The primary reason is that people here are huge consumers
Consumption rises with wealth.
Since no one here got my comment about housing adding more to the GDP back in the 1950s, I'll explain. The reason is that back in the 1950s just about every single thing that went into a house was made in the US. The floor tile, the carpet, the windows, the bricks, the faucets, the bathroom fixtures, the electrical fixtures, the appliances, the lumber, the roofing wood, the vinyl, etc, etc, etc. What goes into a house now is a lot of imported goods. Remember that the GDP attempts to count only the value added to a good. I think people here forget that anything that gets imported gets subtracted from the GDP, so consequently even though residential real estate investment as a percentage of GDP might be .3% higher now, it has no where near the same effect on the GDP that it had back in the 50s when we also had a tremendous housing boom. This boom was not based on ever inflating prices, but one based on a huge number of units being built and the first time advanced production methods borrowed from manufacturing assembly lines were used to build American houses.
The reason we can buy houses that are so much bigger and have so many added amenities now, than we could back then, is that first off the stuff that goes into a house is far cheaper to produce (using advanced production techniques, foreign labor and raw materials) and because we pay for them with the income we get from higher order goods....software, financial services, patents, intellectual property, medical services and devices, drugs, etc. which pay an American workforce, in aggregate, far more than making ceramic tile, washing machines, bath fixtures, etc. would. These higher order goods comprise a much larger percentage of the GDP than they did back in 1950 which has the effect of shrinking the percentage of income we make from building houses and the stuff that goes into them. |
