It's not so much that service industries resist technological change, as that technological changes in direct service industries increase outlays without raising productivity. Shifting from chalk-and-talk to powerpoint, for example, raises the fixed costs of education, but unless class sizes go up, this has no impact on productivity. Better imaging technologies raise health care costs and may improve outcomes, but have little impact on productivity. Ellen
-----Original Message----- From: PEN-L list on behalf of Michael Perelman Sent: Sat 2/5/2005 3:28 PM To: PEN-L@SUS.CSUCHICO.EDU Subject: Re: [PEN-L] Baumol's 'Disease'? If real wages rise with the general level of labor productivity, then service workers will experience increasing real wages even if these increases occur because of declining costs of manufactured goods. Doug, is absolutely correct that the new economy mania implied that services of all kinds could be transformed by revolutionary technology. Wal-Mart showed how this could be true for certain aspects of retailing. Replacing talk psychology with pharmaceuticals might be another example. But some kinds of services still seem resistant to technological transformations.
