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Not completely true. With the advent of ScanTron, Blackboard, online tests and quizzes, etc. much of the 'manual' work of teaching can be automated. Couple this with online classes, and one professor can run WAY more sections of a class than he could if he had to physically teach all of these classes. Even with in-person lectures and automated grading, labor productivity has increased dramatically in the last decade or two.

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It is true that "running sections" has gotten more efficient, but that has nothing to do with education. Lectures have repeatedly been shown to be the worst method of teaching, and being able to speed up exam grading does nothing for that. It's also impossible for our lone professor to grade homework in a mega-section without an army of TAs (who cost money).

Baumol's cost disease concerns jobs whose labour productivity does not increase. It's obvious that teaching has increased in productivity. So where is the money going? Administration and capital expenditure.

Universities compete for the top students. They spend huge amounts of money on elaborate buildings and fancy landscaping. They hire more and more staff to run these facilities and cater to students' every little need. The pool of top students is limited, making this a zero-sum game. This is why tuition keeps going up.

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