How does a Mozart String Quartet resemble health care?
Both have Dr. Baumol’s Cost Disease
Eighty-eight year old economist William J. Baumol expressed concern in today’s NY Times about health care cost control. Comparing health-care to a Mozart String Quartet from 1787, Dr. Baumol pointed out that both were labor intensive. In 1787 and now, the same musicians and the same time are needed to play the piece. Similarly, in many ways, health care cost reduction is constrained by labor intensity.
David M. Herszenhorn, “Economic Diagnosis For Health System”, p. A12, NY Times, January 18, 2010.
The Economic Life:
Production requires “factor recipes” composed of the factors of production: land, labor, and capital. When a factor recipe is labor intensive, it requires labor as the dominant factor input. Capital intensive activities typically can create more savings than those that are labor intensive. Historically, the building of railroads was an example of increased capital, capital intensity, and a propellant of economic growth.