Off the Books

The benefits of free enterprise that economic statistics miss

W. Michael Cox & Richard Alm from the August/September 2002 issue

America's consumer culture is all around us. It's along our highways, studded with shopping malls, fast food joints, and flashy neon signs. It's in our homes, filled with gadgets, furnishings, toys, and closets of clothes. It permeates the media, where ads tell us happiness and sex appeal are as close as the nearest store. It's even within us, at least to the extent that we tie status and identity to the cars we drive, the clothes we wear, and the food we eat.

That's our reputation: a consumer-driven, somewhat crass, shop-'til-you-drop society. As the world's wealthiest nation, we I consume a lot, but the portrait of Americans as consumption crazed misses as much as it captures. We're not working just to acquire more goods and services. Most of us strive for something broader: a balanced life.

Consumption is part of that, of course. We buy myriad things: Chevrolet cars, Sony TV sets, Levi's jeans, Nike sneakers, McDonald's hamburgers, Dell computers. But our wish list doesn't stop there. We also want leisure time, a respite to enjoy life. We want pleasant working conditions and good jobs, so earning a living isn't too arduous. We want safety and security, so we don't live in fear. We want variety, the spice of life. We want convenience, which makes everyday life a little easier. We want a cleaner environment, which enhances health and recreation.

A full description of a balanced life would entail much more, with considerations for family and friends, perhaps even spirituality. Here we want to focus on the components of happiness that clearly depend on the market but are not reflected in the gross domestic product (GDP). Our free enterprise system provides much more than the goods and services we consume; it furnishes ingredients of a balanced life that are often overlooked in discussions of economic performance.

Capitalism creates wealth. During the last two centuries, the United States became the world's richest nation as it embraced an economic system that promotes growth, efficiency, and innovation. Real GDP per capita tripled from 1900 to 1950; then it tripled again from 1950 to 2000, reaching $35,970.

The wealth didn't benefit just a few. It spread throughout society. For many people, owning a home defines the American Dream, and 68 percent of families now do -- the highest percentage on record. Three-quarters of Americans drive their own cars. The vast majority of households possess color televisions (98 percent), videocassette recorders (94 percent), microwave ovens (90 percent), frost-free refrigerators (87 percent), washing machines (83 percent), and clothes dryers (75 percent). In the past decade or so, computers and cell phones have become commonplace.

As people become wealthier, they continue to consume more, but they also look to take care of other needs and wants. They typically choose to forgo at least some additional goods and services, taking a portion of their new wealth in other forms.

Consider a nation that rapidly increases its productive capacity with each passing generation. Workers could toil the same number of hours, taking all of the gains as consumption. They may choose to do so for a while, but eventually they will give up some potential material gains for better working conditions or additional leisure. Hours of work shrink. Workplaces become more comfortable. In the same way, we give up consumption in favor of safety, security, variety, convenience, and a cleaner environment.

>Less Work, More Play

In the early years of the Industrial Revolution, most Americans were poor, and they wanted, above all, more goods and services. These factory workers sharply improved their lives as consumers, even though for most of them it meant long hours of toil in surroundings we'd consider abominable today. As America grew richer, what workers wanted began to change, and leisure became a higher priority.

Few of us want to dedicate every waking hour to earning money. Free time allows us to relax and enjoy ourselves, spend time with family and friends. Higher pay means that each hour of work yields more consumption -- in essence, the price for an hour of leisure is going up -- but we're still choosing to work less than ever before. According to economists' estimates and Department of Labor figures, the average workweek shrank from 59 hours in 1890 to 40 hours in 1950. Although today we hear stories about harried, overworked Americans who never seem to have enough time, the proportion of time spent on the job has continued to fall. Average weekly hours for production workers dropped from 39 in 1960 to 34 in 2001.

Since 1950 time off for holidays has doubled, to an average of 12 days a year. We've added an average of four vacation days a year. Compared to previous generations, today's Americans are starting work later in life, spending less time on chores at home, and living longer after retirement. All told, 70 percent of a typical American's waking lifetime hours are available for leisure, up from 55 percent in 1950.

Even at work, Americans aren't always doing the boss's bidding. According to University of Michigan time diary studies, the average worker spends more than an hour a day engaged in something other than assigned work while on the job. Employees run errands, socialize with colleagues, make personal telephone calls, send e-mail, and surf the Internet. More than a third of American workers, a total of 42 million, access the Internet during working hours. The peak hours for submitting bids on eBay, the popular online auction site, come between noon and 6 p.m., when most Americans are supposedly hard at work.

With added leisure, the United States has turned arts, entertainment, and recreation into a huge industry. Since 1970, attendance per 100,000 people has risen for symphonies, operas, and theaters as well as for national parks and big-league sporting events. The annual Communications Industry Forecast, compiled by New York�based Veronis, Suhler & Associates, indicates that we watch an average of 58 hours of movies at home each year. Yet Americans go out to an average of 5.4 movies a year, up from 4.5 three decades ago.

The number of amusement parks has increased from 362 in 1970 to 1,164 today. The number of health and fitness facilities has more than doubled, to 11,241. Adjusted for inflation, per capita spending on recreation nearly quadrupled in the last three decades. Leisure and recreation are even important enough to have become an academic subject: 350 colleges and universities offer degree programs in it.