For example:
"Dr. John Wennberg, if I could start with you. A great deal of capital is expended on the cost of healthcare. What is driving these costs?"So according to this "expert" the increase in supply is driving up the prices.
"Well, looking at it over time, it seems to me that the most important driver is the continual increase in resources devoted to healthcare, the numbers of doctors we train and put into practice, the number of hospital beds we build, particularly intensive care units and the new technologies and indeed the old technologies which keep creeping in and we're using them at greater intervals."
Another example:
"The military is powering ships with fuel derived from algae-running solar-powered generators and flying jets with fuel made from an oilseed plant. The military says cutting down on oil makes our troops safer. But for now those alternative fuel sources are more expensive than traditional ones. The hope is that a customer the size of the military will create demand and drive prices down."We are expecting that increased demand will drive prices down?!
Remedial Economics
For those of you who somehow managed to avoid even the most basic of economics lessons, here is how supply and demand works: More demand allows prices to go higher, because the goods are more scarce. More supply allows prices to go lower, because there are plenty of goods and more competition. Also, lower prices tend to increase demand, because goods are more affordable, and higher prices tend to decrease demand, as less buyers choose to pay the increased prices. Aside from rare exceptions, such as Irish potatoes, these laws are as universal as laws of economics can get.
In the case of medical health prices, it is not the increasing supply which is driving prices up. It is the increased demand which is made possible because the actual costs are hidden from the consumer. Universal affordable healthcare means greatly increased demand, which drives prices up, and the rapid buildup of healthcare facilities is simply trying to keep up with the demand. Drug costs are particularly high because consumers pay flat rate copays instead of the actual costs. Some people are even advised to get an expensive prescription drug if their copay is less than the cost of the equivalent over-the-counter drug.
Having the military buy renewable fuels is sure to drive the cost up, at least in the short term, as the increased demand overwhelms the suppliers. In the long term, the hope is the suppliers will ramp up production, and there will be opportunities to lower prices due to increased efficiencies in the manufacturing process. This could happen, but there are no guarantees that it will. If the raw materials, not the processing, is the major portion of the cost, increasing efficiency will not help much. And some processes are simply more expensive than pumping oil from the ground. We can hope for a technological breakthrough, but it doesn't always happen. After all, fusion power has been 20 years away for 70 years now.
