Comment by digitaltrees | Hacker News Reader

Comment by digitaltrees | Hacker News Reader

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It scales linearly because the same ratio of services to people continues. There aren’t suddenly less kids to educate, less elderly that need health care or less cases in federal court as the population grows.

—- As someone that has been in healthcare for 12 years it’s broken because of the corporate structure and administrative state of companies. The payors and providers share the same incentive to raise rates because they each collect a percentage of premiums. This is a solved problem in every OCED country in the world except here. RFK isn’t going to fix this, he hasn’t even labeled the problem correctly. He has some ok ideas around nutrition but the rest of his ideas range from futile to dangerous.

—- Corporate tax contributions aren’t at fair levels the national debt is increasing even while spending isn’t. They get access to markets created by society and government and yet as debts increase their ratio of tax payments is going down. The fair level would cover social service costs. I haven’t even gotten to the companies that receive subsidies or pay workers so little that they are in social support.

> It scales linearly because the same ratio of services to people continues

That would be scaling with population, not GDP.

> The payors and providers share the same incentive to raise rates because they each collect a percentage of premiums

This must be an oversimplification. Why would insurers ever reject a claim, or spend time negotiating lower rates, if they're only incentivized to see health costs increase?

> That would be scaling with population, not GDP.

This is Baulmol's Cost Disease (https://en.wikipedia.org/wiki/Baumol_effect) in action, and it's something that advanced economies must take into account.

A barber today is not much more productive than a barber in 1900, but a haircut today costs much more than a haircut in 1900, even adjusted for goods inflation. Why is today's haircut evidently more expensive?

The answer lies in the labour supply. If haircuts didn't cost more today than in 1900, would-be barbers would work in goods-producing sectors that have seen real productivity growth and consequently 'naturally' improved wages.

In some sectors, this has led to the replacement of labour with capital. Domestic help was once hired by the ordinary middle class, but now we have kitchen and household appliances instead. We see fewer expensive hand-crafts and more factory-produced goods. Even fast food joints try to replace human service with ordering kiosks.

This replacement is much more difficult in the government sector, where transfer payments tend to relate to income rather than absolute provision of hard goods and where health-care and education are two of the sectors most affected by the Baulmol effect.

Domestic help was once available because there was an extreme surplus of dirt poor people.

After the economic boom due to rising productivity, there weren't enough dirt poor people willing to work for peanuts, and today things like minimum wage and various benefits programs make it easier to not work for so little money a middle class family can easily afford it.

People would rather buy cheap factory goods than the more expensive hand made ones because they prefer to spend money on other things instead.

Google says the average barber haircut in 1900 for a man (women often did their hair at home) was 25 cents, which is just shy of $10 adjusted for inflation. Most places around me offer basic haircuts for $20.

In 1900, only the state of Minnesota had a requirement for barbers to be licensed (it was the first state to do so, in 1897). No beautician school requirement, no licensure payments, no state or federal income or sales taxes.

In short, it's surprising that the rise in cost of a haircut hasn't been higher.

I think there's something to Baulmol's theory, but there's a lot of hand waving that isn't really supported as well by the examples given here or elsewhere that I've seen. That, or the effect isn't all that it is claimed to be; it's almost tautological that as supply of workers for a low paying job dries up, the wages for the job have to go up to retain workers.

> Domestic help was once available because there was an extreme surplus of dirt poor people.

That's precisely the Baulmol effect. When your next-best job is subsistence farming, being employed as domestic help is a step up. When your next-best job is (e.g.) something relatively well-paid in a factory or a phone exchange, being domestic help is no longer so attractive.

> That, or the effect isn't all that it is claimed to be; it's almost tautological that as supply of workers for a low paying job dries up, the wages for the job have to go up to retain workers.

I think we agree here. The mechanism of the Baulmol effect is pretty boring and pedestrian, but the outcome is surprising in aggregate. It's "why are we paying X times more for the same number of teachers?" and "why are there fewer tailors and more fast fashion?" and "why can't I find a handyman who won't refuse to fix something around my house because the job is 'too small'?" all wrapped up in one.

In most of the world, a haircut averages at $5.

In France the average man cut is between 15€ and 30€. You can find cuts at 8-10€ in poorer areas.

For reference, a visit to a family doctor is 30€, 28€ is reimbursed (you pay 2€ effectively)

> You can find cuts at 8-10€ in poorer areas.

It's not about poor areas. My city is middle-class AF and there's a 8€ barber there.

It's just that they have a list of exactly one haircut they apply to everybody, and a few more shaving styles.

Sure, this will depend on the region. I am west of pairs (middle-class AF as well :)) and the cheapest haircut is 13€ in a somehow shady place without any fancy information about the kind of haircuts.

Barbers are crazy priced (because hipsters and whatnot) and the typical chain (Jean Louis David) is 30€ or so.

The cost of goods does not change. It just means someone else is paying the 28 EUR part

Yes you are right of course - my main point was about the cost of an MD visit. The reimbursement part was just to flex about how our health insurance is good :) (unrelated to the discussion)

Not in Europe or any other developed country. Haircut is that cheap when worker lives on super low wage.

> [wiki:] The rise of wages in jobs without productivity gains results from the need to compete for workers with jobs that have experienced productivity gains

This implies that higher productivity gains result in higher wages, which is historically not the case. This explanation appears to only establish a weak correlation (productivity->wages) and stick to it where other factors like cost of living better explain even regional differences. Or what do i miss?

I've never heard this applied to the healthcare sector, in the way that doctors think about it their salary. I'm a MD and hear this as an explanation that other MDs give for their compensation i.e. "I would/could have done ibanking instead of neurosurgery, therefore my compensation..."

Unfortunately, MD compensation has more to do with a bottleneck in residency spots (post-medical school training), part of which may be artificially tight from lobbying efforts, but also there are real physical barriers to scaling up medical education. there are only so many operating rooms where a resident can be safely assigned and supervised.

However, I think there is a grain of truth to MD's perception of the Baulmol effect, just in the opposite direction. Despite claims of healthcare being privately-funded, about half of healthcare dollars in the US originate with a government agency of some form. This does not taking into account the fact that healthcare organizations don't pay taxes (501c3), get government-provided free labor (aforementioned residents), and have a workforce educated through government financing. Though not one-to-one, our salaries are impacted by what medicare/medicaid sets as procedure-related reimbursements. Though no MD could live off of medicare payments alone (I think total reimbursement for a PCP visit is $125), its a proxy, and is one of the big reasons why proceduralists (surgeons, anesthesiologists) make more than the thinking specialties (infectious disease, rheumatology). So - I think Baulmol here works in that the public/govt who agree to some compensation for MDs that is commensurate with other high-paying fields. There may be some perception that top students would actually choose ibanking over neurosurgery based on compensation, so the public is willing to pay in the same ballpark. Whether that belief is true is another conversation - and whether we really should be sending top students to medicine (where they tend to despise their job and look elsewhere for intellectual stimulation) is another story as well.

No, because the level of services and cost to provide them scales also.

Inflation. What paying workers costs. What is considered an “acceptable” level of poverty vs abject poverty as we get richer. New, expensive medical procedures. And as the world gets richer, defense gets more expensive.

We can’t pay 1930 salaries to workers, field a 1930s army, nor would we consider it humane for our elderly to end up with an impoverished 1930s standard of living with 1930s medical care.

Inflation is misleading for these purposes, too, because it includes hedonic adjustments. So a new better procedure or bigger apartment costing 40 pc more might only be 10 pc higher from an inflation point of view, even though you can’t really buy the old one.

Re: insurers— it is an oversimplification. Suffice it to say they are at scale where they have market power and thus don’t price where p=mc, and the regulatory pressures and price opacity push them even further away from efficiency. They are not completely insulated from costs or market pressures, but it’s fairly close.

> Inflation. What paying workers costs.

GDP without qualification is 'real GDP', not 'nominal GDP', i.e it's already adjusted for inflation. I agree that costs need be adjusted for inflation

> GDP without qualification is 'real GDP', not 'nominal GDP' i.e it's already adjusted for inflation.

Nah.. I can't intuit what you are thinking or arguing. But I already addressed much more than you responded to. e.g.:

> > Inflation is misleading for these purposes, too, because it includes hedonic adjustments. So a new better procedure or bigger apartment costing 40 pc more might only be 10 pc higher from an inflation point of view, even though you can’t really buy the old one.

Claims approval has nothing to do with rate setting. Insurance companies can deny individual claims and still use the total payments in the aggregate to argue for premium increases with their regulators. Remember they are entitled to a statutory administrative costs fee. That’s how they really make money. 10% of a $2B is more than 10% of 1B so they want spending to go up.

> That would be scaling with population, not GDP.

Educating kids the way we did in 1910 would certainly be cheap, but I don’t think anyone in the country is looking for that.

That may actually be an improvement. One of my math teachers in high school hated the text books and gave us sets of problems from the 1950s. Instead of 20 easy problems, it was 3 much more difficult problems. The problem in our education system is the standards are in the toilet because they are afraid to fail people. This does not cost money to correct.

Is that because we’d bring standards back? Harvard is finding that students can’t read books. https://www.nationalreview.com/2024/10/why-elite-students-ca...

Haha, fair point. It might actually be better to educate them like in the 1910’s.

They don't read books for entertainment anymore. They play games people on this forum made. That is about it.

No. Modern kids in the US were trained on short form articles. As a result they experience anxiety when as to read a single book per semester. They really hate being asked to read multiple books per semester for just one class.

Most people didn’t graduate high school back then

What about educating them the way we did in 1980?

> There aren’t suddenly less kids to educate, less elderly that need health care or less cases in federal court as the population grows.

There are fewer kids to educate, but all the school funding formulas are based on number of kids, so as there are fewer kids, there are less federal and state funds for the kids (but schools have a lot of fixed costs). And there is a lot more legally mandated costs for special education than in previous decades due to legally mandated “Individual Education Plans”.

This means less resources overall, and especially less resources for higher achieving kids. Rich people who can supplement their kids’ education will benefit, and lower class kids who used public education systems to break their families out of the lower class will be less likely to succeed.

https://www.axios.com/2024/07/03/education-enrollment-cliff-...

> By the numbers: The U.S. is expected to reach "peak high school graduate" in 2025, when around 3.9 million young people will graduate, per WICHE.

>By 2037, there'll be only about 3.5 million high school graduates, WICHE projects — a 10.7% decrease.

Don’t worry, RFK will be gone in 6mo once the pharma lobbyists get through to Congress members if he touches anything that affects their profits.

I do worry - in a sense. I have no doubt that a mugging gone wrong or a car crash because reasons could occur or is being considered actively.

Too often the enemies of the deep state wind up dead under suspicious circumstances. I see no reason why any of the new guard will be exempt from those methods.

Who would be so bold as to kill a Kennedy?

I think there’s been about 60 years to have the shock value wear off

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