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Baumol's Cost Disease

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Re: Baumol's Cost Disease

#121

Post by AnthonyMouse »

bloppe wrote: post #118
AnthonyMouse wrote: post #115

Earlier quoted context omitted.

> How is this related to Baumol? Because people claim that higher costs are a result of Baumol and are hypothetically something good or normal when it's actually regulatory costs and government capture stealing from working people. "Don't worry, prices are only up because we got so much more productive, not because of artificial scarcity or because it now requires 10 people to do certain things that used to take one.…

Sure, there are plenty of ways that the government can interfere in an otherwise fair market. That's not the point. Absent some sort of market interference, Baumol is empirically good at predicting price movements.

The trouble is that the same empirical data is also consistent with the theory that when efficiency improves it attracts market interference to capture the surplus.

And then it could be either one, or some combination of both, but the people doing the capturing prefer to direct attention to an alternative explanation so they can continue their extraction.

Re: Baumol's Cost Disease

#122

Post by maxerickson »

lumost wrote: post #91
maxerickson wrote: post #87

Earlier quoted context omitted.

Productivity has always imposed an upper limit on wages.

It’s more complex than that. When universities want to give raises to admin, they simply raise prices. The ability of the university to raise prices depends on many factors.

Those wages are far below the upper limit imposed by the value of college education...

That it's possibly signaling rather than something more concrete doesn't really matter to the economic analysis.

Re: Baumol's Cost Disease

#124

Post by yunyu »

wat10000 wrote: post #109
yunyu wrote: post #101

Earlier quoted context omitted.

If you search for low-value consumer queries or aren't a buyer for high-ticket B2B items, you will get less relevant ads. Your personal experiences don't extrapolate well here: advertising for high-value goods is totally different from advertising for low-value goods. Example: hypertargeted ads for F-35 engine upgrades in the DC metro - https://x.com/JosephPolitano/status/1683476652276236295 Is that clear enough?

Sure. I can totally buy that advertising is different for different people. Although I don’t think it’s good regardless. The part that confuses me is that you keep bringing up my experience of advertising despite repeatedly saying it’s not comparable.

I was trying to point out the selection bias in your experiences, since your queries are probably lower-intent than for the typical consumer. Good discussion though.

Re: Baumol's Cost Disease

#125

Post by evanjrowley »

duxup wrote: post #51

In a way, I thought about this when I changed my career the last time. I had worked in what I will call "high end" tech support for some proprietary (and some less proprietary) networking equipment. My job generally paid great and customers paid big support contracts, good deal for a good 20 years. But Tech Support is never glamorous, executives eventually think of them as just problems (even if they're solving probl…

>Yeah they're bad because anyone who knows how to do it ... does not stick around

Can confirm! I'd also like to add that the employer is happy to keep you in that position for a decade or more (as long as the client keeps paying) but one job over an extended period of time reads very poorly on a resume. Switching is a disruption necessary for growth.

Re: Baumol's Cost Disease

#126

Post by Pet_Ant »

duxup wrote: post #51

In a way, I thought about this when I changed my career the last time. I had worked in what I will call "high end" tech support for some proprietary (and some less proprietary) networking equipment. My job generally paid great and customers paid big support contracts, good deal for a good 20 years. But Tech Support is never glamorous, executives eventually think of them as just problems (even if they're solving probl…

> People rightfully complain about tech support, and I always think "Yeah they're bad because anyone who knows how to do it ... does not stick around."

The say "pay peanuts, get elephants" exists for a reason.

A related thought I heard was "pay police and army well, because you don't want them to start looking for ways of making more money...".

Outside the assembly line, you aren't just paying for the work themselves but for the character of the person providing. Drive the wage down low-enough and only the desperate apply. I know that locally, one of the first jobs the agency can get recovering homeless drug addicts is a call-centre job. That explains a lot.

Re: Baumol's Cost Disease

#127

Post by EricRiese »

dang wrote: post #52

Related. Others? The Baumol Effect and Jevons paradox are related - https://news.ycombinator.com/item?id=45955879 - Nov 2025 (67 comments) Baumol Effect - https://news.ycombinator.com/item?id=43065115 - Feb 2025 (1 comment) The Baumol effect - https://news.ycombinator.com/item?id=35220758 - March 2023 (77 comments) Why are the prices so damn high - https://news.ycombinator.com/item?id=33150094 - Oct 2022 (2 comments)…

Why Are the Prices So Damn High? - https://news.ycombinator.com/item?id=33150094 - Oct 2022 (2 comments)

Re: Baumol's Cost Disease

#129

Post by wat10000 »

yunyu wrote: post #124
wat10000 wrote: post #109

Earlier quoted context omitted.

Sure. I can totally buy that advertising is different for different people. Although I don’t think it’s good regardless. The part that confuses me is that you keep bringing up my experience of advertising despite repeatedly saying it’s not comparable.

I was trying to point out the selection bias in your experiences, since your queries are probably lower-intent than for the typical consumer. Good discussion though.

I get that. But you're the one who brought up my experiences in the first place! The last few messages have been, essentially, "Doctors need advertising to find new treatments just like you need advertising to find plumbers." "I don't need, and actively avoid using, advertising to find plumbers." "Your experience isn't comparable, it's not relevant to doctors finding medical treatments." Followed by many repetitions of the last part. I get it. The part I don't get is why I'm supposed to believe advertising is good for doctors, given your previous argument made no sense (what with comparing it to my own experience with advertising) and you haven't given a new one.

Re: Baumol's Cost Disease

#130

Post by bloppe »

AnthonyMouse wrote: post #120
bloppe wrote: post #119

Earlier quoted context omitted.

The 20th percentile probably wouldn't go into finance. But there's a "average" cutoff somewhere. Maybe 50th percentile. Maybe 80th. It doesn't matter. That cutoff will move if demand shifts.

Suppose the cutoff to get into finance is at the 70th percentile of the general population and 99% of retail clerks are below the 50th percentile or otherwise have some reason not to even though those jobs already pay significantly more. How much more are they going to get paid because of that? Or let's even suppose that the amount isn't totally inconsequential. Say they end up with an extra $1000/year. But now they'…

Throwing out random numbers is not a convincing argument about how things would actually work in reality.

Consider the fact that median real income tends to move up [1]. This is the metric that matters. It's the 50th percentile person, so mega rich outliers are ignored. And it weighs incomes against the CPI, which incorporates the price of medicine, construction, education, as well as consumer electronics, food, and pretty much everything people spend money on in realistic proportions. That's objective evidence that people actually get richer, even though the price of labor does tend to go up across the board, relative to goods.

[1]: https://fred.stlouisfed.org/series/mepainusa672n

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