Baumol’s Cost Disease and Education: An Anecdote

My son is in an advanced algebra class in 8th grade – he is decent at math and so is in the most advanced math course offered at his school. His teacher for this course is the head of the math department for this school, and the school has about 800 kids across 6th, 7th, and 8th grades.

She is a good/great teacher, according to my son. My son likes her and also thinks she explains math well.

This year, they decided to go with a new style of teaching math for this class. In his class, they went with an inverted lesson plan, where kids would do homework during class, and watch lessons on videos the night before which taught the lesson.

These videos were between 5-15 minutes long, and he only had to watch a few a week. They did not have mandatory lessons every night, but rather 2-3 times a week. Then during class, they were “in theory” supposed to do homework.

The school ended the experiment last month – too many kids and parents were complaining about it. What ended up happening was this:

  1. The kids would watch the video and not really understand the lesson. Some kids didn’t get it at all, and some kids didn’t watch the lessons.
  2. Because the kids were supposed to watch at night and do homework during class, the teacher assigned a ton of problems – 45 minutes worth of problems a day (this is for 8th graders in the highest level math classes)
  3. The kids having problems would take up all the class time with questions and needing help, so no kids were able to do homework in class, and had to do it at home.
  4. As a result, my son had 45 minutes of math homework every night, and sometimes a full hour if he had to watch a video.
  5. He actually got worse at math! His math skills suffered greatly during this time, and I had to step in with some Dad math school to make it all work for him.

One of the problems with large programs is Baumols cost disease. From Wikipedia:

It involves a rise of salaries in jobs that have experienced no increase of labor productivity in response to rising salaries in other jobs which did experience such labor productivity growth. This seemingly goes against the theory in classical economicsthat wages are closely tied to labor productivity changes.

The rise of wages in jobs without productivity gains is caused by the requirement to compete for employees with jobs that did experience gains and hence can naturally pay higher salaries, just as classical economics predicts. For instance, if the retail sector pays its managers 19th century style salaries, the managers may decide to quit and get a job at an automobile factory where salaries are commensurate with high labor productivity. Hence, managers’ salaries are increased not due to labor productivity increases in the retail sector, but rather due to productivity and wage increases in other industries.

My sons school was trying to do something that would have lowered cost overall for teaching kids math. It just did not work at all and actually was resulting in worse outcomes. My suspicion is that something like teaching – which has been around for thousands of years – will probably never see big gains in productivity, because if there was something better out there for mass teaching, we probably would have stumbled on it already. At least until we get direct knowledge download ala the matrix. So what this means is that teaching is going to become relatively more expensive as our society becomes richer.

Note, we’ve already had an enormous reduction in teaching quality which has put a lid on costs for the last 50 years which is now fully played out and will not help to reduce costs.

Specifically, in the early 1960s, we had high IQ/motivation women who are now excellent lawyers and doctors and entrepreneurs working as grade school and sometimes high school teachers. Those women are no longer teachers because they have more lucrative and challenging professions open to them. Their replacements – while usually quite smart and motivated – are just not the incredible cream-of-the-crop we had as teachers back in the 1960s. We are missing hundreds of thousands of women who are now lawyers and doctors instead of going into teaching.



Expert in business development, product development, and direct marketing. Developed strategic sales plans, product innovations, and business plans for multiple companies. Conceived the patent pending Spot Equivalent Futures (SEF) mechanism, which allows true replication of spot and swap like products in the futures space.

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