Economist Mark J. Perry, who posted this chart on the American Enterprise Institute’s Ideas blog, argued that prices are highest in the economic sectors that are most heavily regulated.
Said he: “Remind me of why socialism is so great again.”
One possible explanation of the price difference is Baumol’s Cost Disease, the tendency of the cost of human services to rise relative to the cost of manufactured goods. That’s not the whole story.
The fact is that European countries that most Americans would consider socialist have free or affordable medical care and free or affordable higher education. And it is not a case of costs being shifted from patients and students onto taxpayers.
Overall costs of health care and higher education are less in so-called socialist European countries (I write “so-called” because most of them have self-described conservative governments).
The reasons why health care costs less in those European countries than in the USA is that there are no for-profit insurance companies standing between the patient and the physician, that European countries control prescription drug prices and that the incomes of physicians and other health care providers are less.
My guess is that European universities cost less because they provide a no-frills education without spending huge sums on sports stadiums and student amenities. My other guess is that their hospitals and universities are not so top-heavy with highly-paid administrators.
In and of itself, government regulation is neither good nor bad. It depends on what is being regulated, how it is being regulated and in whose interest it is being regulated.
LINKS
Chart of the day (century?): Price changes 1997 to 2017 by Mark J. Perry for AEI Ideas.
Mark Perry Has Never Heard of William Baumol by ProGrowth Liberal for Angry Bear.
Tags: Baumol's Disease, Consumer Price Index, Cost of Health Care, Cost of Higher Education, Cost of living
Phil Ebersole's Blog 
February 23, 2018 at 2:54 pm |
Is government regulation supposed to be equivalent to socialism? Does the chart incorporate all costs such as environmental costs? Measuring inflation can also be tricky. I think the question these days is not socialism vs. capitalism but democracy vs. oligarchy.
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February 23, 2018 at 2:56 pm |
Also does the chart take into account government subsidies.
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February 23, 2018 at 3:01 pm |
The clothing or electronics in that chart is made in sweatshops using virtual slave labor. Other products are made with prison labor. Is CEO pay efficient? Do any low costs reflect “economic hit man policies” that have put third world countries in a debt trap?
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February 23, 2018 at 6:43 pm |
In answer to your questions—
1. Government regulation is not equivalent to socialism, except in the eyes of those who are ignorant of what actual socialists believe..
2. The chart does not take external costs, such as environmental impact, into account.
3. The chart does not take government subsidies into account.
4. CEO pay does not correlate with results.
5. Low manufacturing costs costs may well reflect “economic hit man” policies that require poor countries to adopt austerity programs in order to refinance debt.
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February 27, 2018 at 9:36 am |
Public services are a type of “socialism” if you want to call it that. I’m glad you don’t need to have a credit card handy when you call 911. When you gradually de-fund public programs, services decline, and you get people saying that it all has to be privatized. And then we start rationing things based on income and wealth. Nice if you have enough income/wealth. But at the extreme, you die in a privatized society without it.
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March 13, 2018 at 1:22 pm |
Socialists don’t have a clue about how economics work. Rich people don’t get rich by making other people poor.
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