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Baumol's Cost Disease

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Re: Baumol's Cost Disease

#21

Post by randallsquared »

websiteapi wrote: post #13
Dr_Birdbrain wrote: post #12

Earlier quoted context omitted.

Don’t automation technologies improve the productivity of labor? If I can make one widget per hour, and some new tool lets me make 10 widgets per hour? Conventional economic theory suggests the gain will be split between the widget-maker and the widget-consumer, in proportions determined by the relative slopes of the supply-demand curves, but definitely the product will become somewhat cheaper.

sure, but take furniture - is high quality furniture cheaper today than 50 years ago, normalized by inflation? from my investigation the answer is no.

It depends on what you mean by "high quality", I suspect. Above a relatively low floor, price of furniture seems unrelated to (e.g.) sturdiness or expected lifespan. It's more like fashion, in that you are paying for names or decoration.

Re: Baumol's Cost Disease

#22

Post by kgwgk »

Mistletoe wrote: post #9

Computer software is on the chart as getting cheaper with time but that can’t be right? I remember Photoshop used to be a disc and you owned it for a reasonable price and now you subscribe to the Adobe protection racket. Software as a service would be a service which should go in the top of the graph with other extortionists like colleges and hospitals.

The reasonable price was $600 in 2000 which is over $1000 adjusted for inflation. That's four years of subscription, the useful life of a perpetual license may not be much more than that.

Re: Baumol's Cost Disease

#23

Post by AnimalMuppet »

wat10000 wrote: post #18
derf_ wrote: post #4

The submission is titled with "Cost Disease", though the Wikipedia article has the more neutral term "Effect". But it is important to remember that money is a relative resource, not a real resource. If some sectors of the economy become drastically more efficient, and some do not, overall society has become wealthier , even if the prices in the latter sectors rise a lot.

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 fina…

Finance funds hospitals and cancer research institutes - or at least, it enables the gathering and concentrating of resources to do so.

Now, advertising...

Re: Baumol's Cost Disease

#24

Post by Mistletoe »

kgwgk wrote: post #22
Mistletoe wrote: post #9

Computer software is on the chart as getting cheaper with time but that can’t be right? I remember Photoshop used to be a disc and you owned it for a reasonable price and now you subscribe to the Adobe protection racket. Software as a service would be a service which should go in the top of the graph with other extortionists like colleges and hospitals.

The reasonable price was $600 in 2000 which is over $1000 adjusted for inflation. That's four years of subscription, the useful life of a perpetual license may not be much more than that.

No I pretty much still just need Photoshop features from 2000, 25 years later. That’s $24 a year instead of the current price of almost $24 a month.

Re: Baumol's Cost Disease

#25

Post by rwmj »

AnimalMuppet wrote: post #23
wat10000 wrote: post #18

Earlier quoted context omitted.

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 fina…

Finance funds hospitals and cancer research institutes - or at least, it enables the gathering and concentrating of resources to do so. Now, advertising...

Some 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.

Re: Baumol's Cost Disease

#26

Post by yunyu »

AnimalMuppet wrote: post #23
wat10000 wrote: post #18

Earlier quoted context omitted.

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 fina…

Finance funds hospitals and cancer research institutes - or at least, it enables the gathering and concentrating of resources to do so. Now, advertising...

Advertising 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.

Re: Baumol's Cost Disease

#27

Post by nospice »

rwmj wrote: post #25
AnimalMuppet wrote: post #23

Earlier quoted context omitted.

Finance funds hospitals and cancer research institutes - or at least, it enables the gathering and concentrating of resources to do so. Now, advertising...

Some 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…

The 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.

Re: Baumol's Cost Disease

#28

Post by paulpauper »

Mistletoe wrote: post #24
kgwgk wrote: post #22

Earlier quoted context omitted.

The reasonable price was $600 in 2000 which is over $1000 adjusted for inflation. That's four years of subscription, the useful life of a perpetual license may not be much more than that.

No I pretty much still just need Photoshop features from 2000, 25 years later. That’s $24 a year instead of the current price of almost $24 a month.

aren't there open source programs that have caught up to early 2000s era photoshop?

Re: Baumol's Cost Disease

#29

Post by steveBK123 »

Mistletoe wrote: post #24
kgwgk wrote: post #22

Earlier quoted context omitted.

The reasonable price was $600 in 2000 which is over $1000 adjusted for inflation. That's four years of subscription, the useful life of a perpetual license may not be much more than that.

No I pretty much still just need Photoshop features from 2000, 25 years later. That’s $24 a year instead of the current price of almost $24 a month.

Your perpetual license on a fixed version of Photoshop would not have been transferrable across OS/compute generations for 25 years.

In practice most longtime Photoshop users paid the $600 once and some $200~ upgrade cost every 2-4 years. Adjusted for inflation its same or more than what you pay now.

If you think you'd be fine now with 25 year old Photoshop features you maybe forget how basic the product was compared to today. Further besides OS compatibility there were file format / camera raw version additions made over time that you'd have wanted.

Re: Baumol's Cost Disease

#30

Post by steveBK123 »

paulpauper wrote: post #28
Mistletoe wrote: post #24

Earlier quoted context omitted.

No I pretty much still just need Photoshop features from 2000, 25 years later. That’s $24 a year instead of the current price of almost $24 a month.

aren't there open source programs that have caught up to early 2000s era photoshop?

A great secondary point, yes. If you truly believe year 2000 Photoshop was good enough for life, there are plenty of cheap/free options out there today.

Arguably your base desktop/tablet/phone OS editor which is free may already do enough.

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