Transcript

Killer Charts · Underthrow

0:00
SPEAKER_00: Something strange has happened to the American economy.
0:04
SPEAKER_00: Ask people whether life has become less affordable, and you'll probably hear the same story.
0:08
SPEAKER_00: The middle class is disappearing.
0:10
SPEAKER_00: Wages can't keep up.
0:12
SPEAKER_00: Our parents had it better.
0:13
SPEAKER_00: Everything costs too damn much.
0:16
SPEAKER_00: And slivers of that story are true.
0:18
SPEAKER_00: But then you encounter a chart like this from Master of Killer Charts, Mark Perry.
0:23
SPEAKER_00: In 1967, adjusted for inflation, about 30% of American households earned less than $35,000.
0:28
SPEAKER_00: Today, it's about 19%.
0:33
SPEAKER_00: So where did everybody go?
0:34
SPEAKER_00: They got richer.
0:35
SPEAKER_00: In 1967, only 16.5% of households earned the equivalent of $100,000 or more in today's dollars.
0:39
SPEAKER_00: Today, nearly 45%.
0:39
SPEAKER_00: The middle income group really has shrunk from 54% of households to 36%.
0:42
SPEAKER_00: But look where it went up.
1:00
SPEAKER_00: The disappearing middle class didn't simply tumble into poverty.
1:04
SPEAKER_00: Millions of households graduated into higher real incomes despite persistent inflation.
1:10
SPEAKER_00: And the percentage at the bottom fell too.
1:12
SPEAKER_00: So America has this weird problem.
1:16
SPEAKER_00: We're still getting richer on net, but we don't feel richer.
1:20
SPEAKER_00: And another Mark Perry chart helps to explain why.
1:25
SPEAKER_00: The Great Divergence.
1:28
SPEAKER_00: Look at what happened to prices between 2000 and 2025.
1:32
SPEAKER_00: TVs became almost unbelievably cheaper,
1:36
SPEAKER_00: computer software plunged in price,
1:38
SPEAKER_00: so did cell phone services and toys,
1:41
SPEAKER_00: clothing barely budged, Sold furnishings and new cars increased far less than wages.
1:47
SPEAKER_00: These are sectors in which competition,
1:49
SPEAKER_00: technology,
1:49
SPEAKER_00: globalization,
1:51
SPEAKER_00: automation, and scale have been allowed to perform their strange magic.
1:56
SPEAKER_00: Companies figure out how to make more with less.
1:59
SPEAKER_00: Competitors copy them.
2:00
SPEAKER_00: New market entrants undercut them and technology improves.
2:04
SPEAKER_00: Ultimately, consumers benefit.
2:06
SPEAKER_00: But now look at the other end of this chart.
2:09
SPEAKER_00: Hospital services are up 281%.
2:11
SPEAKER_00: College tuition and fees up nearly 197%.
2:13
SPEAKER_00: Childcare, 159%.
2:14
SPEAKER_00: Medical services, 147%.
2:15
SPEAKER_00: Housing, 111%.
2:27
SPEAKER_00: Something very different is happening in these industries.
2:30
SPEAKER_00: And unfortunately, these aren't trivial differences.
2:33
SPEAKER_00: You can postpone buying a new flat screen TV, but you can't postpone appendicitis.
2:38
SPEAKER_00: You can keep using your old laptop, but you still need to play.
2:42
SPEAKER_00: And if your kid needs childcare so you can work,
2:45
SPEAKER_00: Amazon can't ship you a cheaper substitute tomorrow morning.
2:49
SPEAKER_00: Such is the paradox of American prosperity.
2:52
SPEAKER_00: We're richer.
2:53
SPEAKER_00: Many of the things we buy have become dramatically better and cheaper.
2:57
SPEAKER_00: But some of the things we cannot easily do without have become painfully expensive.
3:03
SPEAKER_00: So instead of asking why everything is unaffordable,
3:06
SPEAKER_00: we should ask, what's different about these industries?
3:10
SPEAKER_00: Follow the red lines.
3:14
SPEAKER_00: Start with housing.
3:15
SPEAKER_00: Why don't developers just build more homes where people want them?
3:18
SPEAKER_00: Well, often because it's illegal.
3:21
SPEAKER_00: Zoning restrictions and building codes are costly.
3:24
SPEAKER_00: Minimum lot sizes consume land.
3:27
SPEAKER_00: Parking requirements increase costs.
3:29
SPEAKER_00: Permitting adds delays.
3:32
SPEAKER_00: And NIMBY opposition prevents construction.
3:35
SPEAKER_00: Then we all express shock that restricting the supply of something makes it more expensive.
3:40
SPEAKER_00: Or consider healthcare.
3:41
SPEAKER_00: Whatever else American healthcare is, it is not some laissez-faire free-for-all.
3:47
SPEAKER_00: It is a labyrinth of government subsidies,
3:49
SPEAKER_00: third-party payments,
3:51
SPEAKER_00: occupational licensing,
3:53
SPEAKER_00: insurance regulation,
3:55
SPEAKER_00: patent protections, insurance mandates, and in-state monopolies.
4:00
SPEAKER_00: Some states even maintain certificate of need laws,
4:03
SPEAKER_00: which can require government permission before a provider builds or expands
4:07
SPEAKER_00: a medical facility.
4:08
SPEAKER_00: The Federal Trade Commission and Justice Department have criticized such laws
4:12
SPEAKER_00: because they restrict competition.
4:15
SPEAKER_00: And then there's college.
4:16
SPEAKER_00: For decades,
4:17
SPEAKER_00: our solution to expensive higher education has been to give people more money with
4:21
SPEAKER_00: which to buy increased Increasingly expensive higher education.
4:25
SPEAKER_00: This has created a tuition spiral.
4:28
SPEAKER_00: Loans, grants, subsidies.
4:30
SPEAKER_00: But subsidizing demand
4:32
SPEAKER_00: without proportionately increasing supply almost never makes something cheaper.
4:37
SPEAKER_00: Some of our increased purchasing power becomes higher tuition.
4:41
SPEAKER_00: Meanwhile, universities compete with amenities, facilities, administration, and prestige.
4:47
SPEAKER_00: Costs that don't necessarily translate into more learning.
4:52
SPEAKER_00: Costs disease.
4:55
SPEAKER_00: There's another force at work here, too.
4:57
SPEAKER_00: Economists call it Baumol's cost disease.
5:00
SPEAKER_00: Some industries become dramatically more productive.
5:03
SPEAKER_00: One farmer can feed vastly more people than his ancestor could.
5:07
SPEAKER_00: One factory worker can produce vastly more goods.
5:10
SPEAKER_00: But a string quartet still requires four musicians.
5:13
SPEAKER_00: A nurse practitioner still needs a certain amount of time with a patient.
5:17
SPEAKER_00: A teacher still needs time with students, and a caregiver can only watch so many kids at a time.
5:23
SPEAKER_00: As wages rise in productive sectors,
5:25
SPEAKER_00: these labor-intensive sectors have to raise wages too,
5:28
SPEAKER_00: even though they can't increase output at anything like the same rate.
5:33
SPEAKER_00: So not every red line on this chart is caused by government intervention.
5:37
SPEAKER_00: But officials can make an intrinsically expensive problem considerably worse.
5:43
SPEAKER_00: The Wrong Diagnosis And this is why the standard story matters.
5:49
SPEAKER_00: If your diagnosis is that capitalism has made ordinary life unaffordable,
5:54
SPEAKER_00: your solution will probably be more subsidies, more controls, and more regulation.
5:59
SPEAKER_00: But what if that gets the diagnosis backward?
6:02
SPEAKER_00: What if competitive markets are actually doing remarkably well in much of
6:06
SPEAKER_00: the economy,
6:06
SPEAKER_00: and our worst affordability crises are concentrated in sectors where competition,
6:11
SPEAKER_00: supply, and productivity are tightly regulated and unusually constrained?
6:16
SPEAKER_00: If that's true, the prescription changes.
6:19
SPEAKER_00: For housing, let people build.
6:21
SPEAKER_00: For healthcare, create transparent prices and remove barriers to entry and competition.
6:26
SPEAKER_00: And let patients act more like customers.
6:30
SPEAKER_00: For higher education, never assume subsidizing students will discipline prices.
6:35
SPEAKER_00: And where Balmo's cost disease really is the culprit,
6:38
SPEAKER_00: recognize the trade-off instead of pretending there's a regulatory magic wand
6:42
SPEAKER_00: that makes labor-intensive services cheaper and more widely available.
6:45
SPEAKER_00: The Affluence Paradox
7:06
SPEAKER_00: Right now,
7:07
SPEAKER_00: at least,
7:08
SPEAKER_00: America is in a country steadily sinking into poverty,
7:11
SPEAKER_00: though it risks doing so by sinking into ever more debt.
7:15
SPEAKER_00: In inflation-adjusted terms,
7:17
SPEAKER_00: far fewer live at the bottom of the income distribution,
7:20
SPEAKER_00: and technological progress has delivered goods our grandparents could scarcely
7:25
SPEAKER_00: imagine at prices they could hardly believe.
7:27
SPEAKER_00: Yet we've constructed bottlenecks to accessing some of the most important things in life.
7:33
SPEAKER_00: This is largely a result of cartelization.
7:36
SPEAKER_00: In housing, healthcare, education, and childcare.
7:40
SPEAKER_00: And because those expenses loom so large in a household budget,
7:44
SPEAKER_00: they can sap all the gains in prosperity.
7:46
SPEAKER_00: A 70-inch television for $400 doesn't help much when your rent just went So maybe
7:54
SPEAKER_00: the great economic question of our time isn't, why doesn't capitalism work anymore?
8:00
SPEAKER_00: The question is,
8:01
SPEAKER_00: why do the things exposed
8:03
SPEAKER_00: to vigorous entrepreneurial competition keep getting better and cheaper,
8:08
SPEAKER_00: while so many of the things we've insulated from it keep getting more expensive?
8:12
SPEAKER_00: In short, we need to follow the red lines.
8:16
SPEAKER_00: They're trying to tell us something.
8:18
SPEAKER_00: I'm Max Borders.
8:19
SPEAKER_00: Let's criticize by creating.
8:28
SPEAKER_00: Underthrow is brought to you by Human Respect Labs,
8:31
SPEAKER_00: committed to advancing the philosophy of human respect worldwide.
8:34
SPEAKER_00: Whether you're helping spread the philosophy or building voluntary alternatives
8:38
SPEAKER_00: to political power,
8:40
SPEAKER_00: we support strong startup projects with up to $30,000 in seed funding.
8:44
SPEAKER_00: Got an idea?
8:45
SPEAKER_00: Visit humanrespectlabs.org to see if you qualify.
8:49
SPEAKER_00: That's humanrespectlabs.org.