A Stitch in Haste

This story will no doubt incense the malcontents who are still fuming over Apple's sloppy, but in no way immoral, timing of a significant price cut for the iPhone:

After taking apart the nano, iSuppli estimates that all the parts inside cost Apple $58.85 for the $149 model with 4 gigabytes of storage capacity, and $82.85 for the 8GB version priced at $199. For the lower-priced model, that would represent a drop of more than $13 per unit in costs compared with the 4GB nano that Apple introduced a year ago. That's also more than $31 cheaper per unit than the parts in the original 2GB nano introduced in September, 2005.

Charging $150 for $60 worth of stuff? What could possibly by more oppressive? Surely there's an antitrust violation in there somewhere. Just ask Microsoft.

Of course, the devil-slayer is in the details:

iSuppli's estimates don't account for nonhardware costs, including software development, intellectual property, packaging, final assembly, and distribution.

Stated differently, iSupply's statistics are totally worthless (except to a handful of trade specialists, engineers and investment analysts).

Still, the Big Lie of Marxist-Leninism and its offspring (modern socialism, the New Deal, antitrust law, Michael Moore, etc.) is precisely this notion that a manufactured good is nothing more than the sum of its components — the little pieces and the little people who put them together (after being shown how). The omissions — especially "development" but also marketing, financing, etc. — all the intangibles to which one cannot point as one can point to a button or battery, are somehow not "real components" and are therefore not "real costs."

From there, it is a short step to concluding that what's left over, even after subtracting intangible costs (i.e., "profit"), is even less "legitimate" a component of a good's price than the intangible costs of R&D or marketing. Profits cease to be a return to a factor of production, on an equal footing with wages, rent and interest, but instead are a "residual." Profits, in this model, are not ascribable to a "component" of the good being sold, and are therefore not "earned" in the way that the seller of a component or worker on the assembly line "earns" their share of the price of the final good.

Wholly preposterous. And yet that is precisely what almost every single introductory economics student in every capitalist economy is taught.

Entrepreneurship — innovation and risk-taking — is a factor of production no different in principle, or in ethical underpinning, from labor, capital or land. And the return to entrepreneurship — profit — is no different in principle, or in ethical underpinning, from wages, interest or rent. iPods do not grow on trees, and those who brought them into being are exploiting no one by selling them — at any price to any willing buyer. By definition, not a single supplier, employee or customer of Apple, or of any other entrepreneurial venture, has ever been "exploited" (outside of collusive rent-seeking conspiracies with government — which of course is not "capitalism" but rather the most insolent form of anti-capitalism). "Exploitative capitalism" is simply an oxymoron.

Add that to your intellectual playlist.

(Via Slashdot.)