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Comment by sakoht | Hacker News Reader

"Why are certain things getting so much more expensive?"

Because we are lying about inflation. It's not a conspiracy, just a mutually agreed-to delusion. By pretending inflation is lower than it is, the poor feel like they are standing still instead of sinking ...though instinctively they know. And the people just keeping up get to feel richer. Since technology and efficiency improve, the people staying in the same place have cooler things.

If inflation were reported correctly, average would see their paychecks dropping as wealth and power consolidate elsewhere. There is no interest in creating alarm around this fact. Instead the public is distracted by social drama, and political discourse consumed by things that do not affect the real shift in power.

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Do you have any evidence that “we are lying about inflation”?

Unless you do, I think it those industries are getting more expensive due to Baumol’s Cost Disease:

https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease

http://www.shadowstats.com/alternate_data/inflation-charts

ShadowStats inflation is literally the CPI minus a constant. The guy making is completely laughing at you -- he doesn't have a methodology to calculate the inflation, he's just publishing numbers people want to hear.

I have a different take. Healthcare, education, construction costs are all regulated by governments. Unlike companies, governments are systems of people who thrive from complexity. More complexity = more work, more power, more benefits (direct on indirect).

To give you an example from construction, a company producing a complex part is "giving away" 3 day training in fancy locations, with all hotel & meals paid by the company. As a government employee who gets a fixed salary no matter the results, would you prefer using a product which gives you to these free trainings (free mini-holiday), or using a cheap part which does the same thing, minus the fancy training sessions?

I think the root cause is having some people in charge of other's people money, without clear responsibilities (vs. evaluations which happen in private companies, with the possibility to getting fired anytime if you have a poor performance on result-oriented KPIs), AND having a monopoly. You can't simply start another healthcare or education system, without complying to all existing complex regulations & processes.

From a US perspective, these are all markets that depend on expensive skilled US labor. Many things like manufacturing have shifted to labor markets that are cheaper. How much is due to currency differences, cost of living differences, etc. vs. employee safety or anti-pollution regulations ... I don’t know.

My dad was a programmer and I'm a programmer. I don't think I'll ever make a salary as high as he did[1], and that's in absolute dollars. Yet, my quality of life is definitely better. I take vacations all over the world. I can look up any fact I want instantly on the internet. I work from home 3 days a week. I've easily cured maladies that were huge nuisances when he was my age.

You're right that macroeconomic indicators don't seem to tell the story, but I can't square my experience with your claim.

1. He has a Master of Physics, I don't have a degree.

How much was his salary? I would think a lot of programmers these days make more in absolute dollars than their parents would have.

Not all children are as smart or productive as their parents.

Inflation/devaluation has always been that game. The question is why it’s been so uneven.

I think all of the areas Patrick mentions are places the government has decided are “multipliers,” and has directed spending or subsidy. I vaguely recall a discussion in undergrad macro that it was always an advantage to be at the place inflation is injected into the system. We’ve had these input points for 60+ years.

Tech is a mixed bag, but housing, construction, medicine, and education are all prime places for social “investment.”

I have read that the cost of education is going up because unlike other parts of the economy, which benefit greatly from automation, with education you still have to hire these costly human teachers.

So as the efficiency of everything else goes up, the cost of those things is depressed. But teachers cost the same. So relatively under an inflated environment, they become more expensive.

So why are other things not getting much more expensive? Why are things not getting more expensive at the same rate? Monetary inflation affects all goods more or less uniformly, but the price of milk hasn't skyrocketed as much as the cost of education or housing or healthcare.

Monetary inflation affects all goods more or less uniformly

Money being created is like pouring water into a pool - it creates ripples outwards. Eventually, if you stop, yes the surface of the pool will become calm and the pool will be higher. But whilst you're pouring, the volumes are not even.

These days, when the government creates money it doesn't put that money into everyone's bank account overnight. When was the last time you got a cheque from the government labelled "new money"?

Instead the central bank engages in various forms of manipulation, like via the "QE" programmes that involved asset purchases. So, the prices of certain financial assets go up. They also purchase a lot of government bonds, or that money eventually makes its way into corporate debt. And what do governments do with this money, well, they often spend it on things like subsidising mortgages, or subsidising private banks (via bailouts), or healthcare, or education, or paying a large staff of government workers, or buying military hardware, etc.

So you go look at what's gone up in price very fast over the years and hey, look at that, it's the stuff near the centre of the pool. Things that governments tend to subsidise a lot or things that people feel they have to buy regardless of cost, like education, healthcare, homes, etc. The money pouring into the system ends up stacking up in a few places, it's not evenly distributed.

> Instead the central bank engages in various forms of manipulation, like via the "QE" programmes that involved asset purchases. So, the prices of certain financial assets go up.

The last round of quantitative easing by the Federal Reserve, QE3, ended in 2014. (QE1 began in 2008.) If these price effects for health care and housing began in 2008 and ended in 2014, it would make sense to blame QE, but they didn't, so it doesn't.

Price effects that are associated with government vs. private expenditures are not the same as inflation. That's just governments being bad (perhaps intentionally bad?) at spending taxpayer money efficiently. However, when it comes to health care in particular, that just isn't the case either--Medicare and Medicaid pay much lower prices for medical procedures than private insurance companies do.

The banking system was creating money in various forms outside of QE. That was just a well known mechanism.

The main way it's created is through loans, many of which end up in housing. And rampant speculation on apparently ever-rising house prices is where the financial crisis started. Ripples expanding ever outwards ...

Because monetary policy is only one of a multitude of factors that influence inflation. Regulations, subsidies, tax laws, trade agreements, labor laws, immigration policy are just some of the other things that have wildly disjointed effects on industries, markets and prices.

You're confusing inflation with rising real prices. Inflation doesn't discriminate -- the price of everything rises by the same proportion.

He's not confusing it.

> the price of everything rises by the same proportion

Due to regulation, that's simply not the universal case - e.g. rent control. The economy is conceptual, but prices are concrete leading to some ironic situations.

Inflation is when the currency itself loses market value. There's no such thing as inflation that only affects some goods and not others. The prices of some goods do fluctuate relative to each other, but that's not inflation!

Do taxes matter? Indentical products in the US and France feature French prices that are far more expensive, even when adjusting for currency. Milk, for example. iPhones. Clothing especially. Washing machines, furniture.

Disposable income in France is vastly lower than that of the US. Is that inflation? Or tax policy?

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