Post: #1

Firstly - let's remind ourselves there is no such thing as the Nobel Prize for Economics:

Quote:The five real Nobel Prizes—physics, chemistry, literature, peace, and medicine/physiology—were set up in the will left by the dynamite magnate when he died in 1895. The economics prize is a bit different. It was created by Sweden’s Central Bank in 1969, nearly 75 years later. The award’s real name is the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” It was not established by Nobel, but supposedly in memory of Nobel. It’s a ruse and a PR trick, and I mean that literally. And it was done completely against the wishes of the Nobel family.

Sweden’s Central Bank quietly snuck it in with all the other Nobel Prizes to give free-market economics for the 1% credibility. One of the Federal Reserve banks explained it succinctly, “Few realize, especially outside of economists, that the prize in economics is not an “official” Nobel. . . . The award for economics came almost 70 years later—bootstrapped to the Nobel in 1968 as a bit of a marketing ploy to celebrate the Bank of Sweden’s 300th anniversary.” Yes, you read that right: “a marketing ploy.”

http://www.alternet.org/economy/there-no...-economics

With that out the way. Let's talk about the work of William Baumol.

He is most famous for the phenomenon known as Baumol's Cost Disease.

http://en.wikipedia.org/wiki/Baumol%27s_cost_disease

The simple idea behind it is that the more labor intensive something is - the more expensive it becomes over time.

Why?

Because technological innovation makes most products cheaper over time. Whereas labor intensive services are largely unaffected by technological progress.

Quote:Bowen pointed out that the same number of musicians is needed to play a Beethoven string quartet today as was needed in the 19th century; that is, the productivity of classical music performance has not increased.

On the other hand, real wages of musicians (as well as in all other professions) have increased greatly since the 19th century.

In a range of businesses, such as the car manufacturing sector and the retail sector, workers are continually getting more productive due to technological innovations to their tools and equipment.

In contrast, in some labor-intensive sectors that rely heavily on human interaction or activities, such as nursing, education, or the performing arts there is little or no growth in productivity over time. As with the string quartet example, it takes nurses the same amount of time to change a bandage, or college professors the same amount of time to mark an essay, in 2006 as it did in 1966.

This is because those types of activities rely on the movements of the human body, which cannot be engineered to perform more quickly, accurately or efficiently in the same way that a machine, such as a computer, can.

If I had to pick out just one economic idea that needs to be more widely know - it would be this one.

I am snowed under with books - but I plan to study this area some more since Baumol wrote a popular account in which he discusses his thinking in this area.



http://www.amazon.com/The-Cost-Disease-C...0300179286

This concept is important when trying to understand the strange form that poverty takes in the modern world.

Quote:Unfortunately most economists fail to acknowledge Baumol’s disease when analysing changes in the economy. You won’t find a mention of it in the media (just two results when searching Google news), and you will find plenty of confused ideological articles about modern poverty and flatscreen television.

How can someone live in poverty with a flatscreen television, a coffee maker and a DVD player? Simple. These goods are becoming relatively cheaper over time, while other fundamental goods and services – health, education, food and housing – are becoming more expensive.

In fact, I could buy a flatscreen, a DVD player and a coffee maker for about the cost of four days rent or a week’s groceries for my small family.

This is an important consideration in analysis of the changing cost of living.

http://www.nakedcapitalism.com/2011/09/a...sease.html

All of this is interesting enough. But - what delighted me was something I found on William Baumol's wikipedia entry:

Quote:He was considered a candidate for the Nobel Prize in Economics for 2003, and Thompson Reuters predicted that he would win in 2014.

It seems reasonable that Baumol may with the Nobel Prize - sorry, that should be "Nobel Prize" - for Economics soon.

And when that happens it will be a great day for Karl Marx.

Why?

Baumol's Cost Disease is a reformulation of the central insight in Karl Marx's work - The Labor Theory of Value.

http://en.wikipedia.org/wiki/Labor_theory_of_value

So - let us all hope for the happy day when Karl Marx (in the form of William Baumol) is finally awarded the prize he was too busy being dead (and politically verboten) to ever be a candidate for.

lol

Post: #2

This topic fits in with the thread discussing the book 'Culture Crash'.

It all comes down to Moore's Law.



http://en.wikipedia.org/wiki/Moore%27s_law

Here is futurist and technology philosopher, Jared Lanier, pulling the two topics together.

Quote:Moore’s Law means that more and more things can be done practically for free, if only it weren’t for those people who want to be paid.

People are the flies in Moore’s Law’s ointment. When machines get incredibly cheap to run, people seem correspondingly expensive.

It used to be that printing presses were expensive, so paying newspaper reporters seemed like a natural expense to fill the pages. When the news became free, that anyone would want to be paid at all started to seem unreasonable.

Moore’s Law can make salaries — and social safety nets — seem like unjustifiable luxuries.