I’ve read some great articles around the idea that everything is getting more expensive for no good reason. They usually focus on education and healthcare when giving examples. The discussion showed up in my blogosphere in 2017 and then flared up again in mid 2019 when Alex Tabarrok and Eric Helland published their book Why Are the Prices So D*mn High?
- Tyler Cowen on Cost Disease in 2017 (Bloomberg)
- Scott Alexander responding to Tyler Cowen
- Alex Tabarrok announcing his book in May 2019
- Scott Alexander reviews Tabarrok’s book
- Scott Alexander gets (rightly) upset at Tabarrok brushing off his criticisms
The dominant hypotheses I’ve seen were that (1) cost increase is primarily driven by the Baumol Effect, and (2) cost increase is primarily caused by administrative/legal/regulatory bloat.
I was trying to make sense of all the arguments I had read over time and ended up coming to this conclusion:
What if we have increasing wealth and primarily spend it on things to extend our own lives and help make our children more competitive, because we value those things so highly?
I’m probably not the first person to suggest it, but I haven’t seen it yet in my own reading, so I get to feel original.
I totally missed that Robin Hanson wrote a response to Tabarrok’s book, putting forward the same idea, but I’m still going to go ahead and post this piece without major edits.
- Spending into healthcare is uncapped because we don’t want to die prematurely (or at all) or to suffer from conditions we can partially mitigate
- Spending into education is uncapped because its a competition to position our children sufficiently well to secure them a good life
- There is a strong Red Queen Effect involved, more obviously in education, but also in healthcare, since the baseline rises in both cases