. Would people prefer rural areas if those areas had equal amounts of jobs? Maybe, maybe not. But since they don't, I think it's totally fair to say that the proportion of people who "want" to live in cities is increasing.
marcusbuffett 3y ago
I personally find Wtfhappenedin1971 to be super interesting, even if the conclusion about floating currencies could be wrong. The author here hand-picks like 4 things out of the 50 charts, and IMO the least interesting ones. There’s some massive trends that started around 1971, where healthcare, national debt, education costs, housing, etc all just start to skyrocket, outside of just inflation. I think the 1971 author is certainly motivated in his reasoning to explain what’s going on through his lens, but the OP here seems equally motivated to decide that actually nothing is going on.
- lisper 3y ago
  There's a lot going on. It's just that almost none of the many things going on today started in 1971.
  - notahacker 3y ago
    Not to mention quite a few of the less attractive economic trends are far more closely linked with policies that Austrian economists and most other gold bugs enthusiastically endorse...
- cassepipe 3y ago
  While that may be true some hand picked examples, because they are so obviously methodologically flawed that they betray either a lack of basic skills in a field or dishonesty, can completely destroy credibility. When a documentary tried to explain to me that it was so unsettling that ancient Egyptians were able to build the pyramids with heavy granite blocks that came from 900km away without even mentioning the Nile, I did not think it was worth continuing much further. (Turns out only a little part was made of granite anyways, most of it was built with stone coming from right next the pyramid)
bdowling 3y ago
> No, wtfh1971 isn’t arguing that divorce has to do with wage changes, because he’s too stupid to get that relation. This is the exact point where the mean-spiritedness of the article surpassed my interest in continuing to read it.
tonymet 3y ago
Doubling the labor force suppressed wages at the same time inflation skyrocketed so workers didn't notice (as much). Divorce exacerbated the problem by dividing families and requiring double the resources (two homes, cars, insurance plans, etc). Families had to start paying for daycare and housekeeping , both expensive and taxable . But that increased GDP . A working class single-wage-earner could once support an entire 6-8 person family. All the wealthiest Zips today e..g Berkeley , Palo Alto were once full of working class families. Economic statistics are just indicators. It's important to pay attention to the real world.
cmrdporcupine 3y ago
I like the spirit and target of the article but some of this is pretty off. For one it's insanely US-centric. Granted I'm sure the original website was, too, but some of the explanations don't hold when you pan out a bit. Example: The “relentless 50 year decline in wages” should be labelled the “relentless 50 year increase in healthcare costs”. Doesn't explain why the same incomes decline happened in the rest of the G7. Our insurance rates didn't go up as % of compensation or of corporate profitability. They did go up as a % of government spending, but that's in a different ledger.
- friend_and_foe 3y ago
  Since just after world war 2, most world's currencies were backed by USD which was backed by gold, due to the fact that any country could redeem their dollar reserves for gold at a pegged rate. In 1971 the US broke that agreement, known as the Bretton Woods agreement, and stopped redeeming USD for gold to other countries. So the currencies devalued at least as fast as USD from that point, which explains the same income declines. I wouldn't be so quick to call government spending a different ledger. Governments borrow to spend, they tax to rein in devaluation of their currency, as per modern monetary theory. When they borrow they print money, and a significant chunk of international debt is denominated in USD, so such debt would see a real term devaluation as the federal reserve expands the money supply. This would show up as price inflation for goods and services purchased by the government, inelastic goods and services would plausably show an increase as a percentage of total spending.
lurking15 3y ago
Idk I resent this article if only because the tone is so demeaning and rude. > This is because US Healthcare costs have grown at a ridiculous rate. US Healthcare is paid through insurance. That insurance is tied to employment income because of an idiotic tax deduction. I'm sure he hates "goldbugs" and by extension libertarians, but libertarians are really the only ones I've seen pointing to health insurance in the US as rooted in a weird historical consequence of WWII federal govt centralization and the subsequent enforcement of price controls on wages. Of course this "path dependence" explains why healthcare is so different from the rest of the world and directly implicates the US government instead of "greedy capitalism". Since there's this tax exemption and third party arrangement for healthcare expenses, healthcare insurance is anything but a "free market." As I continue reading it's obvious this dude is married to a certain sarcastically negative viewpoint, funny enough at times getting so close to striking at the heart of economic dysfunction and the debasement of living standards that happens to every empire: > It’s entirely possible that over 5 decades, the interest rate going down has increased housing prices in areas with a housing shortage. You think? Interest rates and money are inextricably tied. And not only did "the interest rate go down" it was held to zero for almost a decade. The result is that anything actually worth having in life has been inflated away and now is a major struggle for the middle class: housing, healthcare, education, food, energy...
friend_and_foe 3y ago
So I've perused that site a number of times, trying to understand the correlations. It's obvious many of them are tenuous at best. But at it's core the concept is sound, and particularly the economy focused graphs show a strong causal correlation to the breaking of the Breton Woods agreement. Wages not keeping up with inflation and the cantillion effect are both well studied and there is plenty of empirical data on them. The social ones, I don't know, maybe some in some way or other but many of them are obvious bias or just red arrows showing no obvious change in trend at all. If we could get data in tables and not just jpg format we could do a lot more with it and see what there is there.
johnea 3y ago
I'm not a bitcoin or gold advocate, but I do think that the end of Bretton-Woods was a disaster. It didn't have anything to do with gold, but with the fixed international exchange rates of national currencies. These were only allowed to be changed by an agreement from the commitee: https://en.wikipedia.org/wiki/Bretton_Woods_system#Fixed_exchange_rates https://en.wikipedia.org/wiki/Bretton_Woods_system#Fixed_exc... To me it seems, that having a market driven currency exchange rate creates something like a double pendulum chaotic effect. With both the values of goods and services driven by a market that is also driving the values of the underlying currencies...

40 points by novia 3y ago

WTFHappendin1971 & this article both practice bad economics and make gross assumptions. Is like the writer took every point made and picked the exact opposite take while missing the correct answer in the middle every time.

andai 3y ago
I think you've elegantly summed up the entire history of human thought.
atq2119 3y ago
Enlighten us? At least one or two concrete examples should be possible, lest people take the more natural conclusion that you're engaging in false equivalence.

jdksmdbtbdnmsm 3y ago

>This is why… uh… people started divorcing more? Yes. Divorce rates inversely correlate with wealth and income measurements. Poor people divorce a lot more than rich people, which is just common sense for any serious person interested in these things. In my experience, Marxists are the only ones who reliably make these obvious connections. I think it's just because they are so concerned with the stranglehold that ecoonomics places on basic societal wellbeing. Almost nobody else seems to take these things seriously. https://www.forbes.com/advisor/legal/divorce/divorce-statistics/ https://www.forbes.com/advisor/legal/divorce/divorce-statist...

kipchak 3y ago
I don't think he would qualify as a Marxist, but you might find some of the Structural-demographic theory work interesting, in terms of considering economic factors as a determinant of well being. For example the double spiral[1] of well being and elite overproduction is a pretty compelling chart. It also in a way addresses a lot of the same ground as wtfhappenedin1971 in terms of changes in trend. [1] https://peterturchin.com/age-of-discord/ https://peterturchin.com/age-of-discord/
- jdksmdbtbdnmsm 3y ago
  I read Ages of Dischord! I think Peter Turchin has a lot of very valuable insights. Big fan! Also a great book for HN readers. :)
  - kipchak 3y ago
    Oh nice, glad you liked it! End Times came out fairly recently and is largely a continuation of Ages of Discord, might be worth a read.

bryanlarsen 3y ago

WTF happened in the early 70's? IMO by far the biggest thing was the Arab oil embargo, which ended a 10,000 year trend where the price of energy got steadily cheaper.

BoiledCabbage 3y ago
Energy is probably the most important determinant of your economy - or at minimum top 3. The oil embargo is what happened and completely re-wrote the economic path. Everything else is secondary.
- deleted 3y ago
  [deleted]
7thaccount 3y ago
It's referring to Nixon taking us off the gold standard, which allows the central bank to essentially inflate our money supply like crazy. I don't necessarily agree with their argument, but there are grains of truth to it. Assuming a giant horde of Smaug level gold isn't found, it keeps things in check fairly well.
- dragontamer 3y ago
  The problem is that we honestly were off the gold standard in 1930s, when gold became illegal to hold. It's turtles all the way down. The economic base in the 1950s, 1960s were NOT backed by gold at all.
  - 7thaccount 3y ago
    I assume even though it became illegal for people to hold gold, that the dollars held by foreign countries were still convertible to gold and thus the standard still worked to a degree. I'm sure things may have changed in WW2, but that's a special case. Still, I appreciate you bringing up your point.
    - 3y ago

deleted 3y ago

[deleted]

7thaccount 3y ago

This quote below is gold (no pun intended). >"Let’s knock this one out of the way now: despite what people at the mises institute would have you think, not a lot of couples divorce because of bitter arguments on the convertibility of the dollar to gold." I share a lot of libertarian views, but can't go all in as it's followers have such a black & white view on things that are inherently grey. I agree that the government is inefficient at best and corrupt/murderous at worst (i.e. innocents given the death penalty), but getting rid of everything (e.g. EPA, FDA, USDA...etc) isn't the best thing either as firms will pollute and take health shortcuts as much as possible absent any laws which prevent it. Mainstream economics points out that monopolies are bad because there is no competition, so you either break them up or regulate them. Libertarians frequently adhere to Austrian economics and you have folks like Milei saying a market failure cannot occur and there is nothing wrong with monopolies. There are valid concerns regarding ineffective regulators and those captured by industry too. Unfortunately, neither a full market based anarchy (i.e. government is there to basically only protect your property rights) or extreme regulations (immeasurable beauracracy)are the way to go IMO. What you want is something in between the two extremes. The question becomes where to draw the line (if this is familiar...it's the same argument as the Laffer curve for taxes). Progressives think it needs to shift one way and Conservatives the opposite. The true answer IMO is that some things need a lot more regulation and some things a lot less. A balanced view doesn't make for good sound bites though.

phpisthebest 3y ago
Well the libertarian position is the "Bad" or Exploitive Monopolies, (True Monopolies not "monopolies" like when people say Apple or Amazon are monopolies) only really happen when government protects them, or "regulates" the market to where no competition is possible.
- AnimalMuppet 3y ago
  They say that, but they're wrong. Monopolies happen when one company has enough money to buy out the competition, when one company has enough leverage to lock out the competition, or when it's a "natural monopoly" (and maybe some other situations). None of those requires government protection to create; all require government intervention to avoid and/or control.

ren_engineer 3y ago

>people want to live in cities no, a ton of jobs outside the cities got outsourced or automated, leaving people with no choice. The number of people who left cities when remote work gave them the chance should make that obvious

bestekov 3y ago
> The number of people who left cities when remote work gave them the chance should make that obvious The number of people who left cities is a remarkably small part of the US population and many of them just left high-cost cities for other lower-cost cities. The steady increase in % of the US population who live in cities (83% in 2023 up from 70% in 2022) [https://www.macrotrends.net/countries/USA/united-states/urban-population https://www.macrotrends.net/countries/USA/united-states/urba...] suggests that yes, Americans do in fact want to live in cities.
- drewcoo 3y ago
  https://www.census.gov/newsroom/press-releases/2022/urban-rural-populations.html https://www.census.gov/newsroom/press-releases/2022/urban-ru... > Despite the increase in the urban population, urban areas, defined as densely developed residential, commercial, and other nonresidential areas, now account for 80.0% of the U.S. population, down from 80.7% in 2010.
  - enterprise_cog 3y ago
    Not sure why you left this part out. > This small decline was largely the result of changes to the criteria for defining urban areas implemented by the Census Bureau, including raising the minimum population threshold for qualification from 2,500 to 5,000.
Reubend 3y ago
But even if someone wants to move for economic opportunity, they still want to move. Would people prefer rural areas if those areas had equal amounts of jobs? Maybe, maybe not. But since they don't, I think it's totally fair to say that the proportion of people who "want" to live in cities is increasing.

marcusbuffett 3y ago

I personally find Wtfhappenedin1971 to be super interesting, even if the conclusion about floating currencies could be wrong. The author here hand-picks like 4 things out of the 50 charts, and IMO the least interesting ones. There’s some massive trends that started around 1971, where healthcare, national debt, education costs, housing, etc all just start to skyrocket, outside of just inflation. I think the 1971 author is certainly motivated in his reasoning to explain what’s going on through his lens, but the OP here seems equally motivated to decide that actually nothing is going on.

lisper 3y ago
There's a lot going on. It's just that almost none of the many things going on today started in 1971.
- notahacker 3y ago
  Not to mention quite a few of the less attractive economic trends are far more closely linked with policies that Austrian economists and most other gold bugs enthusiastically endorse...
cassepipe 3y ago
While that may be true some hand picked examples, because they are so obviously methodologically flawed that they betray either a lack of basic skills in a field or dishonesty, can completely destroy credibility. When a documentary tried to explain to me that it was so unsettling that ancient Egyptians were able to build the pyramids with heavy granite blocks that came from 900km away without even mentioning the Nile, I did not think it was worth continuing much further. (Turns out only a little part was made of granite anyways, most of it was built with stone coming from right next the pyramid)

bdowling 3y ago

> No, wtfh1971 isn’t arguing that divorce has to do with wage changes, because he’s too stupid to get that relation. This is the exact point where the mean-spiritedness of the article surpassed my interest in continuing to read it.

tonymet 3y ago

Doubling the labor force suppressed wages at the same time inflation skyrocketed so workers didn't notice (as much). Divorce exacerbated the problem by dividing families and requiring double the resources (two homes, cars, insurance plans, etc). Families had to start paying for daycare and housekeeping , both expensive and taxable . But that increased GDP . A working class single-wage-earner could once support an entire 6-8 person family. All the wealthiest Zips today e..g Berkeley , Palo Alto were once full of working class families. Economic statistics are just indicators. It's important to pay attention to the real world.

cmrdporcupine 3y ago

I like the spirit and target of the article but some of this is pretty off. For one it's insanely US-centric. Granted I'm sure the original website was, too, but some of the explanations don't hold when you pan out a bit. Example: The “relentless 50 year decline in wages” should be labelled the “relentless 50 year increase in healthcare costs”. Doesn't explain why the same incomes decline happened in the rest of the G7. Our insurance rates didn't go up as % of compensation or of corporate profitability. They did go up as a % of government spending, but that's in a different ledger.

friend_and_foe 3y ago
Since just after world war 2, most world's currencies were backed by USD which was backed by gold, due to the fact that any country could redeem their dollar reserves for gold at a pegged rate. In 1971 the US broke that agreement, known as the Bretton Woods agreement, and stopped redeeming USD for gold to other countries. So the currencies devalued at least as fast as USD from that point, which explains the same income declines. I wouldn't be so quick to call government spending a different ledger. Governments borrow to spend, they tax to rein in devaluation of their currency, as per modern monetary theory. When they borrow they print money, and a significant chunk of international debt is denominated in USD, so such debt would see a real term devaluation as the federal reserve expands the money supply. This would show up as price inflation for goods and services purchased by the government, inelastic goods and services would plausably show an increase as a percentage of total spending.

lurking15 3y ago

Idk I resent this article if only because the tone is so demeaning and rude. > This is because US Healthcare costs have grown at a ridiculous rate. US Healthcare is paid through insurance. That insurance is tied to employment income because of an idiotic tax deduction. I'm sure he hates "goldbugs" and by extension libertarians, but libertarians are really the only ones I've seen pointing to health insurance in the US as rooted in a weird historical consequence of WWII federal govt centralization and the subsequent enforcement of price controls on wages. Of course this "path dependence" explains why healthcare is so different from the rest of the world and directly implicates the US government instead of "greedy capitalism". Since there's this tax exemption and third party arrangement for healthcare expenses, healthcare insurance is anything but a "free market." As I continue reading it's obvious this dude is married to a certain sarcastically negative viewpoint, funny enough at times getting so close to striking at the heart of economic dysfunction and the debasement of living standards that happens to every empire: > It’s entirely possible that over 5 decades, the interest rate going down has increased housing prices in areas with a housing shortage. You think? Interest rates and money are inextricably tied. And not only did "the interest rate go down" it was held to zero for almost a decade. The result is that anything actually worth having in life has been inflated away and now is a major struggle for the middle class: housing, healthcare, education, food, energy...

friend_and_foe 3y ago

So I've perused that site a number of times, trying to understand the correlations. It's obvious many of them are tenuous at best. But at it's core the concept is sound, and particularly the economy focused graphs show a strong causal correlation to the breaking of the Breton Woods agreement. Wages not keeping up with inflation and the cantillion effect are both well studied and there is plenty of empirical data on them. The social ones, I don't know, maybe some in some way or other but many of them are obvious bias or just red arrows showing no obvious change in trend at all. If we could get data in tables and not just jpg format we could do a lot more with it and see what there is there.

johnea 3y ago

I'm not a bitcoin or gold advocate, but I do think that the end of Bretton-Woods was a disaster. It didn't have anything to do with gold, but with the fixed international exchange rates of national currencies. These were only allowed to be changed by an agreement from the commitee: https://en.wikipedia.org/wiki/Bretton_Woods_system#Fixed_exchange_rates https://en.wikipedia.org/wiki/Bretton_Woods_system#Fixed_exc... To me it seems, that having a market driven currency exchange rate creates something like a double pendulum chaotic effect. With both the values of goods and services driven by a market that is also driving the values of the underlying currencies...