a midway bikelog

I was at a gathering recently chatting with a friend who has an interesting theory on our increasing cost of living, gas prices, medical expenses, etc. This friend has worked as an actuarial, so he’s not just a smart guy, he’s spent a little time looking at these sorts of numbers. It’s no secret that over the last couple of decades medical expenses have been rising at a faster rate than both inflation and wages. The theory is that it’s the medical expenses that are the true measure of where our economy should be, and that wages and inflation have been artificially kept low.

Our fuel prices have been kept low through government policy and subsidy for years, and now we’re feeling a more direct version of the market forces at work there. The historically artificially low fuel prices have also kept the price of food and goods artificially low, since fuel cost for production and transportation contribute directly to the cost of those items. As a way to keep price of goods down, the recent trends have been for manufacturers to export production to cheaper factories overseas, which also contributes to the continued low prices. Lots of jobs have moved overseas, from manufacturing to customer service, but one of the few things that cannot be outsourced is health care. There are undoubtedly supplies manufactured overseas, but the people and infrastructure must all be here.

The idea is that despite the somewhat inflated cost of health care due to insurance premiums and the (arguably) overuse of expensive technology, that the cost of health care is more in line with what everything should cost nowadays, if the various subsidies were removed. Wages would also be higher, though we’d be dealing with inflation so we wouldn’t necessarily be any better off, but the inflation of the economy as a whole would be more balanced. I’m no economist, but it doesn’t seem like a policy of managing the economy just to maintain a specific inflation number that sounds good on the campaign trail is necessarily the best way to go.