If you read one thing this week, make it this. Do it, then come back.
Read it yet? No? Go read it!
Okay, so construction, infrastructure, health care, education, and a lot of other things are getting more expensive way faster than inflation or wage growth and we don't know why. Alexander makes the point that most of today's contentious policy debates are really dancing around this fact:
So what the hell is going on? The available information suggests to a lot of depressing conclusions for a lot of different types of people.Imagine if tomorrow, the price of water dectupled. Suddenly people have to choose between drinking and washing dishes. Activists argue that taking a shower is a basic human right, and grumpy talk show hosts point out that in their day, parents taught their children not to waste water. A coalition promotes laws ensuring government-subsidized free water for poor families; a Fox News investigative report shows that some people receiving water on the government dime are taking long luxurious showers. Everyone gets really angry and there’s lots of talk about basic compassion and personal responsibility and whatever but all of this is secondary to why does water costs ten times what it used to?
If we give everyone free college education, that solves a big social problem. It also locks in a price which is ten times too high for no reason. This isn’t fair to the government, which has to pay ten times more than it should. It’s not fair to the poor people, who have to face the stigma of accepting handouts for something they could easily have afforded themselves if it was at its proper price. And it’s not fair to future generations if colleges take this opportunity to increase the cost by twenty times, and then our children have to subsidize that.
First, let's make libertarians cry: markets don't work. Okay, to be fair, they can work for simple commodity goods and familiar comprehensible products where there aren't more than a handful of choices and where social status isn't a major factor. But when we start talking about anything else, it turns out that people have no clue how to evaluate things or how much they should cost, and even if they do, they often behave as if cost is irrelevant compared to status markers that probably are irrelevant (installing central air conditioning for $10,000 instead of four $200 window AC units, or ignoring the free college education in favor of the fancier school that costs $100,000 in student loan debt?). You can't easily comparison-shop for a lot of goods (emergency medicine), or most of the options are really non-options (living in a ghetto to save money on housing), and so on. Also, modern psychology understands human behavior better than ever and this information is ruthlessly used by institutions to manipulate people into professing preferences that aren't really theirs and acting against their own long-term interests. People are successfully manipulated into fearing all sorts of unlikely harms, leading to overconsumption of things like insurance, firearms, and houses in "good neighborhoods."
Liberals are right: without government regulation, people just get manipulated and exploited in these markets, and corporations end up doing reeeeeeally bad things like sponsoring coups in Latin America and dumping known toxins in everybody's water supply.
Now let's make liberals cry: government doesn't work. Fields that are heavily regulated or managed by the government like medicine, education, and construction, display the most dysfunctional behaviors, with spiraling costs, worsening outcomes, falling worker wages, and generally everything sucking a bit more every year. Regulations have compliance costs that trickle down everywhere, and a pervasive fear of lawsuits due to the proliferation of liability and IP laws make everyone defensive and encourages the growth and cost of of every type of insurance. And every "reform" makes things worse since it just increases complexity which is the root of the problem. Furthermore, the phenomenon of a growing number of non-payers being subsidized by payers is a huge contributor. The non-payers overconsume, and the indirect payment system destroys institutional accountability.
Libertarians are right: without market accountability, there is no systemic force to make anything better; government slowly strangles the host society in red tape and inefficiency and must be reigned in before it isn't cost-effective to do anything domestically. And conservatives are right too: there really was a mid-century golden age when you could see a movie for a nickel and work your way through college with a decent humane job and get a doctor to come to your house when you were sick for less than the price of a load of groceries.
I don't know if we can make conservatives cry here because honestly their actual preferences seem contradictory or incomprehensible, but most of what they say they want has more to do with culture and less to do with this how-are-goods-distributed-throughout-society stuff.
But let's make everyone cry: the problem is us. We spend much less of our incomes on food and clothing now, but didn't save the difference or lobby for policies or laws to let us work less. Instead, we plowed it into things that don't actually increase our marginal happiness that much: bigger, fancier houses in neighborhoods with more respectable school districts; more bigger, fancier cars; more fancier college degrees; more gadgets and junk than ever before; prolonging the lives of miserable dying people by 6 months.
So... what do we do?