Things cheap, people expensive

The NYT has a good chart on the relative changes in the costs of important consumption categories.  The simple explanation for why services have exploded in cost while products have plummeted is that services involve people and can't be automated away like widget making can.  But that's only half the story.  The services that have risen in cost the most are the ones where state subsidy and regulation are heaviest:  College is notorious for it's aggressive price discrimination and massive subsidies that result in serious inflation  - health care costs are soaring for similar reasons.  And child care has seen increases in regulation and minimum 'standards' that have driven its costs upwards.  You can even see the 'regulatory' premium on the goods side:  housing costs have stayed relatively high in part because of land use regulation that limits supplies of new housing and   unregulated hardware costs have fallen much faster than regulated wireless services have.

In every case government's meddling and manipulation has been a key contributor to the excessive increase in services costs.  There's no reason that lectures and paper grading should rise in cost faster than car repair or a restaurant meal, it's just that colleges are much better rent seekers. This differential between the 'have' sectors who have state protected cartels and subsidies and the 'have not' sectors exposed to international competition is a major contributor to income inequality.  Hattip John Cochrane