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leah blogs: Ken Thompson's Unix password

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Somewhere around 2014 I found an /etc/passwd file in some dumps of the BSD 3 source tree, containing passwords of all the old timers such as Dennis Ritchie, Ken Thompson, Brian W. Kernighan, Steve Bourne and Bill Joy.

Since the DES-based crypt(3) algorithm used for these hashes is well known to be weak (and limited to at most 8 characters), I thought it would be an easy target to just crack these passwords for fun.

Well known tools for this are john and hashcat.

Quickly, I had cracked a fair deal of these passwords, many of which were very weak. (Curiously, bwk used /.,/.,, which is easy to type on a QWERTY keyboard.)

However, kens password eluded my cracking endeavor. Even an exhaustive search over all lower-case letters and digits took several days (back in 2014) and yielded no result. Since the algorithm was developed by Ken Thompson and Robert Morris, I wondered what’s up there. I also realized, that, compared to other password hashing schemes (such as NTLM), crypt(3) turns out to be quite a bit slower to crack (and perhaps was also less optimized).

Did he really use uppercase letters or even special chars? (A 7-bit exhaustive search would still take over 2 years on a modern GPU.)

The topic came up again earlier this month on The Unix Heritage Society mailing list, and I shared my results and frustration of not being able to break kens password.

Finally, today this secret was resolved by Nigel Williams:

From: Nigel Williams <<a href="mailto:nw@retrocomputingtasmania.com">nw@retrocomputingtasmania.com</a>>
Subject: Re: [TUHS] Recovered /etc/passwd files

ken is done:

ZghOT0eRm4U9s:p/q2-q4!

took 4+ days on an AMD Radeon Vega64 running hashcat at about 930MH/s
during that time (those familiar know the hash-rate fluctuates and
slows down towards the end).

This is a chess move in descriptive notation, and the beginning of many common openings. It fits very well to Ken Thompson’s background in computer chess.

I’m very happy that this mystery has been solved now and I’m pleased of the answer.

[Update 16:29: fix comment on chess.]

NP: Mel Stone—By Now

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ha!
Earth, Sol system, Western spiral arm

What happens if we eliminate crop insurance altogether?

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Farm scene

Imagine for a moment, a possible future, some years ahead: Across the plains, acres that were once plowed up and planted to corn or wheat go back to native grass. Marginal, flood-prone land is left to return to wetlands, improving water quality downstream. Farmers diversify their operations in order to effectively manage risk in a changing climate. Monocropping is a thing of the past. 

Or this scenario, not so long from now: Growers adopt practices like no-till and cover cropping, which helps lower their inputs—the money spent on fertilizer, pesticides, seed, and anything else they need to get a crop in the ground. They turn a profit with ease. They may even switch to cheaper, non-GMO seeds and see profit margins swell.

In this future tableau, cattle are turned out to pasture on land that was once intensively farmed. Land managers plant low-cost grasses and other silage, and graze livestock on a portion of the land while the remaining acres are allowed to rest and regenerate. There’s always something growing in the soil, anchoring nitrogen, helping retain rainwater, and sequestering carbon.

“We’ll end up not being able to feed ourselves or be a productive society because we’ve become reliant upon subsidies.”

This is what American agriculture could one day look like, according to farmers, environmentalists, and economists. But first we’d have to get rid of federally subsidized crop insurance.

More than 300 million acres of cropland in the United States are covered by crop insurance. It’s absolutely essential to the success of American farmers and ranchers, at least according to the industry group, National Crop Insurance Services. It protects farmers from yield or revenue losses caused by natural disasters like drought, flooding, pests, or disease—even market volatility. Although administered by private insurance companies, this “essential” safety net is heavily subsidized. The federal government—the taxpayer, ultimately—chips in more than 60 percent of the premium, with farmers paying, on average, less than 40 percent of the cost of coverage.

That financial shield is a major factor for farmers in deciding what to plant where, and how much to spend on fertilizer and pesticides, because it essentially guarantees a minimum income on that land. But there have also been some mostly unintended consequences. This includes confusing guidelines that have, over time, discouraged farmers from planting cover crops like rye or clover, which anchor soil and nutrients during the off-season, and help stabilize yields through years both dry and wet. Practices, in other words, that could protect farmers from the very losses they end up needing crop insurance to recoup.

This conundrum has prompted calls for reform. Earlier this summer, I wrote about a time-consuming and costly effort to create crop insurance products that would reward farmers for adopting regenerative agriculture practices that are restorative, maintain natural systems, and rebuild the topsoil, thereby defending land against the inevitable ravages of a warming climate. 

Not long after my piece was published, someone popped into my Twitter mentions to make a case for what would be the most revolutionary reform of all: Toss out the federally subsidized crop insurance program altogether.

***

I followed up with some of the farmers who reached out to ask why they’d want to get rid of crop insurance and what a world without it might look like. One of them happens to know the program inside and out. Scott Dudek grows open-pollinated seed corn on 120 acres in Michigan, less than 15 minutes from the Canadian border; he also works as a crop insurance adjuster.

“I would like to see the subsidy part of it phased out,” Dudek says. “Let it become a private product completely.”

In his view, farmers are entirely too reliant on crop insurance.

“We’ll end up not being able to feed ourselves or be a productive society because we’ve become reliant upon subsidies,” he says.

While part of Dudek’s objection to subsidized crop insurance is rooted in his libertarian politics and preference for small government, he also says that getting rid of the subsidy completely would force farmers to adopt more conservation practices. As it is now, farmers don’t need to ensure that their soil is rich enough to sustain a crop even in dry years because they can just get an insurance payout if their yields are sub-par. Although there are a number of incentive programs to nudge farmers to start growing cover crops, at both state and federal levels, they haven’t spurred widespread adoption.

“We’re going to have to become better stewards of the land going forward if we’re to remain profitable,” Dudek says.

Two Iowa farmers display their cover cropping practices, which are not encouraged by crop insurance

It’s not just farmers who take issue with crop insurance. The non-profit, non-partisan Environmental Working Group (EWG) published a report in 2017, arguing that crop insurance policy as it exists now could lead us into another Dust Bowl. The report singles out a particularly egregious provision, the Actual Production History Yield Exclusion, which was slipped into the 2014 farm bill and is exacerbating the inherent problems with crop insurance.

Here’s how crop insurance coverage is normally determined: Adjusters calculate the average yield of a crop in a specific area over many years, which gives a reasonable estimate of what those acres might yield in the future. But the yield exclusion changes that equation, allowing farmers in some counties to exclude bad years from that estimate. And not just one or two bad years, but up to 12. This essentially means farmers can rewrite history, and pretend that the region isn’t as arid or bad for crops as it really is.

“Even if bad years occur more often than good years, the bad years are treated as aberrations and the good years as normal,” the authors of the report write. “Crop insurance becomes a form of annual income support that encourages farmers to keep planting crops that fail more often than they succeed.”

“There was a period where you could, as long as you planted corn, you were guaranteed a profit.”

This not only drives up the cost of subsidizing crop insurance for taxpayers, it’s causing long-term damage to the environment and the American landscape. High crop insurance payouts discourage farmers from adapting to the changing climate, and that could prompt another man-made environmental disaster like the Dust Bowl.

Anne Weir Schechinger, a senior analyst at EWG and co-author of the 2017 report, says the problems with crop insurance aren’t limited to the yield exclusion.

“When you’re subsidizing crop insurance, you have farmers planting riskier crops or bringing riskier acres into production,” Schechinger says. Studies show that crop insurance encourages more farmers to plant corn, because it is subsidized at a higher rate than other commodity crops, like soybeans. That may seem pretty innocuous, says Schechinger, until you consider that corn is often planted in lieu of winter wheat, which holds the soil in place during the colder months. So without winter wheat in the ground (or a cover crop like buckwheat or clover, which are still rare) there is going to be more erosion, and more nutrient runoff.

Schechinger says that marginal land, or land prone to drought or flooding, is more likely to be brought into production because of subsidized crop insurance. Although they might be riskier acres (read: more likely to fail) with drastically different yields from one year to the next, farmers don’t pay the full premiums that account for that risk, so it’s still worth it to them to plant and take a chance. This has environmental consequences: Because the land is prone to drought or flooding, it’s also prone to soil erosion and nutrient runoff, which degrade local water quality and can have serious consequences downstream, causing toxic algal blooms in all types of water bodies and hypoxic dead zones in the ocean.

“There was a period where you could, as long as you planted corn, you were guaranteed a profit,” says Loran Steinlage, who farms 750 acres in Iowa. Although it used to be almost all corn, Steinlage now grows corn, soybeans, buckwheat, rye, barley, and sunflowers, “a little bit of everything.”

Steinlage says as soon as people figured out that planting corn virtually guaranteed a profit, they started buying more land, raising rents and forcing out smaller operators.

Sandra Kay Miller has also seen problems in Pennsylvania, where she raises meat goats, lambs, and poultry on a 75-acre farm.

At its core, crop insurance was intended to help farmers deal with the unpredictability of their livelihood

“I have watched, for the last 20 years, so many abuses of the crop insurance program,” Miller says. “I’m so frustrated that this is what agriculture has come to.”

Miller says she has seen wetlands that have never been farmed before plowed up and planted. And year after year, the acres flood, and year after year, the crop insurance adjuster shows up.

***

In theory, producers should not be allowed to farm converted wetlands at all, or even highly erodible land, without a conservation system in place. But Seth Watkins says that enforcement of those rules is nearly nonexistent. (It is left up to states to monitor and hold farmers accountable, and they have limited resources to do so.) Watkins is a fourth-generation farmer from southwest Iowa. He runs a diversified operation on 3,000 acres, grazes around 600 cows, and grows a mix of alfalfa, hay, oats, and corn for silage.

“What breaks my heart is that, without some significant policy change, someone would buy it all up and turn it all into crops,” Watkins says. This possibility bothered him so much that he recently put his land into a conservation trust to ensure that will never happen.

Watkins doesn’t actually want to get rid of crop insurance, or at least, he doesn’t want to deprive farmers of a safety net.

“Our food system is pretty complex,” Watkins says. “I think the idea of revenue protection is great, as long as it’s supporting appropriate land use. What bothers me with federal crop insurance is it’s created an incentive to farm land that shouldn’t be farmed.”

Eliminating crop insurance would force every grower to be more creative, and more careful.

The problems with crop insurance have united a number of unlikely allies. On one side, you have environmental groups advocating for significant reforms to the federal program. This includes EWG and the Union of Concerned Scientists. On the other, you have conservative think tanks like the Heritage Foundation and the Cato Institute arguing for outright elimination (or, barring that possibility, significant reforms).

In a hefty 2016 report, the Heritage Foundation called the crop insurance program a “complete failure” and argued that it should have been eliminated decades ago.

“Federal coddling of the agriculture industry is deep and comprehensive,” Chris Edwards, director of tax policy studies at Cato, wrote in 2018. “Farm subsidies are costly to taxpayers, but they also harm the economy and the environment.”

Critics of crop insurance argue that farmers are not incentivized to implement regenerative agriculture practices

Some of the problems that these conservative think tanks identify are issues that might just as likely be championed by progressive organizations. For example: Farm subsidies, including crop insurance, further concentrate wealth among the already-wealthy. Edwards notes that, in 2016, the average income of farm households was 42 percent higher than the average American household. And the benefits may not actually be going to the growers; the authors of the Heritage report wryly observe that “reviews of agricultural programs have repeatedly found tens of millions of dollars in agricultural subsidies annually going to residents of such agriculture powerhouses as New York City and Washington, D.C.”

Then there’s the fact that the majority of crop insurance benefits go to producers of cash crops, like soybeans, rather than fruit and vegetable growers, or the people who epitomize our very idea of “farmer.”

Eliminating crop insurance would force every grower to be more creative, and more careful. Suddenly, they would have to manage all of the risks of farming themselves. Conservative economists like Edwards argue that farmers are more than up to it. Business risk is not unique to farming, and other business owners and operators figure out ways to manage it, he says. They save during good years, and borrow during bad. 

If the government-subsidized program disappeared, private insurance companies would create a range of crop insurance products that farmers could choose from. Edwards adds that farmers could diversify their planting to protect themselves from volatile markets or fluctuating yields, something many of the farmers I spoke with for this story have already done. More farmers might pursue secondary or part-time work to supplement their farming income (again many, like Dudek, already do).

Dudek says that some larger operations would be forced to downsize, which could make those acres available to a greater number of farmers. The Heritage Foundation also says that crop insurance artificially inflates the value of land, which can make it harder than it already is for new, beginner farmers to enter the profession.

***

It’s not just farmers who would be impacted, of course. Subsidies like crop insurance have artificially depressed prices for corn, soybeans, and other grains that concentrated animal feeding operations (CAFOs) rely on to produce inexpensive meat at scale. The Union of Concerned Scientists reports that CAFOs have at times indirectly benefited from grain subsidies to the tune of $4 billion a year. Without crop insurance, fewer producers would grow those crops. That means prices would go up, putting financial pressure on existing CAFOs. 

Some of the acres unsuitable for crops might be turned into rangeland for cattle. Farmers could grow low-cost grasses and other silage for grazing, and with feed costs rising for CAFOs, would be in a newly competitive position.

can you imagine what our communities would be like if we really embraced ecologically-sound, carbon-smart farming practices?

Decentralizing the livestock industry could have enormous environmental benefits. Well-managed pastures that always have something growing in them retain soil, water, and nutrients, preventing the run-off that degrades water quality. Rotational grazing can also reduce the greenhouse gas emissions associated with raising animals for food, and can help sequester carbon in the soil, just like growing cover crops and practicing no-till.

Crop insurance has not always been as it is now. The current system replaced a disaster relief program that had become too expensive. And yet, the crop insurance program has been far more costly to taxpayers; the Heritage Foundation calculates that it has been six times more expensive.

Getting rid of crop insurance would not necessarily mean getting rid of the farming safety net entirely. Reverting back to an ad-hoc disaster relief program that distributes funds after truly catastrophic natural disasters could protect farmers from unforeseeable circumstances while also removing the incentives that encourage them to plant on risky, environmentally-fragile acres.

All that said, there are powerful, vested interests in keeping crop insurance around. Crop insurance providers, for one. (They’re represented by the trade group that says crop insurance is essential for farmers.) The government subsidizes the cost of administering crop insurance for private insurance companies, and guarantees a much higher rate of return than they could expect in an open market. The result is that, between 2005 and 2009, private insurance companies received $1.44 in government subsidies for every dollar that went to farmers. And the industry doesn’t hesitate to lobby and spend lavishly so that politicians know that crop insurance is essential.

For at least that reason, crop insurance probably isn’t going anywhere anytime soon. But plenty of people agree that the current system is unsustainable, both financially, and environmentally. And there is an alternative.

“Let’s look 10 or 20 years down the road and say, can you imagine what our communities would be like if we really embraced ecologically sound, carbon-smart farming practices?” says Watkins. “I mean, from our water cleaning up to wild species coming back … it would rejuvenate rural Iowa.”

The post What happens if we eliminate crop insurance altogether? appeared first on New Food Economy.

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brennen
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I haven't read this yet, but it seems interesting...
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Air Conditioning is Warming the Earth

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Modern society has an air conditioning problem. One of the most popular responses by the world’s population to global warming is to use air conditioning. Air conditioning is very greenhouse gas-intensive, which contributes to the warming of the planet. Which causes more people use air conditioning. And so on. In a long Guardian piece, Stephen Buranyi lays out how air conditioning came to be so ubiquitous and how we might escape this air conditioning trap we find ourselves in.

There are just over 1bn single-room air conditioning units in the world right now - about one for every seven people on earth. Numerous reports have projected that by 2050 there are likely to be more than 4.5bn, making them as ubiquitous as the mobile phone is today. The US already uses as much electricity for air conditioning each year as the UK uses in total. The IEA projects that as the rest of the world reaches similar levels, air conditioning will use about 13% of all electricity worldwide, and produce 2bn tonnes of CO2 a year - about the same amount as India, the world’s third-largest emitter, produces today.

All of these reports note the awful irony of this feedback loop: warmer temperatures lead to more air conditioning; more air conditioning leads to warmer temperatures. The problem posed by air conditioning resembles, in miniature, the problem we face in tackling the climate crisis. The solutions that we reach for most easily only bind us closer to the original problem.

Weirdly, the article doesn’t mention that most air conditioning units contain chemical refrigerants (CFCs and HCFCs) that, if released, “have 1,000 to 9,000 times greater capacity to warm the atmosphere than carbon dioxide”. Phasing out the use of CFCs & HCFCs in new units and capturing the refrigerants in discarded units can prevent global warming to such a degree that it’s the #1 way to mitigate the effects of climate change.

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The Big Lie in Personal Finance

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When I was in high school my parents would give me and my siblings $20 a week for lunch. We could either use that money to pay for food at the school cafeteria each day or pack our own brown bag lunch and pocket the cash.

For the first three years of high school, I made my own lunch probably 4 out of 5 days a week so I could save most of my 20 bucks.1

The weird thing is I never really did anything with that cash except hoard it. I opened up a bank account and eventually put my money into a CD.

For whatever reason, I think I was hardwired to be a saver. It also helped that my parents instilled good financial habits in me by having good financial habits themselves, and railing against things like credit card debt.2

So becoming a saver was likely a combination of nature and nurture for me. I was lucky.

Some people aren’t so lucky because either they’re personality isn’t suited for saving money or their circumstances don’t allow them to save or provide a poor example for financial health.

It took me far too long to come to this conclusion. I used to be one of those people who secretly judged others for their poor financial habits. Now I see the error of my ways.

Do some people need a kick in the pants to motivate them to get their finances in order?  Sure, and that will always be the case with a group of people who have the resources but can’t get their spending or savings habits under control.

But there is another group of people who have the deck stacked against them, either because of their upbringing, past experiences or lack of financial resources.

Brad Klontz talks about the “Big Lie” in personal finance in his book Mind Over Money and it’s an important distinction:

Just about everyone has a complicated relationship with money, and more people than you realize have money relationships that are downright dysfunctional. And just about everyone believes the “Big Lie” about personal finance.

What is the Big Lie? It’s the accusation that your financial difficulties are your fault, that they stem from your being lazy, crazy, greedy, or stupid.

Personal finance is important because money impacts so many aspects of our lives. So starting out in a bad place financially can compound against you in a number of ways.

Not only can our experiences set us on the wrong course from the get-go, but our instincts rarely line up with good financial habits. We’re not hardwired to manage money competently in terms of delaying gratification, planning decades into the future, or living below our means.

Very few of us are sabotaging our finances on purpose.

The rational finance person in me hopes there are solutions for this problem but I haven’t seen much progress being made on this front.

Many personal finance experts now take a hard line and spend-shame or savings rate-shame people into feeling bad about how they live their life because of their financial choices.

I get that these people have good intentions but sometimes people who are in a bad place financially deserve a break.

So if you’re one of those people that never seem to be able to get ahead financially, cut yourself some slack. Realize what you’re up against. Figure out the money triggers that are holding you back and work on improving those areas you’re financially deficient in.

But don’t let others dictate how you choose to live your life simply because they’re in better financial standing than you.

There are more important things than money, even though money can be pretty damn important.

Further Reading:
The Stephen A. Smiths of Personal Finance

1The one school lunch I would always pay for would be the rectangular cafeteria pizza. That stuff was pretty damn good (for cafeteria food).

2I didn’t even get my first credit card until getting my first job after college.

 
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Neil and Buzz Barely Got Out of the Infield

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With the 50th anniversary of the first crewed landing on the Moon fast approaching, I thought I’d share one of my favorite views of the Moon walk, a map of where Neil Armstrong and Buzz Aldrin walked on the Moon, superimposed over a baseball field (bigger). The Lunar Module is parked on the pitcher’s mound and you can see where the two astronauts walked, set up cameras, collected samples, and did experiments.

This map easily illustrates something you don’t get from watching video of the Moon walk: just how close the astronauts stayed to the LM and how small an area they covered during their 2 and 1/2 hours on the surface. The crew had spent 75+ hours flying 234,000 miles to the Moon and when they finally got out onto the surface, they barely left the infield! On his longest walk, Armstrong ventured into center field about 200 feet from the mound, not even far enough to reach the warning track in most major league parks. In fact, the length of Armstrong’s walk fell far short of the 363-foot length of the Saturn V rocket that carried him to the Moon and all of their activity could fit neatly into a soccer pitch (bigger):

Apollo 11 Soccer

Astronauts on subsequent missions ventured much further. The Apollo 12 crew ventured 600 feet from the LM on their second walk of the mission. The Apollo 14 crew walked almost a mile. After the Lunar Rover entered the mix, excursions up to 7 miles during EVAs that lasted for more than 7 hours at a time became common.

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Book Review: Why Are The Prices So D*mn High?

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Why have prices for services like health care and education risen so much over the past fifty years? When I looked into this in 2017, I couldn’t find a conclusive answer. Economists Alex Tabarrok and Eric Helland have written a new book on the topic, Why Are The Prices So D*mn High? (link goes to free pdf copy, or you can read Tabarrok’s summary on Marginal Revolution). They do find a conclusive answer: the Baumol effect.

T&H explain it like this:

In 1826, when Beethoven’s String Quartet No. 14 was first played, it took four people 40 minutes to produce a performance. In 2010, it still took four people 40 minutes to produce a performance. Stated differently, in the nearly 200 years between 1826 and 2010, there was no growth in string quartet labor productivity. In 1826 it took 2.66 labor hours to produce one unit of output, and it took 2.66 labor hours to produce one unit of output in 2010.

Fortunately, most other sectors of the economy have experienced substantial growth in labor productivity since 1826. We can measure growth in labor productivity in the economy as a whole by looking at the growth in real wages. In 1826 the average hourly wage for a production worker was $1.14. In 2010 the average hourly wage for a production worker was $26.44, approximately 23 times higher in real (inflation-adjusted) terms. Growth in average labor productivity has a surprising implication: it makes the output of slow productivity-growth sectors (relatively) more expensive. In 1826, the average wage of $1.14 meant that the 2.66 hours needed to produce a performance of Beethoven’s String Quartet No. 14 had an opportunity cost of just $3.02. At a wage of $26.44, the 2.66 hours of labor in music production had an opportunity cost of $70.33. Thus, in 2010 it was 23 times (70.33/3.02) more expensive to produce a performance of Beethoven’s String Quartet No. 14 than in 1826. In other words, one had to give up more other goods and services to produce a music performance in 2010 than one did in 1826. Why? Simply because in 2010, society was better at producing other goods and services than in 1826.

Put another way, a violinist can always choose to stop playing violin, retrain for a while, and work in a factory instead. Maybe in 1826, when factory owners were earning $1.14/hour, violinists were earning $5/hour, so none of them would quit and retrain. But by 2010, factory workers were earning $26.44/hour, so if violinists were still only earning $5 they might all quit and retrain. So in 2010, there would be a strong pressure to increase violinists’ wage to at least $26.44 (probably more, since few people have the skills to be violinists). So violinists must be paid 20x more for the same work, which will look like concerts becoming more expensive.

This should happen in every industry where increasing technology does not increase productivity. Education and health care both qualify. Although we can imagine innovative online education models, in practice no matter how much technology we can, one teacher teaches about twenty to thirty kids per year. Although we can imagine innovative AI health care, in practice one doctor can only treat ten to twenty patients per day. Tabarrok and Helland say this is exactly what is happening. They point to a few lines of evidence.

First, costs have been increasing very consistently over a wide range of service industries. If it was just one industry, we could blame industry-specific factors. If it was just during one time period, we could blame some new policy or market change that happened during that time period. Instead it’s basically omnipresent. So it’s probably some kind of very broad secular trend. The Baumol effect would fit the bill; not much else would.

Second, costs seemed to increase most quickly during the ’60s and ’70s, and are increasing more slowly today. This fits the growth of productivity, the main driver of the Baumol effect. Between 1950 and 2010, the relative productivity of manufacturing compared to services increased by a factor of six, which T&H describe as “of the same order as the growth in relative prices”. This is what the violinist-vs-factory-worker model of the Baumol effect would predict.

Third, competing explanations don’t seem to work. Some people blame rising costs on “administrative bloat”. But administrative costs as a share of total college costs have stayed fixed at 16% from 1980 to today. Others blame rising costs on overregulation. But T&H have a measure for which industries have been getting more regulated recently, and it doesn’t really correlate with which industries have been getting more expensive (wait, did they just disprove that regulation hurts the economy? I guess regulation isn’t a random shock, so this isn’t proof, but it still seems like a big deal). They’re also able to knock down industry-specific explanations like medical malpractice suits, teachers unions, etc.

Fourth, although service quality has improved a little bit over the past few decades, T&H provide some evidence that this explains only a small fraction of the increase in costs. Yet education and health care remain as popular (maybe more popular) than ever. They claim that very few things in economics can explain simultaneous increasing cost, increasing demand, and constant quality. One of those few things is the Baumol effect.

Fifth, they did a study, and the lower productivity growth in an industry, the higher the rise in costs, especially if they use college-educated workers who could otherwise get jobs in higher-productivity industries. This is what the Baumol effect would predict (though framed that way, it also sounds kind of obvious).

I find their case pretty convincing. And I want to believe. If this is true, it’s the best thing I’ve heard all year. It restores my faith in humanity. Rising costs in every sector don’t necessarily mean our society is getting less efficient, or more vulnerable to rent-seeking, or less-well-governed, or greedier, or anything like that. It’s just a natural consequence of high economic growth. We can stop worrying that our civilization is in terminal decline, and just work on the practical issue of how to get costs down.

But I do have some gripes. T&H frequently compare apples and oranges; for example, the administrator share in colleges vs. the faculty share in K-12; it feels like they’re clumsily trying to get one past you. They frequently describe how if you just use eg teacher salaries as a predictor, you can perfectly predict the extent of rising costs. But as far as I can tell, most things have risen the same amount, so if you used any subcomponent as a predictor, you could perfectly predict the extent of rising costs; again, it feels like they’re clumsily trying to get something past me. I think I can work out what they were trying to do (stitch together different datasets to get a better picture, assume salaries rise equally in every category) but I still wish they had discussed their reasoning and its limitations more openly.

The main thesis survives these objections, but there are still a few things that bother me, or don’t quite fit. I want to bring them up not as a gotcha or refutation, but in the hopes that people who know more about economics than I do can explain why I shouldn’t worry about them.

First, real wages have not in fact gone up during most of this period. Factory workers are not getting paid more. That makes it hard for me to understand how rising wages for factory workers are forcing up salaries for violinists, teachers, and doctors.

Second, other data seem to dispute that salaries for the professionals in question have risen at all. T&H talk about rises in “instructional expenditures”, an education-statistics term that includes teacher salary and other costs; their source is NCES. But NCES also includes tables of actual teacher salaries. These show that teacher salaries today are only 6% higher than teacher salaries in 1970. Meanwhile, per-pupil costs are more than twice as high. How is an increase of 6% in teacher salaries driving an increase of 100%+ in costs? Likewise, although on page 33 T&H claim that doctors’ salaries have tripled since 1960, other sources report smaller increases of about 50% to almost nothing. Conventional wisdom among doctors is that the profession used to be more lucrative than it is today. This makes it hard to see how rising doctor salaries could explain a tripling in the cost of health care. And doctor salaries apparently make up only 20% of health spending, so it’s hard to see how they can matter that much.

(also, this SMBC)

Third, the Baumol effect cannot explain things getting less affordable. T&H write:

The cost disease is not a disease but a blessing. To be sure, it would be better if productivity increased in all industries, but that is just to say that more is better. There is nothing negative about productivity growth, even if it is unbalanced.In particular, it is important to see that the increase in the relative price of the string quartet makes string quartets costlier but not less affordable. Society can afford just as many string quartets as in the past. Indeed, it can afford more because the increase in productivity in other sectors has made society richer. Individuals might not choose to buy more, but that is a choice, not a constraint forced upon them by circumstance.

This matches my understanding of the Baumol effect. But it doesn’t match my perception of how things are working in society. College has actually become less affordable. Using these numbers: in 1971, the average man would have had to work five months to earn a year’s tuition at a private college. In 2016, he would have had to work fourteen months. To put this in perspective, my uncle worked a summer job to pay for his college tuition. One summer of working = one year tuition at an Ivy League school. Student debt has increased 700% since 1990. College really does seem to be getting less affordable. So do health care, primary education, and all the other areas affected by cost disease. Baumol effects shouldn’t be able to do this, unless I am really confused about them.

If someone can answer these questions and remove my lingering doubts about the Baumol effect as an explanation for cost disease, they can share credit with Tabarrok and Helland for restoring a big part of my faith in modern civilization.

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bjtitus
132 days ago
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Why Are The Prices So D*mn High? - Commentary on sector specific inflation
Denver, CO
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