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Now look at what it gets spent on. Specifically, take a closer look at housing, healthcare and higher education. All three of those have risen far, far faster

Now look at what it gets spent on. Specifically, take a closer look at housing, healthcare and higher education. All three of those have risen far, far faster than inflation for many years.

andrekandre 4y ago
whats really interesting is, while some things like electronics and automobiles etc have been getting cheaper, intangibles like healthcare and education have been increasing in cost... whats the cause?
- actually_a_dog 4y ago
  Obviously, I don't know the full story, but one thing the three things I named have in common is relatively inelastic demand. In the case of education and healthcare, I suspect Baumol's cost disease is also a factor. Cars and other manufactured goods tend to get cheaper over time because they can take advantage of economies of scale, as well as global supply chains and free trade. We're seeing that very concretely right now as the global chip shortage has put pressure on the used car market. Education, housing, and healthcare are largely unaffected by free trade, and Baumol's cost disease is literally a statement about how certain industries cannot take advantage of economies of scale. Come to think of it, let's also toss childcare in the bucket of "things that have gotten more expensive faster than inflation over time" since, among households with children, we have a predominance of households where all parents who are present work. Again, we have inelastic demand and Baumol's cost disease rearing their ugly heads, so maybe there's something to this theory.
- missedthecue 4y ago
  Baumol's cost disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease TV and automobile manufacturing are a lot more productive than they were 50 years ago. A teacher can still only teach one classroom at a time. Therefore, service industries like healthcare, education, and even construction get less and less efficient relative to manufacturing and production industries, which enjoy massive increase in efficiency year after year. This is partly why an 80 inch 4K TV is eventually going to cost $500 and a 4 year college education is going to cost $500,000.
  - andrekandre 4y ago
    if i understand it correctly, its supposed that overall wage increases mean other industries have to compete to get/keep workers but they dont have effeciency increases like manufacturing so prices continue to rise it makes logical sense, but i wonder if it really is wage competition causing this when wages have been mostly stagnant for the past 50 years? https://www.thebalancecareers.com/industries-with-the-most-wage-stagnation-4176877 https://www.thebalancecareers.com/industries-with-the-most-w...

Now look at what it gets spent on. Specifically, take a closer look at housing, healthcare and higher education. All three of those have risen far, far faster than inflation for many years.

andrekandre 4y ago

whats really interesting is, while some things like electronics and automobiles etc have been getting cheaper, intangibles like healthcare and education have been increasing in cost... whats the cause?

actually_a_dog 4y ago
Obviously, I don't know the full story, but one thing the three things I named have in common is relatively inelastic demand. In the case of education and healthcare, I suspect Baumol's cost disease is also a factor. Cars and other manufactured goods tend to get cheaper over time because they can take advantage of economies of scale, as well as global supply chains and free trade. We're seeing that very concretely right now as the global chip shortage has put pressure on the used car market. Education, housing, and healthcare are largely unaffected by free trade, and Baumol's cost disease is literally a statement about how certain industries cannot take advantage of economies of scale. Come to think of it, let's also toss childcare in the bucket of "things that have gotten more expensive faster than inflation over time" since, among households with children, we have a predominance of households where all parents who are present work. Again, we have inelastic demand and Baumol's cost disease rearing their ugly heads, so maybe there's something to this theory.
missedthecue 4y ago
Baumol's cost disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease TV and automobile manufacturing are a lot more productive than they were 50 years ago. A teacher can still only teach one classroom at a time. Therefore, service industries like healthcare, education, and even construction get less and less efficient relative to manufacturing and production industries, which enjoy massive increase in efficiency year after year. This is partly why an 80 inch 4K TV is eventually going to cost $500 and a 4 year college education is going to cost $500,000.
- andrekandre 4y ago
  if i understand it correctly, its supposed that overall wage increases mean other industries have to compete to get/keep workers but they dont have effeciency increases like manufacturing so prices continue to rise it makes logical sense, but i wonder if it really is wage competition causing this when wages have been mostly stagnant for the past 50 years? https://www.thebalancecareers.com/industries-with-the-most-wage-stagnation-4176877 https://www.thebalancecareers.com/industries-with-the-most-w...