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> What services are costing more outside of healthcare This is a known effect in economics: https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.

> What services are costing more outside of healthcare This is a known effect in economics: https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease "... the rise of salaries in jobs that have experienced no or low increase of labor productivity, in response to rising salaries in other jobs that have experienced higher labor productivity growth"

Retric 6y ago
That doesn’t explain why collage tuition increases so much faster than the cost of a classical music performance which is part of the original 1960’s study. Baumol's cost disease is in effect a labor price floor, but says nothing about a sectors overall efficiency.
- eindiran 6y ago
  Because of the 1992 Higher Education Amendments to the 1965 Higher Education Act and the 1993 Student Loan Reform Act, colleges have no incentive to compete on price: anyone who can't pay for tuition out-of-pocket can get government money to do so. FAFSA is basically a perfect price discrimination system for colleges: why wouldn't they attempt to extract the maximum amount possible from each student? An additional factor to consider is that higher education has increased the number of roles in their org-chart where Baumol's original proposition applies: the number of administrators in higher education just keeps rising. I'm not super familiar with the economics of orchestras, but I would be very surprised if the San Francisco Symphony is staffed with 4x the number of administrators that it was in 1978, even though the number of chairs in the orchestra remains the same.
  - Retric 6y ago
    That’s one theory, but it doesn’t explain why private high school tuition has also spiked. Vermont’s average is up at $31,532 per year. In reality there are a host of social, economic, and political forces in play.
    - eindiran 6y ago
      Most private high schools are using a roll-your-own-FAFSA version of price discrimination. Additionally, private high schools have quite a different distribution of attendees (by parental income) than colleges do.
      - Retric 6y ago
        That’s definitely part of it, but Virginia averages half as much at 15,574 and that’s still high nationally. https://howmuch.net/articles/average-private-school-tuition-cost https://howmuch.net/articles/average-private-school-tuition-... Essentially the most expensive schools are priced as feeders into the elite collages of the North East. Exclusivity is a benefit when students are competing with each other students for placement into top schools. Other parts of the country have a much stronger focus on institutions with a religious rather than purely academic focus. Which gets back to my original point. You get inefficiency when that’s what’s rewarded. It’s not that schools can’t operate cheaply, rather people actively want a different model.
  - stjohnswarts 6y ago
    That's part of it. Two other factors I've seen are ridiculous build out per capita (student population) and also states lower % they contribute to schools more every year almost.
- rogerbinns 6y ago
  > ... why collage tuition increases ... Also covered in economics! https://en.wikipedia.org/wiki/Signalling_%28economics%29 https://en.wikipedia.org/wiki/Signalling_%28economics%29 Being able to get into and complete several years of college signals to a potential employer that you are a better candidate. The more prestigious the institution, more difficult to get in etc, the better for the candidates that manage to. That increases demand, but the (roughly) fixed supply at a college results in increased prices and other things that reinforce the college (eg better sports and more successful sports teams).

Retric 6y ago

That doesn’t explain why collage tuition increases so much faster than the cost of a classical music performance which is part of the original 1960’s study. Baumol's cost disease is in effect a labor price floor, but says nothing about a sectors overall efficiency.

eindiran 6y ago
Because of the 1992 Higher Education Amendments to the 1965 Higher Education Act and the 1993 Student Loan Reform Act, colleges have no incentive to compete on price: anyone who can't pay for tuition out-of-pocket can get government money to do so. FAFSA is basically a perfect price discrimination system for colleges: why wouldn't they attempt to extract the maximum amount possible from each student? An additional factor to consider is that higher education has increased the number of roles in their org-chart where Baumol's original proposition applies: the number of administrators in higher education just keeps rising. I'm not super familiar with the economics of orchestras, but I would be very surprised if the San Francisco Symphony is staffed with 4x the number of administrators that it was in 1978, even though the number of chairs in the orchestra remains the same.
- Retric 6y ago
  That’s one theory, but it doesn’t explain why private high school tuition has also spiked. Vermont’s average is up at $31,532 per year. In reality there are a host of social, economic, and political forces in play.
  - eindiran 6y ago
    Most private high schools are using a roll-your-own-FAFSA version of price discrimination. Additionally, private high schools have quite a different distribution of attendees (by parental income) than colleges do.
    - Retric 6y ago
      That’s definitely part of it, but Virginia averages half as much at 15,574 and that’s still high nationally. https://howmuch.net/articles/average-private-school-tuition-cost https://howmuch.net/articles/average-private-school-tuition-... Essentially the most expensive schools are priced as feeders into the elite collages of the North East. Exclusivity is a benefit when students are competing with each other students for placement into top schools. Other parts of the country have a much stronger focus on institutions with a religious rather than purely academic focus. Which gets back to my original point. You get inefficiency when that’s what’s rewarded. It’s not that schools can’t operate cheaply, rather people actively want a different model.
- stjohnswarts 6y ago
  That's part of it. Two other factors I've seen are ridiculous build out per capita (student population) and also states lower % they contribute to schools more every year almost.
rogerbinns 6y ago
> ... why collage tuition increases ... Also covered in economics! https://en.wikipedia.org/wiki/Signalling_%28economics%29 https://en.wikipedia.org/wiki/Signalling_%28economics%29 Being able to get into and complete several years of college signals to a potential employer that you are a better candidate. The more prestigious the institution, more difficult to get in etc, the better for the candidates that manage to. That increases demand, but the (roughly) fixed supply at a college results in increased prices and other things that reinforce the college (eg better sports and more successful sports teams).