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No, what he's saying is the reason (health care consumption / GDP per capita) is abnormally high in the US is the probably same as the reason that (all consumpt

No, what he's saying is the reason (health care consumption / GDP per capita) is abnormally high in the US is the probably same as the reason that (all consumption / gdp per capita) is abnormally high in the US. That's not circular. It's merely pointing to an underlying cause that is probably not specific to the health care system.

arkis22 10y ago
If it's not specific to the healthcare system, price increases should mirror inflation. The underlying cause being high material standard of living? Because that is why it's circular logic to me. I still have a problem with using the end economic result data. It _automatically_ assumes that price increases are called for based on the market. If all firms in an industry can raise prices at the micro level, then no firm stands out at the macro level, which means macro analysis is kind of useless. An analysis of healthcare companies COGS and profit margins would be more illuminating.
- rcafdm 10y ago
  I wrote the blog post. Some of these broader patterns do relate to Baumol's cost disease, i.e., health and other service typically do not see productivity increases at the same rate as manufactured products, agricultural produce, and wages in these services will tend to reflect increasing wages in other parts of the economy (especially skilled ones), but mostly this is about increasing volume, i.e., quantitive and qualitative increase in health goods and services. This empirical regularity can be explained by the fact that as countries get rich they attach increasing value to human life _and_ they experience diminishing marginal utility with most other consumption expenditures (an extra year of life, even discounted, can be worth a lot more than buying yet another bauble, a few more sqft in housing, etc) "Profits" as such are unlikely to explain more than a tiny fraction of this as (1) for-profit sector isn't that large in the health care space (2) their cost profile is generally very similar to government and non-profit alternatives (3) the patterns generally have relatively little to do with true price increases/inflation. Further, even removing profit per se from the equation does not mean that problems of this sort necessarily disappear. Principal-agent problems abound, even a physician on state payroll doesn't necessarily have their incentives well aligned with the interests of their patients.

arkis22 10y ago

If it's not specific to the healthcare system, price increases should mirror inflation. The underlying cause being high material standard of living? Because that is why it's circular logic to me. I still have a problem with using the end economic result data. It _automatically_ assumes that price increases are called for based on the market. If all firms in an industry can raise prices at the micro level, then no firm stands out at the macro level, which means macro analysis is kind of useless. An analysis of healthcare companies COGS and profit margins would be more illuminating.

rcafdm 10y ago
I wrote the blog post. Some of these broader patterns do relate to Baumol's cost disease, i.e., health and other service typically do not see productivity increases at the same rate as manufactured products, agricultural produce, and wages in these services will tend to reflect increasing wages in other parts of the economy (especially skilled ones), but mostly this is about increasing volume, i.e., quantitive and qualitative increase in health goods and services. This empirical regularity can be explained by the fact that as countries get rich they attach increasing value to human life _and_ they experience diminishing marginal utility with most other consumption expenditures (an extra year of life, even discounted, can be worth a lot more than buying yet another bauble, a few more sqft in housing, etc) "Profits" as such are unlikely to explain more than a tiny fraction of this as (1) for-profit sector isn't that large in the health care space (2) their cost profile is generally very similar to government and non-profit alternatives (3) the patterns generally have relatively little to do with true price increases/inflation. Further, even removing profit per se from the equation does not mean that problems of this sort necessarily disappear. Principal-agent problems abound, even a physician on state payroll doesn't necessarily have their incentives well aligned with the interests of their patients.