7 ms·

It is interesting to me that the three areas main areas in America that have become exponentially more expensive are healthcare, construction, and education. It

It is interesting to me that the three areas main areas in America that have become exponentially more expensive are healthcare, construction, and education. It's curious that they have the most government control.

clay_the_ripper 8y ago
Could you explain to me how the government control of those things had lead to price increases? Specifically? I hear this a lot but have never heard an explaination and I am genuinely curious of the reasoning
- javagram 8y ago
  College administration costs have been expanding rapidly over the previous decades. Part of that could be attributed to federal mandates, e.g. everything to do with investigating/achieving Title IX compliance is the result of government regulation and probably wouldn’t exist in an unrestricted free market. Accreditation is also related to government and can require colleges spend money on things they might not have 50 years ago. I suspect the biggest cost driver is federally-backed student loans though. When you’re paying with what seems like free money it’s a lot harder to control costs. If students run out of money and drop out of your school, that’s a bigger driver to keep costs down.
- gwright 8y ago
  One data point on public works construction, the Davis-Bacon act and "prevailing wages". https://www.forbes.com/sites/timworstall/2016/08/31/union-wages-increase-construction-costs-by-20-abolish-davis-bacon/#173fa964406e https://www.forbes.com/sites/timworstall/2016/08/31/union-wa...
- codeddesign 8y ago
  It’s pretty simple. Both regulation and guarantees reduce competition in certain elements. Example: colleges no longer have to compete on pricing because students no longer have to save to go to college. The loans are easy to get and colleges are guaranteed on payment. Due to this, pricing competition because much less of a concern for colleges.
- mixmastamyk 8y ago
  When you subsidize industries they no longer attempt to contain costs. Unintuitively, instead of getting cheaper they get more expensive. There's an interesting video by Peter Schiff on the subject: https://youtu.be/AIcfMMVcYZg https://youtu.be/AIcfMMVcYZg
- paulddraper 8y ago
  IMO, it has less to do with government control per se, and more to do with someone paying for it. Insurance pays for healthcare -> patients care less about how much it costs -> healthcare costs mysteriously rise Government/lenders pay for school -> students care less about how much it costs -> education costs mysteriously rise
- nostrademons 8y ago
  Some examples other than what people have already mentioned: Prescription drugs. The FDA has a "no existing alternative first" policy - they work on approving drugs for conditions where no current treatment works before they even start considering competitors to existing drugs. This sounds quite logical, but the effect of it is that every new drug is granted a monopoly for a long period of time before any competitor can even legally sell their alternative, so the drug company can literally charge whatever they want. Building codes. In my grandparents' day, it was still possible to construct your own house: you bought a plot of land, hired a concrete mixer to come pour the foundation, bought a lot of 2x4s, and spent a bunch of time hammering & sawing. Now, you have to conform to all of the local building codes (which in the Bay Area, I've heard, is an 800-page tome), and you need to get approval for every feature of the design from the city building inspector, who has the power to completely block your construction if you get on his shit list. As a result, the only people who can build housing are ones who have good relationships with the city and the know-how to adhere closely to all the building codes. Zoning. Even if you have that know-how and relationships, there are some things you just can't do with housing. Own a 1/4 acre with a single family home and want to convert it to a 4-plex? Too bad, it's not zoned for that. And you can see the economic impact of all of these by looking at situations where they're absent. Consider generic drugs: once a generic has been approved, the price of a drug can fall by 90% or more. Or compare housing in the Houston metro area, where you can get a 3BR2BA for under $200K, to the Bay Area, where the same house will set you back $2M.
  - flukus 8y ago
    > Prescription drugs. The FDA has a "no existing alternative first" policy - they work on approving drugs for conditions where no current treatment works before they even start considering competitors to existing drugs. This sounds quite logical, but the effect of it is that every new drug is granted a monopoly for a long period of time before any competitor can even legally sell their alternative, so the drug company can literally charge whatever they want. You think that's government control? Most countries have the government negotiating prices on behalf of it's citizens in a very "take it or leave it" manner. Pharmacists also have to offer a generic if it's available, regardless of what the doctor prescribes. Those much stronger government controls produce better (cheaper and universal) outcomes.
- roenxi 8y ago
  "The Economy" is a (surprisingly effective!) system for allocating resources. It short-circuits a human instinct that social status and fairness should be the guide, and replaces that with "a persons economic contribution" instead. Now, it turns out that the difference in productivity between people is so great (think the old 10x-100x programmer) that allocating resources according to contribution creates so much surplus stuff that everybody wins, even the unproductive. And, as a side benefit, everyone has an incentive to be productive. The flip side is that Government is made up of ordinary people who often ask "what about fairness and status?", and likes to interfere to reallocate from productive people to unproductive people. In mild cases you get a healthy level of support for the disadvantaged, in extreme cases you get Venezuela. But in all cases, since the productive people are given less, they create less and there is less available to distribute. In theory this triggers the laws of supply-and-demand, reduces supply and prices increase. The flip side is if the productive people consume their wealth instead of producing with it then we probably could tax them without any ill effects, but I think that is rarer than most people think.
  - fzeroracer 8y ago
    This seems like an odd way of rationalizing the extreme concentration of wealth to the top along with growing poverty and lack of opportunity to climb the economic ladder. Defining people in baskets like 'productive' and 'unproductive' is a fairly cold and callous way of looking at the plight of many Americans ranging from the poor to the elderly. edit: Also to add onto my point: We've seen in America that people over time have grown more productive, yet wages have stagnated. If your theory was correct that productive Americans are allocated more resources, then presumably we should've seen the economy adjust accordingly.
    - roenxi 8y ago
      Well, I actually believe that the constant money printing (eg, expressed in the US M2 Monetary Stock) has badly messed up the ability of the economy to recognise who is and isn't productive. The system is in real trouble and not working as I'd like it to. But the question wasn't what America is doing wrong, the question was why government intervention always leads to price increases.
moorhosj 8y ago
They are also the three things that are socialized to a much higher degree in other developed countries, where they are not becoming exponentially more expensive.
- oconnor663 8y ago
  I remember hearing from someone in the field that health care in Europe is indeed becoming exponentially more expensive. the exponent is smaller than the US, and the cost isn't borne by individuals, but they're still going to have a problem. (I don't have a source for this though.)
  - moorhosj 8y ago
    My guess is the aging population.
  - batiudrami 8y ago
    There's the aging population and that there are costs associated with improvements in modern medicine. If we save someone from the first expensive-to-treat thing that in the past would have killed them but the second (or third) thing does get them, they have two-to-three times the end of life medical costs. We're able to keep people alive longer, but it is costly. At least in Australia, this is going to go one of two ways - either a user pays system or workers will have to contribute dramatically more tax (it's currently a flat 1%) to the healthcare system to look after people who are no longer working but costing the system a lot. I favour the latter, but the "fuck you, got mine" mentality is insidious and increasingly pervasive.
    - oconnor663 8y ago
      I'm curious about this thought experiment when people are discussing the pros and cons of user pays: > Imagine that in 2019 someone invents a perfect artificial heart, which has zero risks or complications, reliably giving 5 or 10 extra years of life to typical elderly patients with heart issues. The downside is that it has to be made out of a giant diamond and so it costs $100 million. How do we decide who gets one? The point is that somewhere down the line, as our opportunities to spend money on medicine grow and grow (which by itself is a good thing!), we have to come up with some way to draw the "user pays" line. It might be that people with a "fuck you got mine" attitude want to draw the line a lot lower than everyone else, but that's not the same thing as believing that the line exists at all.
jayd16 8y ago
How is this not explained by correlation? It makes sense that important things are both expensive and regulated. Besides, isn't this terribly cherry picked? Sewage is a government issue and you don't talk about runaway costs there.
- derekp7 8y ago
  Talk to the folks in Jefferson Co. AL, facing $200 a month sewer bills after a botched upgrade.
  - Retric 8y ago
    First it’s generally half that 200$ per month. Second, “six of Jefferson County's former commissioners had been found guilty of corruption for accepting the bribes, along with 15 other officials” But yes, if you look for the absolute worst 0.05% you will find problems.
- coryrc 8y ago
  Seattle's power, sewer, and water bills are all growing much higher than inflation; have been for at least a decade; and are going to continue at this pace for the foreseeable future.
alexqgb 8y ago
A better view would focus what kind of government control. Are we talking about a government where legislators are entirely and exclusively dependent on the votes of their constituents? Or are we talking about a government that merely presents the facade of a democracy while actually being dominated by corrupt cartels who use its power to extract rents and squash competition? Because I promise you, "government" behaves very differently in these two situations.
jpfed 8y ago
Of course, that's not all they have in common. Being difficult to automate, they are vulnerable to Baumol's cost disease.

clay_the_ripper 8y ago

Could you explain to me how the government control of those things had lead to price increases? Specifically? I hear this a lot but have never heard an explaination and I am genuinely curious of the reasoning

javagram 8y ago
College administration costs have been expanding rapidly over the previous decades. Part of that could be attributed to federal mandates, e.g. everything to do with investigating/achieving Title IX compliance is the result of government regulation and probably wouldn’t exist in an unrestricted free market. Accreditation is also related to government and can require colleges spend money on things they might not have 50 years ago. I suspect the biggest cost driver is federally-backed student loans though. When you’re paying with what seems like free money it’s a lot harder to control costs. If students run out of money and drop out of your school, that’s a bigger driver to keep costs down.
gwright 8y ago
One data point on public works construction, the Davis-Bacon act and "prevailing wages". https://www.forbes.com/sites/timworstall/2016/08/31/union-wages-increase-construction-costs-by-20-abolish-davis-bacon/#173fa964406e https://www.forbes.com/sites/timworstall/2016/08/31/union-wa...
codeddesign 8y ago
It’s pretty simple. Both regulation and guarantees reduce competition in certain elements. Example: colleges no longer have to compete on pricing because students no longer have to save to go to college. The loans are easy to get and colleges are guaranteed on payment. Due to this, pricing competition because much less of a concern for colleges.
mixmastamyk 8y ago
When you subsidize industries they no longer attempt to contain costs. Unintuitively, instead of getting cheaper they get more expensive. There's an interesting video by Peter Schiff on the subject: https://youtu.be/AIcfMMVcYZg https://youtu.be/AIcfMMVcYZg
paulddraper 8y ago
IMO, it has less to do with government control per se, and more to do with someone paying for it. Insurance pays for healthcare -> patients care less about how much it costs -> healthcare costs mysteriously rise Government/lenders pay for school -> students care less about how much it costs -> education costs mysteriously rise
nostrademons 8y ago
Some examples other than what people have already mentioned: Prescription drugs. The FDA has a "no existing alternative first" policy - they work on approving drugs for conditions where no current treatment works before they even start considering competitors to existing drugs. This sounds quite logical, but the effect of it is that every new drug is granted a monopoly for a long period of time before any competitor can even legally sell their alternative, so the drug company can literally charge whatever they want. Building codes. In my grandparents' day, it was still possible to construct your own house: you bought a plot of land, hired a concrete mixer to come pour the foundation, bought a lot of 2x4s, and spent a bunch of time hammering & sawing. Now, you have to conform to all of the local building codes (which in the Bay Area, I've heard, is an 800-page tome), and you need to get approval for every feature of the design from the city building inspector, who has the power to completely block your construction if you get on his shit list. As a result, the only people who can build housing are ones who have good relationships with the city and the know-how to adhere closely to all the building codes. Zoning. Even if you have that know-how and relationships, there are some things you just can't do with housing. Own a 1/4 acre with a single family home and want to convert it to a 4-plex? Too bad, it's not zoned for that. And you can see the economic impact of all of these by looking at situations where they're absent. Consider generic drugs: once a generic has been approved, the price of a drug can fall by 90% or more. Or compare housing in the Houston metro area, where you can get a 3BR2BA for under $200K, to the Bay Area, where the same house will set you back $2M.
- flukus 8y ago
  > Prescription drugs. The FDA has a "no existing alternative first" policy - they work on approving drugs for conditions where no current treatment works before they even start considering competitors to existing drugs. This sounds quite logical, but the effect of it is that every new drug is granted a monopoly for a long period of time before any competitor can even legally sell their alternative, so the drug company can literally charge whatever they want. You think that's government control? Most countries have the government negotiating prices on behalf of it's citizens in a very "take it or leave it" manner. Pharmacists also have to offer a generic if it's available, regardless of what the doctor prescribes. Those much stronger government controls produce better (cheaper and universal) outcomes.
roenxi 8y ago
"The Economy" is a (surprisingly effective!) system for allocating resources. It short-circuits a human instinct that social status and fairness should be the guide, and replaces that with "a persons economic contribution" instead. Now, it turns out that the difference in productivity between people is so great (think the old 10x-100x programmer) that allocating resources according to contribution creates so much surplus stuff that everybody wins, even the unproductive. And, as a side benefit, everyone has an incentive to be productive. The flip side is that Government is made up of ordinary people who often ask "what about fairness and status?", and likes to interfere to reallocate from productive people to unproductive people. In mild cases you get a healthy level of support for the disadvantaged, in extreme cases you get Venezuela. But in all cases, since the productive people are given less, they create less and there is less available to distribute. In theory this triggers the laws of supply-and-demand, reduces supply and prices increase. The flip side is if the productive people consume their wealth instead of producing with it then we probably could tax them without any ill effects, but I think that is rarer than most people think.
- fzeroracer 8y ago
  This seems like an odd way of rationalizing the extreme concentration of wealth to the top along with growing poverty and lack of opportunity to climb the economic ladder. Defining people in baskets like 'productive' and 'unproductive' is a fairly cold and callous way of looking at the plight of many Americans ranging from the poor to the elderly. edit: Also to add onto my point: We've seen in America that people over time have grown more productive, yet wages have stagnated. If your theory was correct that productive Americans are allocated more resources, then presumably we should've seen the economy adjust accordingly.
  - roenxi 8y ago
    Well, I actually believe that the constant money printing (eg, expressed in the US M2 Monetary Stock) has badly messed up the ability of the economy to recognise who is and isn't productive. The system is in real trouble and not working as I'd like it to. But the question wasn't what America is doing wrong, the question was why government intervention always leads to price increases.

moorhosj 8y ago

They are also the three things that are socialized to a much higher degree in other developed countries, where they are not becoming exponentially more expensive.

oconnor663 8y ago
I remember hearing from someone in the field that health care in Europe is indeed becoming exponentially more expensive. the exponent is smaller than the US, and the cost isn't borne by individuals, but they're still going to have a problem. (I don't have a source for this though.)
- moorhosj 8y ago
  My guess is the aging population.
- batiudrami 8y ago
  There's the aging population and that there are costs associated with improvements in modern medicine. If we save someone from the first expensive-to-treat thing that in the past would have killed them but the second (or third) thing does get them, they have two-to-three times the end of life medical costs. We're able to keep people alive longer, but it is costly. At least in Australia, this is going to go one of two ways - either a user pays system or workers will have to contribute dramatically more tax (it's currently a flat 1%) to the healthcare system to look after people who are no longer working but costing the system a lot. I favour the latter, but the "fuck you, got mine" mentality is insidious and increasingly pervasive.
  - oconnor663 8y ago
    I'm curious about this thought experiment when people are discussing the pros and cons of user pays: > Imagine that in 2019 someone invents a perfect artificial heart, which has zero risks or complications, reliably giving 5 or 10 extra years of life to typical elderly patients with heart issues. The downside is that it has to be made out of a giant diamond and so it costs $100 million. How do we decide who gets one? The point is that somewhere down the line, as our opportunities to spend money on medicine grow and grow (which by itself is a good thing!), we have to come up with some way to draw the "user pays" line. It might be that people with a "fuck you got mine" attitude want to draw the line a lot lower than everyone else, but that's not the same thing as believing that the line exists at all.

jayd16 8y ago

How is this not explained by correlation? It makes sense that important things are both expensive and regulated. Besides, isn't this terribly cherry picked? Sewage is a government issue and you don't talk about runaway costs there.

derekp7 8y ago
Talk to the folks in Jefferson Co. AL, facing $200 a month sewer bills after a botched upgrade.
- Retric 8y ago
  First it’s generally half that 200$ per month. Second, “six of Jefferson County's former commissioners had been found guilty of corruption for accepting the bribes, along with 15 other officials” But yes, if you look for the absolute worst 0.05% you will find problems.
coryrc 8y ago
Seattle's power, sewer, and water bills are all growing much higher than inflation; have been for at least a decade; and are going to continue at this pace for the foreseeable future.

alexqgb 8y ago

A better view would focus what kind of government control. Are we talking about a government where legislators are entirely and exclusively dependent on the votes of their constituents? Or are we talking about a government that merely presents the facade of a democracy while actually being dominated by corrupt cartels who use its power to extract rents and squash competition? Because I promise you, "government" behaves very differently in these two situations.

jpfed 8y ago

Of course, that's not all they have in common. Being difficult to automate, they are vulnerable to Baumol's cost disease.