I was under the impression that cost disease had the following bad effect:
More efficient use of any resource in one industry causes prices to rise in other industries relying on the same resource input. (All industries depend on labor to some extent, so labor is a maximally general example.) This can cause problems when efficiency improvements in the production of necessities do not keep pace with efficiency improvements in non-essential goods production.
This does seem to happen in reality; as far as I know, the prices of healthcare and housing have been increasing dramatically due to efficiency increases in other fields like tech increasing demand for labor. Some portion of people who could barely afford them at previous prices can’t afford enough now.
When looking at healthcare and housing, the critical thing to look at is government restrictions in supply: regulations in healthcare and zoning in housing.
Re-reading my comment, my claim that the price increases are “due to efficiency increases in other fields” was too strongly stated.
I don’t want to claim that cost disease is the only problem with healthcare and housing costs. My main point is that it does not require some bizarre twisty thinking to consider cost disease bad (and thus deserving of the name).
I was under the impression that cost disease had the following bad effect:
More efficient use of any resource in one industry causes prices to rise in other industries relying on the same resource input. (All industries depend on labor to some extent, so labor is a maximally general example.) This can cause problems when efficiency improvements in the production of necessities do not keep pace with efficiency improvements in non-essential goods production.
This does seem to happen in reality; as far as I know, the prices of healthcare and housing have been increasing dramatically due to efficiency increases in other fields like tech increasing demand for labor. Some portion of people who could barely afford them at previous prices can’t afford enough now.
When looking at healthcare and housing, the critical thing to look at is government restrictions in supply: regulations in healthcare and zoning in housing.
Re-reading my comment, my claim that the price increases are “due to efficiency increases in other fields” was too strongly stated.
I don’t want to claim that cost disease is the only problem with healthcare and housing costs. My main point is that it does not require some bizarre twisty thinking to consider cost disease bad (and thus deserving of the name).