Effect of Dow Jones increases

Hello Professor Woff, Just recently discovered Economic Update and have found it immensely informative. Thank you for your work. As Obama is exiting office I am seeing metrics along the lines of the Dow Jones industrial average has increased by approximately 10k points and is getting close to this perceived “magical” milestone of 20k. I am curious as I have been for some time how this metric affects or doesn’t really affect the average American. It seems to be some sort of barometer as to the economic health of the nation but it seems that whether it rises or falls by 1,000s of points it doesn’t seem to impact for instance my standard of living or really anyone else I know who seems to exist in the middle to lower classes. Is this something you could speak about or if you already have could you point me in the direction of a previous episode or possible a good book on the subject of the correlation between the Dow Jones and for lack of a better term the “average” American worker?

Official response from submitted

Your instinct is quite right; there is no direct connection, no necessary linkage between movement in the Dow Jones industrial average (DJ) and the economic conditions of average Americans. The DJ is just the average price of a group of major industrial companies' stocks. These can and often move in one direction while most stocks move in the other. Endless possible combinations of movements have and continue to characterize the price movements of companies, industries, etc. These movements can happen with improving or deteriorating conditions for average Americans. One has no necessary linkage to the other. In particular, dont be fooled by the ideology that seeks to get you to believe that a rising DJ (a sign the stock-owners are making money as the values of their stock holdings rise) is somehow a good sign for average Americans. It is not. The goal of saying something patently untrue is to line up average Americans behind the old idea that what;s good for Wall Street is good for the rest of us. Not so;never was.

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  • Charles Valente
    tagged this with good 2016-12-29 08:08:03 -0500
  • Jason Dean
    commented 2016-12-28 16:28:01 -0500
    Thank you for the response. The ideology that the Dow Jones numbers somehow reflect the health of the economy for all Americans does seem like it has been pervasive in mainstream news and corporate media for quite sometime.
  • Jason Dean
    tagged this with Important 2016-12-28 16:28:00 -0500
  • Jason Dean
    tagged this with good 2016-12-28 16:28:00 -0500
  • Richard Wolff
    responded with submitted 2016-12-27 21:28:51 -0500
  • Jason Dean
    published this page in Ask Prof. Wolff 2016-12-27 16:08:19 -0500