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> Ultimately, college is expensive in the U.S. for the same reason MRIs are expensive: There is no central mechanism to control price increases. “Universities e

> Ultimately, college is expensive in the U.S. for the same reason MRIs are expensive: There is no central mechanism to control price increases. “Universities extract money from students because they can,” says Schleicher at the OECD. “It’s the inevitable outcome of an unregulated fee structure.” Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). What happens when the government tries to provide for us: they gaurantee home loans: Financial crisis, they gaurantee drug costs: Skyrocketing drug costs, they gaurantee your student loan: Skyrocketing cost of school By it's nature, anything the government subsidizes is going to be taken advantage of. You either have to take full central control (lets not go there) or let the free market actually work. You can't layer the two.

fzeroracer 8y ago
The free market does not work in all situations. There's a reason why our healthcare is an absolute disaster compared to any other first world country, why our college is far more expensive, why our drugs cost more etc And it ain't because of cost control. Every time we loosen the reins a bit and let the 'free market' take the wheels, we see things get a lot worse for Americans as a whole. Especially when you have giant companies controlling the market entirely, like with ISPs.
- bhupy 8y ago
  Healthcare in America is one of the least free markets in the country. https://www.vox.com/policy-and-politics/2018/7/31/17629526/mri-cost-certificate-of-need-north-carolina-lawsuit https://www.vox.com/policy-and-politics/2018/7/31/17629526/m...
  - fzeroracer 8y ago
    I don't see a statistic or actual citation there other than an issue with potentially out of date laws. How are you quantifying American Healthcare as being one of the least free markets? And how does it compare to other countries? I don't see anyone ever actually quantify how 'free' a market is; people only ever argue that if a market is not working therefore it's not free enough, which means we must make it free. At what point are we going to stop and realize sometimes it just doesn't work? Especially for issues that result in the death of Americans?
    - bhupy 8y ago
      Sure - in America, healthcare is far from a free market because: 1) We don’t pay our own healthcare bills, we pay for our healthcare through insurance. As a result, there isn’t a pricing system in place, much like there is for other critical goods and services with price-inelastic demand like food and housing. This is caused by regulations that require employers to provide health insurance for their employees, and most recently the mandate that requires individuals to purchase insurance. We’ve essentially forced a world in which insurance is the only way one can pay for healthcare. 2) Our healthcare supply is artificially limited, which forces higher up prices. The MRI “certificate of need” is one such example, there are countless others. Medical licensure, in general, drives up the price to see just a primary care physician. In the US, just becoming a basic physician that prescribes antibiotics takes at least 8 years of expensive schooling. As a result, doctors in America earn more than their counterparts in every other country (adjusted for PPP)[1]. There are a couple solutions that the market can bring about. One of them is to get rid of the employer mandate. The fact that I have to worry about losing my insurance if I get fired or leave my job is totally bonkers. I don’t have to worry about that at all with my car insurance, it’s a cheap monthly premium that adds on to my cost of living, just like my monthly food expenses or my shelter expenses (read: rent). The reason why non-employer provided healthcare is more expensive is that the pool of people buying that type of insurance is much smaller than the pool of people that are happily receiving their employer-provided health insurance. If every single one of these employees participated in the same insurance market as those that are either unemployed or self-employed, premiums can come down. The other solution is cut out insurance for most healthcare. We don’t use car insurance to pay for oil changes and servicing, we only use it to pay for catastrophic accidents. Absent the regulations we have today, the market might look the same for healthcare: you pay out of pocket for basic healthcare like going to the doctor when you’re sick or other preventative care (sort of like an oil change for your body). Insurance might kick in when you get cancer or heart disease. I come from India, where it costs about Rs. 500 out of pocket to see a good doctor that has an MBBS. This is the price of a movie ticket, in India. The concept of using insurance to pay for such care is unheard of. In America, paying for a general checkup, without insurance, can cost $300 out of pocket - absolutely absurd. Singapore is a great example of a country that has a largely market driven healthcare system. Unless you’re poor, you pay out of pocket for all healthcare, in a private market. The government steps in and pays for healthcare for poor people, and for catastrophic care (think: universal high deductible healthcare plans). [1] https://economix.blogs.nytimes.com/2009/07/15/how-much-do-doctors-in-other-countries-make/ https://economix.blogs.nytimes.com/2009/07/15/how-much-do-do...
- noetic_techy 8y ago
  Except for Singapore: https://www.nytimes.com/2017/10/02/upshot/what-makes-singapores-health-care-so-cheap.html https://www.nytimes.com/2017/10/02/upshot/what-makes-singapo...
  - fzeroracer 8y ago
    If you read the article, Singapore is far from a 'free market' and easily has more government oversight than here in America. They actually have public and private options competing for benefits, regulating salaries and hospitals and more. If you were to argue for a public option to health insurance or more regulations against hospitals, you'd be called a crazy socialist here.
  - denzil_correa 8y ago
    Doesn't seem like it. > Initially, Singapore let hospitals compete more, believing that the free market would bring down costs. But when hospitals competed, they did so by buying new technology, offering expensive services, paying more for doctors, decreasing services to lower-class wards, and focusing more on A-class wards. This led to increased spending.
    - sct202 8y ago
      Sounds just like the US healthcare and education systems.
    - tathougies 8y ago
      hmm... increased spending does not mean higher costs. It could mean higher costs, or it could mean flat or declining costs and a lower profit margin, which is a good thing.
- leekyle333 8y ago
  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.
- kansface 8y ago
  > The free market does not work in all situations. Sure, but you did not enumerate a single free market. I'd wager the US healthcare industry is far and away the most regulated market in the entire world. We know that regulation protects the big players at the expense of their would be competition and drives up profits. Colleges are hardly any better, and ISPs are nearly all monopolies granted by municipalities in exchange for kick backs of various sorts. The government has interfered with every industry in this list via direct/indirect regulation, grants, guaranteed loans, or tax incentives. Lets go ahead and throw in housing in our list, too.
  - fzeroracer 8y ago
    Can you prove that the US healthcare industry is more regulated than countries like say, Germany or Canada? Because it would be incredibly hard to believe that somehow America is more regulated than countries that have more direct control over their healthcare.
    - kryogen1c 8y ago
      I think that's exactly the point: direct control and heavy regulation are two different things. This in-between fairyland with artificial barriers to entry on the frontend but no control on the back end is what's creating these captive markets where old companies to do almost anything because new companies can't join the market.
      - chillacy 8y ago
        To add to that point, because the government guarantees things that it has no control over, it means the businesses in these industries have the best risk/reward ratio possible: no risk for unlimited upside, because the risk is taken care of by taxpayers.
  - mcguire 8y ago
    An unregulated healthcare market, complete with all the benefits of the free market, was the rule in the US until the Pure Good and Drug Act of 1906. It's history is... entertaining.
- exabrial 8y ago
  Our healthcare system is not a free market. Insurance companies are forbidden to discriminate premiums on the #1 killer in America: obesity.
- Spooky23 8y ago
  Healthcare is not a free market. It’s a collection of cartels with price controls. Things like healthcare networks were illegal before the Supreme Court redefined monopoly, and are now swallowing up healthcare delivery. CVS essentially controls drug distribution. The AMA is a trade guild that restricts the supply of doctors. A radiologist makes $1M a year because there are only a limited number of new ones minted each year. ISPs are dangerous but nothing close to as awful as healthcare.
  - brownbat 8y ago
    > The AMA is a trade guild that restricts the supply of doctors. Technically the supply of doctors is throttled by residency programs, the numbers of which are determined by an incredibly weird dance between Congress and hospitals. Your point stands, but just noting that simple monopolistic graft would be far more rational than how this actually works.
    - rayiner 8y ago
      It’s not that “incredibly weird.” Medicare doesn’t reimburse for residents unless a teaching physician is also present. Because that dramatically limits hospitals’ incentives to train physicians, Medicare pays hospitals a certain amount to support training residents. To limit how much is paid under that program, the number of residents Medicare will pay for is capped. It’s not irrational, but an example of how a series of government interventions, each seemingly rational on its own and aimed at reducing costs, can end up creating a systematic problem.
      - brownbat 8y ago
        You're skipping past the congressional funding negotiations that set up those rules, and the motivations of hospitals to create the conditions supporting either funded or unfunded slots. Sure, we can slice off portions of this process and explain the decisions of individuals, but there are so many players with motivations independent of the outcome it's not a clean line.
- tathougies 8y ago
  I can understand the argument you're trying to make, but it's incredibly sloppy to call the healthcare system we have in America 'the free market'.
throwawayjava 8y ago
> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). The USA has 4,000+ colleges, most of which do compete aggressively for students. Huge marketing departments with regional and national reach. Radio ads. Television ads. Print ads. Marketing networks with college counselors. Salespeople who spend many months attending college fairs. Fancy dorms and other amenities. Carefully crafted discount rates applied in a way that tickles the applicant's ego in just the right way. Beautifully crafted websites. Massive landscaping budgets, the bulk of which is spent during recruiting season. Expensive logos and mottos crafted by marketing firms that spend a lot of time with study groups. And so on. Higher ed marketing is a big industry in the USA. Competition alone does not drive prices down. > What happens when the government tries to provide for us... they gaurantee your student loan: Skyrocketing cost of school Well, maybe the government should actually provide education instead of providing financial products... On that note, both European higher ed and US K12 would like to have a word... IMO the problem in health and education is that we can't stomach the massive inequalities that show up in free markets (healthcare: let people die; education: only the rich and a few lower-risk borrowers get higher ed), but also can't commit to just socializing the whole damned enterprise. We need to abandon our morality or abandon our aversion to socialism; until we choose one, we'll be stuck with these extremely suboptimal public/private "solutions".
- frebord 8y ago
  Competition ALONE is exactly what drives prices down. The endless supply of students with a government guaranteed loan is why they are not going down, why would they? It completely violates the most basic element of our economy. Fully socializing those things is a solution better than what we have now, but that is the point where those things stagnate (US K12) which is why I prefer the free market solution and still think it is perfectly capable of producing exponentially more opportunity than the car without an engine (socialism).
  - mrep 8y ago
    You do realize students have to pay back those loans right? I know many people including my girlfriend that only considered state schools or ones that offered significant scholarships because they didn't want to be 100s of thousands of dollars in debt.
rossjudson 8y ago
Sure you can. Limit the federal education loan guarantee to 15k per year. Presto. Watch education prices drop like a rock, when lenders raise rates to accommodate future earnings potential, instead of counting on federal guarantees.
- dragonwriter 8y ago
  > Limit the federal education loan guarantee to 15k per year. > Presto. Watch education prices drop like a rock Why would raising the limit have that effect? The limit for federally guaranteed loans (which are also, for nearly a decade, exclusively federal direct loans) is already $57,500 total for undergraduate education, and the maximim per year limit (it is lower for dependent students) is $9,500 for first-year students, $10,500 for second-year students, and $12,500 per year thereafter. https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized#how-much https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsid...
  - rustybelt 8y ago
    I'm guessing the poster is actually proposing changes that would allow the portion of student loan debt above 15k per year to be dischargeable in bankruptcy.
    - rossjudson 8y ago
      More or less. I actually think that the debt above 15k (or whatever) should be shifted back to the school, should the graduate be (provably) unable to pay it back in 10 years. ;)
      - dragonwriter 8y ago
        > I actually think that the debt above 15k (or whatever) should be shifted back to the school Shifted back to the school, not the lender? Or are you assuming that the school is the lender?
        8y ago
wonnage 8y ago
They guarantee free public education -> libertarian hacker news poster cannot spell guarantee Cost disease seems to be a particularly American phenomenon.
jazzyjackson 8y ago
In my view, the government wasn't trying to provide for students by guaranteeing their loans, they were providing for the banks by making those debts unforgivable. The outcome is the desired one: banks own hundreds of billions of dollars more debt than they used to.
deleted 8y ago
[deleted]
Gustomaximus 8y ago
> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). Competition & free markets doesn't work in all markets. Medicine is a prime example of an inelastic product that allows companies to abuse the consumer. There's endless examples and research on this if you feel skeptical. Education less so but it seems to still be there. And I think it needs to be recognised because central control in education of USA working, doesnt mean central control doesn't work. In Australia we have good systems for universal heath and an excellent system to control the price of medicine (called PBS if you want to read more). Our university system while not perfect seems much better run than USA - its called 'HELP' if you want to read more. Or Germany & finland seems to have gold star education systems. These days people seem to increasingly worship 'free market' or 'socialised markets' wholistically. The reality to me seems each suits different market categories and many markets need a hybrid approach. If we stop preaching political preference and look around the world for the many examples of where markets are set up well I suspect we'd improve things greatly. And stop aligning one market category with the if it works well here it must in every category. PBS: https://en.wikipedia.org/wiki/Pharmaceutical_Benefits_Scheme https://en.wikipedia.org/wiki/Pharmaceutical_Benefits_Scheme HELP: https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Aus...
droithomme 8y ago
> the same reason MRIs are expensive MRIs in the US are very cheap. However people are dumb and freely choose to pay much more than they should. This company cheapimaging.com was founded by a teacher as a part time project. They have contracts for MRI imaging throughout the entire US, at fixed, reasonable, cash-only price. Some states you can get an MRI for $265. Or you can go to the exact same facility naively and pay $10,000 or more for the same scan.
- orangecat 8y ago
  Or you can go to the exact same facility naively and pay $10,000 or more for the same scan. Most likely you don't care, because your insurance is covering it. And your insurance company doesn't care because they'll just raise their rates. And other customers won't care because most they don't actually choose their health insurance; they just get whatever their employer offers. A free market depends on competition and consumer awareness to keep prices under control. Central planning depends on the government allocating resources efficiently. The US health care system has neither, and the results are exactly what you'd expect.
justicezyx 8y ago
> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). Because it will be plausibly working.
Spooky23 8y ago
The worst part is nobody knows the real price. The posted prices are ceilings. So the government pays, but each student pays a different rate.
zaptheimpaler 8y ago
The truly free market is great for many things, but demand for college is very inelastic, and a truly free market requires no barriers to entry - this is not the case at all in either education (certification/regulation) or healthcare (regulation/approval/patents). If nothing but the free market can work, how do tax-funded government services for healthcare and education work just fine across much of the world? There are 10+ other countries with socialized healthcare and free or subsidized education. The "free market" argument is equivalent to closing your eyes and pretending these counterexamples don't exist at all.
diogenescynic 8y ago
Then why is college/healthcare/RXs cheaper in Europe where there is more government involvement? Seems like we’ve tried the free market approach and it’s failed us miserably—healthcare costs us 2-3x as much for worse results compared to other developed countries. Why can’t we just do what’s working for every other developed country?
RandomInteger4 8y ago
Actually we definitely need to go there, but cost regulations doesn't requires micromanagement of price controls. We already have a decent working example of some form of central control in the form of the fed bond rates; this is no different. Considering the fact that these are mostly public institutions, there should be a touch more public control in terms of the costs, because the end result of not controlling the costs centrally is a type of competition that we see now, which is to say universities taking on more and more debt for new buildings and other bullshit, knowing that they can account for the burden of that debt on tuition increases and unnecessary. This is not a hard problem and it's vastly different than central planning with respect to prices of toilet paper or other stuff that shouldn't be centrally planned. Don't conflate these contexts and assume that they're all the same with respect to price regulations, because they're not. It's either lazy or intentionally disingenuous on your part to do so. Fostering competition while ensuring that students are not taken advantage of is equally as complex if not more so than centralized cost regulation in the form of restrictions for institutions that accept federal loan monies. That's something I often see unaddressed with comments like yours. Unregulated competition is not a magic wand that solves all problems. Treating it as such is ignorant.
dpc59 8y ago
>You either have to take full central control (lets not go there) In Montreal we have heavily government funded universities, tuition is less than 4k a year. It works great, we're building leadership in AI right now.
iei02ndjd 8y ago
You got that right. Look at all these corps taking advantage of government socialism. Why do we need institutional competition over facts of STEM? Universities have become corporate job training centers, not places of higher learning. They teach what industry seeks, and thus industry is subsidized through government expenditure and private debt. This forum is remarkably ignorant of practical reality. Instead leaning into what are at this point banal and debunked myths Anyone wants a shot at an economically comfortable life it comes with serious strings. And no guarantee the education or 401k will be worth squat in a decade
snowwrestler 8y ago
Home loan guarantees had nothing to do with the financial crisis. The loans that failed were overwhelmingly issued by private institutions backed by capital from private institutions, and carried no government guarantees at all. Drug costs also have little to with government subsidies since they are set by negotiation between private drug companies and private insurers. Medicare and Medicaid must pay those (privately set) prices.
sjg007 8y ago
The Fed guarantee is basically an enforced tax on the student’s earnings until the debt is repayed. Dischargeable only if dead or disabled. This is to make up for states cutting educational budgets for colleges and universities. It’s a progressive tax too where students at higher cost schools (that typically lead to higher incomes) pay more. It sucks for drop outs who can’t make enough to pay the bill but in those cases income dependent payment plans are supposed to help alleviate the pain. The Feds could regulate this by taking back money from schools whose graduates underperform or are whose programs are outright scams etc.. so the government subsidizing the loans is not the problem. The feds could even regulate tuition increases retroactively. It also exempts scholarships and the rich who are otherwise funded. So instead of a state or fed tax on the 1% to fund higher ed, you just guarantee payments from the students.
ionised 8y ago
> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). Because not everyone thinks the free market is a solution to all our problems.
lucideer 8y ago
> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). Because competition and central control optimise for different "ideal" outcomes: we often reach for central control when the market fails to optimise for the desired "ideal". This ideal is different in each case, but is usually largely differentiated on the basis of income inequality. Even a perfect market can't bring about perfect wealth distribution, and central control of education aims for universal access. Market-based price control will produce lower education costs, but only to include an income bracket that provides optimum profits, rather than universal accessibility. > By it's nature, anything the government subsidizes is going to be taken advantage of. This isn't entirely true: only unregulated subsidy has this flaw. The problem with many purported small-government advocates is they lobby for removal of regulation without removal of subsidy. One requires the other. > Schleicher at the OECD. “It’s the inevitable outcome of an unregulated fee structure.” In this particular quote, Schleicher seems to advocate for central control via regulation, rather than removal of subsidy.

fzeroracer 8y ago

The free market does not work in all situations. There's a reason why our healthcare is an absolute disaster compared to any other first world country, why our college is far more expensive, why our drugs cost more etc And it ain't because of cost control. Every time we loosen the reins a bit and let the 'free market' take the wheels, we see things get a lot worse for Americans as a whole. Especially when you have giant companies controlling the market entirely, like with ISPs.

bhupy 8y ago
Healthcare in America is one of the least free markets in the country. https://www.vox.com/policy-and-politics/2018/7/31/17629526/mri-cost-certificate-of-need-north-carolina-lawsuit https://www.vox.com/policy-and-politics/2018/7/31/17629526/m...
- fzeroracer 8y ago
  I don't see a statistic or actual citation there other than an issue with potentially out of date laws. How are you quantifying American Healthcare as being one of the least free markets? And how does it compare to other countries? I don't see anyone ever actually quantify how 'free' a market is; people only ever argue that if a market is not working therefore it's not free enough, which means we must make it free. At what point are we going to stop and realize sometimes it just doesn't work? Especially for issues that result in the death of Americans?
  - bhupy 8y ago
    Sure - in America, healthcare is far from a free market because: 1) We don’t pay our own healthcare bills, we pay for our healthcare through insurance. As a result, there isn’t a pricing system in place, much like there is for other critical goods and services with price-inelastic demand like food and housing. This is caused by regulations that require employers to provide health insurance for their employees, and most recently the mandate that requires individuals to purchase insurance. We’ve essentially forced a world in which insurance is the only way one can pay for healthcare. 2) Our healthcare supply is artificially limited, which forces higher up prices. The MRI “certificate of need” is one such example, there are countless others. Medical licensure, in general, drives up the price to see just a primary care physician. In the US, just becoming a basic physician that prescribes antibiotics takes at least 8 years of expensive schooling. As a result, doctors in America earn more than their counterparts in every other country (adjusted for PPP)[1]. There are a couple solutions that the market can bring about. One of them is to get rid of the employer mandate. The fact that I have to worry about losing my insurance if I get fired or leave my job is totally bonkers. I don’t have to worry about that at all with my car insurance, it’s a cheap monthly premium that adds on to my cost of living, just like my monthly food expenses or my shelter expenses (read: rent). The reason why non-employer provided healthcare is more expensive is that the pool of people buying that type of insurance is much smaller than the pool of people that are happily receiving their employer-provided health insurance. If every single one of these employees participated in the same insurance market as those that are either unemployed or self-employed, premiums can come down. The other solution is cut out insurance for most healthcare. We don’t use car insurance to pay for oil changes and servicing, we only use it to pay for catastrophic accidents. Absent the regulations we have today, the market might look the same for healthcare: you pay out of pocket for basic healthcare like going to the doctor when you’re sick or other preventative care (sort of like an oil change for your body). Insurance might kick in when you get cancer or heart disease. I come from India, where it costs about Rs. 500 out of pocket to see a good doctor that has an MBBS. This is the price of a movie ticket, in India. The concept of using insurance to pay for such care is unheard of. In America, paying for a general checkup, without insurance, can cost $300 out of pocket - absolutely absurd. Singapore is a great example of a country that has a largely market driven healthcare system. Unless you’re poor, you pay out of pocket for all healthcare, in a private market. The government steps in and pays for healthcare for poor people, and for catastrophic care (think: universal high deductible healthcare plans). [1] https://economix.blogs.nytimes.com/2009/07/15/how-much-do-doctors-in-other-countries-make/ https://economix.blogs.nytimes.com/2009/07/15/how-much-do-do...
noetic_techy 8y ago
Except for Singapore: https://www.nytimes.com/2017/10/02/upshot/what-makes-singapores-health-care-so-cheap.html https://www.nytimes.com/2017/10/02/upshot/what-makes-singapo...
- fzeroracer 8y ago
  If you read the article, Singapore is far from a 'free market' and easily has more government oversight than here in America. They actually have public and private options competing for benefits, regulating salaries and hospitals and more. If you were to argue for a public option to health insurance or more regulations against hospitals, you'd be called a crazy socialist here.
- denzil_correa 8y ago
  Doesn't seem like it. > Initially, Singapore let hospitals compete more, believing that the free market would bring down costs. But when hospitals competed, they did so by buying new technology, offering expensive services, paying more for doctors, decreasing services to lower-class wards, and focusing more on A-class wards. This led to increased spending.
  - sct202 8y ago
    Sounds just like the US healthcare and education systems.
  - tathougies 8y ago
    hmm... increased spending does not mean higher costs. It could mean higher costs, or it could mean flat or declining costs and a lower profit margin, which is a good thing.
leekyle333 8y ago
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.
kansface 8y ago
> The free market does not work in all situations. Sure, but you did not enumerate a single free market. I'd wager the US healthcare industry is far and away the most regulated market in the entire world. We know that regulation protects the big players at the expense of their would be competition and drives up profits. Colleges are hardly any better, and ISPs are nearly all monopolies granted by municipalities in exchange for kick backs of various sorts. The government has interfered with every industry in this list via direct/indirect regulation, grants, guaranteed loans, or tax incentives. Lets go ahead and throw in housing in our list, too.
- fzeroracer 8y ago
  Can you prove that the US healthcare industry is more regulated than countries like say, Germany or Canada? Because it would be incredibly hard to believe that somehow America is more regulated than countries that have more direct control over their healthcare.
  - kryogen1c 8y ago
    I think that's exactly the point: direct control and heavy regulation are two different things. This in-between fairyland with artificial barriers to entry on the frontend but no control on the back end is what's creating these captive markets where old companies to do almost anything because new companies can't join the market.
    - chillacy 8y ago
      To add to that point, because the government guarantees things that it has no control over, it means the businesses in these industries have the best risk/reward ratio possible: no risk for unlimited upside, because the risk is taken care of by taxpayers.
- mcguire 8y ago
  An unregulated healthcare market, complete with all the benefits of the free market, was the rule in the US until the Pure Good and Drug Act of 1906. It's history is... entertaining.
exabrial 8y ago
Our healthcare system is not a free market. Insurance companies are forbidden to discriminate premiums on the #1 killer in America: obesity.
Spooky23 8y ago
Healthcare is not a free market. It’s a collection of cartels with price controls. Things like healthcare networks were illegal before the Supreme Court redefined monopoly, and are now swallowing up healthcare delivery. CVS essentially controls drug distribution. The AMA is a trade guild that restricts the supply of doctors. A radiologist makes $1M a year because there are only a limited number of new ones minted each year. ISPs are dangerous but nothing close to as awful as healthcare.
- brownbat 8y ago
  > The AMA is a trade guild that restricts the supply of doctors. Technically the supply of doctors is throttled by residency programs, the numbers of which are determined by an incredibly weird dance between Congress and hospitals. Your point stands, but just noting that simple monopolistic graft would be far more rational than how this actually works.
  - rayiner 8y ago
    It’s not that “incredibly weird.” Medicare doesn’t reimburse for residents unless a teaching physician is also present. Because that dramatically limits hospitals’ incentives to train physicians, Medicare pays hospitals a certain amount to support training residents. To limit how much is paid under that program, the number of residents Medicare will pay for is capped. It’s not irrational, but an example of how a series of government interventions, each seemingly rational on its own and aimed at reducing costs, can end up creating a systematic problem.
    - brownbat 8y ago
      You're skipping past the congressional funding negotiations that set up those rules, and the motivations of hospitals to create the conditions supporting either funded or unfunded slots. Sure, we can slice off portions of this process and explain the decisions of individuals, but there are so many players with motivations independent of the outcome it's not a clean line.
tathougies 8y ago
I can understand the argument you're trying to make, but it's incredibly sloppy to call the healthcare system we have in America 'the free market'.

throwawayjava 8y ago

> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). The USA has 4,000+ colleges, most of which do compete aggressively for students. Huge marketing departments with regional and national reach. Radio ads. Television ads. Print ads. Marketing networks with college counselors. Salespeople who spend many months attending college fairs. Fancy dorms and other amenities. Carefully crafted discount rates applied in a way that tickles the applicant's ego in just the right way. Beautifully crafted websites. Massive landscaping budgets, the bulk of which is spent during recruiting season. Expensive logos and mottos crafted by marketing firms that spend a lot of time with study groups. And so on. Higher ed marketing is a big industry in the USA. Competition alone does not drive prices down. > What happens when the government tries to provide for us... they gaurantee your student loan: Skyrocketing cost of school Well, maybe the government should actually provide education instead of providing financial products... On that note, both European higher ed and US K12 would like to have a word... IMO the problem in health and education is that we can't stomach the massive inequalities that show up in free markets (healthcare: let people die; education: only the rich and a few lower-risk borrowers get higher ed), but also can't commit to just socializing the whole damned enterprise. We need to abandon our morality or abandon our aversion to socialism; until we choose one, we'll be stuck with these extremely suboptimal public/private "solutions".

frebord 8y ago
Competition ALONE is exactly what drives prices down. The endless supply of students with a government guaranteed loan is why they are not going down, why would they? It completely violates the most basic element of our economy. Fully socializing those things is a solution better than what we have now, but that is the point where those things stagnate (US K12) which is why I prefer the free market solution and still think it is perfectly capable of producing exponentially more opportunity than the car without an engine (socialism).
- mrep 8y ago
  You do realize students have to pay back those loans right? I know many people including my girlfriend that only considered state schools or ones that offered significant scholarships because they didn't want to be 100s of thousands of dollars in debt.

rossjudson 8y ago

Sure you can. Limit the federal education loan guarantee to 15k per year. Presto. Watch education prices drop like a rock, when lenders raise rates to accommodate future earnings potential, instead of counting on federal guarantees.

dragonwriter 8y ago
> Limit the federal education loan guarantee to 15k per year. > Presto. Watch education prices drop like a rock Why would raising the limit have that effect? The limit for federally guaranteed loans (which are also, for nearly a decade, exclusively federal direct loans) is already $57,500 total for undergraduate education, and the maximim per year limit (it is lower for dependent students) is $9,500 for first-year students, $10,500 for second-year students, and $12,500 per year thereafter. https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized#how-much https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsid...
- rustybelt 8y ago
  I'm guessing the poster is actually proposing changes that would allow the portion of student loan debt above 15k per year to be dischargeable in bankruptcy.
  - rossjudson 8y ago
    More or less. I actually think that the debt above 15k (or whatever) should be shifted back to the school, should the graduate be (provably) unable to pay it back in 10 years. ;)
    - dragonwriter 8y ago
      > I actually think that the debt above 15k (or whatever) should be shifted back to the school Shifted back to the school, not the lender? Or are you assuming that the school is the lender?
      - 8y ago

wonnage 8y ago

They guarantee free public education -> libertarian hacker news poster cannot spell guarantee Cost disease seems to be a particularly American phenomenon.

jazzyjackson 8y ago

In my view, the government wasn't trying to provide for students by guaranteeing their loans, they were providing for the banks by making those debts unforgivable. The outcome is the desired one: banks own hundreds of billions of dollars more debt than they used to.

deleted 8y ago

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Gustomaximus 8y ago

> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). Competition & free markets doesn't work in all markets. Medicine is a prime example of an inelastic product that allows companies to abuse the consumer. There's endless examples and research on this if you feel skeptical. Education less so but it seems to still be there. And I think it needs to be recognised because central control in education of USA working, doesnt mean central control doesn't work. In Australia we have good systems for universal heath and an excellent system to control the price of medicine (called PBS if you want to read more). Our university system while not perfect seems much better run than USA - its called 'HELP' if you want to read more. Or Germany & finland seems to have gold star education systems. These days people seem to increasingly worship 'free market' or 'socialised markets' wholistically. The reality to me seems each suits different market categories and many markets need a hybrid approach. If we stop preaching political preference and look around the world for the many examples of where markets are set up well I suspect we'd improve things greatly. And stop aligning one market category with the if it works well here it must in every category. PBS: https://en.wikipedia.org/wiki/Pharmaceutical_Benefits_Scheme https://en.wikipedia.org/wiki/Pharmaceutical_Benefits_Scheme HELP: https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Aus...

droithomme 8y ago

> the same reason MRIs are expensive MRIs in the US are very cheap. However people are dumb and freely choose to pay much more than they should. This company cheapimaging.com was founded by a teacher as a part time project. They have contracts for MRI imaging throughout the entire US, at fixed, reasonable, cash-only price. Some states you can get an MRI for $265. Or you can go to the exact same facility naively and pay $10,000 or more for the same scan.

orangecat 8y ago
Or you can go to the exact same facility naively and pay $10,000 or more for the same scan. Most likely you don't care, because your insurance is covering it. And your insurance company doesn't care because they'll just raise their rates. And other customers won't care because most they don't actually choose their health insurance; they just get whatever their employer offers. A free market depends on competition and consumer awareness to keep prices under control. Central planning depends on the government allocating resources efficiently. The US health care system has neither, and the results are exactly what you'd expect.

justicezyx 8y ago

> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). Because it will be plausibly working.

Spooky23 8y ago

The worst part is nobody knows the real price. The posted prices are ceilings. So the government pays, but each student pays a different rate.

zaptheimpaler 8y ago

The truly free market is great for many things, but demand for college is very inelastic, and a truly free market requires no barriers to entry - this is not the case at all in either education (certification/regulation) or healthcare (regulation/approval/patents). If nothing but the free market can work, how do tax-funded government services for healthcare and education work just fine across much of the world? There are 10+ other countries with socialized healthcare and free or subsidized education. The "free market" argument is equivalent to closing your eyes and pretending these counterexamples don't exist at all.

diogenescynic 8y ago

Then why is college/healthcare/RXs cheaper in Europe where there is more government involvement? Seems like we’ve tried the free market approach and it’s failed us miserably—healthcare costs us 2-3x as much for worse results compared to other developed countries. Why can’t we just do what’s working for every other developed country?

RandomInteger4 8y ago

Actually we definitely need to go there, but cost regulations doesn't requires micromanagement of price controls. We already have a decent working example of some form of central control in the form of the fed bond rates; this is no different. Considering the fact that these are mostly public institutions, there should be a touch more public control in terms of the costs, because the end result of not controlling the costs centrally is a type of competition that we see now, which is to say universities taking on more and more debt for new buildings and other bullshit, knowing that they can account for the burden of that debt on tuition increases and unnecessary. This is not a hard problem and it's vastly different than central planning with respect to prices of toilet paper or other stuff that shouldn't be centrally planned. Don't conflate these contexts and assume that they're all the same with respect to price regulations, because they're not. It's either lazy or intentionally disingenuous on your part to do so. Fostering competition while ensuring that students are not taken advantage of is equally as complex if not more so than centralized cost regulation in the form of restrictions for institutions that accept federal loan monies. That's something I often see unaddressed with comments like yours. Unregulated competition is not a magic wand that solves all problems. Treating it as such is ignorant.

dpc59 8y ago

>You either have to take full central control (lets not go there) In Montreal we have heavily government funded universities, tuition is less than 4k a year. It works great, we're building leadership in AI right now.

iei02ndjd 8y ago

You got that right. Look at all these corps taking advantage of government socialism. Why do we need institutional competition over facts of STEM? Universities have become corporate job training centers, not places of higher learning. They teach what industry seeks, and thus industry is subsidized through government expenditure and private debt. This forum is remarkably ignorant of practical reality. Instead leaning into what are at this point banal and debunked myths Anyone wants a shot at an economically comfortable life it comes with serious strings. And no guarantee the education or 401k will be worth squat in a decade

snowwrestler 8y ago

Home loan guarantees had nothing to do with the financial crisis. The loans that failed were overwhelmingly issued by private institutions backed by capital from private institutions, and carried no government guarantees at all. Drug costs also have little to with government subsidies since they are set by negotiation between private drug companies and private insurers. Medicare and Medicaid must pay those (privately set) prices.

sjg007 8y ago

The Fed guarantee is basically an enforced tax on the student’s earnings until the debt is repayed. Dischargeable only if dead or disabled. This is to make up for states cutting educational budgets for colleges and universities. It’s a progressive tax too where students at higher cost schools (that typically lead to higher incomes) pay more. It sucks for drop outs who can’t make enough to pay the bill but in those cases income dependent payment plans are supposed to help alleviate the pain. The Feds could regulate this by taking back money from schools whose graduates underperform or are whose programs are outright scams etc.. so the government subsidizing the loans is not the problem. The feds could even regulate tuition increases retroactively. It also exempts scholarships and the rich who are otherwise funded. So instead of a state or fed tax on the 1% to fund higher ed, you just guarantee payments from the students.

ionised 8y ago

> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). Because not everyone thinks the free market is a solution to all our problems.

lucideer 8y ago

> Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition). Because competition and central control optimise for different "ideal" outcomes: we often reach for central control when the market fails to optimise for the desired "ideal". This ideal is different in each case, but is usually largely differentiated on the basis of income inequality. Even a perfect market can't bring about perfect wealth distribution, and central control of education aims for universal access. Market-based price control will produce lower education costs, but only to include an income bracket that provides optimum profits, rather than universal accessibility. > By it's nature, anything the government subsidizes is going to be taken advantage of. This isn't entirely true: only unregulated subsidy has this flaw. The problem with many purported small-government advocates is they lobby for removal of regulation without removal of subsidy. One requires the other. > Schleicher at the OECD. “It’s the inevitable outcome of an unregulated fee structure.” In this particular quote, Schleicher seems to advocate for central control via regulation, rather than removal of subsidy.