CURBING RUNAWAY EXPENDITURE ON COMPUTERS.

CURBING RUNAWAY EXPENDITURE ON COMPUTERS. The caption is of course nonsensical. It is inspired by an equally nonsensical headline on an editorial in yesterday’s New York Times: “Curbing Runaway Health Inflation.” Expenditures on computers in the United States have increased enormously. So have expenditures on health care. It is completely wrong to refer to either of these increases as inflation. Economists take changes in product quality into account when measuring inflation. This post of three weeks ago argued that it is wrong to refer to increases in health care expenditures as inflationary without somehow taking into account the fact that the average life span at birth increased by five years between 1975 and 2005. Note that whether there has been runaway expenditure on health care is a different issue from whether there are lots of opportunities for savings in health care costs. The Times editorial cites Professor David Cutler that health care reforms could save hundreds of billions of dollars in the next ten years. But this wikipedia article on Professor Cutler points out that: “Much of his work argues that the United States has realized good “bang for its buck” by any reasonable measure of the value of a statistical year of life in good health.”