RETURN TO MAIN PAGE

The Cost Disease
Business
Economics
Political Science

The Cost Disease

Why Computers Get Cheaper and Health Care Doesn't

  • William J. Baumol; With Contributions by David de Ferranti, Monte Malach, Ariel Pablos-Méndez, Hilary Tabish, and Lilian Gomory Wu

The exploding cost of health care in the United States is a source of widespread alarm. Similarly, the upward spiral of college tuition fees is cause for serious concern. In this concise and illuminating book, the well-known economist William J. Baumol explores the causes of these seemingly intractable problems and offers a surprisingly simple explanation. Baumol identifies the "cost disease" as a major source of rapidly rising costs in service sectors of the economy. Once we understand that disease, he explains, effective responses become apparent.

Baumol presents his analysis with characteristic clarity, tracing the fast-rising prices of health care and education in the United States and other major industrial nations, then examining the underlying causes, which have to do with the nature of providing labor-intensive services. The news is good, Baumol reassures us, because the nature of the disease is such that society will be able to afford the rising costs.

William J. Baumol is professor of economics and academic director of the Berkley Center for Entrepreneurship and Innovation, New York University, and professor emeritus, Princeton University. He lives in New York City.