
Why Inflation Is Much Worse Than the Headline Numbers Suggest - Four_Star
http://thesoundingline.com/why-inflation-is-much-worse-than-the-headline-numbers-suggest/
======
api
The housing number is a national average. If you look at major cities housing
has done what health care and college tuition has done.

The general phenomenon described by this article is something I've heard
referred to as "in-deflation" in a couple places: inflation in everything you
need, deflation in everything you make (and thus wages). It's been the
economic condition of the US and to some extent Europe since roughly
2001-2002.

~~~
avgDev
"inflation in everything you need, deflation in everything you make"

Everyone needs food, farmers need equipment, I make equipment for farmers
therefore my wages should grow instead of stagnating based on that statement?
Or does the statement mean that the actual profits go to the select few that
own companies that produce the stuff you need?

~~~
api
I think "everything" is an exaggeration, but it's not entirely wrong. The main
sectors to experience runaway inflation have been health care, college
tuition, and real estate in major cities. Housing is a necessity while the
others while not absolutely non-negotiable are pretty solidly in the "need"
category.

------
hackeraccount
The price of things that are subsidized has gone up and the prices of things
that are not has not.

Too much of the complaints about prices seems like the 70's redux to me. At
that time inflation was sky high. What was the fix? Wage and price controls.
Whip Inflation Now. Why? Because those fixes are politically popular. We'll go
after gougers so honest people can get on with their lives.

Here's the thing. It doesn't work. The joke is that if you have the votes you
can make Monday Sunday. But you can't. Pass all the laws you want and Monday
is Monday and Sunday is Sunday. Pass all the laws you want saying the price of
X should be $Y and it's not going to happen.

As a digression, there's a reasonable argument for Net Neutrality. I don't
really agree with it but I can see it. The unreasonable argument for it is
that Internet access costs too much and we're going to regulate the price
down. That's like voting money for yourself. It doesn't work.

The fix for inflation in 70's was to raise the cost of money i.e. jack up
interest rates. That makes everyone unhappy. But here's the thing; it works.
Inflation went down. If you want to keeps costs down cut off the supply of
money and figure out how to get more people to sell the goods/services you're
interested in.

Why aren't there more Hospitals? Why aren't there more health care providers?
Why aren't more companies producing medical goods? Why aren't there more
insurance providers.

More competition and reduced subsidies doesn't really make anyone happy
though.

~~~
Symmetry
>Why aren't there more Hospitals?

In most states building or expanding a hospital requires getting a Certificate
of Need establishing that you won't be competing with existing providers.

>Why aren't more companies producing medical goods?

If you're competing with one of the big guys and they don't like you they can
find some FDA reg you might plausibly be violating and sue the FDA to get them
to shut you down. They generally have more expensive lawyers than the FDA can
afford so they'll often get their way if their case it even only vaguely
plausible. Or at least this is why the US doesn't have epinephrine injectors
competing with EpiPen, I'm not sure it's the main reason.

The same feedback-by-lawsuit mechanisms work fairly well in other regulatory
contexts, though.

>Why aren't there more insurance providers.

Insurance provider profits are capped by law so I'm not sure adding more of
them would actually help. Especially since they all have a pretty hefty fixed
overhead in terms of negotiating rates with hospitals.

~~~
basch
> Insurance provider profits are capped by law

Doesn't that give them incentive to make things cost more, as their profit is
capped as a percentage? "Oh I can only have 2% profit, fine we will lobby and
push for new tech that make surgery b cost 10x as much.

------
paulpauper
Healthcare and education are heavily subsidized, but electronics and clothes
much less so. To buy clothes and electronics on credit requires credit card
debt as high as 20%/year but student loans are just 5%/year, and unlike
electronics, education gains value to to increased wages and better job
prospects.

~~~
api
They also can't easily be outsourced, which this article mentions as a much
more significant factor.

------
mendelsd
See [1] for a more in-depth analysis of this, and much more.

"In America, for example, the benchmark measure of inflation (CPI-U) has been
modified by ‘substitution’, ‘hedonics’ and ‘geometric weighting’ to the point
where reported numbers seem to be at least six percentage points lower than
they would have been under the ‘pre-tinkering’ basis of calculation used until
the early 1980s."

[1] [https://ftalphaville-cdn.ft.com/wp-
content/uploads/2013/01/P...](https://ftalphaville-cdn.ft.com/wp-
content/uploads/2013/01/Perfect-Storm-LR.pdf)

------
chewz
Under communism people used to say: "Bread is more expensive but locomotives
got cheaper".

------
cyrusmg
Is there a similar article for any European country ?

