"If one-half of the commodities in the market rise in exchange value, the very terms imply a fall of the other half; and reciprocally, the fall implies a rise." – John Stuart Mill, Principles of Political Economy, p. 419
Government is an ass. Human action taking place free of government control exceeds its opposite.
AEI’s Mark Perry would broadly agree with the previous paragraph, if not its tone. As Perry’s “Chart of the Century” indicates, prices in sectors defined by less government slope downward, versus upward sloping prices in sectors where government control is more evident.
Except that Perry himself could perhaps be convinced that the chart is more political than it is economic. The more nuanced truth is that economic liberalization correlates with falling prices such that other prices rise.
Take “college tuition and fees.” Conservatives have latched onto this price for the longest time, and with the laudatory aim of getting the federal government out of student loans.
The correlation between federal student loans and rising tuition/fees seems so obvious until we look at K-12 private school tuition over the decades. Since the federal government doesn’t subsidize loans there, logic dictates that per the chart, private school tuition would be downward sloping. Except that there’s no evidence of just that. Quite the opposite.
It’s a reminder that as with college education and K-12, arguably the biggest driver of soaring tuition and fees for both has been global economic liberalization that resulted in a great deal more Americans (and foreigners) bidding for seats in U.S. private schools (K-12). The previous number has logically been magnified in college education, with exponentially more foreigners (who don't get federal loans) bidding for a limited number of seats in U.S. universities.
With “Hospital Services,” arguably something similar is at work. The reflexive response to nosebleed medical costs is that the consumer is no longer the buyer thanks to insurance mandates from government. It’s compelling, but profit-motivated insurance providers care about prices too, no?
More than that, in a rapidly liberalizing world it seems something similar to education is revealing itself: a great deal more wealth availing itself of a more limited supply of hospital services, limits that perhaps grow by the day as the willingness of the world’s greatest minds to go into patient care shrinks?
In the question, it’s simply being asked if, instead of becoming doctors with daily “rounds,” more and more of the greatest medical and scientific minds are going the pharmaceutical (Eli Lilly) and the Silicon Valley (think cancer screener Grail) route with an eye on much better income born of producing drugs (GLP-1) and medical screening that will meet the needs of exponentially more people. In time, lower healthcare costs will happily reveal themselves from this scenario, but not lower hospital prices.
Perry’s chart points to cars, clothing, cellphone services, computer software, and television alongside falling prices. Free markets at work! That’s true, but how about measure the falling prices mentioned against the costs of a hotel suite, massage, and meal at the Hotel Bel-Air? It’s just a way of saying that global liberalization has happily led to falling prices of myriad market goods, and the latter has coincided with the very wealth explosion reflected in higher prices for other, limited in supply consumptive items.
Once again, government is an ass. Settled science. But a case can be made that the anti-government control case stands on its own because freedom works, not because of a chart that most reveals the genius of free markets through higher prices meant to make an opposing case.
