"I, Phone" and the power of examples in economics

As I’ve been reading a lot of books on economics in the past year or so, one of the things that is interesting to me is how often the most basic examples crop up over and over again. Quotes from Adam Smith are often the most commmon such as the following quote from The Wealth of Nations, probably his most famous:

Every individual…generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

And the following quote, probably the second most famous:

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

Another famous example that crops up time and time again comes from Frédéric Bastiat, who described the fallacy of the “broken window” in his famous essay “That Which is Seen and That Which is Not Seen”. Henry Hazlitt later expounded on this same basic example in his book Economics in One Lesson. Hazlitt thought the basic lesson of economics was so critical, he attempted to sum it up in one sentence:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Another famous example that crops up time and again is the story of how a pencil is manufactured, popularized in the delightful short story called “I, Pencil” by Leonard Read. In this story, told from the point of view of a simple lead pencil, the pencil describes his “genealogy” and illustrates, somewhat indirectly, how global trade and the price system work to make pencils so cheap and the production and distribution of those pencils possible. Milton Friedman used the same example of the lead pencil in his 1980 PBS series Free to Choose.

Russ Roberts also used the example of the pencil in his book The Price of Everything. I’ve posted about this book before, and still can’t recommend it highly enough. This book and the podcast where Russ Roberts discusses the book and its ideas with Arnold Kling have been important thought-provoking stimuli for me.

So, to get to the point of my post, I have been thinking quite a bit about how to write an essay (or maybe something longer) called “I, Phone” which would be an updated version of the “I, Pencil” essay. The essay would describe the components that make up an iPhone, both hardware and software. But more fascinating would be tracing the history of the scientific and technical progress that was necessary to be achieved before a device such as the iPhone was possible. Just looking at the software, you can begin to imagine tracing back some of the core OS to the original invention of Unix at Bell Labs, the creation of the Mach microkernel at Carnegie Mellon, the creation of Berkeley Unix (later BSD) at Berkeley in the 1970s, the invention of Objective-C (the main programming language used to create most iPhone applications) by Brad Cox in the 1980s, and so on.

More on this later.

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More on terminology

Steve Horwitz writes in The Freeman about whether or not the term “capitalism” is outdated and should be replaced with something else. The articles are here and here. This is related to an earlier post I made on the insufficiency of our terminology when discussing economic and political issues in particular.

This is an issue that I find very fascinating because terminology can so often be misused, and often the misuse is intentional to further a political agenda (see the book 1984 for a classic example on how the government intentionally abused the language to further its goals). Take the concept of “network neutrality”. Sounds hard to oppose, right? Keep our content distribution networks “neutral” so certain content providers don’t have an unfair advantage over others. I wasn’t really sure what to think about net neutrality until I read an article (can’t remember what the source was but it was similar to this article from the Tech Liberation Front) arguing that the proposed rules for net neutrality were essentially price controls.

The price and wage controls that were imposed by Nixon in the 1970s to try to combat inflation are now widely seen as a failure, so the term “price controls” now carries a mostly negative connotation. Similar to the net neutrality proposal, the pending health care legislation that is being debated in the House and Senate contains all kinds of price controls, including (as one tiny but illustrative example) the ridiculous amendment forcing health insurance providers to make mammograms available in health insurance plans “free”. So why don’t we refer to the pending legislation as the health care “price control” bill, instead of the “health care reform” bill?