Unless you do, I think it those industries are getting more expensive due to Baumol’s Cost Disease:
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.
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.
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.”
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.
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.
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 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 ...
> 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.
Disposable income in France is vastly lower than that of the US. Is that inflation? Or tax policy?
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.