Sunday, November 22, 2009

7th Art: The Best Years of Our Lives (1946)

I'll not focus on the movie itself. "The Best Years of Our Lives" (1946) is a bold classic directed by William Wyler, which symbolizes life in America in the years that followed the end of WWII. What's amazing about this movie is how clearly it depicts changes in American mores that were happening much before the ascension of the flower power generation. True revolution really happens at the margin, step by step.

The first thing that I'd like to point out is how American movie aesthetics changed since this movie came out. Expectations regarding for example acting, cinematography, sound editing and intonation were totally different at that time. Hollywood has changed a lot, sometimes for better and sometimes for worse.

The second thing that I'd like to point out is how economics training improves your understanding of the world around you, even when it comes to watching movies. I'll give you two examples: in the scene where Al Stephenson, the character played by Fredric March, is offered a job as the vice-president of a small bank, he seems surprised by the generosity of the offer: an yearly salary of $50,000.

At that point I had to hit pause and do a brief mental calculation using material that I teach in my Principles of Macroeconomics classes. Using the rule of 70, and knowing that the average yearly inflation rate since 1946 was a little less than 4%, I could easily find out that prices doubled about every 18 years. It means that since 1946 prices doubled about 3.5 times, and therefore an yearly salary of $50,000 then would have the same purchasing power today of about $600,000! No wonder Mr. Stephenson was positively impressed. Notice that it took me about 30 seconds without a calculator to get to this result.

Fred Derry, the character played by Dana Andrews, on the other hand, was offered, as an assistant manager at a drugstore chain, a salary of $32.5 per week. This is the same as an yearly salary of less than $1,700 in 1946. The purchasing power of Mr. Derry's salary today would be equivalent to about $20,000. Walgreens assistant managers with no experience can make substantially more than that today, around $34,000 in average according to this site. Clearly, Americans are better off today than they were in 1946.

At a certain point the movie also goes into a discussion of the morality and economics of collateralized loans. It's interesting to notice that Mr. March was the vice-president for small loans, so part of his job was exactly to find lending opportunities that didn't have necessarily strong collaterals but yet hinted at a high probability of payback, in a fashion similar to what's now called microcredit. The movie presents Mr. March as a banquer with a good heart, trying to help common folks, particularly veterans. Mr. March may have had indeed a good heart, but he didn't need to have it: what he was doing could have been perfectly described as nothing more than a sound, profitable, professional business practice arising from the search for profits in a market economy. Ironically, the excesses caused by lending populism were exactly one of the main factors behind the recent collapse of the American economy.

Enjoy the trailer!