Creativity and the Positive Reading of Baumol Cost Disease

Abstract

In this paper we propose a more positive and useful reading of the cost disease. We present a case for refocussing the general attention from the characteristics of the cost disease (i.e. the widening production cost and price gap between the product of progressive and stagnant industries) to its sources. This is a useful exercise because the most important aspect of the cost disease is a fundamental intuition: some types of labour provide particular contributions to various production processes that capital and new technologies are not able to replace. We also discuss the implications of these findings.

Keywords: New Economy, Labor Productivity, Creative Industries, Baumol's Cost Disease, Unbalance Growth

JEL Classification: J3, L8, O3