This Economic Phenomenon Is Making Government Sick
K-12 education hasn’t improved very much and also costs more, an economic phenomenon that has been labeled the “cost disease.” It turns out the cost disease also shapes politics: To the extent governments manage, run or fund low-productivity-growth sectors, the spending required to sustain those sectors can automatically boost the size of government over time.
.. Part of the problem is that fixing people is harder than fixing machines, because it requires the cooperation of what are often recalcitrant patients. That’s why productivity improvements are difficult to achieve in education as well. Online learning can be potent and very cheap, but it is hard to get enough of the students to care.
.. If patients and students would diet properly, take the right medicines and crack open their textbooks, more drastic cost improvements could result.
.. The first problem will be that other areas of government spending (“discretionary spending”) will tend to suffer, as money is soaked up by the low-productivity sectors. Voters will feel that governments are neglecting some of their most important interests, such as infrastructure.
.. All of the various sides may be correct in their major claims, but none will have a workable solution. This actually isn’t so far from where the health-care debate stands now, and where the retirement and nursing home debate is headed as America ages.
.. As it stands, we’re set to re-create these debates at higher and higher levels of government spending in the low-productivity sectors. And I don’t view such dramatically tense, life-or-death issues as conducive either to rational decision-making or to a broadly liberal, consensus-based politics.
.. If you care about politics, I suggest spending less time on the candidates and more time studying productivity growth. I also suggest spending more time thinking about how to make working with human beings as easy and as fruitful as manipulating physical capital. Often the real political problem is not the people who disagree with you, but rather the empirical regularities of economies and the humans who inhabit them.