When the average lies

National Review's piece, 'Let Them Eat Aggregates,' puts its finger on something I recognized in every printing house and counting room I ever entered: a column of numbers can balance handsomely at the bottom while every line above it tells a different story for a different man. The aggregate economy, we are told, is performing well. And yet the wage-earner — which is to say, most of us — reports that the economy feels frozen. Both things can be true at once, and that is precisely the problem worth examining.

Consider how an average is made. If one merchant in a town of ten doubles his fortune while the other nine tread water, the town's average wealth rises by ten percent. The nine feel nothing of it. They are not wrong to feel nothing. The number has simply been asked to do more work than any number honestly can. When policy-makers comfort themselves with aggregates, they are, in effect, telling those nine to be grateful for a prosperity they cannot locate in their own purses.

The particular culprit, as I understand it — and I mark this as inference, not recollection, since the modern mechanics of wages and price indices lie beyond my direct experience — is that the gains of recent years have flowed disproportionately to returns on capital: property, financial assets, equity. The working person who owns little beyond her labor and perhaps a modest savings account finds that the rising tide has floated yachts rather than her dinghy. I observed the same dynamic in colonial Pennsylvania whenever land speculation ran ahead of productive improvement: the speculator's ledger glowed; the tenant's did not.

Sound money and honest accounting are sisters. A currency that slowly loses its purchasing power is a tax levied in secret on the wage-earner, who cannot easily hedge against it the way a property-holder can. If the aggregate masks this transfer — if GDP climbs while real wages stagnate — then the statistic has become, however unintentionally, a tool of comfortable reassurance for those who need no reassuring.

What, then, is the useful counsel for the working household? First, distrust any policy argument that rests entirely on aggregate figures without showing the distribution beneath them. Ask: who, specifically, received this growth, and at what price to whom? Second, the old discipline of spending less than you earn remains the one hedge available to any person regardless of policy — not because frugality is a moral performance, but because a small reserve is the only negotiating position a working person actually holds. The nation grows rich, as I have always believed, in the manner of a household: by producing more than it consumes and being honest about both. Right now, someone is being less than honest about which households are doing the producing and which are doing the consuming.