Week 9 - Baumol's Disease

Question 1

How does productivity differ in artistic industries (labor intenive industries) compare to industrial and agricultural industries (capital-intensive industries)?

Answer 1

productivity in the performing arts lags, while other industries have seen dramatic increases

Question 2

What happens to the cost of performing arts over time?

Answer 2

costs of performing arts will increase at a rate that exceeds inflation

applicable for any labor intensive industry
e.g. tuiton increases twice as fast as the average product, major input is skilled labor

Question 3

What is the parodoxical relationship of baumol’s disease?

Answer 3

-workers feel like they’re not making much money and consumers feel like they’re paying a fortune – where does the money go?

Question 4

What two things does Baumol’s dsiease tell us?

Answer 4

no raise vs raise

If productivity of art is stagnant while every other industry’s productivity is increasing…

1. everyone else will get paid more while workers earn the same – these workers will fall into relative poverty (with no productivity and thus no raise)
2. workers get a raise evn though they’re not more productive (From the consumer perspective the labor intensive product gets expensive relative to the capital intensive products that are falling in price)

Question 5

What occurs with Baumols’s disease?

Answer 5

-we tend to split the difference - artists get a small raise despite no change in producitivity, while being poorer relative to other careers
-ticket prices go up but not enough to keep up with rising productivity of the economy

Question 6

Flaws with Baumol’s disease theory

Answer 6

But Baumol and bowen focus on the performing arts - they are comparing hand-made performing arts to technologically mediated performing arts- It’s like comparing hand made performing arts to machine made cloth – they are not comparing machine enhanced performing arts

When you include mass production (e.g. streaming Hamlet on Amazon prime), the productivity of the arts increases just as fast as capital intesnive industries

Question 7

According to Baumol’s disease, what explains the paradoxical relationship between ticket prices and worker wages?

Answer 7

It’s about relative terms
-e.g. relative poverty (compared to wages in capital-intensive industries) and relative costs (compared to falling costs within capital intensive industries