The AEI is a laughingstock in economic circles, and the paper you cite is a good example of the reason why. The authors do not say that more people are buying cars and houses, but argue that there is greater "housing consumption", a catchall term they use to cover rentals along with the accumulated value of detritus like hand-me-down appliances. The authors also redefine the idea of conventional housing to start including things like mobile homes and trailer parks in the mid-1980s.
Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people by calculating the value of these products and services as if they were bought using salary. Leaving aside the morass of problems with the way this approach leads to grossly inflated aggregate income and is clearly intended to deflect from more accurate claims that most market wages are stagnant, their approach is totally off-topic in any discussion about the state of the labor market: what kind of jobs are available to young people; what those jobs pay in salaries and benefits; and what people can afford to purchase given those incomes.
You should also ask yourself why the authors go through such contortions to count things like rentals as purchases and IMPLY that housing is clearly affordable when there is a perfectly straightforward and universally-applicable measure of real estate affordability in the rent/buy ratio? The only reason the AEI does not use this statistic is that it is inconvenient, showing that housing costs have risen significantly across the United States in response to the housing bubble which started in the 1990s, Prices have still not collapsed even close the levels enjoyed by previous generations. So housing is NOT more affordable for people today than in the past. It is in fact significantly more expensive pretty much everywhere except Las Vegas:
Finally, since you explicitly make the claim that health care coverage has improved in your MRI/backpain comment and suggest that this is what people are spending their money on instead of cars and houses, it is interesting that the AEI paper explicitly excludes health care costs in its panegyric on how well-off American workers are, noting that "we exclude from consumption out-of-pocket health expenses because they are not closely tied to well-being." In other words, they realized that including basic health care expenses as income makes people relatively worse off now as compared to the past.
On a final point -- it is worth commenting that your other link to the labor participation rate shows the exact opposite of what you claim: the average labor participation rate is visibly much higher throughout most the 1980s than at present, except for a brief crash during the 1982 recession. If 2008 was anything like 1982, the participation rate now would be well into the 60s again and growing.
The authors do not say that more people are buying cars and houses, but argue that there is greater "housing consumption"...
See table 1 & 2. Housing consumption is measured in terms of square footage, number of rooms, fraction of homes owning a car, and other similar objective properties.
I didn't claim housing was "more affordable" (whatever that means), I claimed people have more of it.
Thaumaturgy's point was simple: rental costs have increased relative to wages and housing prices have increased relative to wages. It is no mystery why fewer young people are able to purchase real estate now than in the past. Or cars.
At worst your argument and sources conflate wages and income and standard of living in order to make insinuations that are statistically wrong. At best they can be interpreted as making the fairly non-controversial claim that the AGGREGATE standard of living in America has improved over the last 30 years, despite the fact that there has been a clear reduction in the relative purchasing power and affluence of younger Americans over the last 10 years.
If you have stats to back up your assertions, present them. So far all you've done is made ad-hominem attacks against the authors of my study and incorrect claims about it's contents.
Sources for health care and housing statistics are already listed above and I do not make a single ad-hominem attack on the authors. If you can point out where exactly you think I am misrepresenting their argument I will be happy to provide page references so they can disagree with you themselves.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. I give them some credit for mentioning this, since it should be obvious even to the uninformed that aggregate measures of "housing consumption" are going to go up when you find new forms of housing to count half-way through your survey.
As far as the reputation of the AEI goes, it stopped having any when it fired David Frum for being too far left [1]. Mainstream economists find the institute laughable [2], and even conservative economists like Bruce Bartlett mock its employees as "scholars" (his quotes) [3]. Poor quality ideological broadsides like the one cited above are the norm rather than the exception. Charles Murray's "The Bell Curve" is broadly derided for racism, while Kevin Hassett and James Glassman are ridiculed in the mainstream media for backing pump-and-dump schemes like "Dow 36,000" and for seeming to be unaware of such basic economic concepts as discounted cash flow.
"The AEI is a laughingstock in economic circles..." <- Ad hominem. See also the third paragraph of your most recent post.
"You should also ask yourself why the authors go through such contortions to count things like rentals as purchases..." <- Misrepresentation. The authors attempt to measure consumption of housing, as does thaumaturgy. You are the only person discussing real estate investments.
"Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people..." <- Misrepresentation. The authors explicitly distinguish between earned and unearned income.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. <- Misrepresentation. The "re-definition" was done by the government, not the AEI. It's also irrelevant, since I compared square footage in 2009 to 1989 (i.e., both stats are after the redefinition).
Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people by calculating the value of these products and services as if they were bought using salary. Leaving aside the morass of problems with the way this approach leads to grossly inflated aggregate income and is clearly intended to deflect from more accurate claims that most market wages are stagnant, their approach is totally off-topic in any discussion about the state of the labor market: what kind of jobs are available to young people; what those jobs pay in salaries and benefits; and what people can afford to purchase given those incomes.
You should also ask yourself why the authors go through such contortions to count things like rentals as purchases and IMPLY that housing is clearly affordable when there is a perfectly straightforward and universally-applicable measure of real estate affordability in the rent/buy ratio? The only reason the AEI does not use this statistic is that it is inconvenient, showing that housing costs have risen significantly across the United States in response to the housing bubble which started in the 1990s, Prices have still not collapsed even close the levels enjoyed by previous generations. So housing is NOT more affordable for people today than in the past. It is in fact significantly more expensive pretty much everywhere except Las Vegas:
http://money.cnn.com/real_estate/storysupplement/price_to_re...
Finally, since you explicitly make the claim that health care coverage has improved in your MRI/backpain comment and suggest that this is what people are spending their money on instead of cars and houses, it is interesting that the AEI paper explicitly excludes health care costs in its panegyric on how well-off American workers are, noting that "we exclude from consumption out-of-pocket health expenses because they are not closely tied to well-being." In other words, they realized that including basic health care expenses as income makes people relatively worse off now as compared to the past.
On a final point -- it is worth commenting that your other link to the labor participation rate shows the exact opposite of what you claim: the average labor participation rate is visibly much higher throughout most the 1980s than at present, except for a brief crash during the 1982 recession. If 2008 was anything like 1982, the participation rate now would be well into the 60s again and growing.