Why Luxury TVs Are Affordable when Basic Health Care and Higher Education Are Not

August 19, 2016 Philip Waring Leave a comment

I’m still running into all sorts of things, most of all ideas, and often for the first time, although a good number of them have been around for a long time, decades, and in some instances centuries, some being older than I am now in my eighties.

And I’m finding these things mostly while surfing on the World Wide Web. Need I even say that the Web is becoming, for many of us has become, the World’s Encyclopedia and Dictionary, having nearly eliminated from our daily lives all earlier prototypes?

And while I’ve only been able to profit from this greatest of all sources of man’s rapidly growing knowledge of himself, of the natural world, and of the cosmos, for some one third of my own lifetime, my lucky grandchildren will profit from the Internet throughout the entirety of their lives.

Just one week ago I encountered on the Web for the first time the Foundation for Economic Education, or FEE, and in particular their magazine the Freeman. About FEE on their web site has this to say:

FEE has been a leading non-profit organization in teaching the principles of a free society since its founding in 1946 by Leonard E. Read. Today, FEE focuses on introducing freedom as a life philosophy to newcomers in the youth audience, striving to bring about a world in which the economic, ethical, and legal principles of a free society are familiar and credible to the rising generation.

I’m now on their mailing list and today in my mailbox was this article by Richard N. Lorenc from the Freeman:

Why Luxury TVs Are Affordable when Health Care Is Not

Imagine this. You are feeling under the weather. You pull out your smartphone and click the Rx app. A nurse arrives in 20 minutes at your home. He gives you a blood test and recommends to the doctor that she prescribe a treatment. It is sent to the CVS down the street, which delivers it to your door in 20 minutes. The entire event costs $20.

Sounds nuts? Not so much. Not if health care were a competitive industry. As it is, medical care prices are up 105% in the last 20 years. This contrasts with the television industry, which is selling products that have fallen 96% in the same period.

Take a look at the chart below, assembled by AEI. It reveals two important points. First, there is no such thing as an aggregate price level, or, rather what we call the price level is a statistical fiction. Second, it shows that competitive industries offer goods and services that are falling in price due to market pressure. In contrast monopolized industries can extract ever higher rents from people based on restriction.

Consider each product or service shown. College is heavily subsidized, regulated, and exclusionary, and the costs are soaring. The textbook industry is hobbled by extreme copyright regulation, and can depend on captive buyers. Childcare is one of the most regulated industries in the country. Not just anyone can enter. Every aspect of childcare provision is controlled by the state.

On the other hand, software, wireless service, toys and and TVs (see: free trade) exist in relatively freer market settings. The price pressure is down.

It’s not that complicated, folks. If you want good services, good products, innovative ideas, and low prices, you need competitive markets. The more you control, the higher the prices and the worse the results.

Now this wasn’t the first time that I’ve encountered the idea that if you want good services, good products, innovative ideas, and low prices, you need competitive markets. But I was struck by the clarity of Lorenc’s presentation of this old and familiar idea.

I’ve known for a very long time, for most of my adult life, that in important areas of our lives the available goods and services were becoming more and more expensive, more and more out of our reach, and that the quality of the goods, and services, was growing worse, clearly not improving in spite of the huge numbers of additional dollars thrown at them.

Not all areas, but important areas. because the story of the (government) free private market is just the opposite. The costs of luxury televisions and cars and much else is coming down all while the quality of going up.

Most of us are witnesses to the failure of our free and public educational system, as evidenced by the small number of people who actively participate in our democracy, this in spite of the oft stated and original intent of the schools’ founders, of Thomas Jefferson and Horace Mann and others, to turn out responsible citizens.

Just hasn’t happened in the nearly 200 years of free public schooling. Most of us are also witnesses to, if not suffering from, the totally inadequate and wretched health care services in our cities and towns, when and if they are even available.

It should be no surprise that on the chart the largest cost increases fall in just two areas, those of health care and education. Is there an elephant in the room? preventing adequate and low cost services? Well yes, and in both instances the elephant is the U.S. government itself, preventing private ideas and initiatives to get started.

elephant in the room — From a New Yorker cover by Liniers, 11/17/14

Name me just one government program that would be a model for efficiency, in particular for the efficient use of resources, for cost effectiveness. The Post Office? the Military? the IRS? the Congress let alone the schools and the hospitals?

What’s keeping textbook, tuition, childcare, and medical services costs from dropping. Well it’s the government refusal to allow these areas to open up to innovators and to proceed on their own, the government’s refusal to allow private goods and services providers to compete with one another for their clients, for that’s the only way that prices will drop.

Lorenc gives an example in the first paragraph of his article, of how efficient and cost effective medical services might be restructured. Such could be done, and is already being done in some of our large cities. Such could be almost immediately and widely available if the elephant were made to disappear.