Why Are the Prices So Damn High?

90 Pages Posted: 23 May 2019

See all articles by Eric Helland

Eric Helland

Claremont McKenna College - Robert Day School of Economics and Finance; RAND

Alexander T. Tabarrok

George Mason University - Department of Economics

Date Written: May 22, 2019

Abstract

We explore why prices in some sectors are increasing dramatically even as economy-wide technology and productivity improves. Education and healthcare are notable examples of sectors seemingly stricken by constantly rising prices. At the same time, home appliances and telecommunications have become much cheaper. This piece examines and rejects explanations such as bloat and administrative costs and focuses attention on rising labor costs driven by productivity improvements in progressive sectors of the economy, an explanation known as Baumol's Cost Disease.

Keywords: cost disease, health care cost, education cost

JEL Classification: I04

Suggested Citation

Helland, Eric A. and Tabarrok, Alexander T., Why Are the Prices So Damn High? (May 22, 2019). Why Are the Prices So Damn High? (2019); ISBN-13: 978-1-942951-55-1 ; Mercatus Research Paper ; Claremont McKenna College Robert Day School of Economics and Finance Research Paper No. 3392666. Available at SSRN: https://ssrn.com/abstract=3392666 or http://dx.doi.org/10.2139/ssrn.3392666

Eric A. Helland (Contact Author)

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-7275 (Phone)
909-621-8243 (Fax)

RAND ( email )

1776 Main Street
Santa Monica, CA
United States

Alexander T. Tabarrok

George Mason University - Department of Economics ( email )

MSN 1D3
4400 University Drive
Fairfax, VA 22030
United States
703-993-2314 (Phone)

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