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Your conclusion falls victim to the same conflation you’re calling out. If some sectors become drastically more efficient, society has become wealthier in terms
by wat10000 11mo ago
Your conclusion falls victim to the same conflation you’re calling out. If some sectors become drastically more efficient, society has become wealthier in terms of money, but not necessarily in terms of real resources.
For example, consider a case where finance becomes much more productive (in terms of $ per employee-hour) and raises wages to attract smart people, leading to fewer people becoming doctors because finance is much more attractive. Is society wealthier? The money says yes. The line goes up. But finance doesn’t set a broken bone or treat cancer. This may well have made society less wealthy in terms of what ordinary people actually care about.
- AnimalMuppet 11mo agoFinance funds hospitals and cancer research institutes - or at least, it enables the gathering and concentrating of resources to do so. Now, advertising...
- rwmj 11mo agoSome finance is needed and beneficial. The ability to form corporations and raise money through the stock market enhances many other fields of endeavour. But this can go too far. In London during 2000-2008, finance consumed every spare IT worker, as well as mathematicians and physicists. Salaries were far higher working for a bank than working in any other IT-related industry or start-up. Did this produce great works? Is London now better off because of this? In a word, no.
- nospice 11mo agoThe problem I have with these arguments is that they're awfully close to the anti-tourism arguments you hear in tourist towns such as Tahoe. You have this influx of visitors and money, and there's a considerable number of residents who see it as uniformly negative: congestion, high property prices, and so on. Imagine what it could've been without all these rich tech bros! But then, the US is full of picturesque small towns where the original heavy industry (logging, copper mine, steel mill) disappeared and tourism did not fill the gap. And all the young people moved out in search of better opportunities, except for the ones addicted to meth. There's no money, no jobs, no hope. Every socioeconomic shift has downsides, but it doesn't automatically mean that the alternative is better. Broad economic gains tend to lift all boats because money changes hands.
- wat10000 11mo agoIt also doesn’t mean the alternative is worse. Nothing says such a shift had to be overall good.
- rwmj 11mo agoIn the case of London, it was misallocation, not an influx of anything. It would have been better if the programmers had been founding start up companies, and the physicists had been researching science, instead of working for banks.
- jimbokun 11mo agoWhat’s your basis for concluding “no”? London is a very desirable place to live.
- yunyu 11mo agoAdvertising enables innovation-producing firms to drive awareness of their services in a cost effective manner, and for less informed consumers to understand what is available on the market. Your typical physician might not be fully caught up on what is the state of the art in arthritis treatments, but advertising enables this to happen.
- wat10000 11mo agoThe only way this should happen is if it’s a fake arthritis treatment meant to detect doctors who learn about treatments from advertising instead of legitimate sources, so they can be prevented from practicing medicine.
- yunyu 11mo agoWhat are legitimate sources in your definition? Should physicians be expected to spend all their free time reading every single study in every medical journal or conference, even for niche areas that they don't usually encounter? Should the average diabetic/arthritic patient need to obsessively pore over academic reports to stay informed about their condition? Should advertisers be banned from sponsoring journals or conferences? This is an extremely ill informed line of reasoning.
- wat10000 11mo agoI don’t know what counts as legitimate sources. I’ll let the professionals figure that one out. > Should advertisers be banned from sponsoring journals or conferences? It baffles me that you apparently think this is some kind of zinger. Yes!
- yunyu 11mo agoGot it. So you want attention to be controlled by the whims of academic/government/publishing bureaucrats or black-box ranking algorithms who are the arbitrators of legitimacy. I can't say I agree with that opinion, but different strokes for different folks.
- simonh 11mo agoThe Baumol effect says wages for doctors will also have to go up. Society can afford this because it now has commensurately more resources due to increased efficiency. It’s a tide that raises all boats, precisely because of this effect. This is why a taxi in London costs and pays better than the same service in Cairo.
- wat10000 11mo agoWill doctors’ pay go up enough to retain the same number of doctors?
- derektank 11mo agoGiven the demand for healthcare is extremely inelastic, almost certainly.
- ip26 11mo agoIt’s not like their wages will always go up exactly in proportion to your income. Goods and services that are afflicted will become less accessible if your own wages increase at a lower rate.
- derf_ 11mo agoExactly. Even though Baumol himself used the phrase "Cost Disease", I think that framing distracts from the fact that it is a result of something desirable happening, namely increased efficiency in some sectors. You could also posit a case where some sectors become less efficient, due to badly conceived regulations, exhaustion of non-renewable resources, an unchecked monopoly, or some other factor, but you don't need a special mechanism to explain why prices rise in such a scenario. > ...consider a case where finance becomes much more productive... leading to fewer people becoming doctors because finance is much more attractive. This is the opposite of what one would expect from a sector whose efficiency increases, as modeled by Baumol. See the first bullet in the article: "The share of total employment in sectors with high productivity growth decreases, while that of low productivity sectors increases" (also see the detailed analysis in the Technical Description section). It might be theoretically possible that induced demand could still increase overall employment in a sector as its efficiency increases, but I think you have to make an argument why that would be true. During the industrial revolution, automation eliminated 98% of the labor required to produce a yard of cotton cloth, but between 1830 and 1900 the number of weavers in the US increased by a factor of 4, because demand increased due to lower prices [0]... although the US population also increased by a factor of 6, so as a percentage of the workforce weavers still declined, even as people consumed much more cloth per capita. [0] James Bessen, Learning by Doing - The Real Connection between Innovation, Wages, and Wealth (2015), pp. 96–97.