Comment by bloppe
Sure, there are plenty of ways that the government can interfere in an otherwise fair market. That's not the point. Absent some sort of market interference, Baumol is empirically good at predicting price movements.
Sure, there are plenty of ways that the government can interfere in an otherwise fair market. That's not the point. Absent some sort of market interference, Baumol is empirically good at predicting price movements.
The trouble is that the same empirical data is also consistent with the theory that when efficiency improves it attracts market interference to capture the surplus.
And then it could be either one, or some combination of both, but the people doing the capturing prefer to direct attention to an alternative explanation so they can continue their extraction.
> there are plenty of ways that the government can interfere in an otherwise fair market
There's no such thing as "otherwise fair market" outside of government regulation. Ergo, any "interference" is for someone's benefit, and as a rule that's not the government. In other words, seeking economics explanations to political phenomena isn't going to lead to anything useful.
> Baumol is empirically good at predicting price movements.
Until something else explains the facts better - AnthonyMouse wrote about a better theory that can actually be expanded to a fairly precise descriptive model, despite the fact that the quantitative part of it would be politics dependent.