Baumol’s Cost Disease and Education

I normally avoid controversial subjects here, but today I thought I’d dive in with both feet with a question, and see what happens!

This morning in Sydney we’re hosting the Australia Education Partner Summit, and I’ll be talking at 10 o’clock about where things are going in the future. I thought you might be interested in some of the content, so here’s one of my first slides:


The reason this is one of my first slides is that I believe that we’re at a tipping point in education.

In our lifetime we’ve seen the price of knowledge decreasing dramatically – in the age of Wikipedia and information being seconds away from discovery on the Internet, the cost of knowledge seems to be heading towards zero rapidly (perhaps I should more accurately say that it’s the cost of access to knowledge – as a child it was about the affordability of the encyclopaedia set and the opening hours and location of the city library)

However, at the same time the price of education – to us as parents, as consumers and as taxpayers – is continuing to increase. If you look across the Pacific at the US, there’s a lot of debate going on at the moment about the cost of education and the relative unaffordability of education for some groups.

Baumol’s Cost Disease and Education

And yet education, in many cases, is still the victim of Baumol’s Cost Disease:


…the same number of musicians is needed to play a Beethoven string quartet today as was needed in the 19th century; that is, the productivity of classical music performance has not increased.

…in some labour-intensive sectors that rely heavily on human interaction or activities, such as nursing, education, or the performing arts there is little or no growth in productivity over time.


In the same way that it takes the same number of musicians to play Beethoven today as it did 200 years ago, in most classrooms teachers are still standing in front of approximately the same number of students, and teaching for approximately the same number of hours per week as in the past. The fundamental productivity as measured by classic economists hasn’t changed.

In actual fact, the Australian Bureau of Statistics published their "Schools Australia, 2012" statistics last week which showed that the number of students being taught per teacher has been going down for the last decade.


In summary we’ve gone from having around 15 students per teacher in 1998 to around 13.5 in 2012.

Which brings me back to my belief that we’re at a tipping point. Baumol’s Cost Disease is obviously not directly applicable to what’s happening in education today. In fact, change is happening – the number of teachers per 1,000 students has gone up over the last ten years.

And yet there is so much conversation going on about the role of IT in education, and the ways that it can transform teaching and learning. That’s why I think we’re at a tipping point – we’ve gone through similar tipping points with other industries and sectors. It may be difficult to see an exact tipping point (it may have already passed), but I think we’re probably in the middle of the moment.

But what happens next?