Final answer:
The 'cost disease' argument suggests that services appear to be more expensive over time due to low productivity growth compared to manufactured goods. This is because manufacturing processes have become more efficient and productive, while services have seen slower productivity growth. The relative cost of services has therefore increased compared to manufactured goods.
Step-by-step explanation:
The 'cost disease' argument refers to the idea that services appear to be more expensive over time due to low productivity growth compared to manufactured goods.
This argument suggests that while manufacturing processes have become more efficient and productive, the same level of productivity growth has not been seen in the service sector.
As a result, the relative cost of services has increased compared to manufactured goods.
For example, advancements in technology and automation have led to increased productivity in manufacturing, allowing for lower production costs and cheaper prices for manufactured goods.
However, the nature of many services, such as healthcare, education, and personal services, makes them less amenable to automation and productivity improvements.
As a result, these services have seen slower productivity growth, leading to relatively higher costs over time.
It's important to note that this argument focuses on the relative cost of services compared to manufactured goods, rather than absolute cost. It does not imply that services are inherently more expensive than before, but rather that their cost has increased compared to other goods.