[mordymoop]

All I can say is that it seems more like a second-order consequence of supply and demand, and an unintuitive one for many people. The counter factual/subjunctive “the musicians are paid more because otherwise they would have chosen other jobs” is not the way in which people usually talk about supply and demand. You could also say that the rules that govern the supply and demand of labor are not quite the same as the rules that govern supply and demand of goods, and people’s general failure to realize this results in the Bamoult effect being surprising.

[lotsofpulp]

> You could also say that the rules that govern the supply and demand of labor are not quite the same as the rules that govern supply and demand of goods, and people’s general failure to realize this results in the Bamoult effect being surprising.

I wouldn’t say that because I disagree there is any difference in the application of supply and demand curves between labor and goods. If anything, Baumol’s effect clearly demonstrates that price (wages) is set by supply and demand just like goods, and it’s entirely unsurprising.

As you reduce the supply of laborers for labor type A because those laborers have better options, then the price for labor type A rises. That’s what Baumol says. That’s what supply and demand says. I fail to see the significance.