4 ms·

There’s only three parts of the economy where prices have consistently outpaced inflation: education, health care (including prescription drugs) and real estate

There’s only three parts of the economy where prices have consistently outpaced inflation: education, health care (including prescription drugs) and real estate over long periods of time. These are all sectors in which public policy subsidizes demand and restricts supply.

samsonradu 9y ago
These are also the most impactful on the quality of life I might add.
jayd16 9y ago
What about food stamps? FDA regulates food. But really, those are huge sectors of the economy. It's weird to say that they can't keep pace with inflation when its the majority of a lot of pay checks. Wouldn't it be better to say wages have stagnated while the price of other goods have dropped?
- cjalmeida 9y ago
  About food, thanks Ricardo for making a case in 19th century that free trade of food makes for a more efficient economy. I wonder what would be the effect if regulations where such that one could easily import and distribute medical drugs. Or the AMA would allows foreign physicians to operate within borders.
viraptor 9y ago
It is country-specific though. In Europe, there are a few countries with (for example) free education from primary too university level. It hasn't changed in years.
SilasX 9y ago
I thought that real estate didn't outpace when averaged across the whole country, but specific urban areas have heavily outpaced, bringing up the average?
justin66 9y ago
> education, health care (including prescription drugs) and real estate over long periods of time. If you're talking about the housing market, the Case-Shiller index indicates that over long periods of time, the value of housing tracks inflation, it does not outpace it. (Which does not exactly help the homeowner caught riding enormous peaks and valleys in pricing, of course.) https://en.wikipedia.org/wiki/Case-Shiller_index https://en.wikipedia.org/wiki/Case-Shiller_index The other two are interesting. It seems safe to say that as more and more technology becomes available to help people stay healthy and alive, medicine will continue to get more expensive. Or maybe medicine will essentially become an information technology where Moore's Law applies and costs will go down, as Kurzweil predicted. Maybe education will become less expensive as credentialism collapses under its own weight and online learning becomes more prevalent. Or maybe we will need more and more education as job hopping becomes the norm and wrangling all different sorts of technology becomes the lot of pretty much everyone who wants to earn more than the universal basic income.
- mercutio2 9y ago
  The Case-Shiller index doesn’t include income (real, or imputed rent), and the index doesn’t go all that far back. When you include imputed rent, maintenance, and property taxes, it’s much less clear whether residential real estate or equities have better total returns over century timelines. I was surprised by this, when I read abstracts of a paper about this recently, but it seems to be at least not as settled as I used to think it is.
  - justin66 9y ago
    I'd be terribly interested in a link to the paper you mentioned. I've never seen anything credible which indicated real estate was as profitable as equities over time (but I've been focused on the United States). I'm not sure how or why Case-Shiller would involve rent or imputed rent. Are you thinking more of commercial real estate?
evanwise 9y ago
Demand for essential healthcare services is inelastic.
emodendroket 9y ago
If the problem is government meddling then we would expect those things to be much more expensive in other OECD countries, where the government has a much larger role and the system is much farther from a "free market" than the US. And yet that is not the case.
Slansitartop 9y ago
You might be putting too much blame on the government for the price increases. The former two, education and healthcare, are also affected by "cost disease" since they've seen little automation relative to other activities. https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease
shellkr 9y ago
You have countries while they had state monopoly over prescription drugs it was much cheaper than after deregulation. The reason for this was that medical companies was forced to reduce prices if they wanted to sell their drug in that country. They could chose from selling to a country and get a small profit.. or no profit at all. (Here the power lies with the customer) The reason for high prices is IP. If you are in the choice of getting that expensive prescription drug that treat your hart disease or die.... you will pick the drug. No competition exist. (Here the power lies with the seller). So to get reasonable prices you either have to remove IP or have a country wide monopoly. Else the free market rule.

samsonradu 9y ago

These are also the most impactful on the quality of life I might add.

jayd16 9y ago

What about food stamps? FDA regulates food. But really, those are huge sectors of the economy. It's weird to say that they can't keep pace with inflation when its the majority of a lot of pay checks. Wouldn't it be better to say wages have stagnated while the price of other goods have dropped?

cjalmeida 9y ago
About food, thanks Ricardo for making a case in 19th century that free trade of food makes for a more efficient economy. I wonder what would be the effect if regulations where such that one could easily import and distribute medical drugs. Or the AMA would allows foreign physicians to operate within borders.

viraptor 9y ago

It is country-specific though. In Europe, there are a few countries with (for example) free education from primary too university level. It hasn't changed in years.

SilasX 9y ago

I thought that real estate didn't outpace when averaged across the whole country, but specific urban areas have heavily outpaced, bringing up the average?

justin66 9y ago

> education, health care (including prescription drugs) and real estate over long periods of time. If you're talking about the housing market, the Case-Shiller index indicates that over long periods of time, the value of housing tracks inflation, it does not outpace it. (Which does not exactly help the homeowner caught riding enormous peaks and valleys in pricing, of course.) https://en.wikipedia.org/wiki/Case-Shiller_index https://en.wikipedia.org/wiki/Case-Shiller_index The other two are interesting. It seems safe to say that as more and more technology becomes available to help people stay healthy and alive, medicine will continue to get more expensive. Or maybe medicine will essentially become an information technology where Moore's Law applies and costs will go down, as Kurzweil predicted. Maybe education will become less expensive as credentialism collapses under its own weight and online learning becomes more prevalent. Or maybe we will need more and more education as job hopping becomes the norm and wrangling all different sorts of technology becomes the lot of pretty much everyone who wants to earn more than the universal basic income.

mercutio2 9y ago
The Case-Shiller index doesn’t include income (real, or imputed rent), and the index doesn’t go all that far back. When you include imputed rent, maintenance, and property taxes, it’s much less clear whether residential real estate or equities have better total returns over century timelines. I was surprised by this, when I read abstracts of a paper about this recently, but it seems to be at least not as settled as I used to think it is.
- justin66 9y ago
  I'd be terribly interested in a link to the paper you mentioned. I've never seen anything credible which indicated real estate was as profitable as equities over time (but I've been focused on the United States). I'm not sure how or why Case-Shiller would involve rent or imputed rent. Are you thinking more of commercial real estate?

evanwise 9y ago

Demand for essential healthcare services is inelastic.

emodendroket 9y ago

If the problem is government meddling then we would expect those things to be much more expensive in other OECD countries, where the government has a much larger role and the system is much farther from a "free market" than the US. And yet that is not the case.

Slansitartop 9y ago

You might be putting too much blame on the government for the price increases. The former two, education and healthcare, are also affected by "cost disease" since they've seen little automation relative to other activities. https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease

shellkr 9y ago

You have countries while they had state monopoly over prescription drugs it was much cheaper than after deregulation. The reason for this was that medical companies was forced to reduce prices if they wanted to sell their drug in that country. They could chose from selling to a country and get a small profit.. or no profit at all. (Here the power lies with the customer) The reason for high prices is IP. If you are in the choice of getting that expensive prescription drug that treat your hart disease or die.... you will pick the drug. No competition exist. (Here the power lies with the seller). So to get reasonable prices you either have to remove IP or have a country wide monopoly. Else the free market rule.