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Megan McArdle

Why Do Education and Health Care Cost So Much?

People want better education and healthcare but have a hard time measuring their quality.

Ezra Klein says that college and health care have the same problem: You can't do without them, and therefore, they are very expensive:

I don't think that this can be right. Food and water are far more vital than health care, let alone higher education, which the human race managed to do without for a few hundred thousands of years. You can go quite a while without blood pressure medication or even insulin -- much longer than most people could go without fuel for heating or cooking. Clothing and some sort of shelter would also rank higher on the list of imminent necessities than health care and education. Yet none of these goods displays health care and education's pattern of above-inflation cost increases. It's true that demand for education and health care is what economists call inelastic -- meaning that the demand doesn't decrease very much even when the price rises -- but that doesn't explain why the prices of these two inelastic services, and no others, has risen faster than inflation for decades.