Rising prices

Sources:

Dwarkesh Patel discusses the topic of rising prices extensively, especially in terms of the Baumol effect and the impact of productivity on different sectors.

  1. Baumol Effect: Patel explores why prices in certain sectors, like education and repairs, continue to rise. The Baumol effect explains that as productivity increases in some sectors, the relative cost of labor in less productive sectors rises, leading to increased prices in those stagnant sectors 1.

  2. Productivity and Opportunity Costs: Alex Tabarrok, in conversation with Patel, explains that as the progressive sector becomes more productive, the opportunity cost for labor in stagnant sectors increases, raising prices. Therefore, rising prices can sometimes indicate economic growth in other sectors 2.

  3. Skilled Labor: Patel further discusses how the rising cost of skilled labor contributes to higher prices in sectors like healthcare and education, despite general wage stagnation. The opportunity cost for these professionals has increased as they have lucrative alternatives in highly productive industries like tech 3.

    The Rising Costs

    Dwarkesh and Alex discuss the Bamu effect, where prices in industries such as education and repairs continue to rise over time. They explore the reasons behind this trend and the impact it has on consumer behavior.
    The Lunar Society
    Alex Tabarrok - Prizes, Prices, and Public Goods
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These insights reveal a complex relationship between productivity, labor costs, and rising prices, challenging the simplified notion that inflation or inefficiency is solely to blame.

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