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I am pretty sure I'm living in an apartment that's smaller than my parent's house was when I was born in 1988, despite having three incomes instead of two to spend on it.

I also think that a pretty big fraction of all the extra people attending college and receiving degrees aren't doing any thing with them. My girlfriend would I think be strictly better off in a world were she didn't have student loans and didn't need a college degree in Psychology for her mostly unrelated office job manipulating artwork and processing orders. I don't think she's consuming less education exactly, but I also think it's tricky to say she's consuming more.

I'm not sure where this fits into your model, and I suspect some of it is "it would be great if we could legalize lower priced options". But it does feel like a place where things go wrong.

Did you see the part where he addressed that? If your only option is a bigger house you don't want but have to pay for anyway, that's an excess cost. If these operations don't actually extend life or quality but you have to buy insurance with them, that's an excess cost.

And likewise, if your compensation has "increased" but it's only to cover health care that's pointlessly more expensive, that's not really an increase in compensation.

Alexander very specifically addresses the tradeoff in "would you rather have 70s health care plus $8000/years cash" etc.

I agree that there is excess cost relative to a counterfactual where smaller/cheaper houses are legal. That's not what I'm disputing.

What I'm disputing is whether, overall, we are actually worse off. Fundamentally here's where I claim SA is wrong:

Imagine if tomorrow, the price of water dectupled. Suddenly people have to choose between drinking and washing dishes. Activists argue that taking a shower is a basic human right, and grumpy talk show hosts point out that in their day, parents taught their children not to waste water. A coalition promotes laws ensuring government-subsidized free water for poor families; a Fox News investigative report shows that some people receiving water on the government dime are taking long luxurious showers. Everyone gets really angry and there’s lots of talk about basic compassion and personal responsibility and whatever but all of this is secondary to why does water costs ten times what it used to?

But in reality, this is not an accurate analogy to the modern world. I'm claiming a better analogy would be this:

Imagine if tomorrow, the price of water dectupled. Furthermore, people's income and ability to purchase water remained flat. Yet somehow people started taking longer showers, drinking 10 glasses/day rather than 8, having greener lawns, and just generally staying very well hydrated.

In this latter scenario, I'd tell you that somewhere along the way you messed up. Water consumption = money spent on water / price per gallon - if water consumption went up, either the numerator increased or the denominator decreased.

If you think I'm wrong, tell me what we have less of.

Then I don't think original comment was productive: you think the cost increase can be explained by quality improvements; Alexander expressed skepticism on that point, by suggesting how the products offered cannot be explained through a reasonable model of consumer preferences. As much as people value bigger homes, do they value them so much as to pay 10x more for 2x the size even when technology should be improving that?

As much as people value better health care, are they actually making a conscious, understandable tradeoff between money and actually-better health care on the metrics they really want?

You then mocked that as "fundamentally wrong", "stylized facts" without quoting the specific part where he reduced it to a thought experiment (take 70s health care + $8000) or addressing the logic there.

I'm not saying it can be explained (completely) by quality improvements.

I'm saying consumption = (income - investment) / price. That's just an arithmetic identity. Investment has been between 5 and 10% since basically forever.

http://www.tradingeconomics.com/united-states/personal-savin...

So if consumption went up, income must have risen faster than price. That's my only point: you can't simultaneously have stagnating income, rising prices, and rising consumption.

Now, if you're saying separately that it would be great if we could legalize lower priced options, I agree with you. That would be great. But all that would do is make (preference-adjusted) consumption go up more, or perhaps make investment go up even more.

That doesn't change the fact that this price increase + stagnating income story is false.

>So if consumption went up, income must have risen faster than price.

You're assuming the consumption itself went up rather than paying more for the same stuff. And people are paying a bigger fraction of their incomes for these things. I don't know what this is adding to the discussion besides assuming away the problem, as if nothing ever becomes pointlessly expensive.

>Now, if you're saying separately that it would be great if we could legalize lower priced options, I agree with you. That would be great. But all that would do is make (preference-adjusted) consumption go up more, or perhaps make investment go up even more.

No, that's an assertion that assumes away one possible resolution: that pointless regulations mandate that only the expensive options be offered. It's unlikely, but your model seems to disallow the very existence of that dynamic.

Yes, I'm assuming people live in bigger houses than in 1975, drive more cars than in 1975, consume more medicine than in 1975, and get more education than in 1975.

Which of these things do you disagree with?

I don't know what this is adding to the discussion besides assuming away the problem, as if nothing ever becomes pointlessly expensive.

You are arguing against a straw man. I never claimed this. Search my HN posting history; you'll discover I do think education and transit are pointlessly expensive.

I greatly respect your insights on the issues, especially when unpopular; you're one of the few whose comment history I directly read, and I was especially appreciative of your contributions in this thread [1].

I'm replying because your comments here are unusually unhelpful -- in contrast with all of your others -- in that you're assuming away certain scenarios or ignoring Alexander's points about them. To wind back to the original question, he is claiming that:

1) We are paying much more for healthcare/housing/education (HHE)

2) We are paying a much bigger fraction of income to HHE.

3) HHE is better ... but not by an amount big enough to justify the additional cost.

4) HHE workers don't make any more than they used to.

Which combination of those do you think is physically impossible?

[1] https://news.ycombinator.com/item?id=10446377

So here's an explanation SA dismisses:

First, can we dismiss all of this as an illusion? Maybe adjusting for inflation is harder than I think. Inflation is an average, so some things have to have higher-than-average inflation; maybe it’s education, health care, etc.

I'm saying that in fact, this explanation must be true.

SA further says:

I’m more worried about the part where the cost of basic human needs goes up faster than wages do. Even if you’re making twice as much money, if your health care and education and so on cost ten times as much, you’re going to start falling behind.

The reason is that if this broader worry were true, then consumption should be going down. In fact, consumption has only gone up. Again: find me a good or service that the median or even the poor consume less of than in 1975.

If SA were making a very isolated claim that education and transit cost too much, I'd be agreeing with him. But he's actually making a much broader claim, and the broader claim is what I dispute.

Your assertion that consumption has increased is compatible with Alexander's article if the quality of the product being consumed has decreased, e.g. people go to the doctor 20x more, but their health is worse than before. Or they go to school for 5 years extra on average, but are worse prepared for a job. In this scenario people are consuming more of an inferior product, and overall getting less utility/dollar spent.

50 years ago you paid $100 to a doctor and $80 of those dollars went towards giving you medical care, whereas now only $10 of those dollars go to giving you medical care. Back then only $20 went to 'overhead', but nowadays $90 goes to 'overhead'. By overhead I mean anything that is not directly germane to giving you care: administrative, taxes, insurance, lawyers, paperwork, even the $15 you spent on driving/parking to get to the hospital. The extra money is thus being destroyed by inefficiencies in the system.

I made these numbers up to illustrate my point.

Then I guess we were reading different articles. The focus here seemed to be "HHE is more expensive and there's no good reason for it". The claim was not "total real consumption is down". If HHE is 10x more expensive for no reason, and technology has reduced the price of everything else, then you can be absolutely correct that consumption of all goods went up ... but that's not the problem under investigation here.

The problem is, why must HHE be so much more expensive despite not delivering comparable value and not being that much more expensive in other countries?

Even when Alexander brought up the resolution you endorse, he went on to say that it doesn't actually resolve the core dilemma because HHE is still overpriced relative to the value it delivers.

So, your comment didn't really justify its dismissive tone if you were essentially saying, "yeah HHE is overpriced for reasons we don't understand, exactly as Alexander is alleging, but it's not big deal because ipads are faster".

Isn't a possible answer that people's (net of tax) incomes are flat, but they can still afford to increase consumption because these services are government subsidized (directly or indirectly)?

Do people get ten times as much education per semester as in 1975?

More people consuming the same amount of college education doesn't predict a 10x cost increase in the same way that people buying (10x?) larger homes would.

consumption = Income/Cost

What about savings and/or debt? Aren't people saving less?

Yes, in retrospect I should have corrected for this. Savings has decreased, but only by 5%-7% of income since the 1970's. That hardly seems like it could explain the phenomenon alexander is discussing.

http://www.tradingeconomics.com/united-states/personal-savin...