In their article, Robert S. Rogers and Tom Rogers explore the disconnect between traditional economic measures and American perceptions of the economy. While indicators like GDP, personal income, and CPI suggest a healthy economy, many Americans rate the economy as poor or only fair. This discord can be attributed to the fact that traditional metrics do not capture the aspects of life that people find important, such as income inequality and intangible factors like democratic freedoms and clean air. The authors propose the development of a new metric called the “Lifestyle Improvement Factor” (LIF) to better reflect people’s actual experiences and well-being.
The authors argue that economic dissatisfaction has been fueled by the surge in inflation, but the trend of spending an increasing share of income on items that do not bring enjoyment has been building for years. Americans are spending more on real estate, tuition, childcare, medical expenses, and other necessities, which are more of a burden than a source of enjoyment. This shift in spending habits has led to a disconnect between economic growth and actual improvement in material lifestyle, as people feel trapped in an escalating cycle of expenses that detracts from their ability to save for the future.
To address the gap between traditional economic measures and perceptions, the authors propose the development of the LIF, a new metric that focuses on capturing the things people actually enjoy spending money on. This includes items that enhance their lifestyle, such as dining out, clothing, gadgets, and entertainment, rather than just the goods required for survival. The LIF aims to provide a more nuanced understanding of economic well-being by measuring spending on items that truly enhance people’s quality of life.
The authors acknowledge that the LIF is not without its flaws and limitations, as it may be challenging to quantify the value of intangible experiences like social media or free concerts. However, they believe it is a useful starting point that can be refined with the input of macroeconomic experts. Developing a new measure of national material well-being is crucial, not only for addressing current economic dissatisfaction but also for evaluating the impact of economic policies and technological advancements on people’s lifestyle and prosperity.
The authors argue that both Democrats and Republicans have reason to embrace the development of the LIF, as it offers a more comprehensive and relevant gauge of material well-being for the 2024 economy. By shifting the focus from traditional economic metrics to one that reflects people’s actual experiences and priorities, policymakers can better assess the impact of their policies on improving the overall quality of life for all Americans. Ultimately, the LIF concept provides a meaningful perspective on prosperity that goes beyond the measures currently at the center of economic debates, offering a more nuanced understanding of how people experience and perceive the economy.
