Baumol and William G. Bowen pointed out that the same number of musicians is needed to play a Beethoven string quartet today as was needed in the 19th century—in other words, the productivity of classical music performance has not increased. However, the real wages of musicians have increased substantially since the 19th century. Early references The concept was alluded to as early as 1776 by Adam Smith in The Wealth of Nations: Let us suppose, for example, that in the greater part of employments the productive powers of labour had been improved to tenfold, or that a day's labour could produce ten times the quantity of work which it had done originally; but that in a particular employment they had been improved only to double, or that a day's labour could produce only twice the quantity of work which it had done before. In exchanging the produce of a day's labour in the greater part of employments for that of a day's labour in this particular one, ten times the original quantity of work in them would purchase only twice the original quantity in it. Any particular quantity in it, therefore, a pound weight, for example, would appear to be five times dearer than before. In reality, however, it would be twice as cheap. Effects Macroeconomic effects Price and output Firms may respond to increases in labor costs induced by the Baumol effect in a variety of ways, including: Cost and price disease: Prices in stagnant industries tend to grow faster than average Stagnant output: Real output in low-productivity-growth industries tends to grow more slowly relative to the overall economy Employment effects: Firms in stagnant industries may reduce employment, decrease hours, or increase non-monetary compensation A 2008 study by American economist William Nordhaus showed as much, concluding that "Baumol-type diseases" in technologically stagnant sectors have led to "rising relative prices and declining relative real outputs". In the realm of prices, Nordhaus showed that in the United States from 1948–2001 "productivity trends are associated almost percentage-point for percentage-point with price decline". Industries with low productivity growth thus saw their relative prices increase, leading Nordhaus to conclude: "The hypothesis of a cost-price disease due to slow productivity growth is strongly supported by the historical data. Industries with relatively lower productivity growth show a percentage-point for percentage-point higher growth in relative prices." A similar conclusion held for real output: "The real output/stagnation hypothesis