While reading recently about the death of economist William Baumol I came across one of his ideas about something called “cost disease”. That’s where the cost of services that cannot be provided in an efficient way keeps going up. The example was putting on a classical symphony, which requires just as many players now as it did 200 or 300 years ago. But over that same period manufacturing workers have become able to produce (probably) thousands of times as much per hour worked.  The production of manufacturing workers is now so high that, even if they’re paid poorly, they can still easily make a lot of money.  Consequently, the organizations that put on symphonies must pay a much higher salary than they used to in order to hang on to their players, even allowing for the better psychological return on performing music. And this applies in a general way to all services that cannot be easily automated, so health workers, for example, need to be paid more. This may be a major part of why health costs have risen so much.

However, this prompts another series of thoughts: it seems related to the problem of jobs going away because robots can do them better and cheaper. This is consistent with how while on the one hand jobs are disappearing, corporations are making TONS of money.Unfortunately it’s making some things, like art and health care prohibitively expensive. And if robots invade enough fields it will make it nearly impossible to get a job — and therefore all the nice, shiny, objects become not affordable even if they are cheap!

But making things better and cheaper should be a good thing! Clearly there should be some kind of transfer of income from people who make things cheaply (and therefore get rich) to people who need those things, while somehow making it so the “needy” people feel they are contributing to society. Hence my idea about paying people for providing companionship. Completing this thought implies there should be some agency that derives payments from the production of things, perhaps performed by robots, and makes payments to people who provide services, such as art, music, or companionship. Hmmmm….


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