Picture of the Day: Thanks to Capitalism, These Gadgets Now Fit in your Pocket

(Hat tip AEI’s Prof Mark Perry)

Capitalism has brought about dematerialization, which has converged the benefits of manifold technologies to fit in a single devise.

Quote of the Day: Manufacturing Fetishism

The rear cover of the iPhone tells you it is designed in California and assembled in China. The phone sells, in the absence of carrier subsidy, for about $700. Purchased components – clever pieces of design such as the tiny flash drive and the small but high-performing camera – may account for as much as $200 of this. The largest supplier of parts is Samsung, Apple’s principal rival in the smartphone market. “Assembled in China” costs about $20. The balance represents the return to “designed in California”, which is why Apple is such a profitable company.

Manufacturing fetishism – the idea that manufacturing is the central economic activity and everything else is somehow subordinate – is deeply ingrained in human thinking. The perception that only tangible objects represent real wealth and only physical labour real work was probably formed in the days when economic activity was the constant search for food, fuel and shelter…

When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be.

Physical labour incorporated in manufactured goods is a cheap commodity in a globalised world. But the skills and capabilities that turn that labour into products of extraordinary complexity and sophistication are not. The iPhone is a manufactured product, but its value to the user is as a crystallisation of services

This is from British author and journalist John Kay debunking the mainstream predilection to use manufacturing as a measure or excuse to promote mercantilist policies (hat tip Professor David Henderson)

Video: Consumer Surplus From Internet and Mobile Technology

Consumer surplus, according to Wikipedia.org, is the "difference between the maximum price a consumer is willing to pay and the actual price they do pay. If a consumer would be willing to pay more than the current asking price, then they are getting more baenefit from the purchased product than they spent to buy it they are getting more benefit from the purchased product than they spent to buy it." (italics added; hat tip Professor Russ Roberts)



The video shows how people tend to see consumer surplus from modern technology powerful enough for them to 'refuse' a ($1 million) monetary offer in exchange for withdrawing access to these technologies. [my guess is that polls aren't taken seriously]

Yet, ironically, the same people in the video would wait for falling prices from new innovative products in order to adapt to them.

Also, the video shows the vital role played by the "rich" in the diffusion of these newly discovered technologies into society, or how the rich, as buyers of the first order, creates incentives for producers to mass produce for widespread use.

The beauty of laissez faire capitalism.