Why is Everything so Expensive?

Everything was better in the good old days. You can ask your grandpa. But anecdotes aside, it really seems like things have been possible in the past that are not possible anymore, and nobody really knows why. On his website, Patrick Collison lists numerous examples for things that were either much cheaper or much more quickly achieved in the past than seems possible today:

  1. The Empire State Building was built in 410 days
  2. Apollo 8 launched 134 days after Congress had decided it should go to the moon. The entire Apollo Space Program took 9 years from its initiation to the moon landing.
  3. The Alaska Highway with its 1700 miles (2736 kilometers) from Canada to Alaska was built in 234 days in 1942. It cost $793 per meter in 2019 dollars. San Francisco, on the other hand proposed a new bus lane in 2001 that still has not opened. Costs: almost $100,000 per meter. 
  4. The Eiffel Tower was built in 2 years and 2 months. It cost $40 million in 2019 dollars.
  5. The New York subway that was opened in 1904 after 4 years of construction with 28 stations operated. Costs: $1.1 billion in 2019 dollars. In 2000, 3 more stations were planned. Those were opened in 2017 for $4.4 billion. Even though our capabilities improved a lot, construction took much longer and cost 37 times more.
  6. The Lockheed P-80 took 143 days from initialization to first deployment.

Other people like Scott Alexander also list rising health care costs and rising costs for education. To me this is indeed an enormous puzzle. While I can at least come up with theories why medical costs are rising, there is really not much I can do to imagine why infrastructure projects that once seemed perfectly feasible are now so far beyond our imagination. I don’t think it is wages, as those have been stagnating. Overwhelming regulations? Excessive security standards? This wouldn’t really explain rising costs for education. Sure, the world seems to have become less flexible. For example, founding a new university is now almost prohibitively hard to do and navigating the jungle of regulations is now much more difficult than it was fifty years ago. However, I suspect that this can only explain part of what is happening here. What is going on? and what can we do to make things simpler, quicker and cheaper?

 

Edit: Maybe wages are much less stagnating than I thought they were. See this post and this. For possible explanations, see this post. However, I still think wages alone aren’t enough to explain what is happening (especially the time component).

 

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