Sunday, July 10, 2016

Another cost disease

Baumol's cost disease famously calls attention to the fact that when there are reasons to expect steady productivity divergence between sectors, the associated product prices will diverge and this will impact consumption patterns. The fine arts sector, for example, cannot expect productivity improvements to match those in manufacturing. Fine arts prices will rise in comparison to manufactured goods as will their relative importance in people's budgets.

The July 10 NY Times Magazine includes Marie Kondo's Stuff Of Nightmares ... and the ruthless war on clutter". Look at all the garage and yard sales, the rise of the self-storage industry -- as well as the relentless accumulations of stuff in our own homes and offices. A la Baumol, the relative costs of accumulating stuff and the space to house it are systematically diverging and there is no relief in sight.  Easy on-line shopping and delivery only make it worse (cheaper in terms of time). There is even now a National Association of Professional Organizers. The problem is that  city and state governments make it increasingly difficult to build.  Growing housing affordability is a result. But so is the growing problem of organizing and storing all of our stuff.

This is another first-world problem, one that we have inflicted on ourselves.