Tuesday, January 03, 2006

$200 Computers?

Pajamas Media reports:

It may be just another wave of a rumor that has been swirling for some time, but the Los Angeles Times writes in its predictions for 2006 that Google will make a big announcement next Friday at the CES computer show in Las Vegas. According to the newspaper, Larry Page, one of Google's co-founders, will unveil the company latest 'thing': a cheap PC -allegedly in the $200 range- to be sold at Wal-Mart and other big retailers, running Google's own operating system and applications.

Prices tend to come down in a free market. The first ballpoint pen cost $25; now you can buy them for pennies. The first transistor radio cost $150 -- and this was back when $150 was worth at least $1,150 today. In the last quarter of the 19th century, when America was on the gold standard, prices fell and the standard of living rose. Today we are not on the gold standard, and inflation masks falling prices somewhat.

Back in 1995 I bought an IBM computer that had I think 2GB and 266 mhz processing power for $3,000, with printer. I told an acquaintance at the time that the price would come down radically. “Never!” he shouted. Instead, he argued, the companies would continue to add features to keep the prices high. They won’t lower the price because they’re greedy!

Well, I’m sure IBM would keep the price at $3,000 if they could. Their job is to make a profit for their shareholders. Unfortunately for them, there is always a competitor willing to cut the price in order to steal market share. The IBM computer I bought this year has 80GB, a Pentium 4 chip and a 19” flat screen monitor. It cost about $1,000. I’m sure there are better deals out there.

The pace of technological innovation would not be nearly as fast if rich people weren’t so selfish. When a new thing like plasma TV comes out, rich people spend $10,000 on one. They think they’re better than everyone else! They have to one-up the Joneses! Conspicuous consumption!

That big money that rich people spend so vainly is reinvested by the TV makers to produce more plasma TV’s. Increased production brings the price down. In another 10 or 15 years we’ll all have plasma TV’s. Poor people in inner city ghettoes will watch on their plasma TV’s as Jesse Jackson orates in bad poetry about how tough they have it.


Jennifer Snow said...

*loves her computer, which she paid <$200 for because most of it was free, given it came in pieces*

In fact, I think I love my computer more than I do most people. Except when it crashes. Then I don't love it.

zama202 said...

"When a new thing like plasma TV comes out, rich people spend $10,000 on one. They think they’re better than everyone else! They have to one-up the Joneses! Conspicuous consumption!"

I think that will be the motivation for some rich people but not all. There are high income individuals that want the best in life and that includes the state of the art in everything. I don't think that needs to be second handed.

Myrhaf said...

I agree, zama202. I should have been more clear that those statements with exclamations are just the kind of things you hear about the rich. Those aren't my explanations. Buying new inventions enriches life. It is completely moral and defensible. And everyone does it, but the rich get to do it first.