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Baumol’s Cost Disease

The cost disease (also known as “Baumol’s cost disease” or, in educational circles, “Bowen’s curse”) is the idea that costs are destined to rise in certain sectors of the economy, including education, health care, and the live performing arts, because it is difficult to reduce the labor required to produce these services. The concept is explained by William J. Baumol in the 2012 book The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t:

Since the Industrial Revolution, labor-saving productivity improvements have been occurring at an unprecedented pace in most manufacturing activities, reducing the cost of making these products even as workers’ wages have risen. In the personal services industries, meanwhile, automation is not always possible, and labor-saving productivity improvements occur at a rate well ...

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