Why 'Cost Disease' Is the Secret Force Behind America's Toxic Solitude

The screens got cheap. The shared experiences got expensive.

I have written a lot about the American crisis of solitude and how it connects to technology, politics, religion, and well-being. What I haven’t explored as much is the economic origins of the phenomenon. That’s the subject of today’s guest post from Alex Mayyasi, the author—along with NPR’s Planet Money team—of the new book Planet Money: A Guide to the Economic Forces That Shape Your Life.

Photo by CDC on Unsplash

Americans spend more time alone—and less time socializing in-person—than any period in recorded history.

Some people think this is a story about technology. The post-war construction of the suburbs spread us out. Television keeps us in our living rooms. Phones keep teens in their bedrooms. Others think this is a story about values. Robert Putnam, the author of Bowling Alone, has pointed to the social gospel of the early 20th century as an example of how communitarian values can sweep the world. In the last 60 years, however, the cult of individualism has turned the ethic of “we” into an ethic of “me” across politics, sports clubs, and family habits.

These technology- and values-based narratives have merit. But they’re missing a big piece of the puzzle. They’re missing a fundamental law of modern economics.

Look across the U.S. economy. Cinemas are fighting to stay relevant, but Netflix is a growing juggernaut. Restaurants feel squeezed, but DoorDash has healthy profit margins.

This is a consistent pattern. Companies in the business of bringing people together for shared experiences are struggling. Meanwhile, products that increase the time we spend alone are doing great.

Alone time has surged in the last 60 years in large part because of changing economics that made it profitable to run businesses that keep people apart and expensive to run businesses that bring people together. If our social lives seem sick with solitude, that’s because they suffer from a disease with a name. It’s called Baumol’s cost disease.

YOU CAN’T ‘INNOVATE’ YOUR WAY TO A THREE-PERSON QUARTET

In the 1960s, the John F. Kennedy administration wanted to understand why so many theaters and artists were struggling financially. They turned to the economist William Baumol to investigate. An avid painter and sculptor, Baumol was the man for the job. With a colleague, he tracked down data by poking around backstages, sending questionnaires to theatergoers, and interviewing Broadway producers.

Baumol soon developed an elegant, data-­backed theory that explained much more than why artists were starving.

His insight was that agriculture can become more productive in a way that theater cannot. While a single farmer produces far more food today than a century ago by making use of machines and improved fertilizer, the business of putting on a play or an opera cannot benefit from similar labor-saving technology. “The output per man-­hour of the violinist playing a Schubert quartet in a standard concert hall is relatively fixed,” Baumol observed, “and it is fairly difficult to reduce the number of actors necessary for a performance of Henry IV, Part II.”

Baumol recognized that this principle extended across the entire economy, beyond farms and opera houses. Some sectors, such as growing corn and making electronics, have become more efficient and productive thanks to new technology, trade, and automation. But other sectors— especially services, such as haircuts, theater performances, and watching toddlers in daycare—still require as much labor as they did before the Industrial Revolution.

To be clear, this is mostly good news! This is the story of economic progress. In 1960, the average American family spent 17% of their disposable income on food. Over the next four decades, that fell below 10%, even as the average family dined out more often. People used to brag about the size of their flat-screen TVs. Now huge TVs are too affordable to be a status symbol.

The trouble is that productivity growth doesn’t just make goods cheaper. It made the economy richer. It raised the economy-wide price of human time—which is a fancy way of saying “wages.” As these industries became more productive, they could pay workers higher salaries. As wages rose, restaurants, operas, and childcare centers had to offer higher pay, as well, to keep their workers from leaving.

This created a sticky problem for businesses that didn’t benefit from new technology, or trade, or automation. Without productivity growth, they just got more expensive. After all, no one can finish five beard trims in the time it used to take to complete one. No ballet company can put on 10 Swan Lake performances in the time it used to do just one. Still, in order to keep their workers from switching careers, theaters and childcare centers had to offer higher salaries. And therefore increase their prices. (Sure, many teachers, cellists, and social workers accept lower salaries to do work they love. But if the salary gap gets too big, they will switch.)

When opera houses and theaters beg wealthy patrons for donations—even as the ticket prices are prohibitively expensive and many singers and actors can barely afford rent—you’re hearing Baumol’s cost disease at work. What they’re saying is: “The rest of the economy has technology, trade, and automation. We don’t. So please make up the difference with tax-deductible donations!”

THE CENTURY OF ANTI-SOCIAL BUSINESSES

If you read this newsletter, you’re probably familiar with Derek’s idea that we are living in an anti-social century. I think he’s right. But—and Derek allowed me to say this!—I don’t think he’s focused enough on the economics of the anti-social century. He’s been missing something big: In capitalism, it often pays to be anti-social.

TV and smartphone-based activities are, after all, very much part of the ever-more-productive economy. They benefit from technology gains: Actors once performed every night for a small local audience. Then TV networks aired one program at a time for national audiences. Now Netflix streams an ever-growing library of content for a global user base. The world of digital, solitude-inducing entertainment is scalable, so investors give founders millions to build the next short-form video app, delivery platform, or AI companion company.

But concerts, independent bookstores, and restaurants (with table service) are in the humans-only economy. They are labor intensive. When they get more efficient over time, it’s generally by becoming less social, like the fast-casual restaurant chains that have customers order by kiosk and sit on uncomfortable metal chairs that prod them to eat quickly and leave promptly. And definitely not linger over dessert or one more drink, the conversation reaching an emotional frontier in the warm glow of a long meal.

Cost disease doesn’t mean people have to be less social. Going on a hike with friends is still free. So is organizing a potluck. Meeting for coffee is a little pricey, but not prohibitively so.

But cost disease and the profit motive shape our choices. Free, social activities compete with cheap, engaging, and high-quality entertainment (like For All Mankind on Apple TV—why is no one talking about this show?!) and even cheaper doomscrolling. The profit margins for a restaurant or cafe whose owner aspires to create a “third space” are vanishingly thin. The marketing budget for Marvel movies is more than $100 million.

Because of cost disease, most of the world’s most powerful corporations and most driven entrepreneurs are well capitalized and incentivized to increase our solitude, while purveyors of long nights with friends are outliers who succeed despite strong headwinds.

Even Facebook’s evolution fits in with cost disease. In the Aughts, people used to ask, only half jokingly, why we were all working for free by creating content for Facebook. But like other labor-intensive services, our free labor did not get more efficient every year. Facebook could only wring so many more posts from each user’s social network. So, to achieve efficiency gains, Facebook had to design an algorithm that displayed the most engaging and relevant-to-you content created by anyone, anywhere in the world, including by more and more professionals. To become more productive, Facebook had to become more anti-social.

THE CURE FOR COST DISEASE

It may sound like Baumol’s cost disease dooms certain industries to get less affordable forever. But the malady he named has a dependable solution. Progressive taxes in a growing economy can be used to subsidize key services so that average Americans can afford them.

For example, there is a strong economic argument for subsidizing health care, education, and even child care.

But should we also subsidize sit-down restaurants? Bowling alleys and the local dive bar? Coachella!

Of course, I’m joking about Coachella. (Kind of.) But my serious point is that if solitude has a social cost, it’s not crazy to think that local, state, and federal governments should be thinking about creative ways to make it cheaper to hang out. Some policy solutions would be familiar, such as local governments providing more public pools and community spaces. Others might sound a little odd, like making pro-social businesses, such as restaurants, qualify for tax-deductible donations, the same way that Puccini fans can write checks to their favorite opera house.

Cost disease is real, and it has a known cure. Today we’re seeing that one price of a successful economy is the rise of anti-social businesses. But if we want our rising living standards to include friendships and shared experiences—and not just a nation of couch potatoes scrolling on their phones for 10 hours a day—then we’ll need to choose our social future. And pay for it.