David M. Brown's Blog

January 5, 2012

A response to responses to @DavidPogue’s response to those who think costs of gadget components are total costs

Filed under: Economics,Society and culture,Technology — davidmbrowndotcom @ 9:05 pm

Readers who say that New York Times technology reviewer David Pogue is missing the point of gadget tear-downs when he rebuts the claims of those who miss the point about total costs of gadget production miss the point. Sure, some persons know that retail prices are not mere markups of component costs. But many do lack a good grasp of what it takes to make things, to run a company or to earn an honest profit, or what kind of policies would make it easier for capable firms to earn and hire. Some of these insight-deficient persons read New York Times articles. Some write New York Times editorials. Some are presidents of the United States.

It’s obvious that a computer tablet may sell only for a price way below average cost of production if few persons want it at “the market price” for more popular tablets, thus requiring its maker to slash prices to get rid of a warehouse stockpile–or if, as in the case of Amazon, the producer is selling a lot more than the gadget in isolation and therefore both expects and will accept a short-term loss in exchange for a longer-term gain. But contrary to what some readers of Pogue’s article imply, prices are not merely “set” by Values floating in the air. Prices are the results of complex interactions that include the costs that a producer confronts and that he expects to confront, his estimation of demand, broader economic conditions, whether there was an earthquake in Japan last week, and the values and purposes of both seller and buyer as they participate in a market or decide to refrain from participating in it. Nobody would “value” a typical car at thousands of dollars, or pay that much for one, if, as a result of technological advances and market processes, it were to become as cheap to produce a Chevy as to produce a pencil.

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2 Comments »

  1. All future christmas gifts to people who believe this should be made in raw materials or components only.

    Comment by Alan Brown (@answerisliberty) — February 3, 2012 @ 6:40 pm | Reply

    • I second the motion. All who favor, say Aye. The Ayes being unanimous, the motion is approved.

      Comment by davidmbrowndotcom — February 4, 2012 @ 4:58 pm | Reply


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