Professor Baumol was “one of the great economists of his generation,” Joseph Stiglitz, a Nobel Prize-winning economist at Columbia University, said in an interview, adding, “The series
of insights he had about managerial economics, the role of innovation — a whole series of innovational breakthroughs over a long period of time — had a profound effect on economics.”
It was in 1965 that Professor Baumol began explaining how technological advances raise productivity
and naturally push up wages as workers are able to produce more goods, from hammers to coffee cups, at lower cost.
“What this says is that the quality of life 30 years from now could deteriorate,” Professor Baumol said in 1983, “because many of the services
that we associate with quality of life will become relatively more expensive while mass-produced things become cheaper and cheaper.”
His work influenced not only generations of economists
but also policy makers, including the architects of the Clinton administration’s health care initiative — even if his ideas were not always incorporated in the final product.
There is no cure for the cost disease, Professor Baumol said, and he warned
that the rising relative expense of health care, education and other essential services, including garbage collection and police patrols, would make them seem less and less affordable.
William G. Bowen (later a president of Princeton) and Professor Baumol essentially invented the discipline
of art economics with their work on the example of the rising costs of a string quartet.