William J. Baumol discusses the economic forces behind urban crises, focusing on unbalanced growth. He argues that certain economic services, such as education, performing arts, and healthcare, face increasing real costs due to technological structures that limit productivity growth. In contrast, other sectors, like manufacturing, experience productivity gains. This imbalance leads to rising costs in nonprogressive sectors, which can drive these services out of the market or force them to absorb more resources. Baumol presents a model where one sector has constant productivity while another grows cumulatively, leading to rising costs in the nonprogressive sector. This results in a decline in the output of the nonprogressive sector and a shift of labor to the progressive sector. The model also shows that attempts to achieve balanced growth in an unbalanced productivity world lead to a declining rate of growth. Baumol applies this model to explain phenomena like the increasing costs of retailing, higher education, and the decline of certain services. He also discusses the financial problems of large cities, noting that municipal services are often in the nonprogressive sector, leading to rising costs and fiscal pressures. Externalities, such as pollution and traffic congestion, also contribute to these pressures. Cumulative urban decay further exacerbates these issues, leading to a cycle of deterioration. Baumol concludes that cities face significant financial challenges and that federal intervention may be necessary to prevent serious crises.William J. Baumol discusses the economic forces behind urban crises, focusing on unbalanced growth. He argues that certain economic services, such as education, performing arts, and healthcare, face increasing real costs due to technological structures that limit productivity growth. In contrast, other sectors, like manufacturing, experience productivity gains. This imbalance leads to rising costs in nonprogressive sectors, which can drive these services out of the market or force them to absorb more resources. Baumol presents a model where one sector has constant productivity while another grows cumulatively, leading to rising costs in the nonprogressive sector. This results in a decline in the output of the nonprogressive sector and a shift of labor to the progressive sector. The model also shows that attempts to achieve balanced growth in an unbalanced productivity world lead to a declining rate of growth. Baumol applies this model to explain phenomena like the increasing costs of retailing, higher education, and the decline of certain services. He also discusses the financial problems of large cities, noting that municipal services are often in the nonprogressive sector, leading to rising costs and fiscal pressures. Externalities, such as pollution and traffic congestion, also contribute to these pressures. Cumulative urban decay further exacerbates these issues, leading to a cycle of deterioration. Baumol concludes that cities face significant financial challenges and that federal intervention may be necessary to prevent serious crises.