Professor Baumol was “one of the great economists of his generation,” Joseph Stiglitz, a Nobel Prize-winning economist at Columbia University, said in an interview, adding, “The series<br />of insights he had about managerial economics, the role of innovation — a whole series of innovational breakthroughs over a long period of time — had a profound effect on economics.”<br />It was in 1965 that Professor Baumol began explaining how technological advances raise productivity<br />and naturally push up wages as workers are able to produce more goods, from hammers to coffee cups, at lower cost.<br />“What this says is that the quality of life 30 years from now could deteriorate,” Professor Baumol said in 1983, “because many of the services<br />that we associate with quality of life will become relatively more expensive while mass-produced things become cheaper and cheaper.”<br />His work influenced not only generations of economists<br />but also policy makers, including the architects of the Clinton administration’s health care initiative — even if his ideas were not always incorporated in the final product.<br />There is no cure for the cost disease, Professor Baumol said, and he warned<br />that the rising relative expense of health care, education and other essential services, including garbage collection and police patrols, would make them seem less and less affordable.<br />William G. Bowen (later a president of Princeton) and Professor Baumol essentially invented the discipline<br />of art economics with their work on the example of the rising costs of a string quartet.
