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Comment by pjdemers | Hacker News Reader

Back in the 60's, many full time jobs came with a defined benefit pension. Health care was not nearly as expensive, even without insurance. Last, houses were cheap, college was almost free, and there were many more good public schools, so living in the very best school districts wasn't as important. In other words, many of the things that today's households making > $150k spend money on were vastly cheaper.

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"Health care was not nearly as expensive"

True, but its capabilities have grown since then, too. Things like monoclonal antibodies can now cure very serious conditions, but they are very expensive to produce.

In the 1960s, cancer was an almost certain death sentence, nowadays, it is often manageable - but that increase in survival comes with a price tag.

I think that when people complain about the cost of health care, they're not talking about things which cost a lot to produce. They're taking about things that cost almost nothing to produce, but are priced outrageously because of some wonky market dynamics

Drugs cost money to produce. Pharma R&D spending has gone up by a factor of 10 since 1980, to almost $90 billion/year. And manufacturing, sales, distribution, etc., aren’t free. EBITDA margins in the industry are typically under 30%. And drugs are just 10% of health care spending. When a cancer or heart attack patient survives instead of dying immediately, they need decades of doctors visits, nursing care, etc.

The second pill costs almost nothing to produce. The first pill costs billions, plural, and the successful minority of new drugs have to foot the bill for all the unsuccessful first pills.

I'm talking about pills developed in the 50s, and which cost nothing to manufacture, and almost given away in most of the world except in the USA.

Which pills developed in the 50s cost much more in the US than in the rest of the world?

Ask Martin Shkreli.

A cartoon villain, to be sure, and a legitimate target for public policy interventions, but pretty clearly not an indication of why US health care costs so much; he managed to price those drugs specifically because they were a corner-case for the pharma industry.

Like a doctor's unhelpful glance

I call this sort of reasoning the "Wonder Years" fallacy. People forget that the “middle class family” in "The Wonder Years" show--headed by a man who graduated college and a woman who completed some college--would have been a solidly top 10% family in 1970.

Since 1970, the poverty rate among seniors has dropped from almost 25% to just above 10%: https://sgp.fas.org/crs/misc/R45791.pdf. Although more people had pension plans (though never a majority), they were not portable, and most workers never stayed at a job long enough to earn their pension. Pension benefits were also low compared to what they are now. See: https://retirementlc.com/golden-age-pensions-another-fairy-t...

Healthcare was cheaper in 1970, but because doctors could not do much for you if you got heart disease or cancer or other chronic illnesses. In 1970, 40% of heart attack patients who were hospitalized died. Today, it is well under 10%. Living longer doesn’t happen automatically, it costs money. Not just to develop heart medication or cardiac stents, but for the decades of additional care that is required when a heart attack patient survives to old age instead of dying at age 55. It’s not just old people either. The infant mortality rate has dropped from 26 per 1,000 in 1960 to under 6 per 1,000 in 2020. That wasn’t from cheap interventions like vaccination, which happened a generation before that. It was from expensive interventions like giving birth in hospitals, extensive pre-natal care, surgical interventions for sick infants, etc.

The costs per square foot of new houses has stayed pretty much the same from 1970 to 2015: https://fee.org/articles/new-homes-today-have-twice-the-squa.... What people overlook is that (1) as the population grows, the "frontier" of where the typical new house is being sold moves; and (2) people are using their growing income to buy much bigger houses. For example, Silicon Valley was an underpopulated, undesirable suburban and rural area in the 1960s—that’s why they built semiconductor facilities there!

It’s important to account for both price increases (paying more for the same thing) and consumption increases (paying more to get more). A good example of both of those things happening is college. The cost of college has undoubtedly gone up faster than inflation. But it’s also a very different product than it was in 1970, with fancy housing and recreational facilities and tons of handholding from support staff.

By contrast, housing is a good example of something where it’s been mainly consumption increases. People are taking all their extra income and using it to buy bigger houses in more desirable areas.

Cries in Vancouver real estate, where homes increased 400% in 10 years

The crunch at the bottom causes people to try to get their children into the elite. This causes high competition among the elites (you can see that with college tuition going up and people with degrees working as baristas) which causes a crunch at the top which is starting to cause political instability. I think a lot of this is cyclical although I'd argue that (in the US anyway) the crunch at the bottom came before it really needed to due to some poor policy decisions.

> many of the things that today's households making > $150k spend money on were vastly cheaper.

So in other words, "inflation adjusted" wasn't done right here?

This link says the share of cost burdened renters has increased from 25% to 50% between 1960 and 2014.

https://www.apartmentlist.com/research/rent-growth-since-196...

That's a type of inflation. The share of cost burdened renters has increased by 1.3% per year relentlessly for 55 years.

Isn’t this comparing inflation adjusted incomes?

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