Baumol's cost disease describes why labor-intensive services like health care, education, and the performing arts face rising costs even without productivity gains. Because workers in these fields must be paid wages competitive with the broader economy, but cannot increase output per hour the way manufacturers can, costs rise structurally. Baumol first developed the theory in a 1967 American Economic Review paper and returned to it in his 2012 book The Cost Disease: Why Computers Get Cheaper and Health Care Doesn't.
What is William Baumol's theory of contestable markets?
Baumol's contestable markets theory holds that the threat of market entry, not the number of existing competitors, is what disciplines firm behavior. A market is contestable when entry is free and exit is costless, meaning even a monopolist must price competitively to avoid being undercut by a potential entrant. Baumol co-authored Contestable Markets and the Theory of Industry Structure in 1982.
Did William Baumol win the Nobel Prize in Economics?
Baumol never received the Nobel Prize in Economics. He was considered a candidate in 2003 and Thomson Reuters cited him as a potential recipient in 2014. He died on the 4th of May 2017 without receiving the prize.
Where did William Baumol study and teach?
Baumol earned his bachelor's degree from the City College of New York in 1942. He was initially admitted only to the master's program at the London School of Economics but was switched to the doctoral program after impressing Lionel Robbins' seminars. He held a professorship at Princeton University and later became a professor of economics at New York University and Academic Director of the Berkley Center for Entrepreneurship and Innovation.
What did William Baumol contribute to the theory of entrepreneurship?
Baumol argued that entrepreneurial talent is always present in an economy, but institutions and incentives determine whether it flows into productive innovation or unproductive rent-seeking. His 1990 Journal of Political Economy paper "Entrepreneurship: Productive, Unproductive and Destructive" is among his most cited works on the subject. He received the Global Award for Entrepreneurship Research in 2003 for his lifelong effort to give the entrepreneur a formal role in mainstream economic theory.
How many books did William Baumol write?
Baumol authored more than eighty books and several hundred journal articles over his career. His publications spanned introductory textbooks, technical monographs, and policy-oriented works across economics, entrepreneurship, environmental policy, and the performing arts.