Identifying Sources of Cost Disease
I think the problem is that the neoclassical theory of perfect competition is just flatly wrong, and markets actually tend to monopoly (oligopoly) pricing over time. (So the &quot;perfect competition&quot; is more an exception than a rule in the real world.) There is plenty evidence for this, see e.g. Keen &amp; Standish: <a href="http:&#x2F;&#x2F;www.albany.edu&#x2F;~gs149266&#x2F;Keen &amp; Standish (2006).pdf" rel="nofollow">http:&#x2F;&#x2F;www.albany.edu&#x2F;~gs149266&#x2F;Keen &amp; Standish (2006)...</a><p>One simple way to see this, really, is to consider a simple example (curiously omitted from economic textbooks) of a supply chain: You have two markets and three entities - producers, distributors and consumers, where producers sell to distributors and distributors sell to consumers. Now consider, in the case of competition, what should be the margin of the distributor in the equilibrium? That is, why should all the cost decrease be propagated to the consumers?<p>In reality, &quot;equilibrium&quot; prices are probably oligopolistic determined by some &quot;relative market power&quot;, which is really about how much you can &quot;screw&quot; your customers.  And health care and education are matter of life and death for most people, so yeah, high prices, unless there is a big factor that will put an end to that (which happens outside the U.S. through regulation and government price negotiation).