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I think your explanation is actually addressed, just not directly: the article touches on the "Government is inefficient" hypothesis (which might be fuelled either by taxes or debt; it's the incentive structure that matters, not the source of the money), but that hypothesis makes a number of predictions that are falsified:

- If the increased cost is due to government inefficiency, there is opportunity for for-profit businesses to provide the same service at lower cost, and either capture the difference as profit or compete on cost for more business. However, in practice, for-profit hospitals and schools operate at similar cost.

- If the increased cost is due to government inefficiency, then countries where the government enforces a monopoly over the service should have higher costs than countries where there is significant for-profit activity in the same sector. However, US costs are much higher and have increased much faster than in other developed countries, despite the US system being the most privatised by far.

> If the increased cost is due to government inefficiency, there is opportunity for for-profit businesses to provide the same service at lower cost, and either capture the difference as profit or compete on cost for more business. However, in practice, for-profit hospitals and schools operate at similar cost.

One possible cause here is government regulation causes increased costs, which all (legal) private companies can't avoid.

> However, US costs are much higher and have increased much faster than in other developed countries, despite the US system being the most privatised by far.

Which industry are you talking about here? The US does not have privatized medicine at all.

Sad to see this king of comments on top.

> Many of these issues he addresses - healthcare, housing, infrastructure, and education, are enabled by federally assumed debt. > The core problem, I believe, is that federal debt is like a blank check that nobody is personally accountable to repay.

This statement is more about ideology than facts: « free money, inflation, federal government doing shit» is like the constant refrain of conservatives for everything …

It's not even relevant in the context of this article :

- housing debts are individual debts, and they are indeed being repaid. Same goes for college tuition debts.

- this attempt to mimic a monetary economist reasoning is wobbly since those figures are expressed in constant dollar: those are cost increase in addition to inflation.

Who is personally accountable to repay government debt? Taxpayers. The politicians that assume debt are not accountable to repay it. that is all I meant by that comment.

The federal government has a hand in underwriting mortgage financing (they own Fannie and Freddie, and they keep the profits from those entities).

The Student Loans are personal loans, underwritten by the federal government.

I am not saying the federal government should never do these things, or that these programs are the root of all evil. However, the federal government has been generous with these programs. I think the incentives of providing easy money through debt to the economy are easy in the short term, and that this cost-disease is one of the long-term results.

If debt is akin to borrowing from the future, then maybe we borrow from the future at the future's level of inflation.

> federal debt is like a blank check that nobody is personally accountable to repay.

that statement is applicable to rising costs in, e.g. federally (or state or municipality) funded infrastructure programs such as the subway construction project that was one of the examples in the article.

the individually assumed debts (student loans, home mortgages) are being paid back and there is accountability there. however, the individual accountability of those debts is not a way out of the cost disease. the fact that individuals are now willing and able to take on larger and larger debts to pay for these perceived essentials is exactly the reason why those things keep going up in price: the buyer's have more money to pay for them (even if it debt and not really wealth).

Even assuming that all of this increased spending is enabled by easier access to capital (through federal debt, as you say), it doesn't really answer the problem. The incentive to lower the cost should still be there.

Suppose before introducing government loans, university education costed ~$X/year on average. The government puts additional $Y/year on the table, so (putting the issue of repayment aside) now people can afford to spend $(X+Y)/year. Why then the colleges that can provide the service for $X increase the price to $(X+Y), when they could have kept the price, so that customers choosing them would only pay $(X-Y) out of pocket? Market should clearly favor the service providers who did that, so why doesn't it?

Rebar now costs something like $600/ton. Suppose government gave direct subsidy for rebar used in building construction of $300/ton. Would it increase the rebar price to $900/ton? I don't think so -- the companies that continue to charge $600 would clearly undercut the companies that try to charge $900. Of course, there are some secondary effects, like the increase of demand for rebar as a result of the subsidy, which could probably increase the price a bit if the supply is limited, but there would still be incentive to drive the cost down (at least until the subsidy cover the whole price).

> The incentive to lower the cost should still be there.

the incentive is for the buyer. the seller has no incentive. seller's incentive is to raise the price as high as possible before it begins to curtail demand. if demand is held constant (or even stimulated to new growth) by supplying debt financing, then the seller will just keep raising costs.

Well, college is "different" (to put it mildly).

My theory is colleges are, in effect, selling a positional good[1], one whose value depends on its ranking relative to other goods. People go there to prove that they are in the nth percentile by some desirable quality.

Positional goods providers behave like monopolists when (the perception of) that ranking can't easily change, and buyers place extreme importance on being in the nth percentile.

To compare back to the rebar example, if a buyer had to get rebar from a top 3 provider (rather than simply "rebar above X psi strength etc"), and the top 3 never changed, you'd probably see the same effect, and they would simply raise prices with every subsidy.

[1] https://en.wikipedia.org/wiki/Positional_good

But the healthcare is not like this, and neither is housing: going to a better doctor is a very weak status signal, and while some people do spend a lot of money on housing to signal their status, for average person the function of their house or apartment is to provide roof over their head.

Don't you look for the best doctor when choosing healthcare? Often, the best doctors cost more money since they have limited time.

Spending more on housing is difficult because the location component of a house usually effects the price as much or more as the quality/size of the house itself.

Fair enough, but these don't all have to have the same cause (except maybe in a very abstract sense).

thank you. I was astonished while reading this that there was no mention whatever of debt financing as an underlying cause for cost disease(s).

every single one of those cost growth curves is a close match for the early part of the exponential growth curves of compound interest on debt. well, it's exponential growth, we know what shape the later part of the curve has.

> every single one of those cost growth curves is a close match for the early part of the exponential growth curves

The early part of a logistic growth curve (https://en.wikipedia.org/wiki/Logistic_function) also looks exponential.