I bumped into this chart via the writings of Jordan Peterson, he of Canada and the book Twelve Rules for Life: An Antidote to Chaos. What struck me about this chart (authored by Mark J. Perry, a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan) is the near-total relationship of rising costs to government “protection.”
Many of us have been arguing for years that government should get out of the protection rackets: as examples, the college business and the ways in which health care is protected by a government that refuses to pass tort reform law.
In the case of the former, college costs, I am stunned at how expense has risen even as the perceived value has decreased. Who among us really thinks that a college education is worth 200% more than it was 20 years ago. Free money (well, at least as it is perceived by those taking student loans) has driven up the cost of college. Period. Full stop.
If students were forced to pay for college using their own money (no loans), I assure you college costs would drop. The universities couldn’t stay in business otherwise.
As to the latter – health care – the increases in cost have more to do with hospitals and doctors protecting themselves against lawyers as it does almost any other aspect of providing care. Yes, technology is costly and our health care system is heavily invested in things like hybrid operating rooms and PET-scans, among many other things. Indeed, health care economists estimate that 40–50% of annual cost increases can be traced to new technologies or the intensified use of old ones. But the other half? In my view it can be laid at the feet of personal injury lawyers. We need tort reform in this country and with it I can almost guarantee that heath care costs will start to decline.
Meanwhile, the costs of things none of us really need – cell phones, TVs, more clothing choices (seriously, how many shirts do you really need?) – have come tumbling down. I suspect that this is due more to the free market system and the advent of global trading. Cheap Chinese-made cellphones, including even Apple’s, have flooded the market and the demand has risen accordingly. Computer software is cheaper because of the incredible number of substitute products available. And so on. Not one word or whiff of government protection.
Housing costs have risen, again, because of 20 years of insane lending practices, wherein virtually anyone can get a mortgage and chase a somewhat constant supply of new housing (thereby increasing the price). Government restricts the building of new homes and viola! housing prices creep up.
College textbook costs have risen because publishers wanted in on the “free money” being thrown around by student loans. Two years ago I mistakenly required a textbook in one of my classes that carried a price tag of $180. Yet, within that text was nothing new, nothing that could not be covered, and was not covered, by a book six years old and about a tenth of that cost. You can guess what I did in the next semester. That’s right: I dropped the expensive book and required one that covered the material at a far better cost to my students.
We can only pray that wages keep pace.
