Apple\’s new prices

Gadget experts said Apple\’s move was a brave one but that the improved technology inside the new machines was not good enough to explain such a large price increase.

OK,

The company said currency fluctuations, with pound falling in value, has forced up its cost.

Aha!

This will of course be execellent news for the indigenous computer manufacturing industry…..oh, yes, well, there\’s a little problem.

However, all goods are substituable (in the economist\’s sense at least. An abacus is a substitute for a calculator, as is pen and paper, as is simply not doing the sums at all) and such rising prices will cut imports and increase domestic production and exports.

Which gets us out of the recession faster which is why having a currency that can indeed depreciate such a lovely thing to have.

12 comments on “Apple\’s new prices

  1. Isn’t it the imports that make us rich?

    Tim adds: Indeed it is. Doesn’t change the point that a floating currency is a great thing to have.

  2. On that argument, the Titanic was floating all the way down until it reached the seabed. Ah, the limits of metaphor.

  3. “Isn’t it the imports that make us rich?”

    Indeed a falling exchange rate means we are getting poorer — the world is demanding more of our goods in order to send us their goods.

    What I’ve never understood is how Tim thinks all countries can devalue against each other in order to ease the recession. I think basically he is calling for generalised inflation (as that is the main way such a thing can happen) – an amazingly common thing now from right-wing pundits (see Telegraph almost ever day).

  4. Isn’t the idea that if the US and UK (and other importers with debts) devalue versus China and Japan (and other exporters with savings), then the Chinese and the Japanese will magically become Anglo-American and start using their massive savings to buy cheap stuff from us?

  5. Current: no, it’s not rubbish, on the labour side at least – nominal wages are, very very obviously and empirically, sticky.

  6. john b…

    Yes, wages are very sticky. So however are many other prices.

    Looking only at wages is looking at only one part of the problem.

    Tim is right in saying that falling prices will stimulate exports. Ed is right to say that there will be a fall in imports.

    There are other effects too. The structure of capital and investment will change.

    So, which effect will predominate? Keynesian economics says that sticky wages predominates. However this is based on some very dubious assumptions. Especially the “capital homogeneity assumption”.

    Read Roger Garrison’s stuff to learn more. Type his name into a web browser and read his personal site.

  7. devalue versus China and Japan (and other exporters with savings), then the “Chinese and the Japanese will magically become Anglo-American and start using their massive savings to buy cheap stuff from us?”

    Except everyone is saying Japan needs to devalue.

  8. Current:

    My guess is that even the shameless types inhabiting mainstream economics blanched at the prospect of having to make forecasts of prices based equations involving a presumed
    “modulus” of elasticity. Thus, “sticky.” Not exactly synonymous (but it’ll do when you’re stuck

    Of course, there is actually science connected with even the “sticky” metaphor (rheology and all that) so, I predict, when the connection gets too close for comfort, they’ll find refuge in
    “ickey” and “yuckey.”

  9. Gene – The stickiness can be measured. The problem is that it is one of the few things that can be.

    The other things I mention can’t be measured at all well. Here lies the epistemological problem.

  10. Gene – I’ve read your other posts on Tim’s blog. I see you are an Austrian too and understand these issues.

Leave a Reply

Name and email are required. Your email address will not be published.