The Cost Disease

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Why Computers Get Cheaper and Health Care Doesn't

William J. Baumol; With Contributions by David de Ferranti, Monte Malach, Ariel Pablos-Méndez, Hilary Tabish, and Lilian Gomory Wu

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Why are the costs of health care and higher education rising so dramatically? How can we keep them affordable for lower- and middle-income American families?

The exploding cost of health care in the United States is a source of widespread alarm. Similarly, the upward spiral of college tuition fees is cause for serious concern. In this concise and illuminating book, the well-known economist William J. Baumol explores the causes of these seemingly intractable problems and offers a surprisingly simple explanation. Baumol identifies the "cost disease" as a major source of rapidly rising costs in service sectors of the economy. Once we understand that disease, he explains, effective responses become apparent.

Baumol presents his analysis with characteristic clarity, tracing the fast-rising prices of health care and education in the United States and other major industrial nations, then examining the underlying causes, which have to do with the nature of providing labor-intensive services. The news is good, Baumol reassures us, because the nature of the disease is such that society will be able to afford the rising costs.


William J. Baumol is professor of economics and academic director of the Berkley Center for Entrepreneurship and Innovation, New York University, and professor emeritus, Princeton University. He lives in New York City.

“It’s a testament to Professor Baumol’s lucid prose, though, that economists and noneconomists alike will find it easy to grasp his surprisingly comforting argument for why we shouldn’t panic. . . .This book is a quick read, packed with charts and case studies. But it is the author’s command of storytelling that makes it not just digestible but also enjoyable.”—Amy Wallace, The New York Times 

“Health-care costs are huge, and still rising. Based on current trends, in 2105 US health care will consume 62% of our national income.  And this is nothing to worry about. How can this be? Relying primarily on simple logic and storytelling, NYU economist William J. Baumol lays out the answer in his new book.”—Kyle Smith, New York Post

"The central message of this important and lucid book is at once sobering and optimistic. Sobering in its explanation of why the relative cost of health care, education, and many other activities that define a civilized society will continue to increase. Optimistic in its demonstration of why societies can nonetheless continue to afford these crucial activities. The causes and consequences of the 'cost disease' have never been explained more clearly or with more attention to the future economic choices the disease offers societies." —Robert J. Flanagan, author, The Perilous Life of Symphony Orchestras

“An excellent book that puts to the sword many health care myths. . . . [A] necessary read for anyone who is engaged in health care costs.”—Lancet Oncology

“A very enjoyable read and a very topical one for followers of the recent debates around the federal budget.”—Economic Record
ISBN: 9780300198157
Publication Date: September 24, 2013
272 pages, 5 1/16 x 8 1/4
20 b/w illus.
Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity

William J. Baumol, Robert E. Litan, and Carl J. Schramm

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