He served in the Army during World War II and got a job at the Agriculture Department, where he worked on allocating grain supplies to starving countries. He graduated from City College and enrolled in the London School of Economics in , after initially being rejected. Less than six weeks after school started, he was hired to become a member of the faculty. He taught at Princeton University from until and then taught at New York University from until his retirement in As an economist, he identified Baumol's cost disease, which explains why the cost of services, like haircuts and college educations, rises faster than the cost of goods, like T-shirts. He published dozens of books, hundreds of papers, and several congressional testimonies on entrepreneurs, environmental policy, corporate finance, stock sales, the economics of Broadway theaters, inflation, and competition and monopolies.
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The World of Economics pp Cite as. In the past two decades a substantial international literature on the economics of the arts has accumulated. Aside from the importance of the cultural contribution made by the arts, interest in the subject among economists has been elicited by some special attributes of the economics of the arts which have proved interesting analytically and whose analysis has had significant applications outside the field.
This is a preview of subscription content, log in to check access. Baumol, H. Inflation and the Performing Arts. Google Scholar. Baumol, W. Performing Arts: The Economic Dilemma. New York: Twentieth Century Fund.
Blaug, M. The Economics of the Arts. London: Mart in Robertson. Feld, A. Netzer, D. The Subsidized Muse. New York: Cambridge University Press. Throsby, C. The Economics of the Performing Arts. Baumol There are no affiliations available. Personalised recommendations. Cite chapter How to cite? ENW EndNote. Buy options.
Baumol's cost disease or the Baumol effect is the rise of salaries in jobs that have experienced no or low increase of labor productivity, in response to rising salaries in other jobs that have experienced higher labor productivity growth. This pattern seemingly goes against the theory in classical economics in which real wage growth is closely tied to labor productivity changes. The phenomenon was described by William J. Baumol and William G. Bowen in the s. The rise of wages in jobs without productivity gains is from the requirement to compete for employees with jobs that have experienced gains and so can naturally pay higher salaries, just as classical economics predicts. For instance, if the retail sector pays its managers 19th-century-style salaries, the managers may decide to quit to get a job at an automobile factory, where salaries are higher because of high labor productivity.
Baumol's cost disease