William J. Baumol

William Jack Baumol (February 26, 1922 - May 4, 2017) was an American economist, who was a Professor of economics at New York University and Professor Emeritus at Princeton University. He wrote extensively about labor market and other economic factors that affect the economy, and his research interests included "economic growth, entrepreneurship and innovation, industrial organization, antitrust economics and regulation, and economics of the arts" (source: stern.nyu.edu).

Quotes

• In order for a writer to produce something which is original and correct, it is not absolutely necessary that his predecessors have been wrong.
  • William J. Baumol, "Baumol's Sales-Maximization Model: Reply." The American Economic Review 54.6 (1964): 1081-1081: Quoted in: Walid Marrouch, Essays on International Environmental Policy. Diss. 2009.

• There seems to be a general consensus among informed observers that genuine cases of predation are very rare birds.
  • William J. Baumol. "Predation and the Logic of the Average Variable Cost Test." Journal of Law and Economics, Vol. XXXIX, April 1996, p. 51.

• How much do you think it costs to go to college? Most people are likely to answer by adding together their expenditures on tuition, room and board, books, and the like, and then deducting any scholarship funds they may receive. Suppose that amount comes to $15,000.
  Economists keep score differently. They first want to know how much you would be earning if you were not attending college. Suppose that salary is $20,000 per year. This may seem irrelevant, but because you give up these earnings by attending college, they must be added to your tuition bill. You have that much less income because of your education. On the other side of the ledger, economists would not count all of the university’s bill for room and board as part of the costs of your education. They would want to know how much more it costs you to live at school rather than at home. Economists would count only these extra costs as an educational expense because you would have incurred these costs whether or not you attend college. On balance, college is probably costing you much more than you think. And, as we will see later, taking opportunity cost into account in any personal planning will help you to make more rational decisions.
  • William Baumol and Alan Blinder, Economics: Principles and Policy (2011), Ch. 1 : What is Economics?

The theory of environmental policy, 1988

William J. Baumol and Wallace E. Oates. The theory of environmental policy. Cambridge university press, 1988.

• This book is... devoted to the study of economic policies to enhance the quality of life. Our willingness to embark on so considerable a subject only reflects our conviction that economists as a body have already made sufficient headway on these problems to make such an undertaking worthwhile.
  • Preface to first edition.

• When the “environmental revolution” arrived in the 1960s, economists were ready and waiting. The economic literature contained an apparently coherent view of the nature of the pollution problem together with a compelling set of implications for public policy. In short, economists saw the problem of environmental degradation as one in which economic agents imposed external costs upon society at large in the form of pollution. With no “prices” to provide the proper incentives for reduction of polluting activities, the inevitable result was excessive demands on the assimilative capacity of the environment. The obvious solution to the problem was to place an appropriate “price,” in this case a tax, on polluting activities so as to internalize the social costs. Marshall and Pigou had suggested such measures many decades earlier. Moreover, pollution and its control through so-called Pigouvian taxes had become a standard textbook case of the application of the principles of microeconomic theory. Economists were thus ready to provide counsel to policy makers on the design of environmental policy.
  • p. 1

• The price-tax conditions necessary to sustain the Pareto optimality of a competitive market solution under the assumed convexity conditions are tantamount to standard Pigovian rules, with neither taxes imposed upon, nor compensation paid to, the victims of externalities.
  • p. 45; Cited in: Vatn, Arild, and Daniel W. Bromley. "Externalities-a market model failure." Environmental and resource economics 9.2 (1997): 135-151.

• We cannot simply rely on a program of pollution abatement in country A [the polluting country] for this would impose costs on A with no offsetting benefits to the polluting country. The OECD’s Polluter-Pays-Principle is thus inconsistent with our insistence on a Pareto improvement. Mutual gains to the countries necessarily require the victim country B to make some payments to A.
  • pp. 280–281; as cited in Vatn & Bromley (1997)

"Entrepreneurship: Productive, unproductive, and destructive," 1996

William J. Baumol, "Entrepreneurship: Productive, unproductive, and destructive." Journal of Business Venturing 11.1 (1996): 3-22.

• The basic hypothesis is that, while the total supply of entrepreneurs varies among societies, the productive contribution of the society's entrepreneurial activities varies much more because of their allocation between productive activities such as innovation and largely unproductive activities such as rent seeking or organized crime. This allocation is heavily influenced by the relative payoffs society offers to such activities. This implies that policy can influence the allocation of entrepreneurship more effectively than it can influence its supply. Historical evidence from ancient Rome, early China, and the Middle Ages and Renaissance in Europe is used to investigate the hypotheses.
  • p. 3

• The notion that our productivity problems reside in "the spirit of entrepreneurship" that waxes and wanes for unexplained reasons is a counsel of despair, for it gives no guidance on how to reawaken that spirit once it has lagged
  • p. 5

Quotes about William Baumol

• In recent years economists and historians have increasingly turned their attention to modern economic institutions. Economists such as Edward S. Mason, A. D. H. Kaplan, John Kenneth Galbraith, Oliver E. Williamson, William J. Baumol, Robin L. Marris, Edith T. Penrose, Robert T. Averitt, and R. Joseph Monsen, following the pioneering work of Adolph A. Berle, Jr., and Gardiner C. Means, have studied the operations and actions of modern business enterprise. They have not attempted, however, to examine its historical development, nor has their work yet had a major impact on economic theory. The firm remains essentially a unit of production, and the theory of the firm a theory of production.
  • Alfred D. Chandler, Jr. The Visible Hand (1977) p. 5.