A Mozart String Quartet and Health Care

Jan 19, 2010 • Thinking Economically • 100 Views    1 Comment

A question:
How does a Mozart String Quartet resemble health care?

The answer:
Both have Dr. Baumol’s Cost Disease

Eighty-eight year old economist William J. Baumol expressed concern in today’s NY Times about health care cost control. Comparing health-care to a Mozart String Quartet from 1787, Dr. Baumol pointed out that both were labor intensive. In 1787 and now, the same musicians and the same time are needed to play the piece. Similarly, in many ways, health care cost reduction is constrained by labor intensity.
David M. Herszenhorn, “Economic Diagnosis For Health System”, p. A12, NY Times, January 18, 2010.

Dr. Baumol discusses labor intensive “cost disease” in his 1966 book Performing Arts: The Economic Dilemma (with W.G. Bowen).

The Economic Life:
Production requires “factor recipes” composed of the factors of production: land, labor, and capital. When a factor recipe is labor intensive, it requires labor as the dominant factor input. Capital intensive activities typically can create more savings than those that are labor intensive. Historically, the building of railroads was an example of increased capital, capital intensity, and a propellant of economic growth.

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  • hem424

    While there is some truth to the fact that medicine will always be labor-intensive, technology is changing the amount of labor necessary for many procedures. For example, laproscopic surgery has decreased the hospital stays for many procedures, therefore lessening the amount of nursing staff necessary. Perhaps, technology can be a cost cutter for medicine, though I’d be surprised to see a robot string quartet (haha).

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