JONATHAN CHAIT AUGUST 18, 2010
A couple months ago, Radio Shack put its old catalogues online. The basic gist is that the quality of electronic goods available today is much, much better and much, much cheaper. Mark Perry of the American Enterprise Institute took this as a lesson about how much better life has gotten:
it’s a “miracle of the market” that almost all Americans today can purchase low-priced electronics products that even a billionaire in the past wouldn’t have been able to buy. The increasing affordability of electronics is just one of many long-term trends that demonstrate that the “good old days” are now, and life for the average American keeps getting better and better all the time
But, of course, not everything has gotten cheaper and better. Health care has dramatically improved, but its cost has skyrocketed. Education has gotten far more expensive without improving much. A few weeks ago, Matthew Yglesias connected middle class stagnation to rising costs of those two sectors:
Talk of wage stagnation since 1970, similarly, obscures some major improvements in quality of life driven by technological progress and new goods. Everyone’s ability to purchase information and media goods in 2010 is drastically better than it was forty years ago and these same advances have driven an overall improvement in the quality of private consumer goods.
But when you look at the enormous challenges that exist, they loop back overwhelmingly to the fact that the health care and education sectors have not seen these kind of impressive productivity improvements.
Let me make this more concrete. Perry notes that, in 1964, Radio Shack sold a stereo system nobody today would want for $379.95. 1964 also happens to be the year my parents started college at the University of Michigan. According to Michigan's Bentley Library, in-state tuition that year for freshmen and sophomores was $140 ($155 for juniors and seniors.) So, a stereo cost more than a year of college in Ann Arbor. Is life so much better now? Yes if you're a middle-class person who wants a stereo. No, if you're a middle-class person who wants a college degree. Now, most people today would consider a college education overwhelmingly more valuable than a stereo, and find it hard to believe that there was a time when the latter was comparably priced eith the former.
Education and health care are immune to the kind of revolutionary productivity improvements we've seen in manufactured goods in general and electronic goods in particular. They're inherently at least somewhat labor-intensive. But they don't necessarily have to be as labor intensive as they are. And their failure to increase productivity owes a lot to poor design. That's why the Obama administration has made its top two priorities the reorganization of those fields, creating measurement systems and aligning incentives in order to drive innovation and higher productivity. I have more to say about this in my forthcoming TRB column. In any case, one of the key drivers of middle-class insecurity is vulnerability to bodily and.or financial disaster caused by the dysfunctional health care system, and the education system's growing role as accelerator rather than leveller of class differences. The success or failure of those two reforms will the ultimate long-term measure of Obama's domestic agenda.