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The state spends a massive portion of its revenues on education and healthcare, those are two things notoriously increasing in price faster than inflation. I w

The state spends a massive portion of its revenues on education and healthcare, those are two things notoriously increasing in price faster than inflation. I would assume that the government is disproportionately likely to spend on these categories. So isn't this another way to illustrate inefficiency? If there's a correlation between government being a customer, and prices rising while the quality of the end product drops, that sounds like one more argument in favor of lower spending.

etal 16y ago
Those sectors are also much harder to automate, relative to the rest of the economy, since people want individual attention from doctors and teachers. So as the cost of everything else drops thanks to improved automation and technology, the proportion of our wealth that we spend on necessary but less-automated services increases. (There's a term for this effect, but I'm having trouble finding it again.)
- wvoq 16y ago
  Cost disease.
  - etal 16y ago
    Thanks! http://en.wikipedia.org/wiki/Baumol%27s_cost_disease http://en.wikipedia.org/wiki/Baumol%27s_cost_disease Baumol's cost disease (also known as the Baumol Effect) [...] involves a rise of salaries in jobs that have experienced no increase of labor productivity in response to rising salaries in other jobs which did experience such labor productivity growth. [...] Baumol's cost disease is often used to describe the lack of growth in productivity in public services such as public hospitals and state colleges. Since many public administration activities are heavily labor-intensive there is little growth in productivity over time because productivity gains come essentially from a better capital technology. As a result growth in the GDP will generate little more resources to be spent in public sector. Thus public sector production is more dependent on taxation level than growth in the GDP.
jbooth 16y ago
That sounds like you're taking a favored conclusion and arguing backwards. How many people have health insurance in the US? How many of those are government employees? (Answer: far less than half) Is the government running health insurance? (Answer: no). EDIT: Wasn't trying to get too political on this. I just find the argument "the government buys some health insurance, so that's why it's expensive" outrageously unpersuasive.

etal 16y ago

Those sectors are also much harder to automate, relative to the rest of the economy, since people want individual attention from doctors and teachers. So as the cost of everything else drops thanks to improved automation and technology, the proportion of our wealth that we spend on necessary but less-automated services increases. (There's a term for this effect, but I'm having trouble finding it again.)

wvoq 16y ago
Cost disease.
- etal 16y ago
  Thanks! http://en.wikipedia.org/wiki/Baumol%27s_cost_disease http://en.wikipedia.org/wiki/Baumol%27s_cost_disease Baumol's cost disease (also known as the Baumol Effect) [...] involves a rise of salaries in jobs that have experienced no increase of labor productivity in response to rising salaries in other jobs which did experience such labor productivity growth. [...] Baumol's cost disease is often used to describe the lack of growth in productivity in public services such as public hospitals and state colleges. Since many public administration activities are heavily labor-intensive there is little growth in productivity over time because productivity gains come essentially from a better capital technology. As a result growth in the GDP will generate little more resources to be spent in public sector. Thus public sector production is more dependent on taxation level than growth in the GDP.

jbooth 16y ago

That sounds like you're taking a favored conclusion and arguing backwards. How many people have health insurance in the US? How many of those are government employees? (Answer: far less than half) Is the government running health insurance? (Answer: no). EDIT: Wasn't trying to get too political on this. I just find the argument "the government buys some health insurance, so that's why it's expensive" outrageously unpersuasive.