I am currently reading the book, "The Cost Disease" that tries to explain why costs of health care and college keep going up.  It says, due to their being labor intense, and highly specialized, they can't help but increase.  There are some things you can't just automated.  And Baumol's cost disease says that other sectors becoming more productive make things worse.  In the book I am reading, it seems to indicate that there is no choice but for the public sector to keep growing, and the poor are going to require redistribution of wealth to be able to keep up with needed and essential services that aren't going to be able to be automated.

Here is Wiki on it:

http://en.wikipedia.org/wiki/Baumol's_cost_disease

And here is Forbes on it:

http://www.forbes.com/sites/timworstall/2011/07/10/matt-yglesias-baumols-cost-disease-and-the-skyrocketing-cost-of-college/

So, anyone here not buy that?  If not, and you are familar with Baumol's cost disease, can you go into why it is bunk, and how unfettered free markets should be able to resolve everything without government involvement outside of reenforcing contracts people sign?

You know... I bet Kaiser would have some interesting data on this, on the healthcare side. As i recall they keep track of the cost breakdowns of healthcare.

I seem to recall it not being the service parts that were rising our costs rapidly but the pharmaceutical and medical devices branches.

For me, healthcare is so expensive pretty much because it's dealing with the one commoditity that is priceless to most people.  Their lives.

So we want the best treatments and techs even if the improvements in survival chance are miniscule and we're spending tons of money.

I'd say the same reason is fairly similar when it comes to University by the way.

We put a huge HUGE social benefit on education and a college degree. Not getting a college degree these days can often just make you feel like some hick who barely passed highschool. People without college degress just aren't as respected socially even with good jobs.

Everyone wants to think the best of themselves... so everyone wants to go to college, even people who shouldn't. It was just too fetishized by the older generations because back that college degree = genius. So again it's a product that plays to our vanities and core conceptions to ourselves. Then the government lets you go for "free" no matter how poorly you did in highschool. Not having to pay until after you graduate and have your kickass new job!

The thing about the cost disease, it speaks to areas that can't be automated.  End result is you are going to get costs spikes in them, above the norm.  It is worth looking ijnto it, because it speaks to more than just universities or health care.  You see arguments that government involvement causes it, when it could be that the government is involved, because it is so expensive.

I don't buy it. Baumol's famous line about the string quartet, while certainly pithy, is a great example of just how wrong he was. Once upon a time, a string quartet would play and only those in attendance would ever hear it. Now, thanks to recording technology, everyone who is alive or who will ever be alive can hear that one single performance. The productivity of musicians has therefore risen dramatically, and there's no reason that the same can't happen in medicine or education if the system is free enough to permit such changes to take place.

In fact, the same has happened with medicine as diseases that could once be dealt with only through invasive surgery (or simply suffered through) can now be treated with a simple pill.

I think the simple issue is that, as far as costs are concerned, the American system is caught in the worst of both worlds, and even with the Affordable Care Act, we still haven't broken on through to the other side where a single-payer system can unilaterally set fair prices, nor are we in a free market where prices have to drop to match what people can actually afford. The quagmire competition of big insurance, those who still lack insurance, and those who are government-supported just means that costs are going to keep pumping upward as the health industry just has access to all the big-money troughs.

It's the same with college, really. The middle system of "government-backed loans" gives colleges free license to pump up fees, unlike if the government simply paid for college or if there were no guaranteed loans at all.

Yeah, exactly.

The thing a lot of people don't realize about Hayek is that he actually advocated redistribution and a minimum wage and standard of living, but he wanted it to be in the form of cash transfers so that it didn't interfere with the price system (in his book, the one unpardonable sin). What we have now has absolutely annihilated any sort of price system. My grandmother consumes an obscene amount of health care and neither knows nor cares what it costs, because it doesn't cost her a red cent. She hits the roof if they so much as send her a bill, even though that bill invariably shows that the government is picking up the tab.

I am currently reading the book, "The Cost Disease" where Baumol goes into greater detail, and can post more once done.  One could argue that the cost disease angle doesn't account for possible blue ocean alternatives that meet the demands of the market, but come from other sectors.  That is valid.  The point, I believe, is that, with the case of string quartets or live theater, the demand for the consumption of one time produced services that can't be automated, is going to rise.  One can speak to listening to string quartet music, but that is different than seeing a live performance of one.

It's always going to rise, forever and ever? Why? If for a number of people listening to a recording is good enough, then that would seem to negatively impact the demand to see a live performance. And if the cost of seeing a live performance continues to rise, then listening to recordings becomes "good enough" for more and more people still until the price of admission becomes more reasonable.

So, the cost of higher education - if by higher education one means taking years out of one's working life to attend the social club known as "college" - does continue to skyrocket. But even if we ignore all the other factors driving this increase of cost (like the fact that universities have suffered terrible mission creep and have to behave less as mere educators and more and more like parental figures who have to address everything from binge drinking to rape to inclusivity and self-esteem issues) and chalk it all up to Baumol's disease, there are still ways to get an actual education outside of this broken ass system on the cheap.

I don't know, maybe there really is such a demand for that very particular experience - not listening to music but going to the symphony, and not getting an education but going to college - that alternatives just won't do. However, if you want your stomach ulcer treated, there's a cheap way to do it. If you insist on an invasive surgery you don't need for whatever reason just because you want that experience, then I guess it will cost more - unless, of course, those ulcer pills everyone else is taking leave that doctor with a lot of free time on his hands. It does seems to me that if you have to narrowly define a particular service in such a way ("Boy, apricots hand-picked by nude blonde-haired Mongolian boys sure are expensive these days! And it's only going to get more expensive as time goes!") then you don't really have much of a leg to stand on.

Pills usually just hide symptoms.  Do you mean shots like shots for polio, smallpox, etc?  Because I don't see that many pills curing diseases.  Take a pill for one symptom then take a pill for the negative symptoms of that pill, then take another pill for the negative symptoms of the previous pill, then take another pill just for the fuck of it.

Eating a diet of foods we are supposed to eat (whole foods such as a fruits, veggies, nuts, and very little processed foods, meats) is far better than any "magical" bs pill the pharmaceutical industries can come up with.