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Baumol's Cost Disease

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Re: Baumol's Cost Disease

#41

Post by SubmarineClub »

kmeisthax wrote: post #37
adam_patarino wrote: post #7

I can’t help but notice the items of increasing price / cost are not optional / discretionary purchases. Price can increase and not affect demand. Whereas the items decreasing in price are all subject intense competition and price sensitivity.

College is optional. Actually, if you're just looking for "a skilled job" trade school is a better bet than college now. But the only people actually saying that are conservative nut-jobs trying to fight a culture war against a balanced education. People send their kids to colleges for the same reason why they demand more car lanes instead of better buses and trains: it's a status symbol. The thing about status symbo…

> Actually, if you're just looking for "a skilled job" trade school is a better bet than college now.

Better for whom? And better in what sense?

Long-term, on average, post-college careers still blow the trades out of the water in earnings.

In my case certainly, if I had bought into the “trades are better!!” online rhetoric I would be making far less money than I am now, and I get to work remote.

Re: Baumol's Cost Disease

#42

Post by [deleted] »

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.

[deleted]

Re: Baumol's Cost Disease

#43

Post by kgwgk »

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.

Are you also happy running Windows XP or Mac OS X 10.1 (Puma) which seem to be the last versions officially supported? (I guess on Windows it may have worked in some form or another longer than that but surely it doesn't work anymore on Windows 11 which is the only version currently supported.)

Re: Baumol's Cost Disease

#44

Post by steveBK123 »

nostrademons wrote: post #8
CPLX wrote: post #2

1. This is certainly a real effect that has some effect on relative wages at the margins in some cases. 2. In 2025 if you hear someone talking about it in the context of the US economy you are most likely hearing propaganda, designed to provide a dodge for the real driver of higher costs which is mostly concentrated corporate power, consolidation, and collusion.

Evidence for claim #2? The sectors where the Baumol effect has been most painful (housing, childcare, education, with the exception of healthcare) are ones that have much higher levels of competition and distribution than areas where prices have rapidly dropped. Construction Physics, for example, did an analysis [1] that showed that the top multifamily housing developer has 2% marketshare; the top residential housing…

My mental model for high/low inflation goods/services are really just what % of their cost is driven by local on-shore labor which isn't / can't be automated to be more efficient. The "can't" is sometimes regulatory or cultural.

So for example childcare & education both fall into high inflation because we almost demand that it be inefficient. Customers demand to know the worker:customer ratios, and expect them to be low. It's held up by universities as a measure of quality!

Similarly with medical care, you don't see a lot of efficiency-increasing changes over time. The process of going to the doctor when you are sick, getting a prescription, and picking it up at the pharmacy is about 90% the same as it was in the 1980s. Maybe Amazon's efforts with telehealth&pharmacy can help here, tbd.

Housing is partially land use / zoning, increased regulatory burdens with time on multi-family housing, and that home construction itself is still something of an artisan craft than an industrial automated process.

Re: Baumol's Cost Disease

#45

Post by kmeisthax »

SubmarineClub wrote: post #41
kmeisthax wrote: post #37

Earlier quoted context omitted.

College is optional. Actually, if you're just looking for "a skilled job" trade school is a better bet than college now. But the only people actually saying that are conservative nut-jobs trying to fight a culture war against a balanced education. People send their kids to colleges for the same reason why they demand more car lanes instead of better buses and trains: it's a status symbol. The thing about status symbo…

> Actually, if you're just looking for "a skilled job" trade school is a better bet than college now. Better for whom? And better in what sense? Long-term, on average, post-college careers still blow the trades out of the water in earnings. In my case certainly, if I had bought into the “trades are better!!” online rhetoric I would be making far less money than I am now, and I get to work remote.

> Long-term, on average, post-college careers still blow the trades out of the water in earnings.

That average has a lot of outliers. There are a handful of degrees which almost guarantee you gainful employment. Like, someone getting a law degree or prepping for hospital residency will make waaay more money than maths, liberal arts, or anything on PhD track. The latter do not have anywhere close to the same job prospects.

Furthermore, some degrees are extremely expensive to get. My guess is you got an engineering or CS degree, which in terms of "degrees with job prospects" are still reasonably priced. You can graduate and go into the work force with little debt (or at least, I did, YMMV). Less so for the lawyers and doctors pushing up the college average, who have to go to more expensive schools and even more expensive post-graduate programs. They rack up lots of student debt in the process. Even if it gives you a higher salary, you might not be comfortable with a decade and change of debt slavery.

Re: Baumol's Cost Disease

#46

Post by bigbadfeline »

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.

> If some sectors of the economy become drastically more efficient... overall society has become wealthier

That's a weird one - what's your metric for the "wealth of overall society"? Stock market indexes can't be it because those are subject to extreme levels of unreported inflation and gaming.

How can you measure something that is subject to extreme inflation when that inflation is not only unmeasured but not even acknowledged as a phenomenon?

At present, the "wealth of overall society" is a unicorn metric as opposed to the perfectly measurable and extreme levels of income and wealth inequality. In other words, the overall losses from skewed distribution dwarf the gains from higher efficiencies.

Re: Baumol's Cost Disease

#47

Post by ben_w »

yunyu wrote: post #26
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...

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.

> in a cost effective manner

Facebook is currently showing me these ads:

Lady's earrings (see my name), Pixel 10 (I'm theoretically an iPhone developer), cat food (I don't own any pet let alone a cat), special offers from a supermarket I would have been shopping at anyway even if they had not told me about the offers, a sponsored government message because apparently the Bundesministerium für Gesundheit don't have a better method of contacting German residents than by buying ads from a US social network (I have previously seen such from the British government telling me that some breed of dog was now banned even though I don't own a dog and also live in Germany)…

… but none of that's what's importantly wrong.

Cost effective? It's an auction, each ad in isolation may be fair (but there's reason even then to be suspicious), but in aggregate the ad sector is an all-pay auction.

There's a massive over-supply of solutions because all the startups chase the same ideas at about the same times, and the only one of them to get big is the one that pays enough to the gatekeepers of eyeballs to win the all-pay auction bidding for mindshare.

If everyone stopped advertising, the knowledge of solutions would still diffuse, the winner would be so by word of mouth. The difference is that the 1200 "trusted partners" on all the GDPR popups wouldn't collect rent on advising people on the best strategy for selling their user's privacy and battery life and mobile data allowance for money that those users never get to see, and the people buying those eyeballs wouldn't be wasting their VC runway making something other than the product.

Re: Baumol's Cost Disease

#48

Post by wat10000 »

yunyu wrote: post #34
wat10000 wrote: post #32

Earlier quoted context omitted.

The only way this should happen is if it’s a fake arthritis treatment meant to detect doctors who learn about treatments from advertising instead of legitimate sources, so they can be prevented from practicing medicine.

What are legitimate sources in your definition? Should physicians be expected to spend all their free time reading every single study in every medical journal or conference, even for niche areas that they don't usually encounter? Should the average diabetic/arthritic patient need to obsessively pore over academic reports to stay informed about their condition? Should advertisers be banned from sponsoring journals or…

I don’t know what counts as legitimate sources. I’ll let the professionals figure that one out.

> Should advertisers be banned from sponsoring journals or conferences?

It baffles me that you apparently think this is some kind of zinger. Yes!

Re: Baumol's Cost Disease

#49

Post by yunyu »

ben_w wrote: post #47
yunyu wrote: post #26

Earlier quoted context omitted.

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.

> in a cost effective manner Facebook is currently showing me these ads: Lady's earrings (see my name), Pixel 10 (I'm theoretically an iPhone developer), cat food (I don't own any pet let alone a cat), special offers from a supermarket I would have been shopping at anyway even if they had not told me about the offers, a sponsored government message because apparently the Bundesministerium für Gesundheit don't have a…

The fact that your Facebook ads are worse is probably because you're in the EU. I'm in the US, and I am getting fairly relevant ads for Broadway shows, data infrastructure products, discounted hotel packages, and climbing gym subscriptions - things that I am actually considering purchasing. And we haven't even brought up intent-based ads (Google search).

Word of mouth benefits incumbents. Advertising at least enables newcomers to temporarily burn money to gain mindshare, while “slow diffusion” will lock society into a “nobody ever got fired for buying IBM” state forever.

Re: Baumol's Cost Disease

#50

Post by yunyu »

wat10000 wrote: post #48
yunyu wrote: post #34

Earlier quoted context omitted.

What are legitimate sources in your definition? Should physicians be expected to spend all their free time reading every single study in every medical journal or conference, even for niche areas that they don't usually encounter? Should the average diabetic/arthritic patient need to obsessively pore over academic reports to stay informed about their condition? Should advertisers be banned from sponsoring journals or…

I don’t know what counts as legitimate sources. I’ll let the professionals figure that one out. > Should advertisers be banned from sponsoring journals or conferences? It baffles me that you apparently think this is some kind of zinger. Yes!

Got it. So you want attention to be controlled by the whims of academic/government/publishing bureaucrats or black-box ranking algorithms who are the arbitrators of legitimacy. I can't say I agree with that opinion, but different strokes for different folks.
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