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April 17, 1987

The Inevitable Failure of Cost-Containment Strategies

Author Affiliations



JAMA. 1987;257(15):2029. doi:10.1001/jama.1987.03390150045006

To the Editor.—  Dr Schwartz1 in the article entitled "The Inevitable Failure of Current Cost-Containment Strategies: Why They Can Provide Only Temporary Relief" nicely provides documentary support for "Baumol's disease," a condition that has been used in the past to explain the high cost of hamburgers in New York (Forbes, Aug 15, 1983, p 92; Forbes, Sept 15, 1977, p 166). William Baumol, an economist at New York University and Princeton (NJ) University, notes that "any service that is inherently labor-intensive will tend to rise in cost faster than the general rate of inflation." He explains that a person can provide only so many units of a labor-intensive service during a day. Since each person must eat and partake of the other basic goods and services of society, each will demand sufficient compensation to permit this. He claims that investment in capital goods, education, and technology is required to