Baumol's Cost Disease
Current Economic Issues
“Baumol’s cost disease is unpopular with politician from both ends of the political spectrum” Why? Is that? Is Baumol’s cost disease likely to remain relevant to the debate about public services?
Introduction
This essay examines Baumols’s cost disease giving reasons why it is unpopular with politicians from both ends of the political spectrum, and also presents further salient factors that makes Baumol’s cost disease relevant to debates about public services.
The discussion begins with an analysis of the meaning of Baumol’s cost disease, then looks at the characteristics of the public sector which may include lack of efficiency and low productivity due to being a sector that relies heavily on people and explains how an increase in wage - costs in one sector of the economy such as manufacturing or finance causes rises in wages across the economy in general. This essay then explores the problem(s) that arose from such theoretical standpoints and how the government has used its power to tackle the risk that the cost disease represents for long term economic growth which all countries aim to achieve and maintain.
According to William Baumol 's and William Bowen (1966)Baumol’s cost disease theory says there are sectors of the economy such as education, arts, heath care that will have increases in wages not associated with an increase in productivity, whereas in other sectors wages increase as a result of an increase in productivity for example in manufacturing, and through gains achieved through the employment of new technologies.
First of all public services such as education, health service, internal law and order, should be made available to any household independently of their financial situation to prevent inequality. Despite being known as essential to any society either developed or undeveloped these services will not be provided by private investors free of charge, or necessarily to the scale of the country’s needs; as
“Baumol’s cost disease is unpopular with politician from both ends of the political spectrum” Why? Is that? Is Baumol’s cost disease likely to remain relevant to the debate about public services?
Introduction
This essay examines Baumols’s cost disease giving reasons why it is unpopular with politicians from both ends of the political spectrum, and also presents further salient factors that makes Baumol’s cost disease relevant to debates about public services.
The discussion begins with an analysis of the meaning of Baumol’s cost disease, then looks at the characteristics of the public sector which may include lack of efficiency and low productivity due to being a sector that relies heavily on people and explains how an increase in wage - costs in one sector of the economy such as manufacturing or finance causes rises in wages across the economy in general. This essay then explores the problem(s) that arose from such theoretical standpoints and how the government has used its power to tackle the risk that the cost disease represents for long term economic growth which all countries aim to achieve and maintain.
According to William Baumol 's and William Bowen (1966)Baumol’s cost disease theory says there are sectors of the economy such as education, arts, heath care that will have increases in wages not associated with an increase in productivity, whereas in other sectors wages increase as a result of an increase in productivity for example in manufacturing, and through gains achieved through the employment of new technologies.
First of all public services such as education, health service, internal law and order, should be made available to any household independently of their financial situation to prevent inequality. Despite being known as essential to any society either developed or undeveloped these services will not be provided by private investors free of charge, or necessarily to the scale of the country’s needs; as