think different

A Gizmodo commenter with the handle OMG-PONIES has a lot to say on the subject of 'consumerism' when it comes to Apple's iPhone. Not having the questionable benefit of a formal education in economics, I'm quite curious to learn if the opinions expressed are what exemplifies the contents of a mainstream education in the dismal science.

"That's not "highway robbery"; it's a sound price point. If the price was egregiously high, people would not buy it because it would be too much of a sacrifice. If the price was too low, it would lose its cachet as an aspirational good and people would not buy it. [Veblen's status goods?]

Compare it to the Freakonomics example of Magnolia Bakery in the West Village. Magnolia sells cupcakes for a couple bucks a pop. They're decent cupcakes, but each one only costs a quarter to make. They were featured in an episode of "Sex & The City", were written up in the New York times, and mentioned in a popular SNL short. As a result, at any given time, there is a line out the door for Magnolia cupcakes.

Logic says that Magnolia can raise the price even higher because there are people willing to wait 1/2 an hour for a cupcake at that price. Theoretically, there is excess demand. However, by raising the price, fewer people will be willing to wait in line. The line adds to the cachet of the product. If they lowered the price, the cupcake would become a bargain and lose its cachet. It would not be a distinctive product.

It's about finding a balance. The buyer should feel a bit of sting in the wallet to convince him/her that s/he is getting value for the money. Too much and it becomes too painful. People shouldn't worry about their rent payment to buy the iPhone; let them charge the cost and pay it off over 10 years time. By the same token, you don't want every schmo to be able to get one because then the iPhone loses its distinction.

Consumerism isn't driven by a desire to conform; it's driven by a desire to be different."

It kind of reminds me of the pointless argument of whether human action is spurred because of the actors' desire to improve his situation, or his desire to remove uneasiness as much as possible. Either way, we know action is purposely driven, and the science of economics, cannot render a valid scientific opinion as to what constitutes the psychological factors behind any action.

As such, the unscientific topic of 'Consumerism' can only be said to represent the fulmination of the collectivist creed of hubris, ostensibly lending an opponent of freedom a scientific soapbox from which he launches a diatribe against other people doing what they believe serves their best interests.

FWIW, he also thinks that "The lead proponent of free-market theory is the Chicago School of Business, which believes in absolutely no controls on the market and advocates, to a large extent, an abolition of consumer protections."

'Nuf said.

the housing that education built

Last week while exploring some city neighborhoods to gauge the current trends in rental and sales numbers, I was shocked into the realization of how much of a factor that free public education plays into the price of city housing.

Obviously, there is the well known rule that housing in districts known to have "good" public education is in higher demand relative to housing located in districts known to have inferior schools.

While that is certainly an important component of what "adds" value to housing, I was actually focusing more on the counterfactual speculation if public education in general leads to increases in the price of housing solely due to the effect that subsidized education leaving over increased funds available to bid up housing prices.

I find this train of thought interesting to one such as myself, living in a micro-neighborhood where a relatively higher number of students attend yeshiva, a form of private schooling. Looking forward at the prospect of shelling out 10K to send my son to kindergarten is a bit daunting in light that I would like to have a few more kids and not live in debt slavery.

What I realized that day while doing my market homework, when I saw lousy apartments in run-down neighborhoods were paying rents in the ballpark of what I'm paying in this more affluent manicured-front-lawn neighborhood made me think of the factors keeping prices lower around me and higher in those "good" public school neighborhoods are greatly affected in that the average joe around me share higher education expenditures and can't afford to spend as much for housing.

If effect this means that to some extent, the existence of free tuition is benefitting a class of building owners who reap the largess of the taxpayers who subsidize public education to their indirect benefit of increased housing prices.

The people who stand to lose from this proposition are the young professionals just out of school who have yet any substantial cash savings to speak of, nor any [grand-]children which could possibly benefit from this arrangement.

In a way, this also serves to keep the religious, private-school attending crowd living separate from those districts in which it is more common to utilize the public school system making adherence to the religious ghetto more rigid than it would be otherwise.