Why cheaper computers lead to higher tuition
Steve Pearlstein explains one of the most important outcomes of an economy with rising productivity, Baumol’s disease:
No matter how innovative people were in coming up with new technology and new ways of organizing their work, Baumol and Bowen reasoned, it would still take a pianist the same 23 minutes to play a Mozart sonata, a barber 20 minutes to cut the hair of the average customer and a first-grade teacher 12 minutes to read her class “Green Eggs and Ham.” Based on this observation, the duo predicted that the cost of education and health care would inevitably outstrip the price of almost everything else.
People who don’t understand the concepts in this column should probably not talk about economic policy until they do.