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.