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Tyler Cowen\\xa0writes about cost disease. I\\u2019d 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 \\u2013 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\\u2019t know if this is true. My impression is that most people still don\\u2019t know about cost disease, or don\\u2019t realize the extent of it. So I thought I would make the case for the cost disease in the sectors Tyler mentions \\u2013 health care and education \\u2013 plus a couple more.

First\\xa0let\\u2019s look at primary education:

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There was some argument about the style of this graph, but\\xa0as per Politifact\\xa0the 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\\xa0the full numbers here, but in short, high school students\\u2019 reading scores went from 285 in 1971 to 287 today \\u2013 a difference of 0.7%.

There is some heterogenity across races \\u2013 white students\\u2019 test scores increased 1.4% and minority students\\u2019 scores by about 20%. But it is hard to credit school spending for the minority students\\u2019 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\\u2019 conditions around that time, giving them better nutrition and a more stable family life. It\\u2019s hard to construct a narrative where it was school spending that did it \\u2013 and even if it did, note that the majority of the increase in school spending happened from 1985 on, and demonstrably helped neither whites\\xa0norminorities.

I discuss this phenomenon more\\xa0here\\xa0and\\xa0here, but the summary is: no, it\\u2019s not just because of special ed; no, it\\u2019s not just a factor of how you measure test scores; no, there\\u2019s not a \\u201cceiling effect\\u201d. Costs really did more-or-less double without any concomitant increase in measurable quality.

So, imagine you\\u2019re 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\\u2019m proposing that choice because as far as I can tell that\\xa0is\\xa0the 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 \\u2013 either taxpayers, or other people who could be helped by government programs.

Second,\\xa0college is even worse:

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Inflation-adjusted cost of a university education was\\xa0something like $2000/year in 1980. Now it\\u2019s closer to $20,000/year. No, it\\u2019s not because of\\xa0decreased government funding, and there are similar trajectories for public and private schools.

I don\\u2019t know if there\\u2019s an equivalent of \\u201ctest scores\\u201d 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\\u2019 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\\u2019 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\\u2019s hard to see what it was.

Third,\\xa0health care. The graph is starting to look disappointingly familiar: