William Baumol Passes Away

William J. Baumol, a pre-eminent economist of his generation, passed away at 95 in New York on May 4, 2017. I cite his work on the cost disease afflicting the arts and education at least once a week.From the Washington Post:

The insight came to him in a 4 a.m. epiphany in the 1960s, when he and a colleague, future Princeton president William G. Bowen, were preparing an analysis of the cost of presenting and attending the performing arts.

“I suddenly woke up and said I know why those costs are going up!” Dr. Baumol recalled in a 2001 oral history with economist Alan B. Krueger. “I got up, wrote down a few notes, and went to sleep again. That’s literally how it happened.”

The result of the cost disease, Princeton professor Alan S. Blinder said in an interview, is that services will be “more and more expensive relative to either goods — things you buy in the store, like bagels or cars,” or automated services such as the Internet.

An often overlooked part of Baumol's incurable cost disease formulation is his notion that it shouldn't worry us because savings in other sectors will enable consumers to spend proportionately more on education and the arts.