[cjy]

>The Baumol Effect, in case you didn't know, is the tendency of wage increases that come from increases in productivity to "spill over" into jobs where there have been no productivity increases. In other words, it's trickle-down economics under a fancier name.

Mr. Garret gets the definition of the Baumol Effect more or less right, but then mislabels it as trickle down economics and proceeds to attack that. Here is an example of the Baumol Effect:

As improving technology makes computer scientists more productive they will receive higher salaries in the business world. Meanwhile, computer scientist teachers in academia may not see similar productive gains (they still can only teach X number of students a semester). Nonetheless, universities must increase computer scientist teacher pay to prevent them from leaving academia for the business world.

In the context of PG's essay, he is saying that high pay for entrepreneurs forces companies to pay competitive salaries:

>anyone who could get rich by creating wealth on their own account will have to be paid enough to prevent them from doing it.

If Mr. Garret, or others, disagree with this assertion they should attack it directly. Personally, the logic and direct incentives at work seem self evident to me.