[jadenPete]

Really interesting stuff. Am I correct in thinking that if productivity were to rapidly increase in the service sector (e.g. due to AI) the same way it did in the manufacturing sector in the 19th and 20th centuries, that the cost of services would decrease?

Also, a side note: I dislike a lot of the popular conversation around the Baumol effect because they’re usually along the lines of “this can’t be the only reason my healthcare or education is expensive”, which is true (there are other factors at play), but the Baumol effect still explains a lot of it.

[mjh2539]

The cost of services will only decrease if labor inputs decrease in that particular sector more rapidly than the cost of labor increases (due to increased productivity).