badgenome on 28 February 2013
| mrstickball said: Even if the cost disease is correct, the problem is that it doesn't apply to those fields. Yes, they can be labor intensive, but technology can make them more productive - that is if they bother with it. In some cases, thanks to market distortion, that doesn't always happen, as the government doesn't care about efficiency or productivity increases. |
I think there is probably merit to the idea that, when the productivity in certain sectors of the economy progresses faster than in others, wages in those areas with stagnant productivity go up as well so that they can remain competitive. But if Baumol himself says that we needn't be worried about it insofar as things will continue to remain affordable, then costs spiraling out of control must be explained by something else. And in education and health care, government intervention seems to be the most obvious culprit.
