You Are Richer Than a 19th Century Billionaire

Don Boudreaux has a great post about why you are richer and better off than John D Rockefeller.  I would have thought this to be almost axiomatic, but apparently he is getting push back on this. Please go to the link and read it.

I posted a similar article in 2007, though in that case I was doing a comparison with California Big 4 magnate Mark Hopkins.  I will reprint the article in full since it has been so long:

One of the really bad ideas that drive some of the worst government actions is the notion that wealth is somehow fixed, and that by implication all wealth is acquired at someone else's expense.  I am working on my annual tax-day post on the zero sum fallacy, but in the mean time here is a brief quiz.

The quiz consists of matching a description to the owners of these two houses:

House1a House2b

One house has hot and cold running water, central air conditioning, electricity and flush toilets.  The other does not.  One owner has a a computer, a high speed connection to the Internet, a DVD player with a movie collection, and several television sets.  The other has none of these things.  One owner has a refrigerator, a vacuum cleaner, a toaster oven, an iPod, an alarm clock that plays music in the morning, a coffee maker, and a decent car.  The other has none of these.  One owner has ice cubes for his lemonade, while the other has to drink his warm in the summer time.  One owner can pick up the telephone and do business with anyone in the world, while the other had to travel by train and ship for days (or weeks) to conduct business in real time.

I think most of you have guessed by now that the homeowner with all the wonderful products of wealth, from cars to stereo systems, lives on the right (the former home of a friend of mine in the Seattle area).  The home on the left was owned by Mark Hopkins, railroad millionaire and one of the most powerful men of his age in California.  Hopkins had a mansion with zillions of rooms and servants to cook and clean for him, but he never saw a movie, never listened to music except when it was live, never crossed the country in less than a week.  And while he could afford numerous servants around the house, Hopkins (like his business associates) tended to work 6 and 7 day weeks of 70 hours or more, in part due to the total lack of business productivity tools (telephone, computer, air travel, etc.) we take for granted.  Hopkins likely never read after dark by any light other than a flame.

If Mark Hopkins or any of his family contracted cancer, TB, polio, heart disease, or even appendicitis, they would probably die.  All the rage today is to moan about people's access to health care, but Hopkins had less access to health care than the poorest resident of East St. Louis.  Hopkins died at 64, an old man in an era where the average life span was in the early forties.  He saw at least one of his children die young, as most others of his age did.  In fact, Stanford University owes its founding to the early death (at 15) of the son of Leland Stanford, Hopkin's business partner and neighbor.  The richest men of his age had more than a ten times greater chance of seeing at least one of their kids die young than the poorest person in the US does today.

Hopkin's mansion pictured above was eventually consumed in the fires of 1906, in large part because San Francisco's infrastructure and emergency services were more backwards than those of many third world nations today.

Here is a man, Mark Hopkins, who was one of the richest and most envied men of his day.  He owned a mansion that would dwarf many hotels I have stayed in.  He had servants at his beck and call.  And I would not even consider trading lives or houses with him.  What we sometimes forget is that we are all infinitely more wealthy than even the richest of the "robber barons" of the 19th century.  We have longer lives, more leisure time, and more stuff to do in that time.   Not only is the sum of wealth not static, but it is expanding so fast that we can't even measure it.  Charts like those here measure the explosion of income, but still fall short in measuring things like leisure, life expectancy, and the explosion of possibilities we are all able to comprehend and grasp.

  • J_W_W

    And the youth of today are willing to sell us out to the deplorable socialism that arose during that period of time.

  • crawdad

    Refrigeration alone does it for me. Throw in a varied diet, medical advancements and Life is good.

  • jimcraq

    But somebody else has more money than I do! Gimme!

  • me

    Depends a bit on what you value most. Mark knew he was better off than most of his contemporaries (social status), has ample leisure time (compared to the poor Seattleite - I am slaving 60h weeks to be able to afford rent, it's a weird market), lived in a freer environment (self actualization) and both higher square footage and a nicer private park (to go full on ad absurdum).

    Multivariate comparison doesn't map so well across one linear dimension, so it's easy to make the case either way.

  • SamWah

    I would expect that Hopkins could have ice, though not cubes, from an ice house.

  • mx

    And so? Clearly there's an implicit point here, which I presume boils down to something like "hey you're not really poor in America even if you're struggling to put food on the table, because you have a toilet and a smartphone."

    Access to cheap and readily available consumer conveniences is great, sure, but it doesn't provide any of the hallmarks of financial stability that are important to well-being. Just because someone has a refrigerator and vacuum cleaner doesn't mean they can afford to take a day off of work if they get sick or that they aren't one car breakdown away from losing both their transportation and their job. Just because someone has a clock radio and a toaster doesn't mean they aren't taking out a payday loan because they have no emergency savings. And certainly, just because someone has a TV set and a cell phone, it doesn't mean they can tap into the wealth-generating machine that is capital investment and compounding returns (40% of families have negative net-worths, and the bottom 80% of families have 12% of the wealth).

    We see this pattern a lot with people who say that the poor in America aren't really poor if they have, say, an iPhone. Yes, it does make you wealthy on a global scale; that's true of anyone in this country. But I think it's a real mistake to compare access to cheap consumer goods with massive generational wealth on the scale of a Rockefeller.

  • kidmugsy

    I can't drink pre-phylloxera claret; our assumed 19th century billionaire was presumably quaffing it by the gallon.

  • Malcolm Mcewen
  • magilson

    mx, your own point undermines itself. If a modern person wanted to take any random day off of work or have increased access to healthcare (let's not play stupid, you mean increased income to spend on healthcare), they could easily do so if they gave up owning a television and cable or satellite programming subscriptions, internet access subscriptions, a personal computer, electric refrigeration, access to an unprecedented quantity of restaurants offering examples of the world's cuisine, multiple cars per household, multiple cell phones per household, and most of all of the other modern appliances and services Mark Hopkins did not enjoy as a rich person in his time.

    You begrudge the disparity in income but never address the unceasing consumerism you hope to allow these people to enjoy. Can poor people express the rampant consumerism that rich people can? No. They can't fulfill your dream for them of buying anything and everything. Could they be the better consumers you so desire if we addressed this disparity by taking potential consumption from The Rich(with the trade off of reduced investment, lest you think the rich literally have a bank vault of money ala Scrooge McDuck) and providing it as guaranteed consumption by the Not Rich.

    Bill Gates is not why the poor overwhelmingly use Emergency health services and buy consumer goods outside of their personal financial interests. Neither do the Koch brothers cause substance abuse or divorce. And Henry Ford didn't care about what now is so garishly called a "living wage" so that his employees could buy the cars they built.

    Knock it off.

  • morganovich

    this is much more complex than that. it's an entirely subjective question.

    rockefeller WAS far richer than
    most of us today. but he was also more limited in terms of what he could
    buy. no amount of money could get him a cell phone or a cure for many
    diseases.

    on the other hand, very few
    today could match the real estate holdings of a JDR.

    few today could afford to employ
    as large a staff as he did. of course, in many cases, we do not need it.

    few could book, on a whim, the
    presidential suite at a top hotel for a month or give, without noticing, a case
    of a top vintage of wine, but JDR could not travel from new york to san
    francisco in 5 hours for any amount of money.

    now amount of money could get JDR a video game, but can you pick up the phone and get the president of the US on the line because of your wealth?

    this is sort of a silly game.
    being much richer in a store with fewer sorts of goods makes for a lot of
    apples and oranges comparisons.

  • Peabody

    An iPhone doesn't make you not poor, it just makes you foolish if you are poor.

  • mx

    Why? A used smartphone can be found pretty cheaply (or scavenged free from a upgrading friend or relative) and is many people's primary internet connection. A device that's worth maybe $100, lasts for years, and allows you to participate in modern society is a pretty good purchase.

  • mx

    So you're saying that people struggling to live paycheck-to-paycheck are poor because they've wasted their money on modern conveniences like refrigerators? I mean why would a poor person want a refrigerator? They're only a few hundred dollars (and are often indirectly leased when they are included in the rent for an apartment), last a long time, and make it possible to not have to buy food multiple times a day and to save money by buying in greater quantities.

    In any case, our economy depends a great deal on rampant consumer consumption, for better or for worse. Economists believe that inequality hurts economic growth (see, e.g. http://www.oecd.org/social/Focus-Inequality-and-Growth-2014.pdf). My dream, as you put it, is not for everyone to be able to buy anything and everything. That's ridiculous. What I would like to see is a country where fewer people struggle to feed their family, where people aren't choosing between medicine and food, and where a single car breakdown won't lead to financial ruin (because in many parts of the country, a car of some sort is a necessity if you want to work).

  • Trapper_John

    This video is a good example of an obvious disconnect: she's clearly obese, as are the majority of those in poverty in the US. It's hard for me to understand how she's going hungry on a 40 pounds/week food budget when she's very obviously not going hungry. I don't doubt things are hard for her, but how can this be a credible video?

  • mx

    Seriously? Just think about it, or google "poverty obesity", and some of the reasons should be obvious. There are pretty good reasons why someone with an extremely limited food budget who spends much of their time doing hard work and may well not live near a quality grocery store might not have a particularly balanced high-quality diet.

  • Trapper_John

    Um, yes, seriously--watch the video. Her complaint was not, "My mix of leafy greens and lean proteins is way off because I'm poor and don't live near Whole Foods," it was "I'm going hungry because I can't afford food." That was the main point of the video. She is clearly receiving more than enough food. Balance and quality were not the point.

    I did your suggested Google search, and what I read was mostly a lot of obfuscation where the relationship between obesity and poverty is "complicated". I don't care about the relationship. What I care about is the claim that "1 in 6" people in America are going hungry. How is this possible when people in poverty are obese? The way to lose weight is to eat fewer calories, not more. The statistic is clearly designed to exaggerate the problem and mask the truth for political ends.

    Behind oxygen, shelter, and water, getting enough calories is the most important ingredient for human survival. Again, it is clear that this need is largely being met (not that there aren't exceptions) in the US. Balance and quality--your point--remain a function of individual choice as influenced by upbringing, education, and other factors. But this doesn't make the case as well as "many people are going hungry". Which is bullsh*t.

  • J K Brown

    I came across this anecdote in a book on teaching kids to study published in 1909. Besides the tragedy of losing all her children, I was struck by the fact that now she wouldn't be so isolated with failing eyes due to television, radio, books on tape, even the cheap functionality of enlarging text, telephone...

    At about that time one of my students, interested in the early history of New York, happened to call upon an old woman living in a shanty midway between these two schools. She was an old inhabitant, and one of the early roadways that the student was hunting had passed near her house. In conversation with the woman he learned that she had had five children, all of whom had been taken from her some years before, within a fortnight, by scarlet fever; and that since then she had been living alone. When he remarked that she must feel lonesome at times, tears came to her eyes, and she replied, "Sometimes." As he was leaving she thanked him for his call and remarked that she seldom had any visitors; she added that, if some one would drop in now and then, either to talk or to read to her, she would greatly appreciate it; her eyes had so failed that she could no longer read for herself.

  • kidmugsy

    Our billionaire could visit such places as Florence and Venice before their pleasures were reduced by hordes of tourists.

  • magilson

    mx:"So you're saying that people struggling to live paycheck-to-paycheck are poor because they've wasted their money on modern conveniences like refrigerators?"

    No. You were saying that. Because you were trying to turn the example of someone in our past who was rich without any of our modern conveniences as being better off than the not rich today who have them. Your point is ignorant and I pointed out why. Economics teaches (some of) us about trade-offs. Trade-offs you seem to ignore as being important. Yes, you say, people have all those things. But they don't have access to good healthcare. That's just not true. We have the EMTAL Act of '86. We were all reminded of how we've already "socialized" medicine way back when and so modern Republicans are just fools.

    Consider this, since I don't think we'll agree on much. A not-insignificant portion of those who garner your concern make seriously poor financial decisions which compromise their long-term health and financial well being. A much smaller portion of those who garner your concern literally do not have the means to make true financial trade-offs and are worthy of supplemented income. If you can accept that possibility, then dumping money on both of those groups would help that tiny portion and seriously exacerbate the issues with the group who can't spend wisely no matter what they do. Consider you may make the problem worse; not better. And if you can consider that possibility, then the money we allocate for welfare is more than sufficient to help those actually in dire need.

    You cannot hope to be taken seriously if you only acknowledge the trade-offs on the side of the debate you're not sitting on. I am willing to accept that welfare programs are the only thing that will help some people. But I submit it's a much smaller cohort than we're currently throwing money and programs toward.

  • Dan Wendlick

    The "One in six" statistic is based on a USDA study on what they deemed food insecurity. The criteria was a self-reporting survey with a cutoff value of missing one meal in the past year due to financial reasons.

  • J_W_W

    I have a computer IN MY HANDS that has more power than the fastest computer in the world in 1950. We live lives of supreme luxury, yet we envy anyone with more that we have. The lefts elevation of envy to a virtue is a sickness of modern society.

  • J_W_W

    Oh shut up, the poor in the rest of the world have NO food, not limited options for quality food. Obese poor are a distinctly American anomaly.

  • marque2

    If you bought a high end phone this year you have a computer in your hands that is faster than the fastest super computer from 1989. With some extras, like 10x the communication speed and wireless data transmission, etc.

  • marque2

    It may have not been due to finances, but I am pretty sure each of the people in my family and the cat have missed at least one meal this year. I guess we know what it is like to be poor.

  • marque2

    There isn't a food shortage, the poor get plenty of food subsidies from food stamps to wic to church weekly handouts. In fact the government food programs are biased toward brand names, with WIC for instance saying buy a pound of cheese and a gallon and a quart of milk (etc) I get the store brand milk while the wiccies are getting the brand name Knudson's. I getna store brand cheddar, while the wiccies are chowing on Tillimook and Cabot. Seriously, the reason they are overweight is that they choose the higher priced prepackaged and preprocessor stuff because it is easier to prepare than the cheaper raw and frozen vegetables - but lefties like to pretend we are giving them to eat hot dogs and hostess cupcakes, because they are "cheaper than the wholesome foods" which is blatantly false.

  • marque2

    I bought an incredible smartphone this year for the kids a Motola Moto G. It was $99 + 15 for a 32gig micro SD card. The phone works so well I almost wonder why i spent 5x as much for my phone.

  • marque2

    I don't understand why it is so bad to want to buy "nice" things. Many like the fridgendo save us money. To purchase all the devices a $200 phone has (and I am not talking subsidized) you would have to pay 1000's of dollars.

  • marque2

    San Fran was a bit far from any convenient icy regions. The ice houses worked because first there was a mini ice age, so a lot more ice was around and they could collect it from local frozen lakes and store it in a barn. No frozen lakes or barns in SF. I am sure they had some ice, but it must have been outrageously expensive and would be only for special occasions. Now, I don't think with the normal weather we are having ice houses would be all that practical.

  • marque2

    Note too, that a poor person, or homeless person can walk into a fast food place and ask for water (many cities and some states make it illegal to deny water) and the restaurant will just throw in the ice since it has become so cheap. Soneven the poorest of the poor experience the luxury of ice.

  • marque2

    I am not sure if MH had ample leisure time, as you claim. I.am sure he took a week off now and then, but would work from his railcar.

  • J_W_W

    Too true. I've seen a couple of modern supercomputers, and it is amazing to think that in 20 years its likely that that kind of capability will be in the phones (neural implants?) of that time.

  • Peabody

    I'll agree with that. I used smartphone with a pay as you go plan could be a reasonable investment. However, I used to see a number of folks receiving various forms of government assistance frequently upgrading to the latest iPhones. That I'll still contend is foolish. (or devils advocate, maybe no, if the assistance is means tested then perhaps blowing out their bank account on things like cell phones may be in their best interest...)

  • me

    Obesity in poverty is a direct consequence of the best deal on calories: carbs, like noodles, potatoes, bread, etc. You are hungry, you are poor, you buy carb-rich food. You eat the food, now you're more hungry... rinse repeat. After a while, you're fat, suffer from all sorts of metabolic disorders. Vicious spiral downwards.

  • t m colon

    I grew up middle class in the 50s-60s. Some of the things we didn't have then yet lived comfortably: Clothes dryer, dishwasher, microwave, AC, second car, computer, cable, cell phone. Our house was half the size of today's normal. Most every family in our suburban area lived like this. That was middle class then.

    You can live better today than we did then spending under ten grand a year. This is not a guess, I'm doing it.

  • Adriana

    It's not that you can't be poor if you have an iPhone. Lots of poor people around the world have iPhones.

    The wealth of the world has increased since Mark Hopkins' day. There's so much more wealth, translated as access to food, clean water, heat, cooling, education, health care, clothing, shoes, as well as goods, services, and new amazing technologies, that even poor people by our standards are living well compared to the wealthy of Hopkins' era.

    If you are mainly concerned with wealth inequality - how much some people have compared to others - then I can see why this argument means very little to you. After all, even if you're wealthier than nearly all the world and live better than 99.999999% of all human beings who have ever existed on the planet, you're still behind others in your own society.

    Your post, though, doesn't address the points being made here. Would you rather be Mark Hopkins or would you rather be the guy who lives in that ugly tract house? I'd rather live in the tract house. I'd rather live in a one-bedroom apartment paycheck to paycheck (which I've done before) than be Mark Hopkins.

  • TruthisaPeskyThing

    My grandfather came to this country at 16 years old. Before the ground froze, he helped his father dig a cave in the side of a hill in South Dakota, and that is where the family lived the first winter (which was the Long Winter of Little House fame). Four of my grandfather's children died in childhood. Since that time, Bill Gates and numerous others have become filthy rich as they have given our society products and services that we highly value, and now I live a middle class life that provides luxuries that even my father could not have imagined. I definitely would keep my lifestyle and let the rich be.

  • TruthisaPeskyThing

    I do question the phrase: struggling to put food on the table. Over four decades, I have volunteered to help the poor and disadvantaged. In the thousands with whom I have dealt, I cannot think of a single instance where "struggling to put food on the table" would apply. Sometimes we have explained to them (and led them to) what assistance is available, but not where there has been any real struggle to get food for the family. To be sure, many times individuals have turned their resources and help into ways to get alcohol and drugs. And teens have sworn at me because the shoes and clothes that we handed out were not the hottest brands at the moment. The problems that I have seen will not be solved by blaming the rich -- in fact, such an attitude is counter-productive. What has been the most help to those in poverty has been a sense of self-responsibility, a sense that they are in charge of their future. What has hurt the most is a message of victimhood, that they cannot control themselves or their situation; others determine their fate.

  • Trapper_John

    I think you missed the sarcasm font on marque2's post. But you are absolutely right, and this is my point exactly.

  • Trapper_John

    Again, "eating more than you should" is not the same as "going hungry", no matter what the underlying reason is. In fact, one might be tempted to say those are opposites. "I am hungry" (actually true for me right now--I haven't eaten breakfast) is also not the same as "I am going hungry". Again, obesity belies the point of the video that she cannot afford enough food.

    If the video were to argue that proper nutrition is not easily affordable on her budget, that's a different story. But they don't make that argument--why not? I would hypothesize that they don't because that argument would logically open her up to scrutiny. What did she choose at the store? Can she spend her money more efficiently? Carrots and lettuce are cheap--why did she choose to eat five boxes of top ramen instead of a salad? Instead, she says that "Jamie Olver wants me to eat lamb" and then gives up on nutrition. So you're telling me you're going hungry because you can't afford lamb? Really?

    I suspect the truth is that such nuanced arguments don't resonate like "1 in 6" sloganeering does. It also opens people up to criticism of their own habits, which the progressive left would rather approach through governmental fiat (NO SODAS FOR YOU). I don't doubt that there are people who can't afford good food regularly, but I'd guess they are the slim minority; for the rest it's a function of prioritization. Health is the most important thing, except when it isn't. When people make choices for themselves (I'll pay the smartphone/cable/cupcake bill instead of eating healthier), they must bear responsibility. Instead, we have an obesity epidemic among the poorest Americans.

  • dentshop

    Not quite. The poor of Mexico, Chile, Brazil, Egypt, Australia and Russia are fat and slow moving. Real fat. Shocking to see the amount of retired Boomers who have a chin for every season. Nobody has mentioned yet the link between booze, obesity and poverty.

  • Zachriel

    "One owner has a refrigerator, a vacuum cleaner, a toaster oven, an iPod, an alarm clock that plays music in the morning, a coffee maker, and a decent car."

    Actually, the rich guy had someone to deliver ice, clean the rugs, bake fresh bread and toast it, play music on demand, wake him with music if he so chose, brew coffee and bring it to him in bed, and transportation to the opera.

    Not to mention the pick of sexual partners. Caesar may not have had ice cream, but he had slaves from all over the world.

  • Zachriel

    Just to point out another salient fact, humans consider themselves rich if they have two goats and their neighbor only has one.

  • John O.

    Modern Plumbing and sanitation is probably the single largest contributor to improved health and its ease of access improves everywhere, its being built slowly even in the worst of the most poverty stricken nations of Africa.

  • Sam Sipl

    hi !!!

    It is really does not matter to me.

    http://goo.gl/rdCxeh