Curing Baumol's Disease: In Search of Productivity Gains in K-12 Schooling

Paul Hill and Marguerite Roza
Center on Reinventing Public Education
July 2010

These eleven pages do something quite useful: Explain the disconnect
between education inputs and outputs in the language of economics. The
affliction is Baumol’s cost disease, or “the tendency of labor-intensive
organizations to become more expensive over time but not any more
productive…(defined as the quantity of product per dollar expended).”
Take a string quartet that “produces the same music from the time it is
first assembled until the players retire.” Then consider that the
education sector solves problems by adding more (money,
teachers, etc.)—“the string quartet both gets wage and benefit increases
and adds enough new members to become a sextet.” This is a structural
problem, the authors explain, and one that better teachers and
competition from independent operators (e.g., charter, private, and
voucher-receiving schools) cannot (at least not alone) fix. But other
industries have cured Baumol’s—or at least controlled its effects—which
leaves hope for education. Some strategies are more applicable (or even
already in use) than others: deregulation, which allows in new firms and
new efficiencies (e.g., alternative certification routes), and
information technology, which streamlines capacity, extending the touch
of workers so that companies need fewer of them (e.g., virtual
education). Others are further off, such as production process
innovation, wherein tasks become specialized by competency and paid
accordingly (e.g., the medical model: doctors supported by descending
chain of residents, interns, nurses, etc.). The bottom line is that not
tackling Baumol’s in education will result in more hiring freezes,
layoffs, school day furloughs, and wage and benefits cuts, not fewer—and
that, because the system is not currently structured to adopt
achievement-raising efficiencies in response to financial difficulties,
cuts will do damage unless we can change the model. Read it here.

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