7 ms·

"Why are certain things getting so much more expensive?" That list is pretty much rank ordered by the amount of non-substitutable human labor involved per unit

"Why are certain things getting so much more expensive?" That list is pretty much rank ordered by the amount of non-substitutable human labor involved per unit. Everything in red is a pretty universal need (health, education, child care, housing, food), while the blues are mostly wants. So we want medical care, but that requires a lot of labor, and each of those workers requires housing, but that's supply constrained in much of the country, and they have be educated, but college cost is rising, and their employees need child care, and the child care workers need to go to the doctor ... If there was a way to reduce the cost of living (my hobby horse is dramatically increasing the amount of by-right housing permitted to be built in an area), then that would ripple through all of these industries. High and increasing costs and wages make labor-intensive industries much more expensive by comparison.

hn_throwaway_99 6y ago
The answer linked to in Collison's question, https://medium.com/@arnoldkling/what-gets-expensive-and-why-33bf4b891be2 https://medium.com/@arnoldkling/what-gets-expensive-and-why-... , is really insightful and interesting in my opinion and goes to a deep level of analysis.
- bohemian99 6y ago
  Exactly- people don't/can't really comparison shop when it comes to medical procedures. They don't know how good their doctors are at it, this is all unpublished information. Similarly college textbooks- if your professors assigns work from their book, then you need that book. You can't competitively shop on that. As the response points out, all of these groups and then backed by accreditation systems to limit new entrants.
  - dalbasal 6y ago
    Starting from Patrick's question, and working through the list... It suggests that some of our market-thinking has been off mark. Free-market economic policies have tended to define things in terms of market "freeness." How much intervention, etc. This is commonly how we think politically, because it relates directly to policies. The way these affect reality is through the market structures themselves. We can regulate or deregulate barber shops and restaurants... but within wide margins they are likely to remain pretty good market structure. Lots of choice, competition, churn, etc. Hospital services or college tuition are structurally different. If we are "laissez faire" with hospitals, and have heavy handed regulation for restaurants... Restaurants would still behave like a more free market, just because of innate structure. It would take a truly byzantine accreditation system to make restaurants look like textbooks or pharmaceutical drugs. Someone would literally have to assign you a dinner reservation.
    - aeternum 6y ago
      I think you're right that some industries are more conducive to competition in general. However shouldn't we be more careful then in terms of creating barriers to competition? If we treated restaurants like hospitals/healthcare we would give your employer a tax break in return for determining the set of restaurants you may dine at. Any new recipe or cooking method used by a restaurant would need to first be approved by the FDA. Restaurant chains would not be allowed to operate across state lines. Restaurant would have to accept below-market pricing for some proportion of customers (medicaid). Each restaurant would need to hire a law service to ensure they comply with HIPPA, and staff a department to allow import/export of your dining history.
      - dalbasal 6y ago
        Possibly. But, I think a lot of economics gets stuck in a sort of theoretical mud. In theory, barriers to competition, entry or always have negative effects. Those negative effects can be small, big, or irrelevant relative to other effects related to the same policy. What i am suggesting, is that industry structure determines these. So yes, there are theoretical policies that might make hairdressing worse or hospitals better in this regard. In reality though, policies are very often acting within margins where competitiveness doesn't move the needle much either way. Assuming a thriving restaurant market exists, it will probably remain pretty competitive under any "normal" policy regime. No one is really going to implement FDA approvals for recipes or tax related employer funding schemes. No one is going to implement a totally nonaccredited hospital system, where doctors & nurses don't have to be trained or licensed. At the very theoretical end, laissez faire dynamics might yield a market-based regulation system that accredits doctors and such without government intervention. But once again (a) that's very unlikely and (b) if it did happen that would still be regulation. For 99% of real life scenarios, restaurants lend to a free market dynamic while hospitals do not. Governments are involved, but they do not create this reality. It is innate. One policy regime or another (short of communism or such) is not going to change that.
        aeternum 6y ago
        Does licensing of doctors and nurses really add much? Don't hospitals have sufficient incentive even without licensing to ensure that their doctors and nurses have the necessary skills? Uber/Lyft have their problems, but one takeaway is that a simple rating system works better than complex licensing and medallions.
  - cryptonector 6y ago
    This is especially true in the U.S. There's no market as such because there's no pricing signals. The barriers to entry are super high: education and licensing of doctors is extremely restrictive, while construction of hospitals requires prior political approval ("certificate of need"!). All the HMO/PPO in-network thing also adds opaqueness, and discourages any negotiation by the consumer. This is madness.
raverbashing 6y ago
And to be fair that graph is weird -100%? If something lost 100% of its value it is now free? I don't think TVs are free now.
- D_Alex 6y ago
  It is 95%, not 100%... and amazingly that looks accurate. As an example, a 32" CRT with remote control (eg Sony Trinitron) cost about $1500-2000 back in 1997. Today, you can buy a 32" TV for $85, delivered. And even though this will be "Brand X" and not Sony, it will have better picture quality, more functionality, be more reliable and use less power to boot.
valuearb 6y ago
Medical care and education have seen a massive torrent of government funding and regulation over the last 60 years, while the things that get cheaper live mostly in free markets.
- dredmorbius 6y ago
  Housing, childcare, textbooks, and food and beverages seem strongly market based, and private college tuition has risen far more than public, challenging your characterisation. I note textbook prices took a dive about the time book-sharing services became prevalent.
  - bhupy 6y ago
    In the markets where housing prices have increased the most, housing is the least market based.
    - dredmorbius 6y ago
      How do you reach that concclusion/ How can a region be tested based on housing-market freeness? Who or what interests advance restrictions?
      - bhupy 6y ago
        It's fairly well established by now that the most significant drivers of housing unaffordability is the preponderance of zoning regulations that restrict the supply of new housing construction. https://www.nber.org/papers/w8835 https://www.nber.org/papers/w8835 https://research.upjohn.org/up_workingpapers/307/ https://research.upjohn.org/up_workingpapers/307/ https://marginalrevolution.com/marginalrevolution/2016/08/laissez-faire-in-tokyo.html https://marginalrevolution.com/marginalrevolution/2016/08/la... https://www.nber.org/papers/w20536 https://www.nber.org/papers/w20536 https://drive.google.com/file/d/1sHh6BJ8dPoN9VQj-PXTPK5ATa8mL8MP4/view https://drive.google.com/file/d/1sHh6BJ8dPoN9VQj-PXTPK5ATa8m...
        6y ago

hn_throwaway_99 6y ago

The answer linked to in Collison's question, https://medium.com/@arnoldkling/what-gets-expensive-and-why-33bf4b891be2 https://medium.com/@arnoldkling/what-gets-expensive-and-why-... , is really insightful and interesting in my opinion and goes to a deep level of analysis.

bohemian99 6y ago
Exactly- people don't/can't really comparison shop when it comes to medical procedures. They don't know how good their doctors are at it, this is all unpublished information. Similarly college textbooks- if your professors assigns work from their book, then you need that book. You can't competitively shop on that. As the response points out, all of these groups and then backed by accreditation systems to limit new entrants.
- dalbasal 6y ago
  Starting from Patrick's question, and working through the list... It suggests that some of our market-thinking has been off mark. Free-market economic policies have tended to define things in terms of market "freeness." How much intervention, etc. This is commonly how we think politically, because it relates directly to policies. The way these affect reality is through the market structures themselves. We can regulate or deregulate barber shops and restaurants... but within wide margins they are likely to remain pretty good market structure. Lots of choice, competition, churn, etc. Hospital services or college tuition are structurally different. If we are "laissez faire" with hospitals, and have heavy handed regulation for restaurants... Restaurants would still behave like a more free market, just because of innate structure. It would take a truly byzantine accreditation system to make restaurants look like textbooks or pharmaceutical drugs. Someone would literally have to assign you a dinner reservation.
  - aeternum 6y ago
    I think you're right that some industries are more conducive to competition in general. However shouldn't we be more careful then in terms of creating barriers to competition? If we treated restaurants like hospitals/healthcare we would give your employer a tax break in return for determining the set of restaurants you may dine at. Any new recipe or cooking method used by a restaurant would need to first be approved by the FDA. Restaurant chains would not be allowed to operate across state lines. Restaurant would have to accept below-market pricing for some proportion of customers (medicaid). Each restaurant would need to hire a law service to ensure they comply with HIPPA, and staff a department to allow import/export of your dining history.
    - dalbasal 6y ago
      Possibly. But, I think a lot of economics gets stuck in a sort of theoretical mud. In theory, barriers to competition, entry or always have negative effects. Those negative effects can be small, big, or irrelevant relative to other effects related to the same policy. What i am suggesting, is that industry structure determines these. So yes, there are theoretical policies that might make hairdressing worse or hospitals better in this regard. In reality though, policies are very often acting within margins where competitiveness doesn't move the needle much either way. Assuming a thriving restaurant market exists, it will probably remain pretty competitive under any "normal" policy regime. No one is really going to implement FDA approvals for recipes or tax related employer funding schemes. No one is going to implement a totally nonaccredited hospital system, where doctors & nurses don't have to be trained or licensed. At the very theoretical end, laissez faire dynamics might yield a market-based regulation system that accredits doctors and such without government intervention. But once again (a) that's very unlikely and (b) if it did happen that would still be regulation. For 99% of real life scenarios, restaurants lend to a free market dynamic while hospitals do not. Governments are involved, but they do not create this reality. It is innate. One policy regime or another (short of communism or such) is not going to change that.
      - aeternum 6y ago
        Does licensing of doctors and nurses really add much? Don't hospitals have sufficient incentive even without licensing to ensure that their doctors and nurses have the necessary skills? Uber/Lyft have their problems, but one takeaway is that a simple rating system works better than complex licensing and medallions.
- cryptonector 6y ago
  This is especially true in the U.S. There's no market as such because there's no pricing signals. The barriers to entry are super high: education and licensing of doctors is extremely restrictive, while construction of hospitals requires prior political approval ("certificate of need"!). All the HMO/PPO in-network thing also adds opaqueness, and discourages any negotiation by the consumer. This is madness.

raverbashing 6y ago

And to be fair that graph is weird -100%? If something lost 100% of its value it is now free? I don't think TVs are free now.

D_Alex 6y ago
It is 95%, not 100%... and amazingly that looks accurate. As an example, a 32" CRT with remote control (eg Sony Trinitron) cost about $1500-2000 back in 1997. Today, you can buy a 32" TV for $85, delivered. And even though this will be "Brand X" and not Sony, it will have better picture quality, more functionality, be more reliable and use less power to boot.

valuearb 6y ago

Medical care and education have seen a massive torrent of government funding and regulation over the last 60 years, while the things that get cheaper live mostly in free markets.

dredmorbius 6y ago
Housing, childcare, textbooks, and food and beverages seem strongly market based, and private college tuition has risen far more than public, challenging your characterisation. I note textbook prices took a dive about the time book-sharing services became prevalent.
- bhupy 6y ago
  In the markets where housing prices have increased the most, housing is the least market based.
  - dredmorbius 6y ago
    How do you reach that concclusion/ How can a region be tested based on housing-market freeness? Who or what interests advance restrictions?
    - bhupy 6y ago
      It's fairly well established by now that the most significant drivers of housing unaffordability is the preponderance of zoning regulations that restrict the supply of new housing construction. https://www.nber.org/papers/w8835 https://www.nber.org/papers/w8835 https://research.upjohn.org/up_workingpapers/307/ https://research.upjohn.org/up_workingpapers/307/ https://marginalrevolution.com/marginalrevolution/2016/08/laissez-faire-in-tokyo.html https://marginalrevolution.com/marginalrevolution/2016/08/la... https://www.nber.org/papers/w20536 https://www.nber.org/papers/w20536 https://drive.google.com/file/d/1sHh6BJ8dPoN9VQj-PXTPK5ATa8mL8MP4/view https://drive.google.com/file/d/1sHh6BJ8dPoN9VQj-PXTPK5ATa8m...
      - 6y ago