Topic 7 August: Cost Disease

Core reading is this very long and very good essay on “Cost Disease” by blogger Scott Alexander at SlateStarCodex.  Cost Disease is the dramatic rise in costs for things like healthcare and education. Scott outlines the problem,  offers eight explanatory hypotheses and finds none of them explains the data.

Here’s an example of cost disease:

(For those who have not read SlateStarCodex before: Scott is a rigorous researcher and provides links to all of the data he uses to draw conclusions. 183 of us like his work well enough to pay, in aggregate, $261 per post for him to keep producing stuff. If you find his work as worthwhile as I do, I encourage you to subscribe through iPatreon–there’s a link on his home page.  Most of what he gets goes to other content creators.)

SSC has an active readership and there are 1022 responses to the post. Scott moderates the responses and throws out anyone posting crap, so the discussion is civil, well-informed, and often as valuable as the post.

Scott wrote a follow-up post “Highlights from the comments on Cost Disease” where he says:

I got many good responses to my Considerations On Cost Disease post, both in the comments and elsewhere. A lot of people thought the explanation was obvious; unfortunately, they all disagreed on what the obvious explanation was. Below are some of the responses I found most interesting.

[Note: my emphasis in the quote]

I’m sure that on Monday, a lot of us with find our own obvious explanations and many of us will disagree with one another about the obvious answer. Sadly, I will not be there in body but will be in spirit.

Scott later turned the discussion into an article published here. It’s pretty much the same post but I think it makes the “we don’t know why this is happening” conclusion a little clearer.

About 6 months later in this post,  Scott reports that he’d found something that he liked. He says:

“Center For A Stateless Society has probably the best response to my cost disease post I’ve seen so far, which suggests the problem is something like oligopolies, plus weird accounting rules that treat “costs” and “revenues” in confusing and inappropriate ways.”

I think it’s a pretty interesting, non-obvious, and at least partly correct explanation.

Leave a Reply