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There was an interesting Planet Money Indicator episode recently that explains why things like tuition tend to outpace inflation. It's called the Baumol Effect
by tempestn 7y ago
There was an interesting Planet Money Indicator episode recently that explains why things like tuition tend to outpace inflation. It's called the Baumol Effect. https://www.npr.org/2019/09/03/757257796/how-a-string-quartet-explains-healthcare-costs https://www.npr.org/2019/09/03/757257796/how-a-string-quarte...
- WhompingWindows 7y agoIt's a highly simplistic theory that fails to take into account the irrationality of economic activity. Yet another economic theory trying to oversimplify psychology with numbers. How many workers actually have the capability of choosing between vastly different fields? There are dozens of factors that lead to people choosing career paths in the short, medium, and long term. Evidence in support of this Baumol effect is at best a correlation and not really an explanation or causation.
- wetpaws 7y agoBaumol Effect does not really explain much, in fact there are a lot of examples that directly contradict it. Check the section 3 of https://slatestarcodex.com/2017/02/09/considerations-on-cost-disease/ https://slatestarcodex.com/2017/02/09/considerations-on-cost....