In Mark Andreessen’s words, software is “eating the world.” Everywhere you look, software is transforming industries and increasing efficiency. Well, not everywhere.
As Washington Post columnist Stephen Pearlstein noted in a recent piece, productivity gains have materialized in some areas more than others:
While the income of both sets of workers has risen, more people are now employed in the service sector while fewer are making goods. Significantly, a big price gap has opened—the prices of goods are lower than they used to be while service prices are higher.
This phenomenon is called Baumol’s cost disease, named for economist William Baumol, who has recently released an updated book on the subject. The original example is classical music. Though we’ve gotten much better at producing lots of different goods, it still takes roughly as much labor as ever to put on a symphony. And yet it costs more today, because the musicians’ salaries have risen in response to higher salaries in other sectors.
via technology review
October 19, 2012
