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Baumol’s cost disease is a bit depressing to think about out
Posted on 7/10/26 at 5:39 pm
Posted on 7/10/26 at 5:39 pm
Essentially, there’s a doom loop between robust economic growth and expensive costs in sectors where productivity gains are impossible
Baumol’s cost disease is an economic phenomenon where salaries rise in labor-intensive, low-productivity jobs (like nursing or teaching) simply because wages have increased in high-productivity sectors (like manufacturing or tech). Because human presence is required, costs inevitably soar without a corresponding increase in output.
Economist William Baumol, who developed the theory with William Bowen in the 1960s, famously used the performing arts to explain the concept. It still takes four musicians the same amount of time (and the exact same amount of labor) to play a Beethoven string quartet today as it did in the 19th century, but wages for musicians are much higher.
As the Baumol effect predicts, between 1998 and 2018, services became more expensive while many manufactured goods became cheaper. Note the modest increase in average wages in the middle.
Baumol’s cost disease is an economic phenomenon where salaries rise in labor-intensive, low-productivity jobs (like nursing or teaching) simply because wages have increased in high-productivity sectors (like manufacturing or tech). Because human presence is required, costs inevitably soar without a corresponding increase in output.
Economist William Baumol, who developed the theory with William Bowen in the 1960s, famously used the performing arts to explain the concept. It still takes four musicians the same amount of time (and the exact same amount of labor) to play a Beethoven string quartet today as it did in the 19th century, but wages for musicians are much higher.
As the Baumol effect predicts, between 1998 and 2018, services became more expensive while many manufactured goods became cheaper. Note the modest increase in average wages in the middle.
13
Posted on 7/10/26 at 5:40 pm to HailHailtoMichigan!
Still better than The Clap
Posted on 7/10/26 at 5:50 pm to HailHailtoMichigan!
Damn, I paid for five college degrees from 2007 to 2023.
Talk about poor timing.
Talk about poor timing.
Posted on 7/10/26 at 5:54 pm to HailHailtoMichigan!
If you think the baumol cost is bad wait til you hear about the haulol cost
ETA: this isn’t really true because the pay for playing a gig has been 100 bucks a man since the 70s
ETA: this isn’t really true because the pay for playing a gig has been 100 bucks a man since the 70s
This post was edited on 7/10/26 at 6:05 pm
Posted on 7/10/26 at 7:06 pm to HailHailtoMichigan!
I immediately disregarded the validity of this chart when it appears to show new cars are the same "affordability" as they were in 1998.
This must be some common core math or something.
This must be some common core math or something.
Posted on 7/10/26 at 7:09 pm to HailHailtoMichigan!
I’m an Econ noob but what about the opportunity costs for the musicians in the sense that they could take other jobs that pay more than if they were receiving 19th century compensation for being musicians? Or is that just a restatement of the problem?
Posted on 7/10/26 at 7:43 pm to STLDawg
are you seriously asking this OP to discuss economic theory as though he has any specific knowledge other than how to copy and paste something he found on the internet?
Posted on 7/10/26 at 7:50 pm to HailHailtoMichigan!
It’s Friday, dude. Go have a drink and try to grab some snizz
Posted on 7/10/26 at 7:58 pm to HailHailtoMichigan!
quote:
Economist William Baumol, who developed the theory with William Bowen in the 1960s, famously used the performing arts to explain the concept. It still takes four musicians the same amount of time (and the exact same amount of labor) to play a Beethoven string quartet today as it did in the 19th century, but wages for musicians are much higher.
Pure stupidity. First we are in a capitalist economy so as cost rise so do the incomes of the class structure or the system breaks down.
Second, you cannot assign a value to a job arbitrarily. As I learned from working for Charles Koch the value of anything is set by what someone is willing to pay for it. If there is no demand for string quartets at $1000 but there is at $500 the that is the value.
This is why I get nauseated by the "talking point" of affordability by our illustrious media. It is a fricking trap arguement. Prices are set by demand. If people can pay the price they will and if they cant they will not.
If you cant afford a house because you have a poor income that is not society's fault. Buy what you can afford.
The problem we have now is people are trying to usurp the system by forcing living wage pay on marginal work like fast food jobs and other min wage jobs. When the govt does that the wages of the tiers above them will just rise to keep their station or the business that pays that forced wage will collapse as we are seeing in Cali and the West Coast food industry.
This post was edited on 7/10/26 at 7:59 pm
Posted on 7/10/26 at 8:08 pm to HailHailtoMichigan!
Quantum Entanglement giggles at human valuation of life.
Posted on 7/10/26 at 8:08 pm to cgrand
I have a degree in Econ from UC-Irvine
Posted on 7/10/26 at 8:10 pm to STLDawg
That’s exactly what Baumol’s cost disease is
Rising wages in the goods-producing sector causes rising wages in the services sector, but because the services sector can’t raise productivity like the goods producing sector can, it causes costs to rise
Rising wages in the goods-producing sector causes rising wages in the services sector, but because the services sector can’t raise productivity like the goods producing sector can, it causes costs to rise
Posted on 7/10/26 at 8:26 pm to HailHailtoMichigan!
I would argue that productivity does rise in the services sector
Consider the zero turn mower
20 years ago nobody had heard of a zero turn mower and the choices were push mower, riding mower, and tractor with a grooming mower. The zero turn has greatly increased efficiency in the grass cutting world allowing for one guy to cut way more yards
Consider the zero turn mower
20 years ago nobody had heard of a zero turn mower and the choices were push mower, riding mower, and tractor with a grooming mower. The zero turn has greatly increased efficiency in the grass cutting world allowing for one guy to cut way more yards
Posted on 7/10/26 at 8:35 pm to el Gaucho
quote:
20 years ago nobody had heard of a zero turn mower and the choices were push mower, riding mower, and tractor with a grooming mower. The zero turn has greatly increased efficiency in the grass cutting world allowing for one guy to cut way more yards
That’s not the service industries he’s talking about here. He’s talking about about ones like nursing and teaching that require the employees to be there the same amount of time no matter what to care for patients or be available for students.
Posted on 7/10/26 at 8:38 pm to HailHailtoMichigan!
No, just no.
Isn’t it a GOOD thing that the rising tide of Capitalism lifts all boats?
Now it’s a BAD thing?
Well perhaps it is for the fat cats at the top.
And who says nursing and teaching aren’t high-productivity jobs? That all depends on who sets the definitions, especially as they relate to humanity.
I can’t speak for teachers, but I can tell you that the nursing situation is(in my experience) one of scarcity - due in large part to the rise of stressful work environments directly related to(but not limited to) a rise in staffing ratio’s and/or decline in ancillary help….and also from injecting TRILLIONS OF DOLLARS into a fiat reserve economy. Did you think that the worker bees would just sit there and take declining wages (adjusted against inflation) on the chin?
Everyone(nurses included) can calculate opportunity costs…isn’t that a GOOD thing?!?
Or again, is that only supposed to be the domain of the fat cats at the top, with Labor shutting up and taking it like good worker bees.
Capitalism is the best economic system to date, but that doesn’t mean it’s perfect. Its desire for ever more efficiency comes at a cost to our humanity IMO, and so there will always be a back and forth between business owners/managers, and the labor they employ…
What if the problem isn’t with the workers, but lies elsewhere?
Isn’t it a GOOD thing that the rising tide of Capitalism lifts all boats?
Now it’s a BAD thing?
Well perhaps it is for the fat cats at the top.
And who says nursing and teaching aren’t high-productivity jobs? That all depends on who sets the definitions, especially as they relate to humanity.
I can’t speak for teachers, but I can tell you that the nursing situation is(in my experience) one of scarcity - due in large part to the rise of stressful work environments directly related to(but not limited to) a rise in staffing ratio’s and/or decline in ancillary help….and also from injecting TRILLIONS OF DOLLARS into a fiat reserve economy. Did you think that the worker bees would just sit there and take declining wages (adjusted against inflation) on the chin?
Everyone(nurses included) can calculate opportunity costs…isn’t that a GOOD thing?!?
Or again, is that only supposed to be the domain of the fat cats at the top, with Labor shutting up and taking it like good worker bees.
Capitalism is the best economic system to date, but that doesn’t mean it’s perfect. Its desire for ever more efficiency comes at a cost to our humanity IMO, and so there will always be a back and forth between business owners/managers, and the labor they employ…
What if the problem isn’t with the workers, but lies elsewhere?
Posted on 7/10/26 at 8:46 pm to cbree88
This is an economists opinion rather than a real life one
Patient to nurse ratio keeps going higher and higher, and even though the nurses complain the outcomes have been getting better over that time
Kids are less educated these days but teaching used to be a good job. The wages haven’t kept up with inflation
ETA: you can’t be like no not those service industries!! That’s not a fair argument
Patient to nurse ratio keeps going higher and higher, and even though the nurses complain the outcomes have been getting better over that time
Kids are less educated these days but teaching used to be a good job. The wages haven’t kept up with inflation
ETA: you can’t be like no not those service industries!! That’s not a fair argument
This post was edited on 7/10/26 at 8:48 pm
Posted on 7/10/26 at 9:45 pm to HailHailtoMichigan!
There are a lot of jobs where you are paying someone to just be there and do nothing most of the time. Those jobs tend to have to pay more than other low wage jobs because they are mind-numbingly boring.
Posted on 7/10/26 at 9:53 pm to AndyCBR
quote:
I immediately disregarded the validity of this chart when it appears to show new cars are the same "affordability" as they were in 1998.
One of the most persistent myths the OT seems to hold on to for dear life is that new vehicles by and large have outpaced inflation.
It's mind blowing but people are really dug in to it. So weird.
Posted on 7/10/26 at 10:17 pm to el Gaucho
quote:
This is an economists opinion rather than a real life one
I’ll take an economics professional’s opinion over an unqualified jack wagon like you.
quote:
Patient to nurse ratio keeps going higher and higher, and even though the nurses complain the outcomes have been getting better over that time
Is this a joke? Wait times and service quality from hospitals and medical clinics are horrible.
Posted on 7/10/26 at 10:21 pm to HailHailtoMichigan!
Is it a bad thing that the salary of a violinist now is higher than 6 pence and a loaf of bread?
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