[nocoiner]

The modern day example that really made Baumol click for me is child care, particularly day care. It’s a highly labor intensive with basically minimal opportunities for productivity enhancements (due both to regulation and parental preferences, as well as just baseline sheer human decency). As the rest of the economy becomes more productive, the relative cost of child care goes up and up and up - which is why we now see situations where two-earner households can an entire after-tax income consumed by child care costs once they need to put 2-3 kids into daycare.

[missedthecue]

Daycare economics are just brutal. It's insanely expensive to pay for, the caregivers make peanuts, and the owners are always at breakeven if they're not explicitly non-profit.

[seg_lol]

Can you explain those numbers? How is it that everyone has it lousy?

[parpfish]

so... where does the money go? is it insurance or have duplo block prices just gotten really out of hand?

[CGMthrowaway]

One way to measure the cost of human capital (the major component of childcare) is by the opportunity cost of that time spent. In Baumol's Effect it's not so much productivity stagnation that is the problem, it's the fact that there are so many better opportunities (jobs or otherwise) for a potential childcare worker to invest their time into.

[estearum]

What productivity improvements would be possible if not for regulation?

[nocoiner]

For one, a higher child-to-caregiver ratio. There may be others, but this seems to be the easiest lever to pull to eke out some productivity gains.

Personally, I’m completely fine with having this be the subject of regulation - even if it’s possibly an overly blunt instrument, this is not an area where I’d be comfortable letting the free hand of the market do its thing. Further, I suspect that universal, subsidized, high-quality pre-K would be a net economic benefit in the long run, but I haven’t done the research to back up this assertion.

[rahimnathwani]

In my city, the regulations specify a maximum # kids per adult. So if you were to devise a way to supervise more children per adult, using technology, you would still have to hire the same number of adults.

The regulations specify that teachers must have completed a certain number of units of a specific type of education. If you create an AI Assistant that means you can hire people with less training and have the same quality, then ... you cannot.

The regulations regulate inputs rather than outputs.