Or Baumol Effect. I had never heard of it until today. Because all prices are relative, if the price of something goes down...No, I am not going to dare explain it. I am reading a paper by Alex Tabarrok from Marginal Revolution and keep thinking I understand it, but the next page reveals that I probably don't. I really thought I had it when I grasped that when productivity improves in one facet of building a house, the wages go up even in areas that have not improved, because they are now the bottleneck that prevents the houses from being finished. But I think I am oversimplifying, as I am told it applies more strongly to services than to manufactured goods.
It was recommended to me as explaining a great deal about economics, as it is a principle that works across countries, across industries, and across time. It is independent of regulation, though regulation keeps trying to correct it.
So have at it, with my blessing. I'm going to try something else.
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