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Man who used CNC mill to make untraceable guns sentenced to 41 months

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Enlarge / An AR-15 lower receiver, seen here in 2014 at a store in Oceanside, California. (credit: Sandy Huffaker for The Washington Post via Getty Images)

A Sacramento, California, man was sentenced Thursday to over three years in prison for unlawful manufacture of a firearm and one count of dealing firearms.

Last year, Daniel Crowninshield pleaded guilty to those counts in exchange for federal prosecutors dropping other charges. According to investigators, Crowninshield, known online as "Dr. Death," would sell unfinished AR-15 lower receivers, which customers would then pay for him to transform into fully machined lower receivers using a computer numerically controlled (CNC) mill. (In October 2014, Cody Wilson, of Austin, Texas, who has pioneered 3D-printed guns, began selling a CNC mill called "Ghost Gunner," designed to work specifically on the AR-15 lower.)

"In order to create the pretext that the individual in such a scenario was building his or her own firearm, the skilled machinist would often have the individual press a button or put his or her hands on a piece of machinery so that the individual could claim that the individual, rather than the machinist, made the firearm," the government claimed in its April 14 plea agreement.

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duerig
4 days ago
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I've been skeptical of the whacko movement to make homemade guns. But this quote shows how odd it is when computer programming comes in contact with reality:

"In order to create the pretext that the individual in such a scenario was building his or her own firearm, the skilled machinist would often have the individual press a button or put his or her hands on a piece of machinery so that the individual could claim that the individual, rather than the machinist, made the firearm,"

Because I have a CNC machine. And once you have a program, there is no 'skilled machinist' needed. Anyone can run that program. It is like printing on a document. Exactly like like that in fact. One could imagine somebody thirty years ago talking about how a skilled printmaker was avoiding responsibility because the individual pressed the 'print' button.

These machines, whether they are 3d printers or CNC mills or robotic arms are becoming more normal. More pedestrian. And no longer the sole province of skilled professionals.
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Don't Buy Mike Pence's Innocent Act

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The official explanation for why Donald Trump asked Michael Flynn to resign (or merely accepted his resignation, depending on who's telling the story) is that Flynn lied to Vice-President Mike Pence about his conversation with Russian Ambassador Sergey Kislyak, which is why Pence then went on television to state with certitude: "They did not discuss anything having to do with the United States' decision to expel diplomats or impose censure against Russia."

Flynn's lie to Pence, which caused Pence's very public "misstatement," is now being cited as the reason underwriting the "erosion of trust" that prompted Trump to ask for Flynn's resignation.

Central to this story is the idea that Pence only made that claim because he'd been misled by Flynn. Pence's alleged innocence has been bolstered by stories, the source for which is Pence's spokesperson, about how Pence only found out he'd been misled when he read it in the Washington Post on February 9, even though "Trump was first informed about the Justice Department's concerns regarding Flynn on Jan. 26."


Indeed, this wholesale buy-in to Pence's incredible claim of innocence is contingent on believing a number of extraordinary things.

1. That Pence was wildly out of the loop.


Pence has emerged as one of the most powerful veeps in the nation's history. He has been acting as the liaison between the White House and the Republican Congressional Caucus to begin enacting a radical conservative agenda, staring with the repeal of the Affordable Care Act.

On January 26, the very day that Trump was informed about Flynn, Pence was profiled by USA Today as leading the charge on domestic policy: "Pence tells Congress to 'buckle up' and get ready to enact major change."

That is, quite simply, not a vice-president who's been pushed out and left in the dark.

2. That Pence made a definitive statement about a vital national security concern based only on Flynn's word.

What we are meant to believe is that Pence went on national television and made a definitive statement about whether Flynn discussed sanctions with a Russian official, based exclusively on Flynn's word and nothing else.

Not only that does that seem like a very foolish move for a seasoned politician who has been through his share of controversies, but it also requires us to believe that, before speaking on such an explosive topic on behalf of the administration, he didn't discuss his talking points with anyone else in the administration, except for one person who had reason to lie.

I've been writing about Pence for many years, and I can tell you that there a lot of deplorable things about him, but being stupid and reckless are not among them.

3. That Flynn lied even though, according to the Trump administration, he had nothing to lie about.

During the White House press briefing yesterday, Sean Spicer repeated over and over that Flynn's discussion about sanctions with Kislyak was not illegal. Flynn was asked for his resignation, Spicer insisted, not because he did anything wrong, but because of the "erosion of trust" after lying to Pence.

But: If Flynn hadn't done anything wrong on that call, then why would he lie about it to Pence in the first place? (The point is: Maybe he didn't.)

4. That Pence hasn't been reading the news for months.

For us to believe that Pence was truly "in the dark" and completely innocent of any knowledge that Flynn had misled him, we also have to believe that Pence hasn't read a shred of news for months. Until he happened to pick up the WaPo on Feb. 9.

Reports of Flynn's ties to Russia have also been circulating for months. We are also meant to believe that Pence has entirely missed reports that Flynn has a long relationship with Putin, including interviews (example) in which Flynn boasts about his ties to Russia.

Either we have to believe Pence missed all of that, or believe that Pence knew it yet inexplicably took Flynn at his word when he said he had not spoken to Kislyak about sanctions.

5. That Pence hasn't used precisely this maneuver before.

While Governor of Indiana, Pence used the old "had no knowledge" chestnut to distance himself from scandal. And it was just as absurd then as it is now.

Perhaps most famously, Pence claimed, exactly as he is now, that he learned from the press about the proposal for a state-run and taxpayer-funded news (propaganda) outlet: "I frankly learned about the memo from press reports late Monday."

He made this incredible claim despite the fact that two employees had already been hired; that "a governance board of communications directors" had been established; that a draft story had already been circulated; and that Pence himself had tweeted about it.

And he claimed that he learned about it from the media, just as he is claiming now.

This is his go-to move to try to disassociate himself from troubling stories that go public via leaks. He feigns ignorance, because it's preferable to look like he's out of the loop than intractably corrupt.

Don't believe him for a second. And urge the corporate media to give Pence the scrutiny he deserves, instead of letting him get away with the wide-eyed innocent routine. Again.
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duerig
6 days ago
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I dunno. Pence is sleazy. But if we can impeach Comrade Trump, I would sleep much easier with a President Sleazy Pence.
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Problems with Constant Compound Interest (6)

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Doctored Photo Credit: Marvin Isidore Macatol || And I say this is heresy!

=================================

My last post produced the following question:

What if your time horizon was 60 years? Would a 5% real return be achievable?

I am answering this as part of an irregular “think deeper” series on the problems of modeling investment over the very long term… the last entry was roughly six years ago.  It’s a good series of five articles, and this is number six.

On to the question.  The model forecasts over a ten-year period, and after that returns return to the long run average — about 9.5%/year nominal.  The naive answer would then be something like this: the model says over a 60-year period you should earn about 8.85%/year, considering that the first ten years, you should earn around 5.63%/year.  (Nominally, your initial investment will grow to be 161x+ as large.)   If you think this, you can earn a 5% real return if inflation over the 60 years averages 3.85%/year or less.  (Multiplying your capital in real terms by 18x+.)

Simple, right?

Now for the problems with this.  Let’s start with the limits of math.  No, I’m not going to teach you precalculus, though I have done that for a number of my kids.  What I am saying is that math reveals, but it also conceals.  In this case the math assumes that there is only one variable that affects returns for ten years — the proportion of investor asset held in stocks.  The result basically says that over a ten-year period, mean reversion will happen.  The proportion of investor asset held in stocks will return to an average level, and returns similar to the historical average will come thereafter.

Implicitly, this assumes that the return series underlying the regression is the perfectly normal return series, and the future will be just like it, only more so.  Let me tell you about some special things involved in the history of the last 71 years:

  • We have not lost a war on our home soil.
  • We have not had socialism to the destructive levels experienced by China under Mao, the USSR. North Korea, Cuba, etc.  (Ordinary socialism isn’t so damaging, though there are ethical reasons for not going that way.  People deserve freedom, not guarantees.  Note that stock returns in moderate socialist countries have been roughly as high as those in the US.  See the book Triumph of the Optimists.)
  • We have continued to have enough children, and they have become moderately productive workers.  Also, we have welcomed a lot of hard working and creative people to the US.
  • Technology has continued to improve, and along with it, labor productivity.
  • Adequate energy to multiply force and distribute knowledge is inexpensively available.
  • We have not experienced hyperinflation.

There are probably a few things that I have missed.  This is what I mean when I say the math conceals.  Every mathematical calculation abstracts quantity away from every other attribute, and considers it to be the only one worth analyzing.  Qualitative analysis is tougher and more necessary than quantitative analysis — we need it to give meaning to mathematical analyses.  (What are the limits?  What is it good for?  How can I use it?  How can I use it ethically?)

If you’ve read me long enough, you know that I view economies and financial markets as ecosystems.  Ecosystems are stable within limits.  Ecosystems also can only develop so quickly; there may be no limits to growth, but there are limits to the speed of growth in mature economies and financial systems.

Thus the question: will these excellent conditions continue?  My belief is that mankind never truly changes, and that history teaches us that all governments and most cultures eventually die.  When they do, most or all economic arrangements tend to break, especially complex ones like financial markets.

But here are three more limits, and they are more local:

  • Can you really hold for 60 years, reinvesting and never taking a material amount out?
  • Will the number investing in the equity markets remain small?
  • Will stock be offered and retired at ordinary prices?

 

Most people can’t lock money away for that long without touching it to some degree.  Some of the assets may get liquidated because of panic, personal emergency needs, etc.  Besides, why be a miser?  Warren Buffett, one of the greatest compounders of all time, might have ended up happier if he had spent less time compounding, and more time on his family.  It would have been better to take a small part of it, and use it to make others happy then, and not wait to be the one of the most famous philanthropists of the 21st century before touching it.

Second, returns may be smaller in the future because more pursue them.  One reason the rewards for being a capitalist are large on average is that there are relatively few of them.  Also, I have sometimes wondered if stock returns will fall when the whole world is employed, and there is no more cheap labor to be had.  Should that bold scenario ever come to pass, labor would have more bargaining power in aggregate, and profits would likely fall.

Finally, you have to recognize that the equity return statistics are somewhat overstated.  I’m not sure how much, but I think it is enough to reduce returns by 1%+.  Equity tends to be offered for initial purchase expensively, and tends to get retired inexpensively.  Businessmen are rational and tend to go public when stock valuations are high, pay employees in stock when valuations are high, and do stock deals when valuations are high.  They tend to go private when stock valuations are low, pay employees cash in ordinary times, and do cash deals when valuations are low.

As a result, though someone that buys and holds the stock index does best, less money is in the index when stocks are low, and a lot more when stocks are high.

Inflation Over 60 Years?

I mentioned the risk of hyperinflation above, but who can tell what inflation will do over 60 years?  If the market survives, I feel confident that stocks would outperform inflation — but how much is the open question.  We haven’t paid the price for loose monetary policy yet.  A 1% rise in inflation tends to cut stock returns by 2% for a year in real terms, but then businesses adjust and pass through higher prices.  Vice-versa when inflation falls.

Right now the 30-year forecast for inflation is around 2.1%/year, but that has bounced around considerably even within a calm environment.  My estimate of inflation over a 60-year period would be the weakest element of this analysis; you can’t tell what the politicians and central bankers will do, and they aren’t sure themselves.

Summary

Yes, you could earn 5% real returns on your money over a 60-year period… potentially.  It would take hard work, discipline, cleverness, frugality, and a cast iron stomach for risk.  You would need to be one of the few doing it.  It would also require the continued prosperity of the US and global economies.  We don’t prosper in a vacuum.

Thus in closing I will tell you that yes, you could do it, but there is a large probability of failure.  Don’t count on buying that grand villa on the Adriatic Sea in your eighties, should you have the strength to enjoy it.

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duerig
6 days ago
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I like how this lays out the reality behind the abstraction of 'compound interest'. Far too many people see the math behind compound interest and get excited because they forget that math is a tool for describing the world, not a fount of absolute knowledge.

There are times and places where exponential equations fit well. But when you take an exponential equation and extrapolate a hundred years, you are implicitly assuming that the exponential equation will be valid across that entire span. And we can look back at the last hundred years and see lots of circumstances where this particular exponential equation did not hold.

As a rule of thumb, you should not expect to invest large amounts of money over large time spans and make money faster than the economy is growing. If your initial investment is with a really hot new thing, then it will grow fast at first and then eventually slow as it runs into diminishing returns. If you have interest bearing bonds or a bank account, then you have loaned money to somebody. And they will be under the same constraints as if you had invested directly. And in the long term if the terms of the loan (or interest paid on account) causes their interest to go up faster than the economy, they will go bankrupt and you will not get the original promise. This logic is one reason why banks reserve the right to change interest rates they pay for accounts.

At the end of the day, there is no 'pure' way to generate compound interest. It is always a temporary situation that depends on the world as a whole staying stable and the economy growing as fast as the compound interest. These are very contingent events, not built into the fabric of the universe. So don't get too excited when calculating compound interest for a thousand years.
ProbablyWrong
6 days ago
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The gender similarities hypothesis

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cubeThere is a popular notion that men and women are very different in their cognitive abilities. The evidence for this may be weaker than you expect. Janet Hyde advances what she calls the ‘gender similarities hypothesis‘, ‘which holds that males and females are similar on most, but not all, psychological variables’. In a 2016 review she states:

According to meta-analyses, however, among both children and adults, females perform equally to males on mathematics assessments. The gender difference in verbal skills is small and varies depending on the type of skill assessed (e.g., vocabulary, essay writing). The gender difference in 3D mental rotation shows a moderate advantage for males.

So from three celebrated examples of differences in ability only two actually show a moderate gender difference. Other abilities show no or negligible gender differences, Hyde concludes. Gender differences in ability may be overinflated in the popular imagination.

Worth noting is that the name of the game here isn’t to find gender differences in behaviour. That’s too easy. Women wear more make-up for example, men are more likely to wear trousers. The game is to find a measure which reflects some more fundamental aspect of mental capacity. Hence the focus on vocabulary size, mental rotation ability, maths ability and the like. These may be less subject to the vagaries of exactly what is expected of each gender, but that’s a shaky assumption. Indeed, it would be weird if different roles and expectations for men vs women didn’t produce different motivations and opportunities for practice of cognitive abilities such as these.

The real challenge is to find immutable gender differences, or to track differences in how abilities develop under different conditions. Without this evidence, we’re not going to be sure which gender differences are immutable, and which are contingent on the specific psychological history of particular men and particular women living in our particular societies.

One way of addressing this challenge is to look at how gender differences change across different socities, or across time as society changes. A 2014 study, ‘The changing face of cognitive gender differences in Europe‘ did just that, showing that less gender-restricted educational opportunities tended to decrease some gender differences but not others. In other words, increasing equality in educational attainment magnified some differences between the sexes.

You can read my take on this in this piece for The Conversation : Are women and men forever destined to think differently?

The Gender Similarities Hypothesis: Hyde, J. S. (2005). The gender similarities hypothesis. American psychologist, 60(6), 581-592

2016 update: Hyde, J. S. (2016). Sex and cognition: gender and cognitive functions. Current opinion in neurobiology, 38, 53-56.

Previously: Gender brain blogging: Sex differences in brain size, no male and female brain types.






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duerig
8 days ago
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It doesn't help that our intuitions about statistics are so weak. Even when somebody finds a weak or moderate statistical effect, we tend to overstate it. "People in A category have more foobars on average than people in B category" is heard as "People in A category have all the foobars and people in B category don't have foobars". We somehow miss the fact that even if the original statement is true, there will still be many people in B category that have more foobars than most people in A category.
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What Made America Great, and Should We Keep Doing That?

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I’ve been consuming some history lately, including lots of American military and economic history. When I hear the #MAGA folks saying “Make America Great Again” I’ve begun looking beyond the obvious response (“America is still great”) and into a pair of deeper questions:

  • What made America great?
  • Should we keep doing that?

The answers, summarized, are “bad behavior” and “no.”

Before you scream at me, hear me out: Americans have worked hard, fought hard, and paid dearly to get here. But we’ve had some unfair advantages, and we should look at them.

Cheap Labor

Americans exploited African peoples for for decades after Europe had abandoned the slave trade. The United States put those slaves to work building an enormous economy (cotton was a big deal in the 19th century) at a fraction of what it would have cost if we¹ were treating slaves like actual human people. The wealth that poured into the American South during the first half of the 19th century put the economy of the United States on par with some of the great economies of Europe, and we’d been a nation for less than 100 years.

Free Resources

The United States was born with a frontier full of valuable natural resources which Americans claimed for their own during long string of violent conflicts with the indigenous peoples. Europe and Asia had similar resources, but the nations of Europe and Asia were hard-pressed to displace each other.

The United States grew westward for a hundred and fifty years, killing and displacing the Original Americans on no other grounds than that we wanted their stuff. I live in some of that territory. It’s rich, beautiful land that we took from someone else. I said “free resources” but it’s a little more accurate to say “stolen resources.”

War Profiteering

In the early 20th century the United States was an isolationist economic power. When the Great War broke out in Europe we pointed at the “foreign entanglements” that dragged nation after nation into a shockingly deadly conflict, and we patted ourselves on the backs for not being entangled. Then we sold weapons and materiel to anybody we could ship them to. A portion of the heavy cost paid by Britain and France during WWI was paid to the United States. We only entered the war in its late stages, and on the cold balance sheets of GNP, we came out of that war ahead.

In the Second World War we again gained an economic leg up with early isolationism, and even after we joined the war our geographic isolation continued to work in our favor. The enormous leverage we had developed in the previous 130 years afforded the United States enough of an advantage that following the war we had become a power, economic and military, that required the coining of the word “superpower.”

Standing on the Shoulders of Giants

From the 1950s forward we leveraged that status. Two or three generations of Americans² grew up assuming that America was the biggest and the best by definition, forgetting the path we took, and the people we literally crushed to get here. Isaac Newton once wrote “If I see far it is because I stand on the shoulders of giants.” When we acknowledge those whose work came before our own, we must not fail to recognize those who did not do that work willingly.

Redefining American Greatness

When we consider the historical context, the phrase “Make America Great Again” is exceedingly problematic, and not only because the word “again” seems to say that we’ve lost our way.  The word “again” also suggests that we want to return to the injustices and exploitation of our past.

I don’t want that.

If you’re alive today, it’s because you had human ancestors who were brutally effective in a world where brutality was often the best survival strategy. Feeling guilty about that won’t do anyone any good, but neither will using that as a justification for brutality today. It’s not the best way to get ahead.

We’ve learned to communicate, automate, improve, and refine in ways our ancestors couldn’t even imagine. That is the path for further greatness, and we cannot walk it alone. We stray from it completely by shouldering other people off of it. If we want to make 21st-century America great, in our own eyes, and in the eyes of the world, it’s time to be done poisoning everybody with the smoke of burning bridges³.

The American people are, like all human people, brilliant and wonderful. Let’s educate them, and care for them, and prop them up so that when they stand on our shoulders, they see things we can’t imagine, and when they look back at us we’re smiling about it.


¹ I say “we” throughout this essay because my ancestors took part in most, if not all, of the aspects of this bad behavior. Also, I benefit, as do almost all Americans, from the economic and military boosts we unfairly acquired in the 19th and 20th centuries.

² I’m one of them. It took a while to disabuse myself of some of those notions. Today I look around and see that non-Americans work at least as hard as Americans do. If we’re ahead in any sense, it’s because our starting line was further forward. 

³ And other stuff. Burning things is terribly inefficient, and messy. We should stop.

 

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duerig
9 days ago
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Considerations On Cost Disease

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I.

Tyler Cowen writes about cost disease. I’d previously heard the term used to refer only to a specific theory of why costs are increasing, involving labor becoming more efficient in some areas than others. Cowen seems to use it indiscriminately to refer to increasing costs in general – which I guess is fine, goodness knows we need a word for that.

Cowen assumes his readers already understand that cost disease exists. I don’t know if this is true. My impression is that most people still don’t know about cost disease, or don’t realize the extent of it. So I thought I would make the case for the cost disease in the sectors Tyler mentions – health care and education – plus a couple more.

First let’s look at primary education:

There was some argument about the style of this graph, but as per Politifact the basic claim is true. Per student spending has increased about 2.5x in the past forty years even after adjusting for inflation.

At the same time, test scores have stayed relatively stagnant. You can see the full numbers here, but in short, high school students’ reading scores went from 285 in 1971 to 287 today – a difference of 0.7%.

There is some heterogenity across races – white students’ test scores increased 1.4% and minority students’ scores by about 20%. But it is hard to credit school spending for the minority students’ improvement, which occurred almost entirely during the period from 1975-1985. School spending has been on exactly the same trajectory before and after that time, and in white and minority areas, suggesting that there was something specific about that decade which improved minority (but not white) scores. Most likely this was the general improvement in minorities’ conditions around that time, giving them better nutrition and a more stable family life. It’s hard to construct a narrative where it was school spending that did it – and even if it did, note that the majority of the increase in school spending happened from 1985 on, and demonstrably helped neither whites nor minorities.

I discuss this phenomenon more here and here, but the summary is: no, it’s not just because of special ed; no, it’s not just a factor of how you measure test scores; no, there’s not a “ceiling effect”. Costs really did more-or-less double without any concomitant increase in measurable quality.

So, imagine you’re a poor person. White, minority, whatever. Which would you prefer? Sending your child to a 2016 school? Or sending your child to a 1975 school, and getting a check for $5,000 every year?

I’m proposing that choice because as far as I can tell that is the stakes here. 2016 schools have whatever tiny test score advantage they have over 1975 schools, and cost $5000/year more, inflation adjusted. That $5000 comes out of the pocket of somebody – either taxpayers, or other people who could be helped by government programs.

Second,, college is even worse:

Note this is not adjusted for inflation; see link below for adjusted figures

Inflation-adjusted cost of a university education was something like $2000/year in 1980. Now it’s closer to $20,000/year. No, it’s not because of decreased government funding, and there are similar trajectories for public and private schools.

I don’t know if there’s an equivalent of “test scores” measuring how well colleges perform, so just use your best judgment. Do you think that modern colleges provide $18,000/year greater value than colleges did in your parents’ day? Would you rather graduate from a modern college, or graduate from a college more like the one your parents went to, plus get a check for $72,000?

(or, more realistically, have $72,000 less in student loans to pay off)

Was your parents’ college even noticeably worse than yours? My parents sometimes talk about their college experience, and it seems to have had all the relevant features of a college experience. Clubs. Classes. Professors. Roommates. I might have gotten something extra for my $72,000, but it’s hard to see what it was.

Third, health care. The graph is starting to look disappointingly familiar:

The cost of health care has about quintupled since 1970. It’s actually been rising since earlier than that, but I can’t find a good graph; it looks like it would have been about $1200 in today’s dollars in 1960, for an increase of about 800% in those fifty years.

This has had the expected effects. 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.

Or not.

This time I can’t say with 100% certainty that all this extra spending has been for nothing. Life expectancy has gone way up since 1960:

Extra bonus conclusion: the Spanish flu was really bad

But a lot of people think that life expectancy depends on other things a lot more than healthcare spending. Sanitation, nutrition, quitting smoking, plus advances in health technology that don’t involve spending more money. ACE inhibitors (invented in 1975) are great and probably increased lifespan a lot, but they cost $20 for a year’s supply and replaced older drugs that cost about the same amount.

In terms of calculating how much lifespan gain healthcare spending has produced, we have a couple of options. Start with by country:

Countries like South Korea and Israel have about the same life expectancy as the US but pay about 25% of what we do. Some people use this to prove the superiority of centralized government health systems, although Random Critical Analysis has an alternative perspective. In any case, it seems very possible to get the same improving life expectancies as the US without octupling health care spending.

The Netherlands increased their health budget by a lot around 2000, sparking a bunch of studies on whether that increased life expectancy or not. There’s a good meta-analysis here, which lists six studies trying to calculate how much of the change in life expectancy was due to the large increases in health spending during this period. There’s a broad range of estimates: 0.3%, 1.8%, 8.0%, 17.2%, 22.1%, 27.5% (I’m taking their numbers for men; the numbers for women are pretty similar). They also mention two studies that they did not officially include; one finding 0% effect and one finding 50% effect (I’m not sure why these studies weren’t included). They add:

In none of these studies is the issue of reverse causality addressed; sometimes it is not even mentioned. This implies that the effect of health care spending on mortality may be overestimated.

They say:

Based on our review of empirical studies, we conclude that it is likely that increased health care spending has contributed to the recent increase in life expectancy in the Netherlands. Applying the estimates form published studies to the observed increase in health care spending in the Netherlands between 2000 and 2010 [of 40%] would imply that 0.3% to almost 50% of the increase in life expectancy may have been caused by increasing health care spending. An important reason for the wide range in such estimates is that they all include methodological problems highlighted in this paper. However, this wide range inicates that the counterfactual study by Meerding et al, which argued that 50% of the increase in life expectancy in the Netherlands since the 1950s can be attributed to medical care, can probably be interpreted as an upper bound.

It’s going to be completely irresponsible to try to apply this to the increase in health spending in the US over the past 50 years, since this is probably different at every margin and the US is not the Netherlands and the 1950s are not the 2010s. But if we irresponsibly take their median estimate and apply it to the current question, we get that increasing health spending in the US has been worth about one extra year of life expectancy.

This study attempts to directly estimate a %GDP health spending to life expectancy conversion, and says that an increase of 1% GDP corresponds to an increase of 0.05 years life expectancy. That would suggest a slightly different number of 0.65 years life expectancy gained by healthcare spending since 1960)

If these numbers seem absurdly low, remember all of those controlled experiments where giving people insurance doesn’t seem to make them much healthier in any meaningful way.

Or instead of slogging through the statistics, we can just ask the same question as before. Do you think the average poor or middle-class person would rather:

a) Get modern health care
b) Get the same amount of health care as their parents’ generation, but with modern technology like ACE inhibitors, and also earn $8000 extra a year

Fourth, we se similar effects in infrastructure. The first New York City subway opened around 1900. Various sources list lengths from 10 to 20 miles and costs from $30 million to $60 million dollars – I think my sources are capturing it at different stages of construction with different numbers of extensions. In any case, it suggests costs of between $1.5 million to $6 million dollars/mile = $1-4 million per kilometer. That looks like it’s about the inflation-adjusted equivalent of $100 million/kilometer today, though I’m very uncertain about that estimate. In contrast, Vox notes that a new New York subway line being opened this year costs about $2.2 billion per kilometer, suggesting a cost increase of twenty times – although I’m very uncertain about this estimate.

Things become clearer when you compare them country-by-country. The same Vox article notes that Paris, Berlin, and Copenhagen subways cost about $250 million per kilometer, almost 90% less. Yet even those European subways are overpriced compared to Korea, where a kilometer of subway in Seoul costs $40 million/km (another Korean subway project cost $80 million/km). This is a difference of 50x between Seoul and New York for apparently comparable services. It suggests that the 1900s New York estimate above may have been roughly accurate if their efficiency was roughly in line with that of modern Europe and Korea.

Fifth, housing:

Most of the important commentary on this graph has already been said, but I would add that optimistic takes like this one by the American Enterprise Institute are missing some of the dynamic. Yes, homes are bigger than they used to be, but part of that is zoning laws which make it easier to get big houses than small houses. There are a lot of people who would prefer to have a smaller house but don’t. When I first moved to Michigan, I lived alone in a three bedroom house because there were no good one-bedroom houses available near my workplace and all of the apartments were loud and crime-y.

Or, once again, just ask yourself: do you think most poor and middle class people would rather:

1. Rent a modern house/apartment
2. Rent the sort of house/apartment their parents had, for half the cost

II.

So, to summarize: in the past fifty years, education costs have doubled, college costs have dectupled, health insurance costs have dectupled, subway costs have at least dectupled, and housing costs have increased by about fifty percent. US health care costs about four times as much as equivalent health care in other First World countries; US subways cost about eight times as much as equivalent subways in other First World countries.

I worry that people don’t appreciate how weird this is. I didn’t appreciate it for a long time. I guess I just figured that Grandpa used to talk about how back in his day movie tickets only cost a nickel; that was just the way of the world. But all of the numbers above are inflation-adjusted. These things have dectupled in cost even after you adjust for movies costing a nickel in Grandpa’s day. They have really, genuinely dectupled in cost, no economic trickery involved.

And this is especially strange because we expect that improving technology and globalization ought to cut costs. In 1983, the first mobile phone cost $4,000 – about $10,000 in today’s dollars. It was also a gigantic piece of crap. Today you can get a much better phone for $100. This is the right and proper way of the universe. It’s why we fund scientists, and pay businesspeople the big bucks.

But things like college and health care have still had their prices dectuple. Patients can now schedule their appointments online; doctors can send prescriptions through the fax, pharmacies can keep track of medication histories on centralized computer systems that interface with the cloud, nurses get automatic reminders when they’re giving two drugs with a potential interaction, insurance companies accept payment through credit cards – and all of this costs ten times as much as it did in the days of punch cards and secretaries who did calculations by hand.

It’s actually even worse than this, because we take so many opportunities to save money that were unavailable in past generations. Underpaid foreign nurses immigrate to America and work for a song. Doctors’ notes are sent to India overnight where they’re transcribed by sweatshop-style labor for pennies an hour. Medical equipment gets manufactured in goodness-only-knows which obscure Third World country. And it still costs ten times as much as when this was all made in the USA – and that back when minimum wages were proportionally higher than today.

And it’s actually even worse than this. A lot of these services have decreased in quality, presumably as an attempt to cut costs even further. Doctors used to make house calls; even when I was young in the ’80s my father would still go to the houses of difficult patients who were too sick to come to his office. This study notes that for women who give birth in the hospital, “the standard length of stay was 8 to 14 days in the 1950s but declined to less than 2 days in the mid-1990s”. The doctors I talk to say this isn’t because modern women are healthier, it’s because they kick them out as soon as it’s safe to free up beds for the next person. Historic records of hospital care generally describe leisurely convalescence periods and making sure somebody felt absolutely well before letting them go; this seems bizarre to anyone who has participated in a modern hospital, where the mantra is to kick people out as soon as they’re “stable” ie not in acute crisis.

If we had to provide the same quality of service as we did in 1960, and without the gains from modern technology and globalization, who even knows how many times more health care would cost? Fifty times more? A hundred times more?

And the same is true for colleges and houses and subways and so on.

III.

The existing literature on cost disease focuses on the Baumol effect. Suppose in some underdeveloped economy, people can choose either to work in a factory or join an orchestra, and the salaries of factory workers and orchestra musicians reflect relative supply and demand and profit in those industries. Then the economy undergoes a technological revolution, and factories can produce ten times as many goods. Some of the increased productivity trickles down to factory workers, and they earn more money. Would-be musicians leave the orchestras behind to go work in the higher-paying factories, and the orchestras have to raise their prices if they want to be assured enough musicians. So tech improvements in the factory sectory raise prices in the orchestra sector.

We could tell a story like this to explain rising costs in education, health care, etc. If technology increases productivity for skilled laborers in other industries, then less susceptible industries might end up footing the bill since they have to pay their workers more.

There’s only one problem: health care and education aren’t paying their workers more; in fact, quite the opposite.

Here are teacher salaries over time (source):

Teacher salaries are relatively flat adjusting for inflation. But salaries for other jobs are increasing modestly relative to inflation. So teacher salaries relative to other occupations’ salaries are actually declining.

Here’s a similar graph for professors (source):

Professor salaries are going up a little, but again, they’re probably losing position relative to the average occupation. Also, note that although the average salary of each type of faculty is stable or increasing, the average salary of all faculty is going down. No mystery here – colleges are doing everything they can to switch from tenured professors to adjuncts, who complain of being overworked and abused while making about the same amount as a Starbucks barista.

This seems to me a lot like the case of the hospitals cutting care for new mothers. The price of the service dectuples, yet at the same time the service has to sacrifice quality in order to control costs.

And speaking of hospitals, here’s the graph for nurses (source):

Female nurses’ salaries went from about $55,000 in 1988 to $63,000 in 2013. This is probably around the average wage increase during that time. Also, some of this reflects changes in education: in the 1980s only 40% of nurses had a degree; by 2010, about 80% did.

And for doctors (source)

Stable again! Except that a lot of doctors’ salaries now go to paying off their medical school debt, which has been ballooning like everything eles.

I don’t have a similar graph for subway workers, but come on. The overall pictures is that health care and education costs have managed to increase by ten times without a single cent of the gains going to teachers, doctors, or nurses. Indeed these professions seem to have lost ground salary-wise relative to others.

I also want to add some anecdote to these hard facts. My father is a doctor and my mother is a teacher, so I got to hear a lot about how these professions have changed over the past generation. It seems at least a little like the adjunct story, although without the clearly defined “professor vs. adjunct” dichotomy that makes it so easy to talk about. Doctors are really, really, really unhappy. When I went to medical school, some of my professors would tell me outright that they couldn’t believe anyone would still go into medicine with all of the new stresses and demands placed on doctors. This doesn’t seem to be limited to one medical school. Wall Street Journal: Why Doctors Are Sick Of Their Profession – “American physicians are increasingly unhappy with their once-vaunted profession, and that malaise is bad for their patients”. The Daily Beast: How Being A Doctor Became The Most Miserable Profession – “Being a doctor has become a miserable and humiliating undertaking. Indeed, many doctors feel that America has declared war on physicians”. Forbes: Why Are Doctors So Unhappy? – “Doctors have become like everyone else: insecure, discontent and scared about the future.” Vox: Only Six Percent Of Doctors Are Happy With Their Jobs. Al Jazeera America: Here’s Why Nine Out Of Ten Doctors Wouldn’t Recommend Medicine As A Profession. Read these articles and they all say the same thing that all the doctors I know say – medicine used to be a well-respected, enjoyable profession where you could give patients good care and feel self-actualized. Now it kind of sucks.

Meanwhile, I also see articles like this piece from NPR saying teachers are experiencing historic stress levels and up to 50% say their job “isn’t worth it”. Teacher job satisfaction is at historic lows. And the veteran teachers I know say the same thing as the veteran doctors I know – their jobs used to be enjoyable and make them feel like they were making a difference; now they feel overworked, unappreciated, and trapped in mountains of paperwork.

It might make sense for these fields to become more expensive if their employees’ salaries were increasing. And it might make sense for salaries to stay the same if employees instead benefitted from lower workloads and better working conditions. But neither of these are happening.

IV.

So what’s going on? Why are costs increasing so dramatically? Some possible answers:

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 I don’t think this is true. The last time I talked about this problem, someone mentioned they’re running a private school which does just as well as public schools but costs only $3000/student/year, a fourth of the usual rate. Marginal Revolution notes that India has a private health system that delivers the same quality of care as its public system for a quarter of the cost. Whenever the same drug is provided by the official US health system and some kind of grey market supplement sort of thing, the grey market supplement costs between a fifth and a tenth as much; for example, Google’s first hit for Deplin®, official prescription L-methylfolate, costs $175 for a month’s supply; unregulated L-methylfolate supplement delivers the same dose for about $30. And this isn’t even mentioning things like the $1 bag of saline that costs $700 at hospitals. Since it seems like it’s not too hard to do things for a fraction of what we currently do things for, probably we should be less reluctant to believe that the cost of everything is really inflated.

Second, might markets just not work? I know this is kind of an extreme question to ask in a post on economics, but maybe nobody knows what they’re doing in a lot of these fields and people can just increase costs and not suffer any decreased demand because of it. Suppose that people proved beyond a shadow of a doubt that Khan Academy could teach you just as much as a normal college education, but for free. People would still ask questions like – will employers accept my Khan Academy degree? Will it look good on a resume? Will people make fun of me for it? The same is true of community colleges, second-tier colleges, for-profit colleges, et cetera. I got offered a free scholarship to a mediocre state college, and I turned it down on the grounds that I knew nothing about anything and maybe years from now I would be locked out of some sort of Exciting Opportunity because my college wasn’t prestigious enough. Assuming everyone thinks like this, can colleges just charge whatever they want?

Likewise, my workplace offered me three different health insurance plans, and I chose the middle-expensiveness one, on the grounds that I had no idea how health insurance worked but maybe if I bought the cheap one I’d get sick and regret my choice, and maybe if I bought the expensive one I wouldn’t be sick and regret my choice. I am a doctor, my employer is a hospital, and the health insurance was for treatment in my own health system. The moral of the story is that I am an idiot. The second moral of the story is that people probably are not super-informed health care consumers.

This can’t be pure price-gouging, since corporate profits haven’t increased nearly enough to be where all the money is going. But a while ago a commenter linked me to the Delta Cost Project, which scrutinizes the exact causes of increasing college tuition. Some of it is the administrative bloat that you would expect. But a lot of it is fun “student life” types of activities like clubs, festivals, and paying Milo Yiannopoulos to speak and then cleaning up after the ensuing riots. These sorts of things improve the student experience, but I’m not sure that the average student would rather go to an expensive college with clubs/festivals/Milo than a cheap college without them. More important, it doesn’t really seem like the average student is offered this choice.

This kind of suggests a picture where colleges expect people will pay whatever price they set, so they set a very high price and then use the money for cool things and increasing their own prestige. Or maybe clubs/festivals/Milo become such a signal of prestige that students avoid colleges that don’t comply since they worry their degrees won’t be respected? Some people have pointed out that hospitals have switched from many-people-all-in-a-big-ward to private rooms. Once again, nobody seems to have been offered the choice between expensive hospitals with private rooms versus cheap hospitals with roommates. It’s almost as if industries have their own reasons for switching to more-bells-and-whistles services that people don’t necessarily want, and consumers just go along with it because for some reason they’re not exercising choice the same as they would in other markets.

(this article on the Oklahoma City Surgery Center might be about a partial corrective for this kind of thing)

Third, can we attribute this to the inefficiency of government relative to private industry? I don’t think so. The government handles most primary education and subways, and has its hand in health care. But we know that for-profit hospitals aren’t much cheaper than government hospitals, and that private schools usually aren’t much cheaper (and are sometimes more expensive) than government schools. And private colleges cost more than government-funded ones.

Fourth, can we attribute it to indirect government intervention through regulation, which public and private companies alike must deal with? This seems to be at least part of the story in health care, given how much money you can save by grey-market practices that avoid the FDA. It’s harder to apply it to colleges, though some people have pointed out regulations like Title IX that affect the educational sector.

One factor that seems to speak out against this is that starting with Reagan in 1980, and picking up steam with Gingrich in 1994, we got an increasing presence of Republicans in government who declared war on overregulation – but the cost disease proceeded unabated. This is suspicious, but in fairness to the Republicans, they did sort of fail miserably at deregulating things. “The literal number of pages in the regulatory code” is kind of a blunt instrument, but it doesn’t exactly inspire confidence in the Republicans’ deregulation efforts:

Here’s a more interesting (and more fun) argument against regulations being to blame: what about pet health care? Veterinary care is much less regulated than human health care, yet its cost is rising as fast (or faster) than that of the human medical system (popular article, study). I’m not sure what to make of this.

Fifth, might the increased regulatory complexity happen not through literal regulations, but through fear of lawsuits? That is, might institutions add extra layers of administration and expense not because they’re forced to, but because they fear being sued if they don’t and then something goes wrong?

I see this all the time in medicine. A patient goes to the hospital with a heart attack. While he’s recovering, he tells his doctor that he’s really upset about all of this. Any normal person would say “You had a heart attack, of course you’re upset, get over it.” But if his doctor says this, and then a year later he commits suicide for some unrelated reason, his family can sue the doctor for “not picking up the warning signs” and win several million dollars. So now the doctor consults a psychiatrist, who does an hour-long evaluation, charges the insurance company $500, and determines using her immense clinical expertise that the patient is upset because he just had a heart attack.

Those outside the field have no idea how much of medicine is built on this principle. People often say that the importance of lawsuits to medical cost increases is overrated because malpractice insurance doesn’t cost that much, but the situation above would never look lawsuit-related; the whole thing only works because everyone involved documents it as well-justified psychiatric consult to investigate depression. Apparently some studies suggest this isn’t happening, but all they do is survey doctors, and with all due respect all the doctors I know say the opposite.

This has nothing to do with government regulations (except insofar as these make lawsuits easier or harder), but it sure can drive cost increases, and it might apply to fields outside medicine as well.

Sixth, might we have changed our level of risk tolerance? That is, might increased caution be due not purely to lawsuitphobia, but to really caring more about whether or not people are protected? I read stuff every so often about how playgrounds are becoming obsolete because nobody wants to let kids run around unsupervised on something with sharp edges. Suppose that one in 10,000 kids get a horrible playground-related injury. Is it worth making playgrounds cost twice as much and be half as fun in order to decrease that number to one in 100,000? This isn’t a rhetorical question; I think different people can have legitimately different opinions here (though there are probably some utilitarian things we can do to improve them).

To bring back the lawsuit point, some of this probably relates to a difference between personal versus institutional risk tolerance. Every so often, an elderly person getting up to walk to the bathroom will fall and break their hip. This is a fact of life, and elderly people deal with it every day. Most elderly people I know don’t spend thousands of dollars fall-proofing the route from their bed to their bathroom, or hiring people to watch them at every moment to make sure they don’t fall, or buy a bedside commode to make bathroom-related falls impossible. This suggests a revealed preference that elderly people are willing to tolerate a certain fall probability in order to save money and convenience. Hospitals, which face huge lawsuits if any elderly person falls on the premises, are not willing to tolerate that probability. They put rails on elderly people’s beds, place alarms on them that will go off if the elderly person tries to leave the bed without permission, and hire patient care assistants who among other things go around carefully holding elderly people upright as they walk to the bathroom (I assume this job will soon require at least a master’s degree). As more things become institutionalized and the level of acceptable institutional risk tolerance becomes lower, this could shift the cost-risk tradeoff even if there isn’t a population-level trend towards more risk-aversion.

Seventh, might things cost more for the people who pay because so many people don’t pay? This is somewhat true of colleges, where an increasing number of people are getting in on scholarships funded by the tuition of non-scholarship students. I haven’t been able to find great statistics on this, but one argument against: couldn’t a college just not fund scholarships, and offer much lower prices to its paying students? I get that scholarships are good and altruistic, but it would be surprising if every single college thought of its role as an altruistic institution, and cared about it more than they cared about providing the same service at a better price. I guess this is related to my confusion about why more people don’t open up colleges. Maybe this is the “smart people are rightly too scared and confused to go to for-profit colleges, and there’s not enough ability to discriminate between the good and the bad ones to make it worthwhile to found a good one” thing again.

This also applies in health care. Our hospital (and every other hospital in the country) has some “frequent flier” patients who overdose on meth at least once a week. They comes in, get treated for their meth overdose (we can’t legally turn away emergency cases), get advised to get help for their meth addiction (without the slightest expectation that they will take our advice) and then get discharged. Most of them are poor and have no insurance, but each admission costs a couple of thousand dollars. The cost gets paid by a combination of taxpayers and other hospital patients with good insurance who get big markups on their own bills.

Eighth, might total compensation be increasing even though wages aren’t? There definitely seems to be a pensions crisis, especially in a lot of government work, and it’s possible that some of this is going to pay the pensions of teachers, etc. My understanding is that in general pensions aren’t really increasing much faster than wages, but this might not be true in those specific industries. Also, this might pass the buck to the question of why we need to spend more on pensions now than in the past. I don’t think increasing life expectancy explains all of this, but I might be wrong.

IV.

I mentioned politics briefly above, but they probably deserve more space here. Libertarian-minded people keep talking about how there’s too much red tape and the economy is being throttled. And less libertarian-minded people keep interpreting it as not caring about the poor, or not understanding that government has an important role in a civilized society, or as a “dog whistle” for racism, or whatever. 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.

For example: some people promote free universal college education, remembering a time when it was easy for middle class people to afford college if they wanted it. Other people oppose the policy, remembering a time when people didn’t depend on government handouts. Both are true! My uncle paid for his tuition at a really good college just by working a pretty easy summer job – not so hard when college cost a tenth of what it did now. The modern conflict between opponents and proponents of free college education is over how to distribute our losses. In the old days, we could combine low taxes with widely available education. Now we can’t, and we have to argue about which value to sacrifice.

Or: some people get upset about teachers’ unions, saying they must be sucking the “dynamism” out of education because of increasing costs. Others people fiercely defend them, saying teachers are underpaid and overworked. Once again, in the context of cost disease, both are obviously true. The taxpayers are just trying to protect their right to get education as cheaply as they used to. The teachers are trying to protect their right to make as much money as they used to. The conflict between the taxpayers and the teachers’ unions is about how to distribute losses; somebody is going to have to be worse off than they were a generation ago, so who should it be?

And the same is true to greater or lesser degrees in the various debates over health care, public housing, et cetera.

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?

I think this is the basic intuition behind so many people, even those who genuinely want to help the poor, are afraid of “tax and spend” policies. In the context of cost disease, these look like industries constantly doubling, tripling, or dectupling their price, and the government saying “Okay, fine,” and increasing taxes however much it costs to pay for whatever they’re demanding now.

If we give everyone free college education, that solves a big social problem. It also locks in a price which is ten times too high for no reason. This isn’t fair to the government, which has to pay ten times more than it should. It’s not fair to the poor people, who have to face the stigma of accepting handouts for something they could easily have afforded themselves if it was at its proper price. And it’s not fair to future generations if colleges take this opportunity to increase the cost by twenty times, and then our children have to subsidize that.

I’m not sure how many people currently opposed to paying for free health care, or free college, or whatever, would be happy to pay for health care that cost less, that was less wasteful and more efficient, and whose price we expected to go down rather than up with every passing year. I expect it would be a lot.

And if it isn’t, who cares? The people who want to help the poor have enough political capital to spend eg $500 billion on Medicaid; if that were to go ten times further, then everyone could get the health care they need without any more political action needed. If some government program found a way to give poor people good health insurance for a few hundred dollars a year, college tuition for about a thousand, and housing for only two-thirds what it costs now, that would be the greatest anti-poverty advance in history. That program is called “having things be as efficient as they were a few decades ago”.

V.

In 1930, economist John Maynard Keynes predicted that his grandchildrens’ generation would have a 15 hour work week. At the time, it made sense. GDP was rising so quickly that anyone who could draw a line on a graph could tell that our generation would be four or five times richer than his. And the average middle-class person in his generation felt like they were doing pretty well and had most of what they needed. Why wouldn’t they decide to take some time off and settle for a lifestyle merely twice as luxurious as Keynes’ own?

Keynes was sort of right. GDP per capita is 4-5x greater today than in his time. Yet we still work forty hour weeks, and some large-but-inconsistently-reported percent of Americans (76? 55? 47?) still live paycheck to paycheck.

And yes, part of this is because inequality is increasing and most of the gains are going to the rich. But this alone wouldn’t be a disaster; we’d get to Keynes’ utopia a little slower than we might otherwise, but eventually we’d get there. Most gains going to the rich means at least some gains are going to the poor. And at least there’s a lot of mainstream awareness of the problem.

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. Right now the standard of living isn’t just stagnant, it’s at risk of declining, and a lot of that is student loans and health insurance costs and so on.

What’s happening? I don’t know and I find it really scary.

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duerig
11 days ago
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This article is a clear case of the dangers of our pattern-matching minds. When you try to find a grand narrative, it is very easy to end up in an intellectual cul-de-sac.

So let's look at the thesis question: "Why do all the most important things cost ten times as much as they used to?"

First, the thesis question is itself a bit misleading. The five sectors discussed (primary education, college, health care, infrastructure, and housing) are all important things. But they are not all the most important things. They don't include food, clothing, utilities, transportation, entertainment, furniture, appliances, or communication.

But the five sectors mentioned are all important things. So a more accurate thesis statement is "Why do many important things costs ten times as much as they used to?"

Once you reframe the question, the unsatisfying answer becomes more clear. The author mentions and then dismisses the fact that 'Inflation is an average'. But this is a key part of the answer. For inflation to be a particular figure, then the sectors that see price decreases must be balanced out by sectors that have price increases. And the math says that these are generally of proportional size. So for any given inflation value, there will be a number of very important things whose prices grow faster than inflation.

Combine that with the realization that the things that if a sector's prices grow faster than inflation in one year, then it is likely that the same forces will cause it to grow faster than inflation the next year.

So our 'grand pattern' comes down to the unsatisfying math of averages. Because there is no real grand pattern. The only things linking primary education, college, health insurance, infrastructure, and housing costs is the fact that these are the sectors that happened to consistently grow faster than inflation.

Why would we expect there to be a grand pattern? If I went to the an airport and looked at the five flights with the longest delays, I wouldn't expect to necessarily find a causal link between them. Likely, each airplane would have its own story about why it is later than usual. In one case it was mechanical issues. In another the flight crew was delayed. In a third, one of the passengers had a medical emergency and had to be evacuated. And so on.

So it is important to look at each of these industries and ask why each one individually has become more costly. And you will find some of the grab bag of reasons in this article for each one. Maybe administrative costs have gone up. Maybe regulations are in the way. Maybe there is a market failure. But each industry will have its own causes and story that is only loosely related to the causes of another industry.

The real and only reason why some important things get expensive faster than inflation is because that is just how the math works. The only things that might change over time are which things are getting expensive faster than inflation.
ahofer
10 days ago
You are right, it shouldn't have been "all the important things", but "some important things". The rest of your comment is true but beside the point. The question is why do *these* things get more expensive so fast and what do they have in common? I don't find your assertion that they don't (other than beating inflation) compelling.They certainly do have much in common, they are skilled-labor intensive, have experienced high levels of government regulation and subsidy. They also, as SSC points out, have not risen rapidly in quality. So I think there is quite a bit left to this post rather than 'just the math'.
duerig
10 days ago
There are certainly some commonalities among them. And it is in principle possible that they all have a common cause. To go back to my airport analogy, there are times when the 5 latest planes are all late for the same reason "Denver airport was snowed in today". But we should not go into it assuming that there is necessarily a larger pattern to find here. Two of the five sectors are not in fact skilled labor intensive (housing and infrastructure). So to the extent that there is something common to all skilled labor intensive fields, it will affect three of the included sectors but not have as much of an effect on the other two. Of the five, some are heavily regulated markets (health insurance, housing), one is a lightly regulated but heavily subsidized (college), and two are directly provided government services (primary education, infrastructure). If there are general effects to regulating a market, it will affect some and not others. If there are general effects to subsidizing a market, it will affect some and not others. And if there is a general effect to direct provision of a service vs having a market for it, that will affect some and not others. This is why I don't think that there turns out to be a common cause for all these sectors to have rising prices relative to inflation. There will always exist a large set of things in our economy whose price rises faster than inflation. These are five that happened to rise faster while other things rose about the same as inflation or slower. Each one has its own reason for being in this list of 5 and there is some overlap between them. Each represents a unique problem. And while some solutions will be able to kill two birds with one stone, it is likely that the solution that helps stem the growth of health care costs is probably not the same as the one that makes infrastructure cheaper to build.
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ahofer
11 days ago
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"So, to summarize: in the past fifty years, education costs have doubled, college costs have dectupled, health insurance costs have dectupled, subway costs have at least dectupled, and housing costs have increased by about fifty percent. US health care costs about four times as much as equivalent health care in other First World countries; US subways cost about eight times as much as equivalent subways in other First World countries. "

“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.
Princeton, NJ or NYC
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