Baumol Goes to College


I probably should have said this explicitly, but the background for yesterday’s post on college lecture courses needs to be that the education system as a whole is very threatened by Baumol’s cost disease. The general idea here is that over time average productivity goes up, and as average productivity goes up so do average wages. As a result of that fields of endeavor that don’t see their domain-specific productivity go up get harder and harder to afford. Baumol’s specific example was that it takes as many people to play Beethoven string quartet today as were needed in the 1800s. But wages for musicians, as for people generally, are way higher than they were in the 1800s. And, thus, live classical music has become a more expensive endeavor.

In the greater scheme of things, though, that’s fine — technology has given us lots of other entertainment options, including digital recordings of classical music on your iPod and so forth.

Education seems to have a lot in common with classical music in this regard. At all levels, we’ve got a basic model where there’s a room, some young people in the room, and then an older person who’s supervising. New technologies come into play, but they haven’t yet substantially altered the basic model. And if nothing changes, that means we need to keep spending more and more money just to tread water. So if we want to get better (which we do) and increase the quantity of people getting higher education (which we also do) we’re going to need to spend vastly more. Which as far as it goes is fine — there’s nothing wrong with spending more money when and where it’s warranted. But it also means that it’s important to look for opportunities to actually improve productivity, whether that means by incorporating new technologies or better management techniques or what have you. And when it comes to higher education, right now we’re doing basically nothing to actually measure quality (and, no, US News sending out surveys to ask about different schools’ reputations doesn’t count) which gives us no way of knowing whether or not changes could improve things.