Why are some prices so high?

MarginalRevolution.com has a terrific post explaining "Baumol's Cost Disease," or in more polite terms, "the Baumol Effect." It rests on two ideas:

1. Opportunity cost:  the cost of an activity is what you give up to pursue it; and
2. Differences in productivity:  some items, like cars, have gotten much easier to produce over time.

 To make this concrete, imagine two goods or services, like education and automobiles.  The first has not had much change in productivity over the past 100 years--it still takes one professor and an army of TA's to deliver a course like Managerial Economics.  But cars can be produced with one tenth the labor as 100 years ago.

This implies that the opportunity cost of producing a Managerial Econ class is now ten times as expensive as it was 100 years ago, in terms of what we give up (cars) to produce it.

This idea is useful as it explains that we can expect the cost of activities without productivity gains to increase, like education, performing arts, and health care.