4 ms·

I think it's interesting how over time, prices for goods have gone through the floor for many things (food, electronics, clothing, even automobiles, etc...) but

I think it's interesting how over time, prices for goods have gone through the floor for many things (food, electronics, clothing, even automobiles, etc...) but prices for services have gone parabolic. Construction, education, and healthcare costs have risen well above CPI for several decades, not just in the US, but in most developed countries.

willcipriano 6y ago
This effect was noticed by Baumol and Bowen back in the 60s. https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease
- notacoward 6y ago
  It would be really hard to cite Baumol's cost disease too often. It's a key part of many things we see going on in the economy, and therefore in society more broadly, today.
kodablah 6y ago
Makes sense that cost is proportional to skilled/local humans required.
legitster 6y ago
https://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ https://slatestarcodex.com/2017/02/09/considerations-on-cost... >I don’t know why more people don’t just come out and say “LOOK, REALLY OUR MAIN PROBLEM IS THAT ALL THE MOST IMPORTANT THINGS COST TEN TIMES AS MUCH AS THEY USED TO FOR NO REASON, PLUS THEY SEEM TO BE GOING DOWN IN QUALITY, AND NOBODY KNOWS WHY, AND WE’RE MOSTLY JUST DESPERATELY FLAILING AROUND LOOKING FOR SOLUTIONS HERE.” State that clearly, and a lot of political debates take on a different light.
heavyset_go 6y ago
> but prices for services have gone parabolic. A few years back, I had a chat with someone who helps developmentally disabled people with job training. The company she worked for billed the state $90/hour for her work, but paid her $15/hour. I'd love to know where the rest of that money went, because it certainly didn't go to those performing services, nor to their professional development, nor to disabled people.
- akvadrako 6y ago
  A lot of it is surely the expertise to navigate the bureaucracy. It's not like it's simple to setup a competing service and manage to get a government contract.
  - willcipriano 6y ago
    > It's not like it's simple to setup a competing service and manage to get a government contract. In Nebraska you have to ask your competitors permission to compete with them: "If you are allowed to drive a home health patient to get groceries, can that passenger also get her prescription filled? In Nebraska, that would be against the law unless you had permission from the government to operate a non-emergency medical transportation company. And, by the state’s certificate of need or “CON” law, the only way to get permission is for the existing transportation companies to allow you to operate." https://ij.org/press-release/new-lawsuit-challenges-nebraskas-non-emergency-medical-transportation-cartel/ https://ij.org/press-release/new-lawsuit-challenges-nebraska... Things like this happen all over the place nationally. To me much of it looks like garden variety corruption as opposed to some kind of reward for figuring out how to work with the government. https://ij.org/pillar/economic-liberty/?post_type=case https://ij.org/pillar/economic-liberty/?post_type=case
  - Ericson2314 6y ago
    Americans love to through around "beauracracy", but the article states we have too weak and balkanized a civil service. This is a very different issue.
- javajosh 6y ago
  I encourage you to look into it yourself, and if you find something egregious (and it looks like your odds are good), make a ruckus in the channels that matter to the decision makers. (Finding the decision makers will take time, too!) Complacency in government contracts is standard, and you have to make noise before anything changes, and its work that does NOT scale. (Although I'd love to see standard data practices help reduce the time commitment required to do this kind of data activism.) One of the best things you could do with this information is show up and yell about it at any and all public hearings. Anyway, I wish it was "sexier" to make trouble for local government that deserves it, but really its always a long paperwork slog.
javajosh 6y ago
The economy is diverging on things vs. services because services require finicky human cooperation, understanding and knowledge, and "things" do not. Things can travel and stay on shelves, services can't. And also, humans will tend to cheat when they can, and the longer lived a game is, the more specialized it becomes, and the harder it becomes to even recognize what is cheating and what is just "regular practice". You get something like "regulatory capture", but worse, because every element of the entire society captures another, forming a Gordian knot. Yet another path to Collapse, I'm afraid (probably a common one, I'd guess).
Sevii 6y ago
It’s the post-scarcity trap. We spend more on services merely because we can.
bsamuels 6y ago
A lot of the problem in the US has to do with the petrodollar system. OPEC has only been allowed to accept US dollars for their oil since the 70s. That generates massive demand for dollars outside the US. Foreign countries obtain the dollars they need to buy oil by converting their currency to USD or by exporting goods/services to the US. As a result, the value of the US dollar gets inflated and large parts of the US economy get "offshored" thanks to the favorable conversion ratio. On the bright side, this system means you can import foreign goods very cheaply - but on the downside, it means exports are often not viable. There are several industries in the US that don't reap large benefits from cheap imports. Education, healthcare, construction, and child care just to name a few. I hope this adds some color to the phenomenon you've observed
- dantheman 6y ago
  I'd say it's just inflation in industries that haven't had any made any progress in efficiency - it takes the same or more effort to do the same/corresponding activity. Productivity in manufacturing has increased a massive amount, so the inflation has less of an impact.
  - Ericson2314 6y ago
    No, it's definitely dutch diesease with our dollar exports too. See https://phenomenalworld.org/reviews/trade-wars https://phenomenalworld.org/reviews/trade-wars
- adventured 6y ago
  > but on the downside, it means exports are often not viable. A large hole is shot in your premise by the fact that the US is a wildly successful exporter of both goods and services. There's very little evidence that the US Dollar has been too strong during the era you're referencing, save for a few brief periods of time. For example the USD was quite weak from 2004-2015, and yet education and healthcare soared in cost regardless. For most of the comparison history, the USD has not been far out of line with the value of the Euro in how they trade, and that's despite the US having a far more potent economy during that time than Western Europe. The so called petro dollar (commodities linked dollar) has existed for most of the post WW2 era. And yet education and healthcare were reasonably priced until the late 1990s forward. The ramp in education costs is easily explained by the infinite backing of student loans by the US Government, that's a never-ending inflationary cycle caused solely by the Feds. When or if they remove that inflationary prop, the cost of higher education in the US will begin to stagnate or deflate. It's real simple: pull the government inflation prop out from under education. Stop backing student loans so freely and to such a dramatic extent. What would happen? It'd instantly collapse, except for higher end private schools. What the universities could command in the way of prices would be obliterated overnight, they'd have to match what the students could actually afford in reality, instead of in govt-backed fantasy land. Education and healthcare costs keep going up because the operators can keep charging more due to how those systems are structured. There's either not a competitive market to push down on prices at all (healthcare) or there's an infinite inflation prop being supplied by the Feds (education). Prices are soaring as entirely proper representatives of real inflation over that time, which you can see if you stack the USD against gold, oil, silver, platinum, housing, or new car prices over decades. It's everything else that is doing worse than real inflation, because there is generally plentiful market competition to push downward on pricing power.

willcipriano 6y ago

This effect was noticed by Baumol and Bowen back in the 60s. https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease

notacoward 6y ago
It would be really hard to cite Baumol's cost disease too often. It's a key part of many things we see going on in the economy, and therefore in society more broadly, today.

kodablah 6y ago

Makes sense that cost is proportional to skilled/local humans required.

legitster 6y ago

https://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ https://slatestarcodex.com/2017/02/09/considerations-on-cost... >I don’t know why more people don’t just come out and say “LOOK, REALLY OUR MAIN PROBLEM IS THAT ALL THE MOST IMPORTANT THINGS COST TEN TIMES AS MUCH AS THEY USED TO FOR NO REASON, PLUS THEY SEEM TO BE GOING DOWN IN QUALITY, AND NOBODY KNOWS WHY, AND WE’RE MOSTLY JUST DESPERATELY FLAILING AROUND LOOKING FOR SOLUTIONS HERE.” State that clearly, and a lot of political debates take on a different light.

heavyset_go 6y ago

> but prices for services have gone parabolic. A few years back, I had a chat with someone who helps developmentally disabled people with job training. The company she worked for billed the state $90/hour for her work, but paid her $15/hour. I'd love to know where the rest of that money went, because it certainly didn't go to those performing services, nor to their professional development, nor to disabled people.

akvadrako 6y ago
A lot of it is surely the expertise to navigate the bureaucracy. It's not like it's simple to setup a competing service and manage to get a government contract.
- willcipriano 6y ago
  > It's not like it's simple to setup a competing service and manage to get a government contract. In Nebraska you have to ask your competitors permission to compete with them: "If you are allowed to drive a home health patient to get groceries, can that passenger also get her prescription filled? In Nebraska, that would be against the law unless you had permission from the government to operate a non-emergency medical transportation company. And, by the state’s certificate of need or “CON” law, the only way to get permission is for the existing transportation companies to allow you to operate." https://ij.org/press-release/new-lawsuit-challenges-nebraskas-non-emergency-medical-transportation-cartel/ https://ij.org/press-release/new-lawsuit-challenges-nebraska... Things like this happen all over the place nationally. To me much of it looks like garden variety corruption as opposed to some kind of reward for figuring out how to work with the government. https://ij.org/pillar/economic-liberty/?post_type=case https://ij.org/pillar/economic-liberty/?post_type=case
- Ericson2314 6y ago
  Americans love to through around "beauracracy", but the article states we have too weak and balkanized a civil service. This is a very different issue.
javajosh 6y ago
I encourage you to look into it yourself, and if you find something egregious (and it looks like your odds are good), make a ruckus in the channels that matter to the decision makers. (Finding the decision makers will take time, too!) Complacency in government contracts is standard, and you have to make noise before anything changes, and its work that does NOT scale. (Although I'd love to see standard data practices help reduce the time commitment required to do this kind of data activism.) One of the best things you could do with this information is show up and yell about it at any and all public hearings. Anyway, I wish it was "sexier" to make trouble for local government that deserves it, but really its always a long paperwork slog.

javajosh 6y ago

The economy is diverging on things vs. services because services require finicky human cooperation, understanding and knowledge, and "things" do not. Things can travel and stay on shelves, services can't. And also, humans will tend to cheat when they can, and the longer lived a game is, the more specialized it becomes, and the harder it becomes to even recognize what is cheating and what is just "regular practice". You get something like "regulatory capture", but worse, because every element of the entire society captures another, forming a Gordian knot. Yet another path to Collapse, I'm afraid (probably a common one, I'd guess).

Sevii 6y ago

It’s the post-scarcity trap. We spend more on services merely because we can.

bsamuels 6y ago

A lot of the problem in the US has to do with the petrodollar system. OPEC has only been allowed to accept US dollars for their oil since the 70s. That generates massive demand for dollars outside the US. Foreign countries obtain the dollars they need to buy oil by converting their currency to USD or by exporting goods/services to the US. As a result, the value of the US dollar gets inflated and large parts of the US economy get "offshored" thanks to the favorable conversion ratio. On the bright side, this system means you can import foreign goods very cheaply - but on the downside, it means exports are often not viable. There are several industries in the US that don't reap large benefits from cheap imports. Education, healthcare, construction, and child care just to name a few. I hope this adds some color to the phenomenon you've observed

dantheman 6y ago
I'd say it's just inflation in industries that haven't had any made any progress in efficiency - it takes the same or more effort to do the same/corresponding activity. Productivity in manufacturing has increased a massive amount, so the inflation has less of an impact.
- Ericson2314 6y ago
  No, it's definitely dutch diesease with our dollar exports too. See https://phenomenalworld.org/reviews/trade-wars https://phenomenalworld.org/reviews/trade-wars
adventured 6y ago
> but on the downside, it means exports are often not viable. A large hole is shot in your premise by the fact that the US is a wildly successful exporter of both goods and services. There's very little evidence that the US Dollar has been too strong during the era you're referencing, save for a few brief periods of time. For example the USD was quite weak from 2004-2015, and yet education and healthcare soared in cost regardless. For most of the comparison history, the USD has not been far out of line with the value of the Euro in how they trade, and that's despite the US having a far more potent economy during that time than Western Europe. The so called petro dollar (commodities linked dollar) has existed for most of the post WW2 era. And yet education and healthcare were reasonably priced until the late 1990s forward. The ramp in education costs is easily explained by the infinite backing of student loans by the US Government, that's a never-ending inflationary cycle caused solely by the Feds. When or if they remove that inflationary prop, the cost of higher education in the US will begin to stagnate or deflate. It's real simple: pull the government inflation prop out from under education. Stop backing student loans so freely and to such a dramatic extent. What would happen? It'd instantly collapse, except for higher end private schools. What the universities could command in the way of prices would be obliterated overnight, they'd have to match what the students could actually afford in reality, instead of in govt-backed fantasy land. Education and healthcare costs keep going up because the operators can keep charging more due to how those systems are structured. There's either not a competitive market to push down on prices at all (healthcare) or there's an infinite inflation prop being supplied by the Feds (education). Prices are soaring as entirely proper representatives of real inflation over that time, which you can see if you stack the USD against gold, oil, silver, platinum, housing, or new car prices over decades. It's everything else that is doing worse than real inflation, because there is generally plentiful market competition to push downward on pricing power.