While it never pays to get upset about the American public’s periodic fits of moral outrage, the rhetoric sometimes becomes so near obsessive, and so ridiculous, that it demands a response.  In this instance, I am thinking of the last few years’ debates about the national standard of living, an issue that has surfaced so aggressively in this current election season.

One concern—namely, that of inequality—is dealt with easily enough.  If you want to see a truly equal society, look at North Korea, where virtually everyone is a starving pauper.  Equality of itself is irrelevant, and what matters is rather the standard of living, and the range of opportunities available to ordinary people.  But here, too, we hear plenty of claims about the country’s alleged stagnation, how average incomes have frozen since the early 1980’s, allegedly because the superrich have grabbed resources that should have been more equitably distributed.  In essence, we are told, Americans have been stagnating economically since about 1978.

Let’s think this through.

Assume for the sake of argument that I am a reasonably well-off person earning, say, $250,000 per year, and I have a net worth of a million dollars.  Across town, John Smith earns a middle-class income of $50,000, and his net worth is negligible, perhaps approaching zero.  Massive income inequality there, right?  And that picture remains morally outrageous, until we factor in pensions.  My million dollars is the nest egg that has to support me for the rest of my life, and from which I will be drawing an annual income of, say, $40,000 for the next three or four decades.  John Smith has no such nest egg, but he does not need it.  As a public-sector employee, he can count on a defined-benefit pension scheme under which he can retire at 60 and draw in about the same amount as me, and for the same period of time, assuming our medical outcomes are more or less similar.  Moreover, my retirement income will depend on the vagaries of the stock market, while John’s won’t.  He’s set.

As ethnic minorities are overrepresented in public-sector employment, that fact goes a long way toward eliminating the supposed racial disparities in wealth—and such employees make up a very sizable share of the workforce in most states.  It is scandalous that most supposedly informed accounts of our economic realities simply ignore the critical implications of such pension rights.

But what about those stagnant incomes?  Have most Americans really made no social and economic gains since the Carter era?  Such a claim might make sense if we slavishly equate income with standard of living, but no sane person would do that.  To see why, imagine that we compare a woman living in Chicago in 1912 with a modern-day counterpart, and we decide that, allowing for inflation, the dollar value of their wages was roughly the same, so that their living standards must have been comparable.  Well, yes, if we ignore the revolutionary and multifaceted impact of technology.  The 1912 woman lived in a society of massively inferior healthcare, in a systematically polluted world unable to rely on the safety of food, air, or the environment at large, and her access to means of communication, knowledge, or entertainment was constrained to a degree that her modern counterpart would find catastrophic.  However notionally equal their incomes, the 2012 woman would immediately consign her great-great-great-grandmother to the Third World.

Well, perhaps 1978 middle-class America was not exactly the Third World, but I challenge a modern-day advocate of the economic-stagnation theory to go back to that year and change places with someone earning notionally the same income.  Was that person really sharing the same living standard?  Absolutely not, if you look at the cars they drove, the houses they lived in, the medical technologies on which they could rely, and above all, the social and cultural opportunities made available by near-universal access to computers.  By the standards of 2012, the 1978 counterpart was living a gravely impoverished life, no matter what the dollar total on his paycheck.

Just to illustrate the point, take out a modern-day smart phone, an iPhone or a Droid, and itemize the chores that you expect it to do.  That ubiquitous modern item cost $200 or $300.  What was the equivalent price in 1978?  The question is, of course, absurd, because not even the most powerful secret intelligence agencies could dream of access to computing power so massive, and certainly not in so compact a space.  If you showed such a working phone to an intelligent Carter-era scientist, he would probably speculate about an alien origin.

And yet our standards of living haven’t changed since 1978?  What a lunatic belief.