3 ms·

Link to Wikipedia article on cost disease: https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease

• filleokus 9y ago
  One problem I've always had when stumbling upon the cost disease theory is my sense that real wages not only "should" rise due to productivity gains, but also due to the wages of alternative occupations. If a person has the intellect / drive / grit / possibility etc. to pursue either an occupation as a university professor (where the productivity gain has been low) or a high end engineering job (with high productivity gains), it's obvious that if there's demand for university professors, universities will have to somewhat compete with the engineering firms for labour. I guess the situation is somewhat different for the arts, but still, if the real wages had been constant since the 1600s I guess very few would pursue a career as professional classical pianists if it would be impossible to make more than minimum wage (even at the topmost levels).
  • URSpider94 9y ago
    That is exactly the point of the theory. Wages increase roughly at parity for equally skilled workers, regardless of their productivity, since otherwise people wouldn't choose to go into careers that under-pay. While costs decrease for goods and services that benefit from productivity increases, they stay the same for goods and services where productivity doesn't improve. Since all other costs are dropping, this has the effect of making prices go UP for hands-on services.
  • Lazare 9y ago
    Yes, that's exactly the point/mechanism of the cost disease theory.