Saturday, August 7, 2021

Reading A Graph Between the Lines

This is a recent update to something that we've talked about here over the years: Compounded inflation from Jan. '00 to June '21 in several different categories of goods and services.  I think it's very illustrative. 

That's US Consumer Price inflation for 15 different things; and some categories are broader than others, but the overall changes in price go from up over 200% to down (guessing) 95%.  

It also shows from top to bottom the things that are highly government regulated (another way of saying there's no free market working) down to consumer goods that are regulated much more lightly (saying the free market if functioning fully).  

College tuition and fees are virtually untouched by the market economy.  The number of real classroom seats to put equally real student butts into is far smaller than the number of those butts.  In a free market, that supply/demand imbalance tends to raise prices but only a small number of students say "that's too much" and looks for other career options.  For those who don't look elsewhere, the has guaranteed that grants, scholarships, and loans are available to pay for those seats regardless of the costs.  Or as we've just seen with graduate students, the just guarantees they'll pay back the loan regardless of what the student does, essentially making graduate schools free to anyone who reads their contracts. 

BTW, the leveling off of college textbook prices is surprising and unprecedented.  Nobody knows quite what to make of that other than to point out how remarkable it is.

Hospitalization and medical care services are likewise backed up by government edict as well as government direct payment, both Federal (e.g. Medicare) and state (Medicaid).  The effect of private insurance is harder to pin down because it's susceptible to market forces but only weakly compared to the patient picking the service and provider directly.  The insurance carriers compete to sell to the employers buying coverage, so there is some market there.  (In most instances, health insurance isn't bought directly by the person using it, rather it most often comes as a benefit with employment.)  The problem is that a third party (the contracted insurance company) doesn't have as much at stake as an individual buying their own healthcare. 

The lowest of the rising prices have been tied between Housing and Food and Beverages for the entire time; these are strongly competed for, but government programs for housing low income people affect the market, as does food relief (Food stamps/EBT cards).  

The most free market is for home electronics, and they pick TVs in particular.  I think most people might guess this and the world is full of stories of how much the prices for LED TVs dropped over the years.  In comparison to computers, for example, computers tend to have a harder to evaluate price for some level of performance.  Prices aren't in free fall or dropping in half every couple of years, but the buyer gets more for their money; maybe more processor cores, or more memory, faster solid state drive or other upgrades.   

Since "cellphone services" (I read the word "contracts") are full of government mandatory fees, I'm moderately surprised they say the prices have come down as much as they're saying.  Similarly, the prices of new cars are all affected by government mandates, but there haven't been any major changes going into effect over the period - say like increasing mandatory fuel efficiencies or other high cost demands.

In essence you can read this plot as reflective of the total effect of market intervention.  The higher the inflation, the more the government distorts the free markets, while the lower, the freer the market.  It's not a completely perfect correlation but it's a good one.


  1. Cell phone plan costs have come down a lot. Paying for 500MB data, unlimited texts, and unlimited calls to 10 "friends and family" in 2005 my bill was $100 a month. Now I pay all of $15 more for two lines, unlimited talk/text/data.

  2. Textbook publishers have gotten hep to e-books, with a hook. One gets a 'subscription' to an ebook, good for 4 - 6 months. Used to be you could recoup some of the cost by selling about half of your used textbooks (the 'new revised 37th edition', yanno, with INCLUSIVE LANGUAGE!), but no longer!

  3. Medicare and Medicaid were known to adversely effect medical costs... back in the late 70's. 60 Minutes even did a piece on it. Nothing's changed for the positive, and the regulations and paperwork for anything government-involved has gotten so bad even a 1-doc-shop has to have 2-3 paperwork people.

    Back in 82, I went to a $75.00/Quarter Hour college, and that was considered expensive. In the early 2000's, the local community college was above that. School's too expensive, and there are so many good trades out there.

  4. There is no way that the price of a new car has stayed the same for the last 20 years. (Remember, this graph does not account for inflation, just apples-to-apples price comparisons.) I call BS on that line of the graph.

  5. McChuck, I think it is accurate. The Camry I bought a year ago was about the same price as they were in 2001. The difference you are seeing, I believe, is that people's tastes have changed and the cars they buy are further upscale. Your basic pickup's price hasn't changed much, but everybody wants all the goodies and carmakers have priced those options higher.

    The inflation curve probably measures the basic vehicles. How many options are chosen is hard to capture, especially when cars have options today that weren't even imagined in 2001.

  6. I'm ideologically inclined to believe this, but some of this just seems wrong to me - I simply don't believe that new car prices have had 0% inflation over the last 2 decades. In fact, this is glaring enough to cause me to wonder what else is dramatically wrong in this graph.

  7. Borepatch, we have had "expectations inflation". People expect to buy luxury vehicles. The prices of the bone-stock, base vehicles haven't changed much.

  8. The US government CPI is fiction. Actual consumer price inflation has been 5-6-7-8%/year for 2000-2015 as shown by the shadowstats 1980 calculation, 10%/year for 2016-2020 as shown by chapwoodindex, and maybe 20% this year alone. Multiply all that and you get a 5X increase over the last 20 years.

    BTW, the leveling off of college textbook prices is surprising and unprecedented. Nobody knows quite what to make of that other than to point out how remarkable it is.

    Meaning that a) pdfs containing whole books are now convenient, b) copyright theft is widespread and easy, and c) nothing new is going into the textbooks so an old one is a good as a new one. Functionally, the college textbooks are now in the college library where they're supposed to be.

  9. Things you have to have are up, things that are nice to have are down. Not a good combination.

  10. @Malatrope: ORLY?!?
    2021 Camry: Base model MSRP LE $25,045
    2001 Camry: Base model MSRP CE $17,645
    MSRP LE $20,415

  11. I think, after years of college bookstores trying to turn the secondary market for textbooks into a cheaper primary market for textbooks, book thrifts sites and Amazon have broken their hold, somewhat. The point made up-thread about e-book rentals and subscription is valid, too, but enough students can find their books used on Amazon to test the bookstores monopoly. Most of my students prefer to get their books on Amazon instead of fighting the bookstore, particularly if they aren't obliged to use financial aid to buy them.