> Society can afford this because it now has commensurately more resources due to increased efficiency.

Does it though? Suppose that Wall St has discovered a strategy, like high frequency trading, that produces nothing but allows the one doing it to extract a margin that would otherwise have gone to the second-fastest trader. Many people are employed in a competition to be the fastest because being the fastest is rewarded but it's a zero-sum game where nothing useful is produced and the players each have to continuously spend resources to keep running faster in order to stay in the same place.

What benefit is the person now paying more for healthcare getting in exchange for this?

> It’s a tide that raises all boats, precisely because of this effect.

What if it's not all boats? Suppose it causes doctors to get paid more because people who have the wherewithal to become doctors could also work in finance, but it doesn't cause retail clerks to get paid more because Wall St isn't hiring them away from their existing jobs, and in the meantime they now have to pay more for healthcare.

▲

bloppe a day ago | parent | next [-]

> it doesn't cause retail clerks to get paid more because Wall St isn't hiring them away from their existing jobs

Nobody with an existing job actually has to switch professions for Baumol to occur. As the pay gap widens, more kids would study finance and fewer kids would consider retail an adequate career, leading to a relative shortage of retail labor, raising retail wages.

▲

AnthonyMouse a day ago | parent [-]

Your premise is that the people who work in retail have the option of studying finance or medicine. Suppose they work in retail because they scored at the 20th percentile on entrance exams and couldn't get into college.

▲

bloppe a day ago | parent [-]

The 20th percentile probably wouldn't go into finance. But there's a "average" cutoff somewhere. Maybe 50th percentile. Maybe 80th. It doesn't matter. That cutoff will move if demand shifts.

▲

AnthonyMouse a day ago | parent [-]

Suppose the cutoff to get into finance is at the 70th percentile of the general population and 99% of retail clerks are below the 50th percentile or otherwise have some reason not to even though those jobs already pay significantly more. How much more are they going to get paid because of that?

Or let's even suppose that the amount isn't totally inconsequential. Say they end up with an extra $1000/year. But now they're also paying $1500/year more for medicine. They're still down $500/year.

▲

bloppe 14 hours ago | parent [-]

Throwing out random numbers is not a convincing argument about how things would actually work in reality.

Consider the fact that median real income tends to move up [1]. This is the metric that matters. It's the 50th percentile person, so mega rich outliers are ignored. And it weighs incomes against the CPI, which incorporates the price of medicine, construction, education, as well as consumer electronics, food, and pretty much everything people spend money on in realistic proportions. That's objective evidence that people actually get richer, even though the price of labor does tend to go up across the board, relative to goods.

[1]: https://fred.stlouisfed.org/series/mepainusa672n

	▲	AnthonyMouse 12 hours ago \| parent [-]
		> Consider the fact that median real income tends to move up [1]. This is the metric that matters. Well, it's what matters if the CPI metric is perfect and doesn't e.g. over-weight things like food that haven't increased in cost as much as some other things. And again, nobody is claiming that efficiency hasn't improved or that that isn't good. The issue is, if efficiency improves by 300% and then you get a 70% improvement out of it, that's bad -- people should have gotten the whole thing instead of having rent seekers capture a huge proportion of the improvement. And for some specific subset of "efficiency improvements" the result isn't even guaranteed to be positive for the average person, so we don't need to lump them all together into an aggregate.

▲

simonh a day ago | parent | prev [-]

High frequency trading does create benefits. It speeds up market corrections, increases liquidity, and means buyers and sellers get quicker execution closer to consensus market value.

If financiers and doctors are wealthier, they have more disposable income, some of which they will spend in retail, benefiting retail clerks. They will also get taxed more, benefiting other tax payers.

The Baumol effect is sometimes described as a disease. It isn’t. It’s fundamentally redistributive.

	▲	AnthonyMouse a day ago \| parent [-]
		> It speeds up market corrections, increases liquidity, and means buyers and sellers get quicker execution closer to consensus market value. This is the BS that Wall St says whenever people complain about them doing it. Nobody actually benefits from getting their liquidity in 8ms instead of 8.2ms, and in fact it costs them the money the high frequency trader was making compared to having the exchange's computers do it without taking a margin for itself. > If financiers and doctors are wealthier, they have more disposable income, some of which they will spend in retail, benefiting retail clerks. Or they'll further outbid the people in retail on things like housing, making them poorer yet. > They will also get taxed more, benefiting other tax payers. Only if the other taxpayers actually get taxed less instead of the government giving the extra money to cronies.