5 ms·

"Why are certain things getting so much more expensive?" Because we are lying about inflation. It's not a conspiracy, just a mutually agreed-to delusion. By

by sakoht 8y ago

"Why are certain things getting so much more expensive?" Because we are lying about inflation. It's not a conspiracy, just a mutually agreed-to delusion. By pretending inflation is lower than it is, the poor feel like they are standing still instead of sinking ...though instinctively they know. And the people just keeping up get to feel richer. Since technology and efficiency improve, the people staying in the same place have cooler things. If inflation were reported correctly, average would see their paychecks dropping as wealth and power consolidate elsewhere. There is no interest in creating alarm around this fact. Instead the public is distracted by social drama, and political discourse consumed by things that do not affect the real shift in power.

andrewmutz 8y ago
Do you have any evidence that “we are lying about inflation”? Unless you do, I think it those industries are getting more expensive due to Baumol’s Cost Disease: https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease
- 0x445442 8y ago
  http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
  - VHRanger 8y ago
    ShadowStats inflation is literally the CPI minus a constant. The guy making is completely laughing at you -- he doesn't have a methodology to calculate the inflation, he's just publishing numbers people want to hear.
loxs 8y ago
There is a a better and a lot more consistent explanation. Government involvement. Wherever government puts its dirty fingers, efficiency sinks and prices skyrocket.
ttul 8y ago
I have read that the cost of education is going up because unlike other parts of the economy, which benefit greatly from automation, with education you still have to hire these costly human teachers. So as the efficiency of everything else goes up, the cost of those things is depressed. But teachers cost the same. So relatively under an inflated environment, they become more expensive.
Digory 8y ago
Inflation/devaluation has always been that game. The question is why it’s been so uneven. I think all of the areas Patrick mentions are places the government has decided are “multipliers,” and has directed spending or subsidy. I vaguely recall a discussion in undergrad macro that it was always an advantage to be at the place inflation is injected into the system. We’ve had these input points for 60+ years. Tech is a mixed bag, but housing, construction, medicine, and education are all prime places for social “investment.”
philwelch 8y ago
So why are other things not getting much more expensive? Why are things not getting more expensive at the same rate? Monetary inflation affects all goods more or less uniformly, but the price of milk hasn't skyrocketed as much as the cost of education or housing or healthcare.
- StanislavPetrov 8y ago
  Because monetary policy is only one of a multitude of factors that influence inflation. Regulations, subsidies, tax laws, trade agreements, labor laws, immigration policy are just some of the other things that have wildly disjointed effects on industries, markets and prices.
  - TheTrotters 8y ago
    You're confusing inflation with rising real prices. Inflation doesn't discriminate -- the price of everything rises by the same proportion.
    - jack9 8y ago
      He's not confusing it. > the price of everything rises by the same proportion Due to regulation, that's simply not the universal case - e.g. rent control. The economy is conceptual, but prices are concrete leading to some ironic situations.
      - philwelch 8y ago
        Inflation is when the currency itself loses market value. There's no such thing as inflation that only affects some goods and not others. The prices of some goods do fluctuate relative to each other, but that's not inflation!
- repolfx 8y ago
  Monetary inflation affects all goods more or less uniformly Money being created is like pouring water into a pool - it creates ripples outwards. Eventually, if you stop, yes the surface of the pool will become calm and the pool will be higher. But whilst you're pouring, the volumes are not even. These days, when the government creates money it doesn't put that money into everyone's bank account overnight. When was the last time you got a cheque from the government labelled "new money"? Instead the central bank engages in various forms of manipulation, like via the "QE" programmes that involved asset purchases. So, the prices of certain financial assets go up. They also purchase a lot of government bonds, or that money eventually makes its way into corporate debt. And what do governments do with this money, well, they often spend it on things like subsidising mortgages, or subsidising private banks (via bailouts), or healthcare, or education, or paying a large staff of government workers, or buying military hardware, etc. So you go look at what's gone up in price very fast over the years and hey, look at that, it's the stuff near the centre of the pool. Things that governments tend to subsidise a lot or things that people feel they have to buy regardless of cost, like education, healthcare, homes, etc. The money pouring into the system ends up stacking up in a few places, it's not evenly distributed.
briandear 8y ago
Do taxes matter? Indentical products in the US and France feature French prices that are far more expensive, even when adjusting for currency. Milk, for example. iPhones. Clothing especially. Washing machines, furniture. Disposable income in France is vastly lower than that of the US. Is that inflation? Or tax policy?
mariushn 8y ago
I have a different take. Healthcare, education, construction costs are all regulated by governments. Unlike companies, governments are systems of people who thrive from complexity. More complexity = more work, more power, more benefits (direct on indirect). To give you an example from construction, a company producing a complex part is "giving away" 3 day training in fancy locations, with all hotel & meals paid by the company. As a government employee who gets a fixed salary no matter the results, would you prefer using a product which gives you to these free trainings (free mini-holiday), or using a cheap part which does the same thing, minus the fancy training sessions? I think the root cause is having some people in charge of other's people money, without clear responsibilities (vs. evaluations which happen in private companies, with the possibility to getting fired anytime if you have a poor performance on result-oriented KPIs), AND having a monopoly. You can't simply start another healthcare or education system, without complying to all existing complex regulations & processes.
- deleted 8y ago
  [deleted]
- gahikr 8y ago
  From a US perspective, these are all markets that depend on expensive skilled US labor. Many things like manufacturing have shifted to labor markets that are cheaper. How much is due to currency differences, cost of living differences, etc. vs. employee safety or anti-pollution regulations ... I don’t know.
ellyagg 8y ago
My dad was a programmer and I'm a programmer. I don't think I'll ever make a salary as high as he did[1], and that's in absolute dollars. Yet, my quality of life is definitely better. I take vacations all over the world. I can look up any fact I want instantly on the internet. I work from home 3 days a week. I've easily cured maladies that were huge nuisances when he was my age. You're right that macroeconomic indicators don't seem to tell the story, but I can't square my experience with your claim. 1. He has a Master of Physics, I don't have a degree.
- softawre 8y ago
  How much was his salary? I would think a lot of programmers these days make more in absolute dollars than their parents would have.
  - dennisgorelik 8y ago
    Not all children are as smart or productive as their parents.

by sakoht 8y ago

andrewmutz 8y ago

Do you have any evidence that “we are lying about inflation”? Unless you do, I think it those industries are getting more expensive due to Baumol’s Cost Disease: https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease

0x445442 8y ago
http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
- VHRanger 8y ago
  ShadowStats inflation is literally the CPI minus a constant. The guy making is completely laughing at you -- he doesn't have a methodology to calculate the inflation, he's just publishing numbers people want to hear.

loxs 8y ago

There is a a better and a lot more consistent explanation. Government involvement. Wherever government puts its dirty fingers, efficiency sinks and prices skyrocket.

ttul 8y ago

I have read that the cost of education is going up because unlike other parts of the economy, which benefit greatly from automation, with education you still have to hire these costly human teachers. So as the efficiency of everything else goes up, the cost of those things is depressed. But teachers cost the same. So relatively under an inflated environment, they become more expensive.

Digory 8y ago

Inflation/devaluation has always been that game. The question is why it’s been so uneven. I think all of the areas Patrick mentions are places the government has decided are “multipliers,” and has directed spending or subsidy. I vaguely recall a discussion in undergrad macro that it was always an advantage to be at the place inflation is injected into the system. We’ve had these input points for 60+ years. Tech is a mixed bag, but housing, construction, medicine, and education are all prime places for social “investment.”

philwelch 8y ago

So why are other things not getting much more expensive? Why are things not getting more expensive at the same rate? Monetary inflation affects all goods more or less uniformly, but the price of milk hasn't skyrocketed as much as the cost of education or housing or healthcare.

StanislavPetrov 8y ago
Because monetary policy is only one of a multitude of factors that influence inflation. Regulations, subsidies, tax laws, trade agreements, labor laws, immigration policy are just some of the other things that have wildly disjointed effects on industries, markets and prices.
- TheTrotters 8y ago
  You're confusing inflation with rising real prices. Inflation doesn't discriminate -- the price of everything rises by the same proportion.
  - jack9 8y ago
    He's not confusing it. > the price of everything rises by the same proportion Due to regulation, that's simply not the universal case - e.g. rent control. The economy is conceptual, but prices are concrete leading to some ironic situations.
    - philwelch 8y ago
      Inflation is when the currency itself loses market value. There's no such thing as inflation that only affects some goods and not others. The prices of some goods do fluctuate relative to each other, but that's not inflation!
repolfx 8y ago
Monetary inflation affects all goods more or less uniformly Money being created is like pouring water into a pool - it creates ripples outwards. Eventually, if you stop, yes the surface of the pool will become calm and the pool will be higher. But whilst you're pouring, the volumes are not even. These days, when the government creates money it doesn't put that money into everyone's bank account overnight. When was the last time you got a cheque from the government labelled "new money"? Instead the central bank engages in various forms of manipulation, like via the "QE" programmes that involved asset purchases. So, the prices of certain financial assets go up. They also purchase a lot of government bonds, or that money eventually makes its way into corporate debt. And what do governments do with this money, well, they often spend it on things like subsidising mortgages, or subsidising private banks (via bailouts), or healthcare, or education, or paying a large staff of government workers, or buying military hardware, etc. So you go look at what's gone up in price very fast over the years and hey, look at that, it's the stuff near the centre of the pool. Things that governments tend to subsidise a lot or things that people feel they have to buy regardless of cost, like education, healthcare, homes, etc. The money pouring into the system ends up stacking up in a few places, it's not evenly distributed.

briandear 8y ago

Do taxes matter? Indentical products in the US and France feature French prices that are far more expensive, even when adjusting for currency. Milk, for example. iPhones. Clothing especially. Washing machines, furniture. Disposable income in France is vastly lower than that of the US. Is that inflation? Or tax policy?

mariushn 8y ago

I have a different take. Healthcare, education, construction costs are all regulated by governments. Unlike companies, governments are systems of people who thrive from complexity. More complexity = more work, more power, more benefits (direct on indirect). To give you an example from construction, a company producing a complex part is "giving away" 3 day training in fancy locations, with all hotel & meals paid by the company. As a government employee who gets a fixed salary no matter the results, would you prefer using a product which gives you to these free trainings (free mini-holiday), or using a cheap part which does the same thing, minus the fancy training sessions? I think the root cause is having some people in charge of other's people money, without clear responsibilities (vs. evaluations which happen in private companies, with the possibility to getting fired anytime if you have a poor performance on result-oriented KPIs), AND having a monopoly. You can't simply start another healthcare or education system, without complying to all existing complex regulations & processes.

deleted 8y ago
[deleted]
gahikr 8y ago
From a US perspective, these are all markets that depend on expensive skilled US labor. Many things like manufacturing have shifted to labor markets that are cheaper. How much is due to currency differences, cost of living differences, etc. vs. employee safety or anti-pollution regulations ... I don’t know.

ellyagg 8y ago

My dad was a programmer and I'm a programmer. I don't think I'll ever make a salary as high as he did[1], and that's in absolute dollars. Yet, my quality of life is definitely better. I take vacations all over the world. I can look up any fact I want instantly on the internet. I work from home 3 days a week. I've easily cured maladies that were huge nuisances when he was my age. You're right that macroeconomic indicators don't seem to tell the story, but I can't square my experience with your claim. 1. He has a Master of Physics, I don't have a degree.

softawre 8y ago
How much was his salary? I would think a lot of programmers these days make more in absolute dollars than their parents would have.
- dennisgorelik 8y ago
  Not all children are as smart or productive as their parents.