
Considerations on Cost Disease - apsec112
http://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/?
======
justcommenting
The question I'd ask in response to this post is "So where did the money
actually go?"

I suspect inequality and wealth transfer explains much more of the observed
trends than the author acknowledges at the end. In each of the verticals
discussed, there have been strong (albeit sometimes less obvious) trends for
consolidation among institutions and organizations. This includes companies,
government contractors, and even vendors in ecosystems we tend to think of as
decentralized like local schools, where significant consolidation might be
occurring over time at the level of food suppliers like Aramark, utility
companies, or diesel fuel suppliers for school buses.

These organizations' compensation and capital structures, in turn, likely grew
increasingly unequal over time. Stockholders, stakeholders like executives,
and intermediaries like insurance companies in those organizations likely
extracted more and more capital relative to traditional stakeholders like the
college students, physicians, and teachers addressed in the post.

Wealth transfer from traditional stakeholders (college students, physicians,
teachers) to organizational stakeholders (execs, stockholders, suppliers in
consolidating markets) seems like both a cause and a consequence of the 'cost
disease' discussed in the post.

~~~
oli5679
I think he's trying not to be too opinionated about the cause of the problem,
mainly highlighting that the problem exists.

Amongst people who are aware of cost-disease, conservatives and libertarians
normally see the cause as excessive regulation and occupational licencing,
whilst liberals jump to increasing corporate power and market failure.

Determining which if these is the true cause is tricky, and can quickly become
political. However, it is important for everyone to acknowledge the problem.

~~~
pjc50
The original formulation of Baumol's cost disease is that it's a _relative_
effect caused by increasing efficiency in automatable fields making non-
automatable fields look bad.

If a job has to be done by a human in the West, of course it's expensive
compared to those that have either been outsourced to cheaper humans or turned
over to machines.

The "exchange rate" between human-produced goods and machine-produced goods
looks worse and worse over time. The classic example is whenever you hear
someone describing "flatscreen TVs" as a lavish expense. They're not. All TVs
are flatscreen and you can get perfectly adequate ones for under $100. Whereas
ladies' haircuts can easily exceed that - after all, it's a job you can't
export to the Far East. And a college education costs several hundred
televisions.

~~~
oli5679
Baumol's model is interesting. It's definitely part of the story.

It seems that there are other factors at play as well though. Scott shows that
wages haven't risen as fast as costs in many of the problem sectors, and that
there is significant cost variation between countries with similar wealth
levels.

~~~
joe_the_user
An extension to Baumol would be that not only have wages in non-productive
industries had to keep up with wages in productive industries but capital
spending rates in non-productive industries have kept up with capital spending
rates in productive industries. At least in education and health care, you see
buildings, equipment, administrators and so-forth taking more and more of the
expenses relative to the salaries of service provider.

Admittedly that's automatic given cost increases without concomitant salary
increases but I think one can this to standards of capitalization of
productive industries bleeding over to non-productive industries. And there's
a constant belief/hope/snake-oil that these increases in capital spending will
make the industries productive. Indeed, the "captains" of these would never
frame the industries as static, non-productive support industries.

~~~
bluGill
Except that that doesn't seem to be the case. A house in 1960 costs an
inflation adjusted $100,000 today - The average house last year sold for about
$300,000. So we can say infrastructure is 3 times as expensive - that doesn't
seem to account for the 10x cost increase.

~~~
joe_the_user
Obviously, the kind of thing I speculate on above is an industry-by-industry
effect.

However, as mentioned in the article, the average house that is built today is
larger than a house built in 1960 and that can account for some of the
increase also.

Moreover, a 3x increase in one cost factor is a good start on explaining a 10x
increase in overall costs. You can't expect any economic process, from grocery
bills upwards, to yield an exactly proportional result between two "back of
the envelope" estimates, now can you? One inflation estimator might not be
akin to another etc, etc.

------
tptacek
Nominal teacher salaries may be reverting back towards the mean salary, but
teacher compensation is not. Public school teachers in the US have a unique
compensation structure:

1\. They're salaried at a middle-class level (in a major metro like Chicago,
the median teacher salary is $70k).

2\. The get an extraordinary amount of time off. There are large public school
districts where teachers have a contractual _maximum_ of 190 work days.

3\. Most importantly, many (most?) receive a defined-benefit pension plan.
During the period of time this piece documents the teacher salary decline,
virtually all competing jobs of every status lost defined-benefit pensions and
switched to defined-contribution plans.

Further, the trend over the last 10 years has been towards tonier school
districts paying spectacularly high teacher salaries. The perception in those
districts is that a dollar spent on the schools (in any way) pays back more
than a dollar in increased property values. So my kids at Oak Park River
Forest high school have teachers --- not assistant principals, not coaches,
not LD/BD specialists, just teachers --- making over $100,000. And bear in
mind, if you normalize this back to a 50 week work year, that's closer to
$140,000. With a defined-benefit pension.

And we're pikers compared to Buffalo Grove, which has several teachers making
over $150,000.

~~~
kurthr
So where are these numbers coming from?

A contractual maximum of 190 work days sounds a lot like 200 days a year,
which is pretty normal (52 weeks with 4 off for vacation and 5 days a week =
190)

In California (I don't know Illinois) teachers get a pension, but DO NOT GET
Social Security!

I see some clickbait articles searching about Buffalo Grove teachers, but
those end up leading to data from ISBE.
[https://www.isbe.net/Documents/teacher_salary_14-15.pdf](https://www.isbe.net/Documents/teacher_salary_14-15.pdf)

The data from there doesn't come up to $150k even for maximums. They list
$122-139k as the maximum from 2011-15 with median values of $67-74k.

~~~
tptacek
The salaries for public employees of most of Chicago suburbs are public
information. I'm not guessing: there's a web page that lists them all, by
name. I know this because some friends and I were comparing notes on the
salaries of teachers in our respective suburbs yesterday, on Slack. I don't
have the link handy, but if you'd like to wager against me on this, I'm happy
to take your money. :)

I do not understand your math on workdays. I am terrible at math, but it sure
sounds to me like 48 work weeks in a year is 240 work days, not 200, or 190.

~~~
kurthr
Yes I already responded that you are correct to the exact same comment on 200
days vs 2000 hours an hour before your comment.

I posted a link to exactly the salary information you are referring to in my
unedited comment. They do not match those in the parent comment.

~~~
tptacek
Sorry, I went through my browser history and it's Arlington Heights, not
Buffalo Grove (they're adjacent and I get them confused). You would have won
the bet!

What was the highest normal teacher salary you saw in Buffalo Grove? In
Arlington Heights, it's $150,660.

~~~
kurthr
Thanks for your understanding... we all make mistakes.

------
BrailleHunting
In the US, education, military and other budgets are seen as sacred cows as
proxy signals for the emotional investment in their missions, such that
insisting on service value for budget outlay is viewed as "social treason."

The US needs to do more of what Robert Reich ("Inequality for All"), Michael
Moore ("Where to Invade Next?"), Bernie Sanders and Plato suggest: copy what
works from elsewhere in the world (which others often copied from elsewhere
including the US in the past), strengthen unions and get people more engaged
in all levels of politics. (The US isn't a special snowflake, policy
prescriptions can be tried and customized for commonwealth utility. But first,
get money out of politics.)

"The price good men pay for indifference to public affairs is to be ruled by
evil men." -Plato

~~~
matt4077
I don't quite understand how you jump from "sacred cow / cannot be cut" to
"insisting on service value is viewed as treason".

I'm firmly in the camp that wouldn't cut education, but does consider the
state of the system somewhat prolematic. Those two opinions aren't in
conflict.

But, having experienced both the US and the German school systems, they were
ultimately pretty similar: put 20-something children in a room with a teacher
(where variability seems to be extremely high everywhere). Do calculus for
45min, repeat. Even though outcomes are quite similar as measured by PISA,
there is a lot around the margins even these countries could learn from each
other: extracurricular are virtually nonexistent in Germany and added so much,
at least to my experience. OTOH I felt US high schools tended to be too large.

~~~
AnthonyMouse
> I'm firmly in the camp that wouldn't cut education, but does consider the
> state of the system somewhat prolematic. Those two opinions aren't in
> conflict.

Aren't they?

Suppose it actually costs a specific, much lower than we are currently paying
amount to fund a decent education. Spending more than that doesn't materially
improve outcomes, but if you allocate more money than that, schools will
dutifully find a way to spend it anyway.

What solution to this problem do you imagine exists, separate from reducing
funding to that level from the eight-times-that-much or so level that we
currently pay?

------
struppi
Ok, maybe I'm getting this wrong, but to me, it's not entirely surprising that
those costs have been rising, even when adjusted for inflation.

AFAIR, we spend _a lot_ of money on food, transport, holidays, electronic
devices, ... All of which have become cheaper over the last few decades. The
consumer price index reflects this. So, if a lot of items have become cheaper,
even adjusted for inflation, others _must_ become more expensive, adjusted for
inflation.

The article even mentions this effect:

    
    
      First, can we dismiss all of this as an illusion? Maybe adjusting for inflation is harder
      than I think. Inflation is an average, so some things have to have higher-than-average 
      inflation; maybe it’s education, health care, etc. Or maybe my sources have the wrong 
      statistics.
    

But: Maybe this does not explain the whole effect, and maybe I am missing
something important. I am not an economist, after all.

~~~
Scaevolus
You don't have to use CPI-- just compare percentages of income spent on
expenses for people performing the same job over time.

If the price of basic goods became cheaper, you might expect people to invest
more of their money or buy more luxury goods. You wouldn't expect basic
necessities like health care or education to increase their total cost
percentage vs income.

FTA: "The average 1960 worker spent ten days’ worth of their yearly paycheck
on health insurance; the average modern worker spends sixty days’ worth of it,
a sixth of their entire earnings."

~~~
Sacho
There's an implicit assumption that the health care coverage a person recrived
is roughly the same as it was in 1960, or at the very least that the expansion
of health benefits is smaller than the possible price decrease due to
improvements and commoditization. I'm not sure this assumption holds.

~~~
qball
I think it _does_ hold for education, however, specifically higher education.

If anything, costs should stay roughly the same for higher education- like
broadcasting, higher education costs about the same to provide to 3 people as
it does 300 (something "micro-degrees" take full advantage of). The only cost
difference is the building and personnel to mark tests.

What _has_ changed are two things.

First, more jobs now need university-educated people (or rather, people with
the mental ability to make it to university- the proportion of the population
that isn't university material likely hasn't changed). The average job for an
individual in the 60s did not require the applicant to have even finished high
school (national graduation rate: 72%). The decline in those jobs increased
the graduation rate; it had nothing to do with the quality of education at the
time as you can see from the average test scores.

Second (and as a consequence of the first point), a signalling war in
education began. Employers started requiring high school graduation for
positions that don't actually require it, and bachelor's degrees for positions
that only really require high school graduation and possibly some specialized
training (the signalling problem, also on SSC:
[http://slatestarcodex.com/2015/06/06/against-tulip-
subsidies...](http://slatestarcodex.com/2015/06/06/against-tulip-subsidies/)).
Education is still as much a golden ticket as it was in 1960, but the
difference is that everyone has one now, so you must have one to be
competitive, whether you need it or not.

The solution devalues it somehow; the assumption is that even without a degree
graduates will be more competent than non-graduates. I'm not convinced that's
true enough to avoid hurting a lot of people, but at least we can save those
unfortunate enough to be currently stuck in the system and the people most
invested don't vote.

~~~
matt4077
Elite universities do have extremely low professor:student ratios. At Harvard
it's 7. That does produce quite a difference – it's a level where 1:1 teaching
happens fairly regularly.

Your analysis seems to rely on the price being a function of demand. I'm not
sure if that holds, considering supply in this market is highly flexible.

~~~
JamesBarney
The supply of elite universities with national reputations is pretty dang
inflexible. You can't open another MIT, Harvard, Yale, Columbia, etc...

The supply of universities recognized at the state level is similarly fixed.
In Texas all of the recognized state universities have been around for quite a
while.

For profit tech schools are probably pretty flexible but they don't really
compete on price as much as advertising and ability to get their students
loans.

------
lend000
Diseconomies of scale is a very real phenomenon, and it makes a pressing
argument for decentralizing by giving power back to the states. Was that a
foreseen side effect the founders wanted to avoid with the 10th amendment?
Probably not, but freedom is inherently a decentralized proposition, and tends
to be more efficient in many cases as a result.

[https://en.wikipedia.org/wiki/Diseconomies_of_scale](https://en.wikipedia.org/wiki/Diseconomies_of_scale)

> Cowen assumes his readers already understand that cost disease exists. I
> don’t know if this is true.

Unfortunately, "cost disease" has become politicized, so just like some won't
accept global warming, others deny basic realities about economics.

~~~
_bpo
> "cost disease" has become politicized

Citation needed. Where is this term common and where is it broadly discussed?

~~~
lend000
It's not; I've never heard of the term before the article. I'm referring to
the phenomenon itself. For example, Elizabeth Warren was recently quoted as
measuring success in dollars spent: [http://reason.com/blog/2017/01/19/on-
entitlements-elizabeth-...](http://reason.com/blog/2017/01/19/on-entitlements-
elizabeth-warren-says-th)

~~~
_bpo
"Entitlement programs" is politicized as a term, certainly. "Cost disease",
though... possibly in search for a new keyword?

> I'm referring to the phenomenon itself.

From your example, Elizabeth Warren and Tom Price are looking at the same
appearances (phenomena) and deriving different "noumena".

~~~
_bpo
Lots of downvotes here – any explanation? The GP uses the phrase "the
phenomenon itself" referring to the Kantian term "Ding an sich", which (as
applied to phenomena) is just a logical error...

~~~
lend000
I have nothing against being the guy who spends time pointing out small, or
even irrelevant errors, but there is no error to correct. I think this is just
a misinterpretation on your part, either stemming from not reading the article
to understand what the author described as 'cost disease,' or perhaps you did
not understand my use of quotation marks around cost disease in my original
post.

------
johngalt
Two gut feelings about this.

1\. Progress/inflation doesn't scale as homogeneously as we think. Producing a
consumer good such as a car or computer is easier to optimize than providing
healthcare, or an education. It also scales differently with globalization. A
global economy competing to produce the best car at the lowest cost, is also a
global population competing for the same limited slots in top universities.

2\. Costs have a way of cascading through a system. Double the price of oil
and it doesn't only mean more expensive plane tickets. It means more expensive
everything. This article paints the picture of several costs increasing, but
it could just be education. What happens to healthcare costs if medical school
costs 20k rather than 200k?

Of course this doesn't explain all of it. The subway instance is probably the
strongest counter argument.

~~~
tomjen3
1) Would explain stagnent prices, not prices going up as a percentage of total
income. And I am about as convinced that there is a massive difference in how
much things inflate as I am that the sun will rise tomorrow (one example:
compare how much better an iphone you get in 17 vs 07 when they launch with
how much gas you can buy for a set amount of hours worked).

2) I am not sure how that would work. If we take gas as an example, then if
that is 10% of the cost to produce a good intuitively it should be at most 20%
of the cost to produce a good even if it doubles (and might be a lot less, if
the new higher cost of gas means it is cheaper to produce closer to the
consumer).

------
imh
This makes me think of charities. Suppose I'm trying to raise money for cancer
research. Maybe I tell my friends and raise $100k. I then give that $100k to a
research lab. The next year I raise $100k again, except that this time, I
spend that money on advertisements telling people to donate to my charity. I
raise $300k that way, netting me $200k which I give to the lab.

My contribution to cancer research has doubled, yay! But this time, I raised a
total of $400k, so for the donors (consumers), a dollar of cancer research now
costs two dollars. I (the firm) became more sophisticated and in some ways
more efficient, but in other ways less efficient. Costs to the consumer went
up, but now I'm the dominant cancer charity. Other charities trying to raise
money can't compete since nobody has heard of them, and their message isn't
crafted by highly-paid marketers. To compete, they have to raise prices too! I
remember this being a big controversy in charities a few years ago.

The analogous scenario with for-profit firms making widgets is straight-
forward. I wonder what role this kind of mechanism could be playing in cost
disease?

------
misja111
I'm probably biased because I'm from Europe but to me it seems that the
decreasing cost effectiveness for health care and schooling in the USA is due
to the capitalist philosophy that is so strong in USA politics.

For instance in health care, in the USA pharmaceutic companies have much more
opportunity to sell or advertise their products directly to consumers. This is
because as a consumer in the USA you have more influence in the choice of
medicine or medical care you receive; as long as you are willing to pay for
it, you can get almost anything. In many European countries it is not like
that, it is many times the doctor who decides what is the most appropriate
cure for you and even he can not always decide which medicine to use, many
times this is regulated by the state or by health insurance companies.

In schooling there is a big competition in the USA between universities to
have the best ratings; this competition drives up salaries of top professors
to a level that does not reflect the extra benefits that they bring to their
students. All of this can happen because universities are pretty much free to
ask whatever fee they desire to students. Again in many European countries it
is not like that, universities have only limited freedom to determine their
tuition fees by themselves.

~~~
SilasX
I think that the pharma advertising, whatever the merits of the critique, is
something of a distraction; remember, the cost absurdity is _across the
board_. There's no direct-to-consumer saline-bag marketing, and yet it still
has the $1-to-$700 blowup.

Also, I think the European model places excessive trust in doctors; I bet a
lot of people there get stuck with some phone-it-in doctor who hasn't bothered
to keep up with the cure that was found ten years ago, and the system still
has to find some way to throttle all the demand to switch over to the good
doctors that _are_ diligent about this stuff.

With that said, I think the Europe-Asia vs US split is hint to the answer.
Remember, Europe and Asian rail construction hasn't seen the cost blowup the
the US has; theirs has kept in line with inflation a lot better.

~~~
projektfu
Saline bags are $80/dozen. They used to be $25/dozen before the price
increases. While manufacturers did increase prices in lockstep, they are
limited by the ease of new entrants. You might end up paying $700 for a bag
but that's the hospital setting the price.

~~~
SilasX
Right, but the hospital's overcharging is exactly what I was citing as the
problem.

------
earljwagner
We see similar phenomena in software: "software bloat", "feature creep", the
"second system effect" (see Wikipedia for details). Linux provides the same
basic functionality as Unix in 1980 but has orders of magnitude more lines of
code. Why? It's more complicated because the world is more complicated, and we
have higher (and more detailed) expectations for that functionality.

Basically, once you have a lean MVP that works, all social and economic
pressures are to add new features with decreasing marginal gains, support
standards of interest to fewer and fewer users, handle increasingly obscure
edge cases, etc.

~~~
RobertKerans
Yeah, I think this provides a useful analogy at the very least. The cost of
new features increases over time (it is much easier to add/change/swap out
features at an earlier point). Razing something to the ground and starting
again can often produce better systems, but at that point the external world
depends upong the systems already in place, so any efficiency you gain by
reconstructing is bled away almost immediately. Coupled to that is this idea
that automation always simplifies, make things more efficient. Whereas in
practise it often does the opposite: it works well _if_ you can control the
environment, simplify the interface to the external world. But reality isn't
that clean; in education, health, infrastructure etc the external world
becomes so complex that only aspects of it can be controlled, thus you only
get very partial, focussed solutions that are sold as complete solutions (and
fail). Maybe..

------
kbenson
> I don’t know why more people don’t just come out and say “LOOK, REALLY OUR
> MAIN PROBLEM IS THAT ALL THE MOST IMPORTANT THINGS COST TEN TIMES AS MUCH AS
> THEY USED TO FOR NO REASON, PLUS THEY SEEM TO BE GOING DOWN IN QUALITY, AND
> NOBODY KNOWS WHY, AND WE’RE MOSTLY JUST DESPERATELY FLAILING AROUND LOOKING
> FOR SOLUTIONS HERE.” State that clearly, and a lot of political debates take
> on a different light.

Well, politicians don't get elected for saying "I don't know", especially when
the competition says "It's simple, we stop doing X and start doing Y." I mean,
they _should_ get elected for saying they want to really understand the
problem, so they can actually fix it, but that's not what the public likes to
hear. :/

~~~
marvy
Not sure I agree with you. Suppose I want to fix this problem, and I decide I
need political power to do it. Which of the following strategies would you
recommend? Option A: get elected, spend first few years of my time in office
trying to understand what's going on. By the time I achieve enlightenment, my
term is over and I will not be reelected because I have nothing to show for my
time in office. Option B: study the problem first. It may take longer this
way, because politicians have access to resources that not everyone has.
Eventually understand the problem well enough to propose a solution I think
will help, and then run on a platform advocating that solution.

(There is also option C: make up a plausible sounding solution without even
caring whether it works or not; but then you're just seeking power and don't
care about the problem at all. Let's ignore that for now, despite the fact
that I sometimes worry that this may account for a large fraction of
politicians.)

~~~
kbenson
> Option A: get elected, spend first few years of my time in office trying to
> understand what's going on. By the time I achieve enlightenment, my term is
> over and I will not be reelected because I have nothing to show for my time
> in office.

I don't think we are really disagreeing... The electorate is just stuck in a
loop in this case where their own impatience (no doubt stirred by those
looking to challenge the status quo) works against them.

> Option B: study the problem first. It may take longer this way, because
> politicians have access to resources that not everyone has. Eventually
> understand the problem well enough to propose a solution I think will help,
> and then run on a platform advocating that solution.

Likely the only solution that will work, but it's hard, and you have the
problem of convincing people that your understanding and solution is correct.
I suspect being correct might even be an impediment to being elected, because
you'll likely have some hard truths to swallow for the electorate, which some
other less robust solutions can likely sidestep - or safely target towards
only a specific segment of the electorate - since they don't have the added
burden of actually having to solve the problem.

> (There is also option C: make up a plausible sounding solution without even
> caring whether it works or not; but then you're just seeking power and don't
> care about the problem at all. Let's ignore that for now, despite the fact
> that I sometimes worry that this may account for a large fraction of
> politicians.)

Well, I think we can't ignore that, because that's almost exactly what I was
referring to. :) The main difference being that the politicians may not be
purposefully - or at least not consciously - trying to put forth solutions
that are incorrect or at least very poorly researched and understood. It's
expedient to their worldview to not look too closely at whether their
"hunches" about the problem and solution stand up under scrutiny, and
confirmation bias takes care of the rest.

Combine this with an electorate that is increasingly upset about the problem
and wants a solution ASAP, and you get a revolving door of politicians that
espouse their pet solutions to the problem, possibly alternating between
opposing extremes that can both be incorrect.

~~~
marvy
yep, seems like we agree. now, what to do about it??

~~~
marvy
Found the answer: do nothing!

[http://secondenumerations.blogspot.com/2017/02/episode-4-in-...](http://secondenumerations.blogspot.com/2017/02/episode-4-in-
praise-of-passivity.html)

[http://studiahumana.com/pliki/wydania/In%20Praise%20of%20Pas...](http://studiahumana.com/pliki/wydania/In%20Praise%20of%20Passivity.pdf)

------
rjeli
I vaguely remember someone saying the #1 doomsday scenario that keeps them up
at night is complex systems collapse: that everything just starts to fail and
no one knows why. Anyone have a link?

~~~
imh
Sounds like a Strogatz kind of thing. I seem to remember him talking about it
somewhere, but can't find it either.

------
yummyfajitas
I think this post is fundamentally wrong. I left a comment there explaining,
but I'll also paste it here.

Note that my critique is an attempt at Feynmaning this theory.

Stylized fact 1: Income has remained flat after adjusting for chained CPI.

Stylized fact 2: costs have gone way up adjusting for chained CPI.

Conclusion: Consumption must have gone down, since consumption = Income/Cost.

The problem is that this simply hasn’t happened. People live in bigger homes.
They visit the doctor more, and have all sorts of medical procedures that
didn’t exist in the past. More people are attending college and receiving
degrees than ever before. People just have more of everything.

If you want to argue with this point, I challenge you: find a major category
of consumption that has gone down in material terms over a long period of
time. The most I can think of is obsolete goods like land lines, or inferior
goods like homed cooked meals (relative to restaurant meals).

That’s exactly the opposite of what this theory predicts! Therefore, although
I can’t identify exactly where things go wrong, they must go wrong somewhere.

~~~
SilasX
Did you see the part where he addressed that? If your only option is a bigger
house you don't want but have to pay for anyway, that's an excess cost. If
these operations don't actually extend life or quality but you have to buy
insurance with them, that's an excess cost.

And likewise, if your compensation has "increased" but it's only to cover
health care that's pointlessly more expensive, that's not really an increase
in compensation.

Alexander very specifically addresses the tradeoff in "would you rather have
70s health care plus $8000/years cash" etc.

~~~
yummyfajitas
I agree that there is excess cost relative to a counterfactual where
smaller/cheaper houses are legal. That's not what I'm disputing.

What I'm disputing is whether, overall, we are actually worse off.
Fundamentally here's where I claim SA is wrong:

 _Imagine if tomorrow, the price of water dectupled. Suddenly people have to
choose between drinking and washing dishes. Activists argue that taking a
shower is a basic human right, and grumpy talk show hosts point out that in
their day, parents taught their children not to waste water. A coalition
promotes laws ensuring government-subsidized free water for poor families; a
Fox News investigative report shows that some people receiving water on the
government dime are taking long luxurious showers. Everyone gets really angry
and there’s lots of talk about basic compassion and personal responsibility
and whatever but all of this is secondary to why does water costs ten times
what it used to?_

But in reality, this is not an accurate analogy to the modern world. I'm
claiming a better analogy would be this:

 _Imagine if tomorrow, the price of water dectupled. Furthermore, people 's
income and ability to purchase water remained flat. Yet somehow people started
taking longer showers, drinking 10 glasses/day rather than 8, having greener
lawns, and just generally staying very well hydrated._

In this latter scenario, I'd tell you that somewhere along the way you messed
up. Water consumption = money spent on water / price per gallon - if water
consumption went up, either the numerator increased or the denominator
decreased.

If you think I'm wrong, _tell me what we have less of_.

~~~
SilasX
Then I don't think original comment was productive: you think the cost
increase can be explained by quality improvements; Alexander expressed
skepticism on that point, by suggesting how the products offered cannot be
explained through a reasonable model of consumer preferences. As much as
people value bigger homes, do they value them so much as to pay 10x more for
2x the size even when technology should be improving that?

As much as people value better health care, are they _actually_ making a
conscious, understandable tradeoff between money and actually-better health
care on the metrics they really want?

You then mocked that as "fundamentally wrong", "stylized facts" without
quoting the specific part where he reduced it to a thought experiment (take
70s health care + $8000) or addressing the logic there.

~~~
yummyfajitas
I'm not saying it can be explained (completely) by quality improvements.

I'm saying consumption = (income - investment) / price. That's just an
arithmetic identity. Investment has been between 5 and 10% since basically
forever.

[http://www.tradingeconomics.com/united-states/personal-
savin...](http://www.tradingeconomics.com/united-states/personal-savings)

So if consumption went up, income must have risen faster than price. That's my
only point: you can't simultaneously have stagnating income, rising prices,
and rising consumption.

Now, if you're saying separately that it would be great if we could legalize
lower priced options, I agree with you. That would be great. But all that
would do is make (preference-adjusted) consumption go up more, or perhaps make
investment go up even more.

That doesn't change the fact that this price increase + stagnating income
story is false.

~~~
SilasX
>So if consumption went up, income must have risen faster than price.

You're assuming the consumption itself went up rather than paying more for the
same stuff. And people are paying a bigger fraction of their incomes for these
things. I don't know what this is adding to the discussion besides assuming
away the problem, as if _nothing ever_ becomes pointlessly expensive.

>Now, if you're saying separately that it would be great if we could legalize
lower priced options, I agree with you. That would be great. But all that
would do is make (preference-adjusted) consumption go up more, or perhaps make
investment go up even more.

No, that's an assertion that assumes away one possible resolution: that
pointless regulations mandate that only the expensive options be offered. It's
unlikely, but your model seems to disallow the very existence of that dynamic.

~~~
yummyfajitas
Yes, I'm assuming people live in bigger houses than in 1975, drive more cars
than in 1975, consume more medicine than in 1975, and get more education than
in 1975.

Which of these things do you disagree with?

 _I don 't know what this is adding to the discussion besides assuming away
the problem, as if nothing ever becomes pointlessly expensive._

You are arguing against a straw man. I never claimed this. Search my HN
posting history; you'll discover I do think education and transit are
pointlessly expensive.

~~~
SilasX
I greatly respect your insights on the issues, especially when unpopular;
you're one of the few whose comment history I directly read, and I was
especially appreciative of your contributions in this thread [1].

I'm replying because your comments here are unusually unhelpful -- in contrast
with all of your others -- in that you're assuming away certain scenarios or
ignoring Alexander's points about them. To wind back to the original question,
he is claiming that:

1) We are paying much more for healthcare/housing/education (HHE)

2) We are paying a much bigger fraction of income to HHE.

3) HHE is better ... but not by an amount big enough to justify the additional
cost.

4) HHE workers don't make any more than they used to.

Which combination of those do you think is physically impossible?

[1]
[https://news.ycombinator.com/item?id=10446377](https://news.ycombinator.com/item?id=10446377)

~~~
yummyfajitas
So here's an explanation SA dismisses:

 _First, can we dismiss all of this as an illusion? Maybe adjusting for
inflation is harder than I think. Inflation is an average, so some things have
to have higher-than-average inflation; maybe it’s education, health care,
etc._

I'm saying that in fact, this explanation must be true.

SA further says:

 _I’m more worried about the part where the cost of basic human needs goes up
faster than wages do. Even if you’re making twice as much money, if your
health care and education and so on cost ten times as much, you’re going to
start falling behind._

The reason is that if this broader worry were true, then consumption should be
going down. In fact, consumption has only gone up. Again: find me a good or
service that the median or even the poor consume less of than in 1975.

If SA were making a very isolated claim that education and transit cost too
much, I'd be agreeing with him. But he's actually making a much broader claim,
and the broader claim is what I dispute.

~~~
themikemachine
Your assertion that consumption has increased is compatible with Alexander's
article if the quality of the product being consumed has decreased, e.g.
people go to the doctor 20x more, but their health is worse than before. Or
they go to school for 5 years extra on average, but are worse prepared for a
job. In this scenario people are consuming more of an inferior product, and
overall getting less utility/dollar spent.

50 years ago you paid $100 to a doctor and $80 of those dollars went towards
giving you medical care, whereas now only $10 of those dollars go to giving
you medical care. Back then only $20 went to 'overhead', but nowadays $90 goes
to 'overhead'. By overhead I mean anything that is not directly germane to
giving you care: administrative, taxes, insurance, lawyers, paperwork, even
the $15 you spent on driving/parking to get to the hospital. The extra money
is thus being destroyed by inefficiencies in the system.

I made these numbers up to illustrate my point.

------
martinpw
For the specific case of public university tuition costs, this analysis from
the UC system suggests the increase it is primarily due to reduced government
funding, requiring students to make up the difference:

[http://www.ppic.org/main/publication_quick.asp?i=1119](http://www.ppic.org/main/publication_quick.asp?i=1119)

It also suggests that increasing administrative costs are not a significant
contributor, but that there is some effect from increased student services.

~~~
jimhefferon
I'm a prof at a private college, no state funding. When I ask our president he
says, "80% of costs are personnel and the driver there is health care."
Certainly I don't make what it says on the chart and have not had a raise
since 2008; in fact, my overall compensation has fallen.

(I don't know about doctors but I can absolutely testify that the satisfaction
in being a professor has plummeted, particularly since 2008. I have a son who
graduated a couple of years ago and considered graduate school, which I did my
best to warn him about.)

------
abakker
This article does a really nice job of laying out this issue, but avoids an
explanation that is difficult to show in data, I think. Many of these issues
he addresses - healthcare, housing, infrastructure, and education, are enabled
by federally assumed debt.

The core problem, I believe, is that federal debt is like a blank check that
nobody is personally accountable to repay. The result is that people in charge
of spending simply do not bargain well. There is no immediate incentive to
drive cost down by forcing suppliers to deliver at a lower cost, or find the
the real market equilibrium where nobody will offer a service.

Loose spending from the government is a different problem than government
spending in general. If the government were interested in getting the best
deal, it has more bargaining power than most entities in the world. However,
they frequently pay MORE for the same services. That alone should be a
trigger. I think most people intuitively know this and rail against it when
confronted by examples like student loans being spent on predatory for-profit
colleges, but, in aggregate, I blame most of the problem here.

The government has a nearly infinite potential for more debt, and as a result
they have no incentive to get a good price. Things have spiraled out of
control.

~~~
stymaar
Sad to see this king of comments on top.

> Many of these issues he addresses - healthcare, housing, infrastructure, and
> education, are enabled by federally assumed debt. > The core problem, I
> believe, is that federal debt is like a blank check that nobody is
> personally accountable to repay.

This statement is more about ideology than facts: « free money, inflation,
federal government doing shit» is like the constant refrain of conservatives
for everything …

It's not even relevant in the context of this article :

\- housing debts are individual debts, and they are indeed being repaid. Same
goes for college tuition debts.

\- this attempt to mimic a monetary economist reasoning is wobbly since those
figures are expressed in constant dollar: those are cost increase _in addition
to_ inflation.

~~~
abakker
Who is personally accountable to repay government debt? Taxpayers. The
politicians that assume debt are not accountable to repay it. that is all I
meant by that comment.

The federal government has a hand in underwriting mortgage financing (they own
Fannie and Freddie, and they keep the profits from those entities).

The Student Loans are personal loans, underwritten by the federal government.

I am not saying the federal government should never do these things, or that
these programs are the root of all evil. However, the federal government has
been generous with these programs. I think the incentives of providing easy
money through debt to the economy are easy in the short term, and that this
cost-disease is one of the long-term results.

If debt is akin to borrowing from the future, then maybe we borrow from the
future at the future's level of inflation.

------
omgwtfbyobbq
My guess is that the increases in college costs are coming from for-profit
universities and other "value" adds (student housing, etc...).

Inflation adjusted tuition costs in the UC system have apparently dropped by
40% or so since 1960 (~$2200 now compared to ~$3700 in 1960s dollars).
Granted, the tuition costs for students have increased substantially, since
the state used to cover most of it, but the total cost has still dropped a
fair bit.

[http://ucpay.globl.org/funding_vs_fees.php](http://ucpay.globl.org/funding_vs_fees.php)

I wouldn't be surprised to see the same in healthcare. An outpatient CTA at a
local hospital is something like $3500+ through my insurance, but the cash
price at a local radiology clinic is $550.

Don't even get me started with housing. The markups are ridiculous in some
places, although not in all places.

If I had to guess, I'd say that at least some of these examples of cost-
disease are really symptoms of excesses that weren't as common in the past and
market/regulatory capture.

------
woodandsteel
Interesting article. I think, however, if we are doing to do anything
effective about the problem, it will happen only if we examine in detail those
countries that don't have the same problems.

For instance, many Western European countries have very good health care for
far less expense, and besides that the doctors enjoy their work. What we need
to do is compare in detail how those health care systems work differently such
that there are such good results, and then figure out how to make something
similar in this country.

Ditto for the other areas. I can think of no sensible reason for not doing
such studies. Of course, various groups wouldn't want this because it would
run counter to their ideology or financial interests, but this is the right
way to go about it.

------
jchrisa
So everything has been running in successively more nested layers of virtual
machine, ever since the Magna Carta. What we need is for someone to start a
"rust for civilization" project.

Further thought: could the thing that's happening be that money is getting
less real? So it takes more of it to "push the string."

To me it seems that heavy redistribution, with high taxes and a basic income,
could help make money more real.

One has to trust the opportunity landscape has shifted due to the Internet,
and now capital accumulation is not a requirement for innovation. Otherwise it
looks really scary to tamp down on the idea of capital accumulation.
Especially to the bankers, who might be out of a job.

------
aidenn0
Elizabeth Warren gave a talk about this about a decade ago (before becoming a
senator):

[https://www.youtube.com/watch?v=akVL7QY0S8A](https://www.youtube.com/watch?v=akVL7QY0S8A)

For a family of 4 compared 1975 to 2005, all inflation-adjusted:

Median housing went up by 76%, median number of rooms only went from 5.8 to
6.1 (5% increase), and the house is older.

74% increase in median health-care costs for a family of 4 with employer
sponsored health-care.

52% increase in spending on cars, but cars are cheaper; many more families
have 2+ cars.

Childcare went from the median family of 4 spending $0 to being a significant
expense.

Tax liability went up by 21%

~~~
aaron-lebo
That's a remarkable criticism for someone who:

 _She earned about $165,300 from September 2010 through August 2011 as a
special adviser to President Obama, setting up the consumer protection agency
she helped establish._

 _Before that, she collected a total of $192,722 for leading the congressional
panel that oversaw the US bank bailout. That government salary covered a
period that began before her latest disclosure report, spanning from November
2008 through September 2010._

 _Elizabeth Warren, the Harvard Law School professor and consumer advocate
challenging Republican Senator Scott Brown, took home more than $700,000 in
compensation from teaching and consulting fees over a two-year period from
2010 to 2011, according to her most recent financial disclosure form._

I don't understand how you can in good conscience make criticisms like that
while collecting millions of dollars serving the American people and working
in academia.

[https://www.bostonglobe.com/metro/2012/01/13/elizabeth-
warre...](https://www.bostonglobe.com/metro/2012/01/13/elizabeth-warren-
salary-topped-over-two-years/pRhtt3yITonYDO7SXiongJ/story.html)

~~~
mehwoot
_“When I was poor and complained about inequality they said I was bitter; now
that I 'm rich and I complain about inequality they say I'm a hypocrite. I'm
beginning to think they just don't want to talk about inequality.”_

~~~
aaron-lebo
That would be a great retort except for the fact that there are people who
care about inequality but aren't willing to take money from a system which is
the very driver of inequality they preach against. Human beings are great at
justification, no matter who they are.

Do as I say but not as I do? That seems to be a problem with politics as a
whole. It'd be better if we didn't defend it.

~~~
eli_gottlieb
>That would be a great retort except for the fact that there are people who
care about inequality but aren't willing to take money from a system which is
the very driver of inequality they preach against.

You know, I don't think anyone has ever deliberately kept themselves at
minimum wage to make a point about capitalism.

~~~
loeg
> You know, I don't think anyone has ever deliberately kept themselves at
> minimum wage to make a point about capitalism.

We have a crazy socialist local city council member who comes close:
[http://blog.seattlepi.com/seattlepolitics/2014/01/27/sawant-...](http://blog.seattlepi.com/seattlepolitics/2014/01/27/sawant-
takes-40000-of-salary-rest-goes-to-solidarity-fund/)

~~~
eli_gottlieb
I was under the impression she made a chunk of money at Microsoft, and so
doesn't have to support herself off City Council work.

~~~
loeg
I guess it's possible. Wikipedia doesn't have any information on on her work
between getting her Comp Sci B.Sc in 1994 and her economics PhD sometime
around ~2003.

She didn't move to Seattle until 2006, unless that's missing from her
1994-2003 bio; after she had left the CS field. Maybe not Microsoft then, but
still tech money.

------
bradleyjg
For schools and healthcare I'd like to see total FTE across every employment
category in the sector per student and per capita respectively.

I'd guess that even if the teacher and doctor ratios are staying the same or
going down the overall ratios are shooting up.

If so, the missing money isn't mostly being siphoned off to a few people but
is going to enormous new workforce that didn't exist in the medical and
education systems of the 1970s.

------
mindslight
Most of this "cost disease" is simple _inflation_. But we've been fooled into
thinking that "inflation" is a single number defined by a government
committee, when really it's a general concept applicable to any sector where
currency is infused. For instance housing valuations haven't outpaced
inflation, they _are_ inflation!

~~~
dwaltrip
Can you please explain and provide evidence for the final declaration in your
comment?

Are you saying that changes in housing valuations are definitionally equal to
inflation? As in, they don't change price for any other reason, ever? That
doesn't sound very realistic.

~~~
mindslight
> _Are you saying that changes in housing valuations are definitionally equal
> to inflation?_

Yes, essentially. For most housing transactions, the money supply that is made
available to buy the house is equal to the appraisal of the house. It is a
circular relationship.

------
ekianjo
good article but it should look at who profits from increased revenues and why
instead of focusing only on costs increasing.

------
hamilyon2
Underpaid/free labour (by women and black) that was very common back then.
Much less now. This sosiety shift alone could double every price in economy,
while keeping wages stagnant.

I.e. household income rose even if wages did not.

~~~
laurent123456
If people were underpaid back then, wouldn't the average salary have raised
significantly over the past decades? However his article shows that it's
pretty much stagnant.

~~~
chongli
_wouldn 't the average salary have raised significantly over the past
decades?_

Not if those people were previously excluded from salary calculations. If they
were unpaid, it's definitely true that they weren't included in the average
salary figures.

------
brilee
My take on it is, even if health costs were 30% of my cushy software salary,
I'd pay them, because well, everyone wants to live. And so, prices continue
rising to the point where people are willing to pay for them. I'm willing to
pay 30% of my salary for healthcare. I'm willing to pay 20% of my salary to
get a good education for my kids. I'm willing to pay 20% of my salary to live
in a city with good culture. I'm willing to... oh wait, what's that? I ran out
of money because 40% of my salary went to federal and state taxes? Oops!

------
jasonmorton
Imagine a distant future where advances in technology makes everyone
fantastically wealthy in modern terms. Material goods are as cheap as digital
storage feels now. What would spend money on in this utopia? My guess would be
extending our time and quality of life (health care) and improving our minds
(education).

------
jger15
Any book recommendations that go more in-depth on this that you're aware?

------
John_Innocent
Isn't it obvious? All of the fields experiencing the cost disease are
dominated by government. Either through massive funding, or vast numbers of
regulations.

Even within sectors, we see the pattern. For example, the two fields of
medicine which have seen the least cost growth are cosmetic [1] and laser eye
surgery. Not only have costs risen the least, but the quality of some
procedures in these fields has improved tremendously over the last two
decades. Both are electives, so there are fewer mandates requiring that they
be covered by insurance and fewer redistributive programs to subsidise them.

The source of the complex system dysfunction is the political and social
system, which enables special interests to mislead the public in order to
implement policies that benefit themselves but have a negative-sum impact on
the economy as a whole. One of the 'big lies' that these special interests
have succeeded in convincing the public of is that the free market is a
misguided ideology that is promulgated by the rich in order to exploit the
poor, when in reality it is a basic rule-set necessary for economic
development in complex systems (due to properties like the rule-set enabling
effective large-scale coordination of economic resources through price
signalling, aligning private incentives with the public interest through laws
granting and protecting the right to property produced through one's own
efforts, or acquired through trade (and inversely, prohibiting acquisition of
property through theft, armed robbery and other non-voluntary and predatory
means), etc).

[1] [http://healthblog.ncpa.org/wp-
content/uploads/2013/06/HA1-06...](http://healthblog.ncpa.org/wp-
content/uploads/2013/06/HA1-06-17-2013.jpg)

~~~
pjc50
> Both are electives

This is critical, because it makes them actually price-sensitive. You can't
choose not to have heart disease, though.

Free markets have a bunch of conditions on their efficiency that are often
ignored by advocates and don't always apply: must be plurality of non-
coordinated buyers and sellers, must be feasible for participants to determine
quality of goods (Akerloff's "lemons"), must be low barriers to entry, must be
feasible for participants to choose not to do a transaction, and so on.

~~~
_yosefk
You can't choose not to eat, yet food prices don't rise like healthcare
prices.

I think TFA did a pretty good job showing the difficulty of pinning the
problem on market failure, government failure etc. At least any confident
explanation must come with numbers and not just passionate words showing where
the money went.

~~~
metaphorm
> yet food prices don't rise like healthcare prices.

agricultural subsidies and price support (government agrees to purchase unsold
surplus of many crops) are a huge contributor here.

also consider the externalities. the price of cheap beef is that 60 years from
now a global climate crisis will cost the entire world thousands of trillions
of dollars, and probably lots of lost lives as well.

~~~
John_Innocent
The price trends of food and healthcare couldn't be more different. There's
clearly something more than agricultural subsidies at work explaining the
difference, given healthcare receives many fold more subsidies. In fact, it's
possible that receiving compatively little in sibsidies is one reason that
food prices have declined. An even more likely explanation for the price
decline of food is that consumers are incentivizes to bargain hunt when buying
food, since doing so reduces what they pay, and thus a real consumer-driven
market, that rewards efficiency, exists in food. In healthcare, with
private/government insurance, there is no incentive for consumers to bargain
hunt.

Another factor that likely contributes to the divergence in prices is that
healthcare is heavily regulated while food production is not anywhere near as
constrained by government mandates.

~~~
metaphorm
food production and distribution is also heavily regulated. the USDA inspects
farms for safety and sanitation. the FDA inspects food processors for safety
and sanitation and inspects food products for safety and purity (whether or
not the item in the package is what it claims to be).

I don't know precisely how this compares with the degree of regulation and
government intervention in the healthcare sector, but I wish you would try to
make a more concrete argument with some examples or citations. as is it really
seems as if you're arguing purely from ideology.

~~~
John_Innocent
>food production and distribution is also heavily regulated.

Nowhere near as much as healthcare. Sorry I can't provide any concrete
evidence of that

------
_bpo
Tangential, but why do people write things like "even after adjusting for
inflation" when discussing long timespans (40 years in this case)?

Is there any reason to _not_ adjust for inflation? The "even..." in the
sentence suggests that the author is being liberal with potential critics when
it would seem only rudimentary to acknowledge inflation when discussing a
40-year timespan. A typical (new) car cost ~$4.5k in 1977 in the US....

~~~
Tenoke
Because news articles often don't adjust for it when making their arguments,
and savvy readers are used to thinking "yeah, this argument only sounds right
because they don't adjust for inflation".

------
John_Innocent
Anyone who identifies the problem and the solution is labeled a free market
ideologue and ignored.

This is the solution:

[http://www.ncpa.org/pdfs/st349.pdf](http://www.ncpa.org/pdfs/st349.pdf)

It's not a mystery why all of the industries suffering the cost disease are
dominated by government.

~~~
justinlaster
>Cosmetic surgery provides price competition because patients pay the bills.

Is this supposed to be satire? Do I even need to explain how ridiculous this
stance is? I'll save my energy until I get a resounding "yes."

~~~
loeg
Yes, it seems clear from the downvotes that you need to explain your
dismissal.

~~~
justinlaster
It's at -1. I really should not need to explain why a luxury service is not at
all analogous to a service that deals with life-threatening, chronic
conditions with a population that may not always have the means to pay
especially when that payment amount is built off of a shadow market place and
several entities which are notorious for not giving a flying shit about
people.

Don't be silly.

~~~
John_Innocent
Having the means to pay and needing the service for life or death reasons have
nothing do with the forces that drive costs down, namely consumers bargain
hunting for the lowest price service that offers adequate an level of quality.
Neither being poor nor needing a service for a life-or-death reasons. will
prevent consumer from bargain hunting. The factors are orthogonal to those
that affect cost trends.

You're failing to see that mechanics behind the evolution of consumer markets
that lead to prices being driven down. Combined with your rude and arrogant
dismissal of the link, your attitude embodies everything that is wrong with
our political system and that prevents solutions from being found and
implemented.

~~~
justinlaster
>You're failing to see that mechanics behind the evolution of consumer markets
that lead to prices being driven down.

How so? If anything, I succinctly recognized these so-called mechanics are
really just symptoms of other underlying actions and motivations. The PDF
wants to pretend like it's looking at market forces, while completely ignoring
some fundamental economic theories.

>Combined with your rude and arrogant dismissal of the link, your attitude
embodies everything that is wrong with our political system and that prevents
solutions from being found and implemented.

Your personal appeals to however insulted you feel or however blunt my
response was isn't going to make anything that was stated in your comment or
in the link any more substantive than it already is not.

Upon further investigation, the NCPA is a completely biased think-tank whose
explicit goals are apparently "to develop and promote private alternatives to
government regulation and control." I've never even heard of the NCPA, but the
whole contrived tone of the PDF immediately spiked my bullshit meter.

I'm sorry you think you can get away with espousing complete drivel that needs
to cherry-pick information to push forward a narrative, contrary to the
experiences of the rest of the world. I have a feeling the more and more I'm
going to look into this perspective, the less friendly this conversation is
going to become. At this point, I have zero tolerance for intellectual
dishonesty.

~~~
John_Innocent
"I succinctly recognized these so-called mechanics are really just symptoms of
other underlying actions and motivations. "

I have no idea what that means or what you're referring to. You still haven't
addressed any of the arguments I made.

Once more, my response to your argument:

>Having the means to pay and needing the service for life or death reasons
have nothing do with the forces that drive costs down, namely consumers
bargain hunting for the lowest price service that offers adequate an level of
quality. Neither being poor nor needing a service for a life-or-death reasons,
will prevent consumers from bargain hunting. The factors are orthogonal to
those that affect cost trends.

All you've done is try to justify the unscientific response you provided to my
comment, which contains only ad hominem ideological name-calling about the
source, rather than addressing the facts it listed and logic it offered.

To recap: you've had a viscerally emotional response, where you engaged in
totally rude and intellectually dishonest behaviour against me, all because
the argument I made is for the free market, and the party I cited believes in
the free market. This embodies everything wrong with our political system.

~~~
justinlaster
I did address it, and you are ignoring it. I honestly do not care how insulted
you are, or how rude you think I am. You removed any right to be cordially
addressed when you pushed non-sense into this board, and then had the audacity
to actually treat it as if you were being scientific.

Part of being scientific is asking your own position, "What does this look
like if the theory is wrong?" It's called falsifiability. If the PDF you
linked had the intellectual capacity and honesty to ask themselves that, then
the PDF would have never been published.

Yet you nor the paper have yet to realize, again, some pretty fundamental
economic concepts that explain the paper as a whole and why it's completely
irrelevant to the conversation at large.

>because the argument I made is for the free market, and the party I cited
believes in the free market.

No because they put their blinders on and didn't bother to actually look at
any other direction except for the one they wanted to see.

Allow me to be completely straight-forward with my final words: fuck off with
your unscientific, dishonest drivel.

~~~
dang
> _fuck off with your unscientific, dishonest drivel._

We've banned this account for repeatedly breaking HN's civility rule. That's
not allowed here.

If you don't want it to be banned, you're welcome to email hn@ycombinator.com
and give us reason to believe that you'll follow HN's rules in the future.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

[https://news.ycombinator.com/newswelcome.html](https://news.ycombinator.com/newswelcome.html)

------
venomsnake
I think I can explain the subway costs - the construction itself is relatively
cheap - tunneling and excavating is something mine companies do regularly on a
bigger scale.

It is the NIMBY, regulations and not breaking anything. Unlike China you
cannot rule by decree - there be subway here - dig.

~~~
mahyarm
But how about spain, france & the UK?

~~~
tomarr
The UK also has problems with particularly expensive infrastructure projects.

They tend to cost magnitudes more in common law countries (USA, Canada, UK,
Australia, NZ. This is generally down to the land and legal costs, with the
dispute framework becoming much more expensive. Land and property rights are
much more extensively protected in common law countries.

~~~
xioxox
Germany has also had massive cost problems with some projects, such as the
Hamburg concert hall. There's also the Berlin airport which is years late and
has costs over twice of what was expected.

------
fnord123
This is a 3% compounded increase in cost YoY. Not bad seeing at the population
about doubled in the same time (2.5% YoY):

[http://www.censusscope.org/us/chart_popl.html](http://www.censusscope.org/us/chart_popl.html)

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rdiddly
I suspect the hidden factor is population growth. You can find numerous
examples of things that become less efficient (more difficult/costly yet also
crappier) when more people are out there demanding that service. Or not even
using the same service, but simply interfering with each other in ways
unrelated - getting in each other's way, affecting each other. Cost is not in
a linear relationship with population size, or maybe it's population density.
There's a kind of friction that increases. Diminishing returns of scale &
complexity, you could call it.

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hiddencost
Reasons I can't stand the rationalists: They pick an arbitrary objective
metric for a topic about which they have no expertise, assume the metric is
basically complete, and then draw ridiculous conclusions.

You can have the best methods in the world, but if your prior is crap and your
data collection is crap, your posterior estimate will be crap.

\-----

(sardonic paraphrase): "test scores aren't increasing, so objectively schools
aren't better". and "I talked with my parents and their school experience
seemed similar to mine".

Hypothesis that they didn't seriously evaluate: "the spending went to things
not related to test scores which still has value"

~~~
yummyfajitas
If you think that's what happened, why don't you make that argument? What is
that thing unrelated to test scores which still has value?

(Similarly, what is the hidden thing in transit costs, in health care, etc?)

"Maybe there's a hidden thing this guy missed, and I can't stand people like
him" isn't really a counterargument.

~~~
hiddencost
SSC does this regularly: he'll take a problem, choose an arbitrary metric, and
then run the whole way. It's a cultural rejection of expertise (especially
expertise from the social sciences) which is endemic to tech and mathematics.
It leads to terrible policy recommendations (c.f., the effect on education by
the Gates Foundation and Zuckerberg's 100M to NJ).

("The Best and the Brightest" is a good book that talks about this phenomena
in another context.)

As a starting point, we can talk about issues related to: \-- increasing
prevalence of mental health issues \-- the expanding nature of school
populations (a lot more students, coming often from much more disadvantaged
backgrounds) \-- shifts from off-campus housing to on-campus housing which
have necessitated a massive expansion of facilities staff, security, dining
halls, etc. \-- changes in the legal burden that schools need to reach (e.g.,
title 9)

~~~
yummyfajitas
You are still not arguing that he's wrong. You're merely arguing that if he
were wrong, he might be wrong at other times for similar reasons.

