Economist Russ Roberts Isn't Worried About the Middle Class.

• Author: Osterhoudt, John

"A LOT OF people think the middle class is dead, dying, hollowed out," says Russ Roberts, an economist at Stanford University's Hoover Institution and host of the podcast EconTalk. "And that's a view that's held now increasingly by not just the left... but by conservatives, Republicans, and economists across the spectrum." Roberts' trademark optimism has been tested by the authoritarian shift of American politics in recent years, but he still sees quantitative reasons to celebrate the U.S. economy. He says leading proponents of the claim that the country's middle class is dying have offered "a misreading of the data, or at least an incomplete reading of the data, [ignoring] a much fuller story of opportunity and progress."

In August, Reason's John Osterhoudt spoke with Roberts about how to measure economic progress in a way that tells a more nuanced story about the middle class.

Q: What are the most common errors researchers make when measuring economic progress?

A: There are a lot of different choices you have to make when you're doing a study on how the middle class has done over the last quarter-century. For instance, how do you correct for inflation? One study found that middle-class incomes went down 7 percent over a 40-year period, which would be terrible, because the economy grew substantially over that period.

It turns out if you use a different measure of inflation, you get middle-class income growth of about 14 percent. Now, 14 percent is not very good at a time when the economy as a whole doubled, but even that number is flawed because your money actually buys a lot more today than it did 40 years ago. You can say a TV today is roughly the same price as a TV 40 years ago, but the TV today is a lot bigger. Do you want to correct your comparison for the size of the TV? How about the fact that modern TVs basically never break?

Q: Is there a more accurate way to measure wealth in 1975 vs. today?

A: A recent study found the bottom half of the income distribution today makes the same on average as the bottom half 35 or 40 years ago. That's extraordinarily depressing, if true. It implies the top is just doing way too well. But a handful of studies have instead taken people in 1975 and followed them through time to see if the rich truly did get all the gains. When you do that, you find out that the people at the bottom have the largest percentage gains and often the largest absolute gains over time.

Q: Your colleague, the economist...