The Atlantic has a recent piece on how the optometrist industry is rigged against consumers:
In every other country in which I’ve lived—Germany and Britain, France and Italy—it is far easier to buy glasses or contact lenses than it is here. In those countries, as in Peru, you can simply walk into an optician’s store and ask an employee to give you an eye test, likely free of charge. If you already know your strength, you can just tell them what you want. You can also buy contact lenses from the closest drugstore without having to talk to a single soul—no doctor’s prescription necessary.
Another Atlantic article finds similar problems in dentistry. The NYT finds similar problems in health care:
Much of what we accept as legal in medical billing would be regarded as fraud in any other sector.
And NPR provides an example:
For Her Head Cold, Insurer Coughed Up $25,865
If you think these are isolated incidents, think again. I personally know of similar examples (one involved an $8,000 bill for a mild cold, paid by taxpayers), so I very much doubt that they are unusual.
It’s not just health care. Consumers buying cars are ripped off by a car dealer cartel, which prevents direct sales from manufacturers. The fireman industry is a huge rip-off, with America having roughly twice as many fire stations as needed, as a huge cost to taxpayers. Young homebuyers are ripped off by older homeowners who prevent new construction in towns like Reston, Virginia. There are similar examples in dozens of other industries, perhaps hundreds of others.
Politicians often complain that middle-class Americans are lagging behind because the system is rigged against them. They are right. But the politicians don’t tell the entire story. Only a modest portion of the rigging is done by big corporations like Facebook, Google, Goldman Sachs and JP Morgan. The biggest problem is various interest groups comprised of middle class people, who rip off the general public.
If we had free markets in health care, dentistry, optometry, fire protection, home building, car retailing and many other industries, then we could shed enormous numbers of workers from useless activities. These workers could then produce useful output elsewhere, dramatically boosting real GDP and living standards. The WSJ reports that our living standards are being depressed by a lack of workers:
The U.S. Furniture Industry Is Back—but There Aren’t Enough Workers
If a politician promised to crack down on doctors, dentists, teachers, firemen, and older homeowners (like me), they’d certainly get my vote. Unfortunately, that’s pretty much the only vote they would get.
And yet, we should not despair. There is a great deal of ruin in a nation. Despite all of these inefficiencies, living standards continue to rise:
Median family income adjusted for inflation was $29,000 in 1955. Today it’s just over $63,000, an all-time high. . . .
In the 1950s camping was an acceptable vacation. Hand-me-downs were acceptable clothes. A 983 square foot house was an acceptable size. Kids sharing a room was an acceptable arrangement. A tire swing was acceptable entertainment. Few of those things are acceptable baselines for most households today. The average new home now has more bathrooms than occupants.
In 1971, I stayed in a hotel for the first time in my life, at age 16. I shared a bedroom with my brother, and we had a tire swing in the backyard. No computer games in those days. And yet you’ll hear “experts” tell you that living standards haven’t risen since the early 1970s.
We could do much better, but we are still doing pretty well.
HT: Aaron Renn, Tyler Cowen
READER COMMENTS
Chris
Jan 22 2020 at 3:33pm
Megan just wrote about it in the Washington Post as well.
Hazel Meade
Jan 22 2020 at 4:17pm
Thank you so much for saying this.
In many ways, yes the system is rigged, but it’s often rigged not by big impersonal corporations that make easy rhetorical targets, it’s often rigged by the very interest groups who play upon the fears and sympathies of the voters to get precisely the rigging other people complain about, while arguing it’s for their own good!
Take the optometry system – this is most likely justified on the basis that there is a public health hazard entailed by unlicensed people giving eye tests and prescribing lenses. Yet if you asked an average Democrat, they would probably blame “greed” or evil corporations. They look away when you point out that the regulation *is* the rigging.
In many cases, the average voter directly supports and argues for rigging things, often in their own interest, but just as often because they are just following a party line where the party itself has been “captured” in a sense by the people who benefit from it. I would point to the teachers unions as an example – the way a typical Democrat will have a knee-jerk reaction against school choice or anything which weakens teacher tenure. In other words, the regulatory capture isn’t just in the bureaucracy, it’s in the ideological identity of the parties, and more democracy isn’t going to fix that.
john hare
Jan 22 2020 at 4:33pm
This post absolutely nails it. I call it deep seated corruption, that is to say Legal deep seated corruption.
MarkW
Jan 22 2020 at 5:34pm
How is it rigged? By powerful interest groups using tools provided by big government. Without the regulatory power of government, none of these abuses would be possible. Not a single one. None of these interest groups could shake down customers without government serving as the muscle.
Scott Sumner
Jan 23 2020 at 4:41am
Exactly right.
Hazel Meade
Jan 24 2020 at 2:53pm
Saying “none” would be overstating things a bit. At least most progressives would insist that lots of market power allows for abuses.
The problem is that we already have many many tools aimed at limiting a mitigating power, where all the attention of progressives is focused, while almost zero attention is focused on regulatory capture, which is really where the problem is right now.
When you think about what the problems of ordinary Americans are right now, when you think about housing prices, or the cost of health insurance, or barriers to market entry – these largely aren’t problems caused by monopolistic market actors acting in an unfettered free market – they’re all caused by various kinds of regulatory capture -and most progressives don’t want to even think about that. They just keep hammering on how we need MORE regulation to contain unregulated players, like, …. um, er … Facebook? (Because Facebook is such a big problem for average Americans right now, right?)
MarkW
Jan 25 2020 at 5:38pm
<i>Saying “none” would be overstating things a bit. At least most progressives would insist that lots of market power allows for abuses.</i>
I meant none of the abuses that Scott listed, and I think that’s correct. And, yes, you’re right that progressives would insist on that, but they’re generally wrong. There’s really very little that the U.S.’s largest companies with the greatest market share can to do me (or anyone) with the exception of cases of what Smith called a ‘conspiracy against the public’ to raise prices. Government enforcement against such conspiracies is useful, like this and this.
nobody.really
Jan 22 2020 at 6:33pm
CHARLIE: But you go ahead, Henry; you do it your way. You go on back in there and tell them that you rule there’s no Santa Claus. But if you do, remember this: You can count on getting just two votes–your own, and that district attorney’s out there.
JUDGE HARPER: (Ruefully) The district attorney’s a Republican.
Miracle on 34th Street (1947)
David Henderson
Jan 22 2020 at 9:30pm
One of my favorite lines, especially with the doleful look on the judge’s face.
Matthias Görgens
Jan 22 2020 at 8:53pm
Given the electoral realities you allude to, the only vote that would change something is the one with your feet.
But Bryan Caplan’s hope in austerity, and competition from the internet, are also worth thinking about.
Not much austerity in the near past or near future, though. Perhaps you should replace the debt ceiling with a Schuldenbremse.
Thaomas
Jan 23 2020 at 5:15am
Not even the temporary support to the auto industry in 2009 could get rid of the auto dealer system!
Dylan
Jan 23 2020 at 7:06am
I write this post sitting in my 800 sqft home, which is considered large by most of my friends, many of whom live in places much smaller. I’m wearing a hand me down Pendleton that came originally from my great grandfather, and has passed through multiple generations since then, I’d say roughly half of my wardrobe if you leave out undergarments, is hand me down or secondhand purchases. We don’t go camping much anymore, it’s too expensive when you don’t own a car, but many of our wealthier friends do once a year. I’d love a tire swing, if I had a tree to hang it from.
Thomas Sewell
Jan 23 2020 at 10:53pm
I don’t know anything about you beyond what you’ve posted here, but I’m willing to bet you live either outside the United States, or else in a location which has been governed primarily by Democratic politicians for decades.
Am I correct?
Dylan
Jan 24 2020 at 11:47am
In the U.S. and currently living in a city that you would probably think of as run by Democrats, although 2 of the last 3 mayor’s were Republicans.
It’s funny though, I’m not sure the alternative is a lot better. My father is retired and wanted to downsize to a smaller home and property recently. He lives in a more rural area dominated by Republicans. He had the opposite problem, in that it was incredibly difficult to find a place that would let him build as small as he wanted. Most locations zoned for single family homes either had minimum house sizes designated by the local municipality or the HOA, the place he finally bought had the smallest requirement, which was still 2500sqft, about double what he wanted.
As for the rest of my comment, I’d think that most of what I said would hold even more true in parts of the country that have been under Republican control? Certainly secondhand clothing and camping as the family vacation seem the rule rather than the exception for friends and family that live in more rural areas?
Thomas Sewell
Jan 24 2020 at 8:35pm
I just figured living somewhere that small as a “large” option had to be NY, SF, or someplace similar. In the vast majority of the United States outside the Democratic city strongholds, an 800 sq. ft. apartment is considered small and the rent for even a “small” house could be as low as $500/month while you might pay $1000-1400/month for a few thousand sq. ft. People spend accordingly.
Camping seems to be more of a cultural and regional thing. I have circles of friends out west who go camping multiple times a year and others out east who might have camped a few times a long time ago. Now it seems to be more popular to rent an AirBNB somewhere with scenery or water or resort-style stuff or whatever. That didn’t really exist when I was growing up.
In terms of second-hand clothing, I see people with lots of kids sometimes try to re-use clothes/shoes as hand-me-downs, even trading between families, but most people with relatively limited means will at least buy new at Walmart or wherever, as it’s about as cheap as buying at a thrift store nowadays.
Virtually nobody doesn’t own or at least have access to a car in GOP-dominated areas. Alternatives are too expensive in the more spread-out areas and “city folks” are likely wealthy enough to own one even if they don’t need it day to day. You might see a few exceptions for college students living at or near a university.
Dylan
Jan 25 2020 at 7:57am
I should say that I don’t disagree with Scott’s overall point that living standards have risen. I just thought the quote chosen as an example of the way they have risen was a little funny given my perspective.
I agree that it was a reasonable assumption of guessing that I live in a major metro (NYC for the record) based on the size of my place, and from there, guessing that it was Democratically controlled is also reasonable, since almost all of our major cities are…but I think that is more correlation than causation, since even places like Hong Kong and Singapore, which overall are considered the most economically free places on earth, have incredibly high housing prices and very small living spaces (I realize that housing is one of the areas that both places are less than free, but I think that those policies are something of a byproduct of living in places that are dense, rather than a specific political outlook).
I also thought housing size was an odd metric to focus on given that, for those of us who live in cities, I’m thinking there is a decent chance that many of us have less personal space now than we did growing up. If you grew up in a suburban area and moved to the city because that’s where the good jobs were, you’re likely living with roommates well into your 30s, sharing bathrooms with multiple people. There’s an apartment in my building that was until recently shared by 7 people from their early 20s to mid-50s, with only one bathroom.
I’m also skeptical that this phenomenon is only limited to the major cities. 15 years ago I lived in a medium sized college town, and spent $950 a month on a 500 sqft apartment. Even places that are fairly rural, don’t seem that cheap. I’m amazed at just how many multi-million dollar places I see when I’m in Spokane, Wa…and how new construction townhomes are starting at $350,000 and go up pretty quickly from there.
As for the rest, sure, you can get incredibly cheap new clothing at places like Target, Wal-Mart, and even H&M. Many times it will even be cheaper than buying secondhand, but the quality usually reflects that. I saw a presentation from Zara (I think, might have been another “fast-fashion” company) which talked about the number of “wears” that was expected of their clothing, and it was something less than 10. That Pendelton I was wearing the other day was likely manufactured in the 1930s, and I must wear it at least 20 times every winter for the last 20 years, probably more than that when I first got it, and it still looks like new.
Lastly, on car ownership, I again think it is a mistake to talk in political party terms. Sure, GOP dominates in rural and ex-urban areas where car ownership is basically mandatory, but it is pretty much mandatory in places like L.A., Seattle, Austin, Portland, Miami, etc… Really, the only places in the U.S. where not owning a car is seen as normal are NYC, SF, and (maybe?) Chicago.
Dylan
Jan 25 2020 at 10:13am
A visit to the grocery store this morning made me want to add an addendum to this post. I think one of the most visible signs of how living standards have improved, beyond the computers/electronics side of thing is seen by walking down the aisle of a grocery store. Since I live in NYC, I don’t have the kinds of grocery stores with a horizon you’ll see in many other parts of the country…but still, the sheer variety and quality of the products is astounding. We’ve got microbrews and kombucha on tap, quail eggs, huge varieties of vegetarian and vegan options, there was truffle hot sauce that cost $20 a bottle, yogurt from Iceland and cheese from New Zealand. Compare to grocery stores of even 20 years ago, and the difference is huge, and the fact that these products aren’t exclusive to only super rich areas gives a big hint of improving living standards.
But, just because things are improving along some dimensions, doesn’t mean they are improving equally on all fronts. I know for me personally, and for a lot of friends, the sense of financial insecurity that comes from having most of your income come from sporadic, gig jobs coupled with a feeling that the essentials of housing and healthcare are really expensive can leave a person feeling they are always on the precipice of disaster, even while they have luxuries available to them that were barely imaginable to earlier generations.
Hazel Meade
Jan 24 2020 at 2:56pm
Yes, I will say that camping is still very much an acceptable vacation to me.
Who are these people who can afford to blow $10,000 a year vacationing at a resort in the bahamas ? I need that money to pay off my mortgage.
Floccina
Jan 23 2020 at 11:00am
This is such a great post! IMO the worst rig today are executive regulation in medical care and housing.
IVV
Jan 23 2020 at 12:55pm
What’s ironic is that buying used and downsizing are seeming increasingly smart in today’s world. We just don’t need all this extra stuff. Can’t we turn that productive capacity into something else? Or are we stuck with an overabundance of clothing factories producing flimsier and flimsier garments that really go straight to the garbage?
robc
Jan 23 2020 at 1:55pm
As quality clothing still exists, “we” aren’t stuck at all, assuming by “we” you mean IVV and robc, and not some larger societal “we”. We can make our own choices, but we can’t control theirs.
There is an argument that Dave Ramsey sometimes brings up, “If everyone followed your principles, the economy would collapse.” His response is, “That isn’t a problem, only a small fraction will ever follow them, so it works for them and the economy as a whole staas the same.”
The same applies to the clothing example, you can buy nicer quality clothes and it won’t change anything but your wardrobe.
I happen to think the argument Ramsey is replying to is wrong, I don’t think everyone living within their means would crater the economy, productivity would stay at least the same, it would just be different.
Dylan
Jan 25 2020 at 8:33am
I’m sure quality clothing still exists, but there’s kind of a difficult knowledge problem in figuring that out. I have a pair of Reef flip flops that I bought some time in the late 90s or early 00s. In the summer, I hardly where anything else, and they’ve lasted and lasted and lasted. A couple of years ago I came across a pair that appeared on the surface to be mostly identical, they were $60, but I thought that was still a bargain if they lasted even half as long as my other pair had. But nope, bought them and by the second summer they were pretty much done, and I went back to the old pair which just keeps going and going and going.
anonymous
Jan 23 2020 at 3:21pm
I’ve been wearing the same t-shirts for 20 years now and the logos can still be seen. I think high efficiency washers/dryers have made clothes last longer.
IVV
Jan 27 2020 at 12:59pm
Like Dylan mentions above, the clothing from 20 years ago lasts and lasts. It’s the clothing from 5 years ago that falls apart.
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