Evidence in support of the Baumol effect?

Bayesian Update (6 June 2019): I have changed the title of this blog post to reflect a more likely explanation for the pattern of price changes pictured below. For more information about William Baumol and the so-called “Baumol effect”, see here.

Economics professor Mark Perry (@Mark_J_Perry) recently posted an updated chart (pictured above) of price changes of certain consumer goods and services in the U.S. In summary, his chart shows falling prices for free-market goods like TV sets and toys as well as rising prices for such publicly-subsidized services as health care and higher education.

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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1 Response to Evidence in support of the Baumol effect?

  1. crea8ive53 says:

    Rather misleading. This has nothing to do with “free market” vs “subsidies” but rather whether the item is imported from a cheap-labor nation or is a service involving domestic labor. I could argue that it is China who we are subsidizing here…

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