In the chart shown we see the price changes in goods and services in the United States from 1997-2017, measured as the percentage price change since 1997. Positive values indicate an increase in prices since 1997, and negative values represent a price decline. Here we see a distinct divide between consumer durables and technologies (which have typically seen a price decline), and service-based purchases (which have increased in price).
A combination of industrial offshoring, technological innovation and economies of scale have resulted in a price decline in goods such as televisions (-96% since 1997), software (-67%), toys (-69%), and clothing (-4%). In contrast, the prices of goods and services such as education, childcare, medical care, and housing have increased significantly, rising by 150%, 110%, 100% and 58%, respectively.
The observed rise in costs of services may be partly attributed to the so-called ‘Baumol’s cost disease‘, which is an important exception