Baumol’s new book on the cost disease

It is self-recommending, here are a few points of relevance:

1. There has been a clear cost disease in most kinds of education and many kinds of medicine, but I blame institutions and laws as much as the intrinsic nature of the product.

2. I do not see the arts as subject to the cost disease very much at all.  As for the “live performing arts,” the disease seems to afflict the older and less innovative sectors, such as opera and the symphony.  There is plenty of live music these days, it is offered in innovative ways, and much of it is free.

3. Even “the live performing arts” can be broken down into underlying characteristics, many of which show a great deal of recent innovation.  For instance the supply of “musical immediacy” has been non-stagnant through YouTube, which often gives you a better glimpse of the performer than you get through nosebleed seats and giant screens.  YouTube isn’t “live,” but there is no particular reason to break down the analysis at that level and certainly it is not a sacred category for consumers.

4. In many sectors of the arts, especially music, consumers demand constant turnover of product.  Old music becomes “obsolete” — for whatever sociological reasons — and in this sense the sector is creating lots of new value every year.  From an “objectivist” point of view they are still strumming guitars with the same speed, but from a subjectivist point of view — the relevant one for the economist – they are remarkably innovative all the time in the battle against obsolescence.  A lot of the cost disease argument is actually an aesthetic objection that the art forms which have already peaked — such as Mozart — sometimes have a hard time holding their ground in terms of cost and innovation.

5. In general “cost disease” sectors do not remain constant over time.  Agriculture has been unusually stagnant for the last twenty or so years, but it is hardly obvious that this trend will continue for the next century to come and it certainly was not the case for the period 1948-1990, quite the contrary.

6. The stagnancy of one sector may depend on the stagnancy of other sectors in non-transparent ways.  “Live music” may seem like it doesn’t change much, but lifting the embargo on Cuba would boost the quantity and quality of my consumption of spectacular concert experiences, as would a non-stop flight to Haiti.

You can buy the book here.

Addendum: Matt Yglesias comments.


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