6 ms·

Isn't it obvious? All of the fields experiencing the cost disease are dominated by government. Either through massive funding, or vast numbers of regulations.

Isn't it obvious? All of the fields experiencing the cost disease are dominated by government. Either through massive funding, or vast numbers of regulations. Even within sectors, we see the pattern. For example, the two fields of medicine which have seen the least cost growth are cosmetic [1] and laser eye surgery. Not only have costs risen the least, but the quality of some procedures in these fields has improved tremendously over the last two decades. Both are electives, so there are fewer mandates requiring that they be covered by insurance and fewer redistributive programs to subsidise them. The source of the complex system dysfunction is the political and social system, which enables special interests to mislead the public in order to implement policies that benefit themselves but have a negative-sum impact on the economy as a whole. One of the 'big lies' that these special interests have succeeded in convincing the public of is that the free market is a misguided ideology that is promulgated by the rich in order to exploit the poor, when in reality it is a basic rule-set necessary for economic development in complex systems (due to properties like the rule-set enabling effective large-scale coordination of economic resources through price signalling, aligning private incentives with the public interest through laws granting and protecting the right to property produced through one's own efforts, or acquired through trade (and inversely, prohibiting acquisition of property through theft, armed robbery and other non-voluntary and predatory means), etc). [1] http://healthblog.ncpa.org/wp-content/uploads/2013/06/HA1-06-17-2013.jpg http://healthblog.ncpa.org/wp-content/uploads/2013/06/HA1-06...

PaulHoule 10y ago
The U.S. government seems to be worse than the others. For instance when Europeans hear how much it costs to build a subway in the U.S. often they are shocked. Heck, the Green Party in my town got shocked when it heard how much it costs to build a bus shelter. Also government is involved in healthcare in other countries too. The difference is that our government spends more than the others and then the private sector spends more money on top of that. Thus government itself is not a problem so much as the U.S. government is particularly broken.
- John_Innocent 10y ago
  Where do you get the idea that government is not involved in subway building in a big way in the US? Perhaps there are more legal/regulatory barriers in place to build a subway in the US than in Europe. >Thus government itself is not a problem so much as the U.S. government is particularly broken. The cost disease is affecting all developed economies, not just the US, and it affects almost exclusively government dominated industries. If all governments are broken, then that suggests something inherently wrong with government.
  - PaulHoule 10y ago
    More to the point, it is usually the government that funds, builds and operates the subway.
  - anonymoushn 10y ago
    Can you use this model to explain why government-involved health care, education, and subway construction is much cheaper in all other developed countries than in the United States?
    - John_Innocent 10y ago
      I don't know but if I had to speculate, I'd say the US has less efficient government, because of factors like greater wealth (more complacency toward waste and corruption) and a larger and less homogenous population (a less coherent public debate). With respect to the second point, I hypothesize that generally central economic planning becomes less efficient as the economy it plans grows larger. I suspect this is related to Dunbar's number.
pjc50 10y ago
> Both are electives This is critical, because it makes them actually price-sensitive. You can't choose not to have heart disease, though. Free markets have a bunch of conditions on their efficiency that are often ignored by advocates and don't always apply: must be plurality of non-coordinated buyers and sellers, must be feasible for participants to determine quality of goods (Akerloff's "lemons"), must be low barriers to entry, must be feasible for participants to choose not to do a transaction, and so on.
- John_Innocent 10y ago
  >This is critical, because it makes them actually price-sensitive. You can't choose not to have heart disease, though. But the sectors experiencing the cost disease do not universally share the property of having inelastic demand. In fact, inelastic demand alone will not make a field price-insensitive. One can still be price conscious when purchasing a non-elective service. Only in the case of an emergency service, where the consumer is not capable of shopping the market is price sensitivity lost. The biggest source of price insensitivity is government coverage, which eliminates all incentive for a consumer to shop around to find the lowest cost product/service. >must be plurality of non-coordinated buyers and sellers, must be feasible for participants to determine quality of goods (Akerloff's "lemons"), must be low barriers to entry, must be feasible for participants to choose not to do a transaction, and so on. Collusion-prone industries are the edge case, not the norm. We have levels of government intervention far in excess of what's needed to prevent abuse in these sectors. Moreover, many of these sectors are collusion-prone due to artificial regulatory costs imposed by government, as well as the intellectual property system created by government, which create barriers to entry that benefit larger economic entities, and lead to many sectors being dominated by a handful of large companies that are in a position of being able to collude with one another. >must be feasible for participants to determine quality of goods (Akerloff's "lemons"), Akerloff's lemons have many market solutions.
- yosefk 10y ago
  You can't choose not to eat, yet food prices don't rise like healthcare prices. I think TFA did a pretty good job showing the difficulty of pinning the problem on market failure, government failure etc. At least any confident explanation must come with numbers and not just passionate words showing where the money went.
legulere 10y ago
> Isn't it obvious? All of the fields experiencing the cost disease are dominated by government Those are all fields which actually need state involvement. In the graphs you can see that countries with more state involvements are actually doing better. So the bad performance in the USA could be pinned to an avoidance of letting the state do things.
- John_Innocent 10y ago
  There was no runaway growth in cost when government first started getting involved in those industries in a big way. The cost disease began in all developing economies after large scale government intervention began. >In the graphs you can see that countries with more state involvements are actually doing better. So the bad performance in the USA could be pinned to an avoidance of letting the state do things. That's overly simplistic. Government in the US spends more than most developed countries on healthcare per capita so it is not at all clear that it is less quantatively less involved, the until recent lack of universal coverage notwithstanding. Also, the fact that patients consume far more technologically advanced services, like medical imaging, and experimental and cutting age treatments in the US than in Europe and has to be factored into any analysis on cost-benefit.

PaulHoule 10y ago

The U.S. government seems to be worse than the others. For instance when Europeans hear how much it costs to build a subway in the U.S. often they are shocked. Heck, the Green Party in my town got shocked when it heard how much it costs to build a bus shelter. Also government is involved in healthcare in other countries too. The difference is that our government spends more than the others and then the private sector spends more money on top of that. Thus government itself is not a problem so much as the U.S. government is particularly broken.

John_Innocent 10y ago
Where do you get the idea that government is not involved in subway building in a big way in the US? Perhaps there are more legal/regulatory barriers in place to build a subway in the US than in Europe. >Thus government itself is not a problem so much as the U.S. government is particularly broken. The cost disease is affecting all developed economies, not just the US, and it affects almost exclusively government dominated industries. If all governments are broken, then that suggests something inherently wrong with government.
- PaulHoule 10y ago
  More to the point, it is usually the government that funds, builds and operates the subway.
- anonymoushn 10y ago
  Can you use this model to explain why government-involved health care, education, and subway construction is much cheaper in all other developed countries than in the United States?
  - John_Innocent 10y ago
    I don't know but if I had to speculate, I'd say the US has less efficient government, because of factors like greater wealth (more complacency toward waste and corruption) and a larger and less homogenous population (a less coherent public debate). With respect to the second point, I hypothesize that generally central economic planning becomes less efficient as the economy it plans grows larger. I suspect this is related to Dunbar's number.

pjc50 10y ago

> Both are electives This is critical, because it makes them actually price-sensitive. You can't choose not to have heart disease, though. Free markets have a bunch of conditions on their efficiency that are often ignored by advocates and don't always apply: must be plurality of non-coordinated buyers and sellers, must be feasible for participants to determine quality of goods (Akerloff's "lemons"), must be low barriers to entry, must be feasible for participants to choose not to do a transaction, and so on.

John_Innocent 10y ago
>This is critical, because it makes them actually price-sensitive. You can't choose not to have heart disease, though. But the sectors experiencing the cost disease do not universally share the property of having inelastic demand. In fact, inelastic demand alone will not make a field price-insensitive. One can still be price conscious when purchasing a non-elective service. Only in the case of an emergency service, where the consumer is not capable of shopping the market is price sensitivity lost. The biggest source of price insensitivity is government coverage, which eliminates all incentive for a consumer to shop around to find the lowest cost product/service. >must be plurality of non-coordinated buyers and sellers, must be feasible for participants to determine quality of goods (Akerloff's "lemons"), must be low barriers to entry, must be feasible for participants to choose not to do a transaction, and so on. Collusion-prone industries are the edge case, not the norm. We have levels of government intervention far in excess of what's needed to prevent abuse in these sectors. Moreover, many of these sectors are collusion-prone due to artificial regulatory costs imposed by government, as well as the intellectual property system created by government, which create barriers to entry that benefit larger economic entities, and lead to many sectors being dominated by a handful of large companies that are in a position of being able to collude with one another. >must be feasible for participants to determine quality of goods (Akerloff's "lemons"), Akerloff's lemons have many market solutions.
yosefk 10y ago
You can't choose not to eat, yet food prices don't rise like healthcare prices. I think TFA did a pretty good job showing the difficulty of pinning the problem on market failure, government failure etc. At least any confident explanation must come with numbers and not just passionate words showing where the money went.

legulere 10y ago

> Isn't it obvious? All of the fields experiencing the cost disease are dominated by government Those are all fields which actually need state involvement. In the graphs you can see that countries with more state involvements are actually doing better. So the bad performance in the USA could be pinned to an avoidance of letting the state do things.

John_Innocent 10y ago
There was no runaway growth in cost when government first started getting involved in those industries in a big way. The cost disease began in all developing economies after large scale government intervention began. >In the graphs you can see that countries with more state involvements are actually doing better. So the bad performance in the USA could be pinned to an avoidance of letting the state do things. That's overly simplistic. Government in the US spends more than most developed countries on healthcare per capita so it is not at all clear that it is less quantatively less involved, the until recent lack of universal coverage notwithstanding. Also, the fact that patients consume far more technologically advanced services, like medical imaging, and experimental and cutting age treatments in the US than in Europe and has to be factored into any analysis on cost-benefit.