A couple years ago, Mark Perry published a chart showing the change in prices of goods and services over time.
The chart has become something like a Rorschach test, where people magically interpret it as confirmation of what they already believe. Globalists point out the low-cost benefits of outsourced manufacturing; Libertarians blame government intervention for price increases in healthcare and education; Socialists see the same price gains and attribute it to Baumol’s Cost Disease, because they believe that human labor confers some irreproachable value regardless of productivity.
I was in Cuba X years ago, where X is some number greater than the statute of limitations for OFAC violations. What struck me was how closely the Cuban economy mirrors that of the US. And by “mirror”, I mean everything is the exact opposite.
In Cuba, health care and education are Free, and toys and food are expensive. Well technically toys and food are free too, if you don’t want very much. Every Cuban receives a ration book that entitles them to five eggs a month and, for those with children, three toys a year. If you want more than that, you pay up on the black market.
Turns out everyone is absolutely right about that inflation chart. Globalization has indeed made manufactured goods dirt cheap in the US. A quick way to similarly reduce health care and education costs might be to send students and patients offshore, like the Mariel boatlift in reverse. As for Libertarian complaints of regulatory capture — if we rationed toys the way we ration physicians and college diplomas, toys would be expensive too. But the Socialists are smartest of them all. Baumol was right — Healthcare and education are overpriced because the opportunity cost of labor is high.
Cuba gets it. By running an authoritarian commie state, they don’t waste human resources on politics and media and bankers and other parasites. That frees up a lot of manpower for people to become doctors.
In Capitalism’s defense, well, free-market capitalism has never really been tried.