Official inflation statistics have also badly overstated increases in "cost of living" throughout my adult life, failing to take into account changed consumption patterns and changing (improving) quality of many goods and services, thus making people think they are poorer than they actually are. By observation of actual consumption patterns, young people today are better off in general than young people a generation ago, which is the consistent expectation of American culture.

It is an unending source of frustration to myself that smart people lump "consumption", "real income" or "GDP" into one amalgamated mass. Then we get in this endless arguments over whether "income" is going up or down, when in reality purchasing power consists of the ability to purchase all sorts of goods, some of which might be getting cheaper relative to income and some more expensive.

It is undeniable that the median purchasing power of luxury and entertainment goods - movies, books, music, computing power, video games, sushi, gourmet coffee, cars with AC, etc, has massively increased in the past forty years. (However, from a hedonics standpoint it's not clear that there has been much improvement - the bowling leagues, poker nights, and bridge clubs of the 1960's seem plenty enough to maximize happiness, video games are not necessarily any better from that standpoint).

It is also true that the median purchasing power of the necessities of life - transportation and fuel to get to work, a home in a neighborhood with low crime and friendly schools, health insurance that covers the basics care, nutritious food - has gone down. Try building a basket of goods consisting of the cheapest automobile that can you get an average person to work every day, the gasoline to power that car, natural gas to heat the home, the median home amortized with a mortgage at the contemporary interest rate, the cheapest healthcare plan on the market, and balanced food diet of grains, meat, and vegetables. Then compare the price of that basket compared to the median wage of a full time, 30 something, male worker in 1970 to that in 2010. I have done that math, and found that the purchasing power of the median worker has decreased substanitially ( by about 23%). Most of this decline in purchasing power came from the rapid rise in the cost of housing, oil, and healthcare.

The normal reubttal is that the quality of the cheapest car in 2010 has nicer amenities than the cheapest car in 1970. The median home is much larger than the median home in 1970. This is true. But there is no existing option in 2010 to buy the 1970 car or 1970 home at a cheaper price. And from a hedonics standpoint, trading financial stress for a bigger home is not a good trade.

Because the decrease in median purchasing power is concentrated in the basic cost of living, many young adults have made a decision to defer or forgoe raising families. This gives a surplus income which can then be spent on all manners of luxuries unknown to the typical worker in 1970. So from outside appearance, it can appear that the standard of living has improved greatly.

So from my opinion it is great that we have the internt and kindles and such.

But real life is not GDP statistics - the growth in one area does not necessarily negate the decline in other.

The existence of kindles does not negate the problem of declining purchasing power of the base necessities of living. This decline is still a huge problem that must be addressed.