{"id":2203,"date":"2017-05-06T10:38:12","date_gmt":"2017-05-06T17:38:12","guid":{"rendered":"http:\/\/www.artsjournal.com\/worth\/?p=2203"},"modified":"2017-05-06T10:38:12","modified_gmt":"2017-05-06T17:38:12","slug":"cost-disease-does-not-explain-everything","status":"publish","type":"post","link":"https:\/\/www.artsjournal.com\/worth\/2017\/05\/cost-disease-does-not-explain-everything\/","title":{"rendered":"Cost disease does not explain everything"},"content":{"rendered":"

\"this<\/a>In my last post<\/a> I wrote about cost disease, the powerful analysis of economic shifts that results from labor-saving technological change occurring at different speeds in different sectors of the economy. This is an addendum: cost disease explains some<\/em> changes in costs and prices, but not all<\/em> of them. It explains why school districts struggle to attract teachers and balance budgets, but it doesn’t explain why it costs so much to attend Wellesley. It explains why it’s hard for high schools to find bands they can afford to perform at school dances, but doesn’t explain why the Philadelphia Orchestra has an annual budget of $46 million.<\/p>\n

What are the differences?<\/p>\n

The markets for teachers, and for local dance bands, are competitive – many sellers and buyers, none with much market power. People will only enter those professions (teaching, live performance of dance music) if the pay (and conditions) match those of other professions that are available to them. As wages rise everywhere else, so they must rise for teachers and local musicians to attract anybody at all to the job. For those who would hire them, they have to find some funds to do so, and that will become increasingly difficult as wages rise. That’s pure cost disease.<\/p>\n

But elite schools and arts organizations are in a different position: their status gives them a product with very high demand, expressed in terms of what people will pay and what they will donate. As nonprofit organizations, they have to spend – eventually at least – what they take in. But they are able to take in much more than the market cost of doing what they do; this leads to what economists call rent. And the organizations capture that rent by finding innovative ways to use up all those funds. Cost disease will explain a part of their costs – professors’ and cellists’ salaries will need to rise with the rest of the economy, after all. But it doesn’t explain all of the cost increases, which in elite nonprofits arise from rents. Their costs are determined to a large degree by their revenues.<\/p>\n","protected":false},"excerpt":{"rendered":"

In my last post I wrote about cost disease, the powerful analysis of economic shifts that results from labor-saving technological change occurring at different speeds in different sectors of the economy. This is an addendum: cost disease explains some changes in costs and prices, but not all of them. It explains why school districts struggle […]<\/p>\n","protected":false},"author":3,"featured_media":2206,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26],"tags":[],"class_list":{"0":"post-2203","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-issues","8":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/philadelphia-orchestra-yannick-600-587x0.jpg","jetpack_shortlink":"https:\/\/wp.me\/p3dIW5-zx","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":2195,"url":"https:\/\/www.artsjournal.com\/worth\/2017\/05\/cost-disease-in-the-arts-what-does-it-mean\/","url_meta":{"origin":2203,"position":0},"title":"Cost disease in the arts: what does it mean?","author":"Michael Rushton","date":"May 4, 2017","format":false,"excerpt":"Professor William Baumol, one of the greatest living economists, has died at the age of 95. Alan Krueger did an interview with him here, and Tyler Cowen has written often about him, here. Readers of artsjournal.com know him best for his conception of cost disease, done jointly with William Bowen.\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"this costs *how* much?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/05\/barbershop.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":1673,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/11\/orchestras-and-cost-disease\/","url_meta":{"origin":2203,"position":1},"title":"Orchestras and cost disease (Updated)","author":"Michael Rushton","date":"November 4, 2014","format":false,"excerpt":"At The Clyde Fitch Report Duncan Webb has an interesting piece that looks into the future, and he sees chronic cost disease: I first read Baumol and Bowen\u2019s The Economic Dilemma of the Performing Arts some 20\u00a0years ago, almost 30 years after it was first published in 1965. The theory\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"It's not lupus","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/11\/cost-disease.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":3779,"url":"https:\/\/www.artsjournal.com\/worth\/2025\/04\/on-the-hidden-economics-of-live-theatre\/","url_meta":{"origin":2203,"position":2},"title":"On the hidden economics of live theatre","author":"Michael Rushton","date":"April 18, 2025","format":false,"excerpt":"Freakonomics Radio has a new three part series on the economic landscape facing live theatre. Part One is here, and part two is here, which as a supporting act in an episode with Lin-Manuel Miranda, has me trying to coherently explain cost disease in the theatre, where it comes from\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2025\/04\/image-2.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":1838,"url":"https:\/\/www.artsjournal.com\/worth\/2015\/03\/on-the-return-to-public-investments-in-museums\/","url_meta":{"origin":2203,"position":3},"title":"On the return to public investments in museums","author":"Michael Rushton","date":"March 3, 2015","format":false,"excerpt":"Arts Council England has released a new report that seeks to quantify the 'economic impact' of museums. It estimates that to be\u00a0\u00a31.45 billion. That doesn't matter much - there are no insights to be gained, no policy implications, from the estimate's being \u00a31.45 billion or \u00a32.07 billion or \u00a31.03 billion.\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"maybe this time?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/03\/sisyphus.jpeg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":2824,"url":"https:\/\/www.artsjournal.com\/worth\/2023\/02\/what-does-chatgpt-know\/","url_meta":{"origin":2203,"position":4},"title":"What does ChatGPT know?","author":"Michael Rushton","date":"February 10, 2023","format":false,"excerpt":"In my last post I expressed skepticism that movie cinemas in the US could \"scale the house\" with much success (people were quick to tell me \"But in Europe, but in New York\", which is fair, but I'm talking the multiplex in Bloomington here). I mentioned in passing that cinemas\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/NorthridgeFashionCtr-GhostWorld-2.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/NorthridgeFashionCtr-GhostWorld-2.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/NorthridgeFashionCtr-GhostWorld-2.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/NorthridgeFashionCtr-GhostWorld-2.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/NorthridgeFashionCtr-GhostWorld-2.jpg?resize=1050%2C600&ssl=1 3x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2023\/02\/NorthridgeFashionCtr-GhostWorld-2.jpg?resize=1400%2C800&ssl=1 4x"},"classes":[]},{"id":910,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/06\/cost-disease-wages-and-skills\/","url_meta":{"origin":2203,"position":5},"title":"Cost disease, wages and skills","author":"Michael Rushton","date":"June 27, 2013","format":false,"excerpt":"Cost disease is often cited as an economic phenomenon that poses particular challenges in the arts, especially the live performing arts. In a nutshell, here is the theory: productivity is defined as the value of output produced per worker. Rising income over time depends upon rising productivity: if the economy\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"the human touch","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/06\/Floyd-300x209.jpg?resize=350%2C200","width":350,"height":200},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/2203","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/comments?post=2203"}],"version-history":[{"count":3,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/2203\/revisions"}],"predecessor-version":[{"id":2207,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/2203\/revisions\/2207"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media\/2206"}],"wp:attachment":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media?parent=2203"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/categories?post=2203"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/tags?post=2203"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}