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Automatic TRANSCRIPT

Support for this podcast and the following message come from cohnresnick whose business of baseball and original MLB video series shares key insights on the business side of America's America's pastime for game changing strategies to help your business visit cohnresnick dot com slash mlb so we expect prices of goods and services services to go up over time right but why has the cost of healthcare and education risen far faster than things like TV's cars and everyday consumer uh-huh well you can trust economist come with theory they call it the Bomoh Affect Cardiff Garcia and Daniel Kurtz Laban from our daily Economics podcast the indicator from planet money explain how this Works Alex Tab Rock and economist at George Mason University is the CO author of a new book called. Why are the prices so damn high and the answer he says has starts with an economist named William Bommel. He says think about a string quartet in eighteen twenty six it takes four people forty minutes to play this string quartet now. Let's think about the same string quartet in two thousand nineteen live performance same for people will it still takes them forty minutes to produce the music but the price you pay to see that live string quartet has gone up way more than the price price of everything else in the economy the reason why is the bomb will affect some sectors of the economy get better at making stuff every year in other words productivity grows really fast in these sectors for example. Let's say an electronics company can make more flat screen televisions this year with the same number of workers as last year and those workers work the the same number of hours more is produced for each hour of work. Maybe because there's better equipment for the worker sues or new technology that makes producing flat screen. TV's more efficient when a sector of the economy economy has fast productivity growth that means it can afford to raise the wages it pays to its workers without raising the prices of the goods they make there are also some sectors that have very slow productivity growth. They do not become more efficient at producing their goods or services from year to year kind of like the musicians in a string quartet. These workers do not produce much more of the same product. The healthcare and education sectors fall into this category Doctors Nurses Teachers College Professors Their Productivity Tiffany just doesn't go up much every year the reason they don't get more efficient over time is largely because a big part of what their customers want from them is their time their presence since the healthcare and education sectors still have to pay wages that can compete with other sectors of the economy that do have fast productivity growth because otherwise not enough people would become doctors nurses teachers professors or playing string quartets the way that the healthcare and education sectors pay those higher salaries is by raising the prices of what they sell since the workers in these sectors are not making more stuff to sell each year the businesses that hire them the schools colleges hospitals they have to raise as their prices so they can afford to pay those rising salaries and when Alex analyze what was happening in the healthcare and education sectors he found that not only had salaries for education healthcare co-workers climbed year after year for decades but also we have more of them than we used to because teachers are fairly well educated and skilled. We have to to pay them at least as much as could earn elsewhere. The cost of healthcare and education would still rise faster than the costs in other parts of the economy simply blay because productivity growth in healthcare education is slower that is the mechanical relationship explained by the ball effect Cardiff. Garcia Danielle Kurt Sleeping N._p._R. News.