The U.S. government seems to be worse than the others.

For instance when Europeans hear how much it costs to build a subway in the U.S. often they are shocked. Heck, the Green Party in my town got shocked when it heard how much it costs to build a bus shelter.

Also government is involved in healthcare in other countries too. The difference is that our government spends more than the others and then the private sector spends more money on top of that.

Thus government itself is not a problem so much as the U.S. government is particularly broken.

Where do you get the idea that government is not involved in subway building in a big way in the US? Perhaps there are more legal/regulatory barriers in place to build a subway in the US than in Europe.

>Thus government itself is not a problem so much as the U.S. government is particularly broken.

The cost disease is affecting all developed economies, not just the US, and it affects almost exclusively government dominated industries. If all governments are broken, then that suggests something inherently wrong with government.

Can you use this model to explain why government-involved health care, education, and subway construction is much cheaper in all other developed countries than in the United States?

I don't know but if I had to speculate, I'd say the US has less efficient government, because of factors like greater wealth (more complacency toward waste and corruption) and a larger and less homogenous population (a less coherent public debate).

With respect to the second point, I hypothesize that generally central economic planning becomes less efficient as the economy it plans grows larger. I suspect this is related to Dunbar's number.

More to the point, it is usually the government that funds, builds and operates the subway.

> Both are electives

This is critical, because it makes them actually price-sensitive. You can't choose not to have heart disease, though.

Free markets have a bunch of conditions on their efficiency that are often ignored by advocates and don't always apply: must be plurality of non-coordinated buyers and sellers, must be feasible for participants to determine quality of goods (Akerloff's "lemons"), must be low barriers to entry, must be feasible for participants to choose not to do a transaction, and so on.

You can't choose not to eat, yet food prices don't rise like healthcare prices.

I think TFA did a pretty good job showing the difficulty of pinning the problem on market failure, government failure etc. At least any confident explanation must come with numbers and not just passionate words showing where the money went.

You have to eat, but you can choose what to eat. The beef farmer has to compete against the pig farmer and the bean farmers.

I don't have an explanation, but your counter doesn't fit either.

> yet food prices don't rise like healthcare prices.

agricultural subsidies and price support (government agrees to purchase unsold surplus of many crops) are a huge contributor here.

also consider the externalities. the price of cheap beef is that 60 years from now a global climate crisis will cost the entire world thousands of trillions of dollars, and probably lots of lost lives as well.

The price trends of food and healthcare couldn't be more different. There's clearly something more than agricultural subsidies at work explaining the difference, given healthcare receives many fold more subsidies. In fact, it's possible that receiving compatively little in sibsidies is one reason that food prices have declined. An even more likely explanation for the price decline of food is that consumers are incentivizes to bargain hunt when buying food, since doing so reduces what they pay, and thus a real consumer-driven market, that rewards efficiency, exists in food. In healthcare, with private/government insurance, there is no incentive for consumers to bargain hunt.

Another factor that likely contributes to the divergence in prices is that healthcare is heavily regulated while food production is not anywhere near as constrained by government mandates.

food production and distribution is also heavily regulated. the USDA inspects farms for safety and sanitation. the FDA inspects food processors for safety and sanitation and inspects food products for safety and purity (whether or not the item in the package is what it claims to be).

I don't know precisely how this compares with the degree of regulation and government intervention in the healthcare sector, but I wish you would try to make a more concrete argument with some examples or citations. as is it really seems as if you're arguing purely from ideology.

>food production and distribution is also heavily regulated.

Nowhere near as much as healthcare. Sorry I can't provide any concrete evidence of that

The most obvious problem with healthcare prices is that consumers are removed two steps* from paying for it, so there's little price pressure. But it's hard to have an insurance-based system while also providing an incentive to choose a lower cost provider.

* first by insurance, and second by the employer/government paying for the bulk of that insurance

That's why we shouldn't have an insurance based system. Like Ron Paul (who has been a medical doctor since the early 1960s) says, health insurance should be for catastrophic medical events, not for routine checkups and minor ailments and illnesses.

That's how Singapore does it, which is probably fine. A shame nobody their system hasn't come up as a viable option over here.

>This is critical, because it makes them actually price-sensitive. You can't choose not to have heart disease, though.

But the sectors experiencing the cost disease do not universally share the property of having inelastic demand. In fact, inelastic demand alone will not make a field price-insensitive. One can still be price conscious when purchasing a non-elective service. Only in the case of an emergency service, where the consumer is not capable of shopping the market is price sensitivity lost.

The biggest source of price insensitivity is government coverage, which eliminates all incentive for a consumer to shop around to find the lowest cost product/service.

>must be plurality of non-coordinated buyers and sellers, must be feasible for participants to determine quality of goods (Akerloff's "lemons"), must be low barriers to entry, must be feasible for participants to choose not to do a transaction, and so on.

Collusion-prone industries are the edge case, not the norm. We have levels of government intervention far in excess of what's needed to prevent abuse in these sectors. Moreover, many of these sectors are collusion-prone due to artificial regulatory costs imposed by government, as well as the intellectual property system created by government, which create barriers to entry that benefit larger economic entities, and lead to many sectors being dominated by a handful of large companies that are in a position of being able to collude with one another.

>must be feasible for participants to determine quality of goods (Akerloff's "lemons"),

Akerloff's lemons have many market solutions.

> Isn't it obvious? All of the fields experiencing the cost disease are dominated by government

Those are all fields which actually need state involvement. In the graphs you can see that countries with more state involvements are actually doing better. So the bad performance in the USA could be pinned to an avoidance of letting the state do things.

There was no runaway growth in cost when government first started getting involved in those industries in a big way. The cost disease began in all developing economies after large scale government intervention began.

>In the graphs you can see that countries with more state involvements are actually doing better. So the bad performance in the USA could be pinned to an avoidance of letting the state do things.

That's overly simplistic. Government in the US spends more than most developed countries on healthcare per capita so it is not at all clear that it is less quantatively less involved, the until recent lack of universal coverage notwithstanding.

Also, the fact that patients consume far more technologically advanced services, like medical imaging, and experimental and cutting age treatments in the US than in Europe and has to be factored into any analysis on cost-benefit.