This is an outstanding article, and it deserves a lot more analysis and debate. Here are some of my initial thoughts.
First is that the phenomenon could be nearly entirely to rent-seeking. You said the key words: “all of the important things”. Education is critical, health care is critical. K-12 is critical as preparation for college, and getting a high reputation college is critical for status and earnings throughout life. The medical system is obviously directly critical to health. The offerors of these services have an effective monopoly (as a collective) on their services, so they can increase prices and not see a decline in quantity of goods. That the money is not going to teachers or doctors indicates that within these collectives, the actors with the greatest power are not actually those individuals, but other elements. This is not a surprise; each individual doctor or teacher does not have a monopoly, as they can be replaced with another doctor or teacher. The power resides in the bottlenecks of these institutions.
Within education, the bottlenecks are the NEA, the elite schools, accreditation organizations, and Government. Each of these players have a monopoly within their respective fields of action. So if you look to see where the money is going, it’s to these actors, or others like them that I’m not aware of as I type this paragraph.
Within medicine, the monopolies include patented drugs, major hospital chains, local hospitals, large health insurance companies, and Government. In some places, the local health insurance provider has a stranglehold over the health insurance market. Even if they are non-profit, they still control the market and collect rent.
Where does the money go? I can guess that it leaks out through people networks, some going to increased administrator salaries, and also more administrators, more consultants (who happen to know the head admin), other miscellaneous and specialized services that would have been completely unheard of 60 years ago (like unconscious bias training), and preferences for services companies. Some of this likely meets the definition of corruption, but it is usually well-hidden, transitory, or within the supposed discretion of the principle players.
Another factor that I didn’t see fully covered was actual rent. Urban real estate is significantly more expensive over the time periods you indicated, and I believe has appreciated faster than the general inflation rate. Urban colleges, medical facilities, and highly educated elites pay these increased real estate prices and pass on those costs to their customers. So each area of unusual cost growth also faces monopolists in the real estate business, and those monopolists seek to capture rent from the users of health and education services.
Sorry to revive an old topic, but there’s one more factor in the education space that I want to point out for where the money goes: Supplies, textbooks, and digital resources.
These companies are often duopolies or have resisted disruption over the course of the past few years, and work hard to build a closed ecosystem as much as possible. Textbooks didn’t get upgraded with anything fresh for years, ctrl+c, ctrl+v for too many of the editions.
I don’t have any numbers for this next bit, just anecdotal evidence: Google Classroom is eating everyone for lunch, but there were a lot of folks who were shockingly bad at implementing it pre pandemic. There’s a lot of resource bloat, underutilization, and scattered focus in the urban education field. If the district buys NewsELA for everyone, but the teachers only use it 5 times a year, is that optimal? Discovery education? Phet (amazing free resources) means that I’ll only go to those pages a few times. What makes the most sense?
Focus, consistency, retention, and discernment do wonders in the education field, but it doesn’t scale all that effectively.