Monday, October 8, 2012

Cost Disease And Our False Healthcare Problem

This is a review of a book that makes a paradoxical claim.  It argues that the cost of healthcare, education, handcrafted products etc. are on the rise because they are labor intensive.  It is hard to provide these services with fewer people.  On the other hand, we will always be able to afford them because we will have to work fewer hours to pay for them.  That is because of rapidly increasing productivity in producing things with the assistance of machines.  The biggest problems that we face comes from producing products like fossil fuel devouring vehicles and weapons which continually fall in cost as a result of rising productivity.  This causes us to destroy the environment and to engage in continual warfare.

This is an interesting argument because rising productivity can be our friend rather than our enemy.  It depends upon how we spread the benefits from rising productivity.  If the benefits are divided between labor and capital, we can afford to purchase expensive services that make our lives worthwhile.  We will also employ more people in providing the services that we desire.  The composition of GDP will shift from producing more things that we can get rid of with a great benefit, and consuming services that really make our lives better. 

One of the problems that we suffer from today is cost disease.  Our politicians tell us that we can't afford things like healthcare that make our lives worthwhile.  We can afford healthcare, education and other desirable services as long as we spread the benefits from productivity more liberally.

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