Comment by bigbadfeline

Comment by bigbadfeline 2 days ago

> If some sectors of the economy become drastically more efficient... overall society has become wealthier

That's a weird one - what's your metric for the "wealth of overall society"? Stock market indexes can't be it because those are subject to extreme levels of unreported inflation and gaming.

How can you measure something that is subject to extreme inflation when that inflation is not only unmeasured but not even acknowledged as a phenomenon?

At present, the "wealth of overall society" is a unicorn metric as opposed to the perfectly measurable and extreme levels of income and wealth inequality. In other words, the overall losses from skewed distribution dwarf the gains from higher efficiencies.

michaelt 2 days ago

If the orchestra performs less often because the violists have better paying jobs in a factory making the latest and greatest TVs, more homes will have the latest and greatest TVs.

Of course, this relies on the assumption most work - and hence most productivity - is a net social good. If the violinists have instead got jobs operating an orphan-crushing machine, that would be a bad thing. But hopefully your society is structured in such a way that the average worker is contributing to the prosperity of their local community.

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tomrod 2 days ago

GDP produced divided by costs required measures intensity. These will be typically normalized (inflation removed) or, if a ratio, can be nominal since both have the inflation ratioed out.

GDP is known to be an imperfect measure, especially for capturing cottage industry and due to the distribution effect you described, but it's not horrible to start with.

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BurningFrog a day ago

GDP is how much wealth is produced in society at a moment in time.
The total accumulated wealth in a society is a related but entirely different number.

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bloppe 2 days ago

The main metrics are mean and median real income (i.e. inflation-adjusted). Baumol's only occurs if mean real income rises. Unless inequality rises simultaneously, then median real income (the metric most people care about) will rise as well.

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AnthonyMouse a day ago

Suppose that every single person in society receives the same compensation and has the same wealth, i.e. there is perfect equality.
Society produces housing and other necessities and people consume them in some amount and then have what's left as disposable income to spend on whatever they like, e.g. for going on dates.
Then a law is passed prohibiting the construction of housing with more than two stories. Building ten housing units on ten lots with ten foundations requires more labor than constructing ten units all on the same lot, so the price of housing increases, people have to spend more on housing and have less money left to buy flowers and some people quit their jobs at the flower shop to go pour concrete (while still getting paid exactly the same amount as before).
There is zero change in inequality but the cost of something has gone up and people have to eat it by getting less of something else.

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- bloppe a day ago
  
  How is this related to Baumol?
  Baumol does not describe general inflation. It specifically describes when prices go up in some sectors because of an increase in productivity in another sector.
  Baumol is also rooted in the concept of price elasticity, which in your contrived example seems not to exist.
  
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  AnthonyMouse a day ago
  
  > How is this related to Baumol?
  Because people claim that higher costs are a result of Baumol and are hypothetically something good or normal when it's actually regulatory costs and government capture stealing from working people. "Don't worry, prices are only up because we got so much more productive, not because of artificial scarcity or because it now requires 10 people to do certain things that used to take one."
  > Baumol is also rooted in the concept of price elasticity, which in your contrived example seems not to exist.
  Because the example is housing, which is a necessity and therefore has fairly inelastic demand. If the price goes up, you pay it, because otherwise you're homeless. And then people buy flowers less because they can't afford it, so people lose their jobs at the flower shop, but new jobs open up in construction because it became more labor-intensive and has fairly inelastic demand.
  > It specifically describes when prices go up in some sectors because of an increase in productivity in another sector.
  Here's the less contrived example: Productivity improves in things like electronics or manufacturing, giving people more disposable income. But there is certain amount of disposable income people have to be left with before they'll revolt, and the increase in efficiency leaves them with more than that. Which allows the government to increase regulatory overhead or real dollars per capita collected in taxes or pass rules that artificially increase scarcity at the behest of campaign donors, without making people feel like they've lost ground.
  But the efficiency improvements should have allowed them to gain ground, which is what has been taken from them.
  
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