venerdì 28 ottobre 2016

Is the Cost Disease Dead? Alex Tabarrok

Notebook per
Is the Cost Disease Dead?
Alex Tabarrok
Citation (APA): Tabarrok, A. (2016). Is the Cost Disease Dead? [Kindle Android version]. Retrieved from

Parte introduttiva
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Is the Cost Disease Dead? By Alex Tabarrok•
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William Baumol
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co-author of Performing Arts– The Economic Dilemma which
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The cost disease says that if two sectors have unequal levels of productivity growth then the sector with lower growth will increase in relative price. If in 1900, for example, it took 1 day of labor to produce one A good and 1 day of labor to produce one B good then the goods will trade 1: 1. Now suppose that by 2000 1 unit of labor can produce 10 units of A but still only one unit of B. Now the goods trade 10: 1. In other words, in 1900 the price or opportunity cost of one B was one A but in 2000 to get one B you must give up 10 A. B goods have become much more expensive.
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The economy in 2000 is much wealthier than in 1900 so relative to income B has become cheaper.
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the only difference is that in 2000 they will be giving up more A than in 1900 so
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contentious when we try to identify the A and B
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The performing arts were the key example– it took four quartet players 40 minutes to perform a Mozart composition in 1900 (or 1800) and it took four quartet players 40 minutes to perform a Mozart composition in 2000, hence no productivity improvements in Mozart performances,
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true if you define the good narrowly
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why should we define the good narrowly?
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define the good as “listen to music for 40 minutes”
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costs have fallen dramatically.
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Not only has the cost of listening fallen, variety has increased.
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different and more fundamental response.
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Baumol pointed to labor and the service sector as the low productivity, low growth, sector.
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robots and artificial intelligence mean that there is no longer a pure “labor” sector.
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much more capital in the service sector than ever before.
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K has become L. And when K becomes L, the productivity of L increases with the productivity of K. If manufacturing productivity improves and we are manufacturing robots then any sector that uses robots increases in productivity.
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