William Baumol has passed away

by on May 4, 2017 at 3:17 pm in Economics | Permalink

He was one of the greatest of living economists, with contributions in numerous areas, including productivity, economics of the arts, contestable markets, environmental economics, and entrepreneurship theory.  Here are previous MR entries on Baumol and his ideas.

1 ben May 4, 2017 at 3:35 pm

One of the greats. I particularly enjoyed his book “The free market innovation machine”. He and Robert Willig had a major and lasting influence on competition policy here in New Zealand.

2 Michael Davies May 4, 2017 at 9:05 pm

Major. Lasting. And deeply destructive.

3 Andrew May 4, 2017 at 3:52 pm

Not calling out”cost-disease”?

4 carlospln May 4, 2017 at 5:08 pm

carlospln May 4, 2017 at 1:52 am
“Why isn’t it possible (in the long run) for some jobs to keep increasing in productivity in a society while other jobs stagnate?”

It is. Fracking is more productive in 2017 than in 2020 [‘learning curve’ + better technology]

But my barber still requires 20″ to cut my hair!

https://en.wikipedia.org/wiki/Baumol's_cost_disease

5 Someone May 5, 2017 at 4:58 pm

Here’s a question. What if we tackled cost disease by just forcing some people to work for less?

6 Les Cargill May 5, 2017 at 8:35 pm

You first.

7 dearieme May 4, 2017 at 4:15 pm

When was the expression “contestable markets” coined? The idea is old as the hills, but a snappy title for it is a useful thing.

8 mkt42 May 5, 2017 at 3:28 am

I don’t know when it was coined but Baumol, Bailey, Panzar, and Willig popularized it in the early 1980s, perhaps the most prominent publication was Baumol’s 1982 AER article, “Contestable Markets: An Uprising in the Theory of Industry Structure”, although by then they’d been working on the topic for awhile.
https://www.jstor.org/stable/1808571?seq=17#page_scan_tab_contents

I don’t know if I’d say that the idea was as old as the hills. The notion of potential competition is an easy and obvious enough one, but Baumol et al put the idea on a mathematical foundation and worked out the conditions regarding fixed costs and sunk costs under which contestability might be relevant. That was what was new and innovative about contestability.

It’s a nice theory and worth thinking about but I think it’s relevance and usefulness is limited. In particular, sunk costs and other frictions abound.

9 Veysel Ulusoy May 4, 2017 at 4:17 pm

I benefited to much from his ideas during my thesis at Syracuse University.

will not forget…

10 Barkley Rosser May 4, 2017 at 4:29 pm

Sigh…. One of those many of us thought deserved the Nobel but now will not get it. Too bad.

11 msgkings May 4, 2017 at 4:51 pm

+1

12 Larry Siegel May 4, 2017 at 11:40 pm

++1 There could not have been a more deserving recipient.

13 mkt42 May 5, 2017 at 3:00 am

That was my first thought too. If I entered Nobel betting pools, he would’ve been my perennial pick to win the next one.

In response to other comments about longevity of economists: it wouldn’t surprise me if PhD holders in general have longer life expectancies, but there are also economists who died (relatively) young: Harry Johnson, Rudi Dornbusch, Sherwin Rosen, Henry Simons, Carlos Diaz-Alejandro, Suzanne Scotchmer, Miguel Sidrauski. And the guy whose death at 26 may’ve been the greatest intellectual loss of the 20th century: Frank Ramsey. Like John von Neumann and John Nash he was more of a mathematician than an economist but made huge contributions to economics almost as a side activity. Had he lived he might’ve made contributions of the same order as von Neumann.

14 Paul Krugman May 4, 2017 at 4:36 pm

Were those reporting a huge increase in optimism really feeling that much better about their economic prospects, or were they simply using the survey as an opportunity to affirm the rightness of their vote?” Krugman asked. “If consumers really are feeling super-confident, they’re not acting on those feelings.

(profit, afterlife, [sin], race, consumers, super-happy, sentiments)

15 rayward May 4, 2017 at 5:17 pm

Why do so many economists live to such old age? Is it because they live a boring life or a healthy life? I’m hoping Cowen, being an economist, fits the pattern. I’d hate to think he’d die young. What would we do? Read comic books instead? Go for a walk? Talk to our wives and girlfriends? Work? Do economists do their best work when they are young and full of vigor or when they are old and full of Geritol and laxatives?

16 D May 4, 2017 at 5:26 pm

Same with philosophers. I’m thinking it’s high IQ (an independent predictor of longevity) , high status (doting students), and a low stress and interesting career.

17 Rafael R May 4, 2017 at 6:53 pm

Low stress? Only for the ones who finished their PHDs before 1990. I think that the profession today is significantly less well suited for high life expectancy than before.

18 Todd K May 4, 2017 at 7:29 pm

But a 40 year old prof. today will see the medical advances of 2037 at age 60 and of 2057 when 80.

Never mind…

19 Larry Siegel May 4, 2017 at 11:41 pm

You win the internet for today.

20 Niroscience May 5, 2017 at 8:53 am

This implies the problems from mental health and stress are the ones we’ll innovate at 2037 and 2057, which I think is pretty likely given the market for them. Not to mention that people don’t die or off themselves beforehand from mental illnesses.

21 Michael Davies May 4, 2017 at 9:03 pm

A shiver ran down my spine – this man was the very bane of my existence for the Baumol Woking rule which institutionalized rent extraction by monopolists.

I spent years fighting his pernicious influence…

He did untold harm to the New Zealand economy by stifling competition and innovation.

22 Tom T. May 4, 2017 at 9:18 pm

Did he die of you-know-what disease?

23 Judah Benjamin Hur May 5, 2017 at 1:43 am

Has anyone done a study (even just made an informed guess) about the life expectancy of academic economists? An unusually high percentage seem to make it past 90.

24 Todd K May 5, 2017 at 5:56 am

I didn’t know until yesterday that Baumol was also an excellent artist.

25 Peter Metrinko May 5, 2017 at 10:51 am

I had the privilege of asking Mr. Baumol a question once about a merger. He was an expert witness for the merging parties, as I recall. I was advising a commissioner at the FTC, and parties sometimes meet with all the Commissioners. From his earlier comments in the meeting, it was plain the man was off-the-charts brilliant (though he was very reserved). The time came for my question and I could feel my pulse pounding — would he point at me and say “Dunce!” and I’d vanish in a cloud of smoke? No, he answered it well and was immensely relieved.

26 wiki May 5, 2017 at 11:28 am

It is really regrettable that the Swedish Academy did not grant him the Nobel Memorial Prize. Difficult to speculate on why. But the omission was surely deliberate and unfortunate.

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