Thanks for reading. I’m still new to these forums. I received a lot of valuable feedback on my last question, so I am excited to hear what people have to say about this:
It would seem to me that the industries with the most government intervention (health and education come to mind) are the industries that have rising prices for their respective commodities or services. Can this be substantiated or is this just me projecting my anarcho-capitalist government disdain onto an issue?
I don’t believe that a 4-year college education is more valuable than it was 20 years ago (graduates certainly aren’t earning a higher real wage, that is, if they HAVE a job), but the real price of that education seems to have exploded. Whereas I look at something like computer components which are much more valuable than they were 20 years ago (more computing power), but their price has significantly declined. I don’t think there is much government intervention or spending towards the hardware industry. To me it’s pretty basic that highly competitive markets drive prices down over time. Please debunk me if any of my assumptions are incorrect.
Do we pay more for education, healthcare, and other goods and services because bureaucrats put their hands in the market? If so, what’s really happening through regulation, extension of federal credit, and licensing that causes prices to escalate. Perhaps there is a more subtle cause that I am missing. What is your take?
I’m afraid I haven’t gotten all of my thoughts together to offer a clear-cut and biting explanation of why, but I can certainly provide you with more evidence:
Here is an article about the railroad industry during the Gilded Age and the private market railroads vs. the government-subsidized ones:
Essentially, the free market one drove prices down and quality up. The government-backed ones had high prices and rushed to build (poorly-made) miles of railroads because they received per-mile subsidies from the government. Hill’s railroad, the free market one, never went bankrupt. All the government-aided and -regulated ones did go bankrupt.
It’s about the very determinants of price itself, back to the basics of supply and demand.
Government intervention in the healthcare industry has decreased the supply through the following:
Restricting the number of doctors (AMA monopoly)
Restricting the production of hospitals (various federal and state restrictions)
Increased uncertainty (death of fraternal societies)
Restricting availability of drugs (amazingly harsh FDA regulations where it can take up to 10 years to pass drugs that can save thousands of lives and which makes it very risky to produce drugs in the first place)
Harsh malpractice laws
Restricting healthcare provision over state lines, thusly enforcing local monopolies or at least suboptimal firm size
Prevent price discrimination within health insurance, furthering the cost added by insurance companies by increasing the overall cost for those who are within the pool
Further regulation of insurance companies
Funelling funding into insurance companies in the first place through tax incentives so that people are dependent on expensive health insurance in the first place
Government Increases demand in the following ways
Helping to provide health insurance to everyone. This means that the out of pocket expense is often decreased or eradicated and the disincentive to have expensive services is gone
Regulations which put excess strain on doctors, for instance doctors have to be present in order to remove a mole in some states. This puts excess demand on higher level services. Midwives were also banned back in the day, both harming the division of labor as well as giving us another example
Requiring that all hospitals work on people no matter what when they turn up at the emergency room, providing a form of free universal healthcare
Medicare and Medicade. trillion dollar government subsudy lead to inreased purchasing power, enough said
Supply is decreased and shifts to the left, demand is increased and moves to the right. You can work out the effect for yourself
I’m not saying there aren’t other, more market oriented factors that are driving up the price, but nothing else can come close to explaining the shere magnitude of the increase.
In a word, yes. Peter Schiff in particular has spoken quite a bit on this, and economic historian Richard Vedder has done quite a bit of research into the area. The basic issue as Neo points out is an increase in demand (subsidized by the govenment), which would be bad enough, but at the same time, there is a restriction on supply (again, thanks to government.)
