Baumol Effect

&gt;&gt;&gt; ... the productivity of classical music performance has not increased<p>Maybe it has, or maybe wages are not the same, or it&#x27;s not really the same product. I&#x27;m a jazz musician, and my gig pay has stayed steady at about $100&#x2F;night for 40 years, though my skill has improved. A lot of people who would have been classical musicians during the classical period are now working as church musicians for peanuts, or playing for free. Musicians playing in front of crowds of thousands didn&#x27;t exist during the classical period -- the instruments weren&#x27;t loud enough yet. And &quot;classical&quot; music has gotten harder to play.<p>The article mentions teachers. My teacher taught me BASIC. Today&#x27;s teacher teaches Python, which is considerably more productive and valuable. College is increasingly being taught by adjuncts.<p>Doctors and nurses. A century ago they mostly poisoned people. Today, my primary care clinic has a &quot;doctor&quot; who oversees multiple nurse-practitioners and nurses, and who I see only once a year.

Did we lose occupations to this effect and if yes, which?<p>Like, work we would still like to pay someone for, but now the minimum wages are too high.

Highly recommend people follow up the Wikipedia article with this great piece on further implications of the Baumol Effect:<p><a href="https:&#x2F;&#x2F;marginalrevolution.com&#x2F;marginalrevolution&#x2F;2019&#x2F;05&#x2F;the-baumol-effect.html" rel="nofollow">https:&#x2F;&#x2F;marginalrevolution.com&#x2F;marginalrevolution&#x2F;2019&#x2F;05&#x2F;th...</a>

A side effect of this is that if your individual productivity goes up, your real wage might go up, but if your whole industry’s productivity goes up, it’ll be mitigated by this effect.<p>Kinda like how everything in SF is so expensive, so the real wage is diminished by the increasing cost of living.

Can this all be explained by the cost of labor being uniform (since humans are humans in all industries)?<p>So if one industry demands more labor, all others will feel the rising price of labor?

I would be more interested in seeing the other thing - that increase in productivity results in higher salary.<p>(It is taken from granted, but it does not seem to be the case in service-oriented jobs. More productivity means less people are needed to do the job, and while customers are happier at falling prices, it does not mean there is any benefit for the employees - except for lay offs.)

I first encountered this idea and &quot;cost disease&quot; in this SSC article: <a href="https:&#x2F;&#x2F;slatestarcodex.com&#x2F;2017&#x2F;02&#x2F;09&#x2F;considerations-on-cost-disease&#x2F;" rel="nofollow">https:&#x2F;&#x2F;slatestarcodex.com&#x2F;2017&#x2F;02&#x2F;09&#x2F;considerations-on-cost...</a><p>There are several interesting follow ups as well; I think this is one of the most interesting and important ideas I&#x27;ve ever read about.

&gt; This pattern seemingly goes against the theory in classical economics in which real wage growth is closely tied to labor productivity changes.<p>That sounds like a pretty big assumption. Why should labor prices be other than what is demanded?

Prices (of goods, services and work) are in huge part influenced by affluence of the buyer.<p>I&#x27;m not sure if this effect is captured by some economic theory (can someone point me to it?) but it&#x27;s very real.<p>On the local level where same goods can have very different prices if the local customers can afford higher prices.<p>Also on national level when real estate prices shot up when credit becomes more available due to change of rules.

Using their first example, the factory workers world take their extra, efficiency-induced earnings to market, and buy more services and luxury goods, increasing the profits in nearby but not more efficient sectors. And so those managers and workers in the example could in fact be paid more.

India is Unique; It has Producers, Consumers and Leeches; <a href="https:&#x2F;&#x2F;archive.vn&#x2F;pOmij" rel="nofollow">https:&#x2F;&#x2F;archive.vn&#x2F;pOmij</a>

Do we see Baumol&#x27;s effect with Indian developers?

Maybe the way we calculate &quot;real cost&quot; is wrong?

This kind of hand-wavey nonsense is exactly why I have no respect for what passes for rational argument in conventional economics.<p>Let&#x27;s deconstruct these assumptions:<p>&quot;Baumol and Bowen pointed out that the same number of musicians is needed to play a Beethoven string quartet today as was needed in the 19th century; the productivity of classical music performance has not increased. On the other hand, the real wages of musicians (as in all other professions) have increased greatly since the 19th century.&quot;<p>1. Yes, string quartets still require four people.<p>2. This does not mean the &quot;productivity of classical music has not increased&quot;, because:<p>a. String quartets can now make recordings and also play on radio&#x2F;TV&#x2F;streaming services, in addition to playing live. This means much larger numbers of people can hear a performance. This translates to ad revenue, streaming income, and sales of recordings. And there is also secondary income of various kinds for various supporting industries, including other forms of media.<p>b. String quartets can travel much larger distances than they used to be able to, allowing them to play live music over a much wider area than was possible when the fastest mode of transport was a horse. This hugely increases the possible listener base and potential ticket sales.<p>c. Culturally notable string quartets are likely to play in much larger concert halls than used to be the case, with increased direct ticket income.<p>d. The classical music industry is far more commercialised. There are numerous festivals and concert series which bring in far more money than they did when owning a pet orchestra was an eccentric hobby for aristocrats.<p>e. There are far more people than there used to be in the 19th century, and the worldwide classical music audience is much larger than it used to be.<p>So - this is simply a bad, ignorant example. It&#x27;s not just wrong, it&#x27;s flagrantly, wildly, <i>outrageously</i> misinformed, and is based on an almost total lack of insight into an industry that is worth $146 million a year - of which around $90 million is income from streaming.<p>The other examples are just as ridiculous and trivially incorrect. The productivity of nurses is not defined by the time it takes to change a bandage - ask any ICU nurse - and the productivity of professors is not measured by the time it takes to mark an essay.<p>How is anyone supposed to take this level of argumentation seriously when there is no evidence the authors made a credible professional effort to understand the economics of their own examples?<p>And as an advanced exercise for economists - how much has this poor level of economic insight cost the economy?