William J. Baumol's paper, "The Anatomy of Urban Crisis," explores the economic forces that drive unbalanced growth and their implications for various sectors, including municipal government, education, performing arts, restaurants, and leisure activities. The author argues that technological structures in these activities inherently lead to cumulative increases in real costs, making it difficult to control these costs in the long run. He introduces a model that categorizes economic activities into two types: those with progressive technological structures, where innovations and scale economies lead to increasing output per man-hour, and those with constant productivity, where labor is the primary product and quality is directly tied to the amount of labor. Baumol's model demonstrates that in an economy with unbalanced productivity growth, the costs of non-progressive sectors will rise indefinitely, leading to a decline in their relative demand and ultimately, their output. This trend is exacerbated by the fact that wages in both sectors tend to rise together, further increasing costs. The paper also discusses the implications for urban areas, where a significant portion of municipal expenditures are in the non-progressive sector, such as education and public services. These costs are expected to continue rising, leading to financial pressures and the potential for urban decay. The author concludes by highlighting the financial challenges faced by large cities, which are further compounded by externalities and cumulative decay processes. He suggests that federal intervention may be necessary to address these issues and prevent the decline of urban communities, which could have significant economic and social consequences.William J. Baumol's paper, "The Anatomy of Urban Crisis," explores the economic forces that drive unbalanced growth and their implications for various sectors, including municipal government, education, performing arts, restaurants, and leisure activities. The author argues that technological structures in these activities inherently lead to cumulative increases in real costs, making it difficult to control these costs in the long run. He introduces a model that categorizes economic activities into two types: those with progressive technological structures, where innovations and scale economies lead to increasing output per man-hour, and those with constant productivity, where labor is the primary product and quality is directly tied to the amount of labor. Baumol's model demonstrates that in an economy with unbalanced productivity growth, the costs of non-progressive sectors will rise indefinitely, leading to a decline in their relative demand and ultimately, their output. This trend is exacerbated by the fact that wages in both sectors tend to rise together, further increasing costs. The paper also discusses the implications for urban areas, where a significant portion of municipal expenditures are in the non-progressive sector, such as education and public services. These costs are expected to continue rising, leading to financial pressures and the potential for urban decay. The author concludes by highlighting the financial challenges faced by large cities, which are further compounded by externalities and cumulative decay processes. He suggests that federal intervention may be necessary to address these issues and prevent the decline of urban communities, which could have significant economic and social consequences.