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Friday

25

October 2013

Shrinking Dollars

Written by , Posted in Economics & the Economy

A recent letter to the The New York Times:

To the Editor:

Richard A. Friedman finds that an hour of psychotherapy ain’t what it used to be (“Shrinking Hours,” October 12). He attributes this, along with similar phenomena, to a “contracting culture.” It’s an interesting hypothesis, but economics might provide a better answer. Thanks to inflation brought about by government monetary policy, prices in nominal dollars must constantly rise just for providers to maintain the same level of compensation over time.

Many industries are able to innovate and reduce costs at an equal or faster pace than inflation, which hides its impact from consumers. For the rest it’s either raise prices or lower the quantity of goods provided (ever shrinking chip bags being a prominent example). It’s further no surprise that therapists would understand the psychology of consumers and bet that they’ll be less likely to notice a few minutes trimmed off their sessions than a price increase.

Sincerely,
Brian Garst
Director of Government Affairs
Center for Freedom and Prosperity