Dismal Science

Apple iPhone Price Drop

jasonomics — Fri, 16 Nov 2007 14:58:24 +0000

On 5 September 2007, Apple lowered the price of the iPhone just 69 days after bringing the product to market. The iPhone launched on 29 June 2007, with two models: an 8GB for $599 and a 4GB for $399. The price change lowered the 8GB to $399 and dropped the 4GB from the line-up due to demand concentration on the 8GB model. Consumer outrage ensued.

I have no sympathy for anyone who feels cheated by Apple. The reality is this: every consumer who lined up to buy an iPhone prior to 5 September 2007, did so of their own will and without coercion. After two months of observing the market and responding to changes in demand, Apple eliminated part of the line-up and lowered the price. That’s all. Those who decided to wait for Apple to lower the price, which they have a history of doing, saved themselves $200 at the expense of being uncool for a couple of months.

Rising College Tuition Is Economically (Un)Sound

jasonomics — Tue, 13 Nov 2007 01:18:14 +0000

This just in: College is more expensive than it used to be. In fact, it is more more expensive. It makes sense. The demand for college education has risen in the past 30 years. Basic economics teaches us that as demand increases so do prices (thanks, college).

I believe, however, that college prices are more inflated than they should be. To explain: Many college students pay for some part of their education with Federal financial aid. Students take out loans or get grants from the US government to attend a school they cannot afford out of pocket. Regardless, this means the government has effectively subsidized almost every college in the US. Government subsidies consistently have a couple of effects on markets. They prevent inferior firms from succumbing to market forces and closing, and they make products more expensive for consumers (see AmTrak, US Agriculture Industry).

All you need to know: It costs more to go to college, and you are getting less than you pay for. Still like your federal aid?

Campaign Finance: It’s All The Same

jasonomics — Mon, 12 Nov 2007 03:58:42 +0000

In a response to this post, I traced some of the info the author cited regarding Ron Paul‘s donors in Q3 2007. This got me looking at the cash leaders of both parties and where their money comes from. I looked at the top 20 contributors for Clinton, Obama, Edwards, Romney, Giuliani, McCain, and Thompson.

You may notice the same thing I did. There is significant overlap between candidates and their top 20 campaign contributors.

Citigroup Inc – Clinton, Obama, Edwards, Romney, Giuliani, Thompson, McCain
Credit Suisse Group – Obama, Romney, Giuliani, McCain
Goldman Sachs – Clinton, Obama, Edwards, Romney, Giuliani, McCain
JP Morgan Chase & Co – Clinton, Obama, Romney, Giuliani, McCain
Lehman Brothers – Clinton, Obama, Romney, Giuliani, McCain
Merrill Lynch – Clinton, Romney, Giuliani, McCain
Morgan Stanley – Clinton, Obama, Edwards, Romney, Giuliani, Thompson, McCain

There are many ways this pattern could be explained, the most obvious being that all these firms have lots of employees with different political leanings, therefore making it likely that many campaigns would find these companies’ employees amongst their donors. It strikes me as odd, however, that all of these candidates, with the exception of Ron Paul, find their coffers flush with cash specifically from the financial sector. Perhaps it is because these companies and their employees depend on the Federal Reserve System to retain their market dominance, thus their jobs, and that system is high on Ron Paul’s list of things the government shouldn’t do.