Higher-than-inflation challenge

Glenn Reynolds had a nice piece about student loans in the Wall Street Journal yesterday. These two paragraphs reminded me of an observation (that I will turn into a challenge) I’ve had for a while:

Why do students have so much debt? According to a recent study by Mark Perry, a professor of economics and finance at the University of Michigan at Flint, between 1978 and 2011 college tuition in the U.S. increased at an annual rate of 7.45%, vastly exceeding the rate of inflation and the almost-stagnant rate of growth in family incomes.

The difference has been made up by more and more debt. With costs above $60,000 a year for many private schools, and out-of-state costs at many state schools exceeding $40,000, some young people are graduating with student loan debts of $100,000 or more, sometimes much more. A study released last month by Fidelity Investments found that 70% of the class of 2013 is graduating with college-related debt—averaging $35,200.

Yep.

Here’s the observation/challenge:

Name a sector of the economy where prices have consistently grown at rates higher than overall inflation and that does not have government involved to a heavy extent. 

Education (K-12 and college) and health care are two common examples where cost increases have consistently outpaced inflation and both have government — Federal, State and Local — heavily involved.

In sectors of the economy without a great deal of government involvement, we generally enjoy more innovation and lower costs, or at least costs that do not rise faster than inflation consistently.

One thought on “Higher-than-inflation challenge

  1. Pingback: Why prices in only three parts of the economy grow faster than inflation | Our Dinner Table

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