Party Better Than iPhone?

iPhoneThis morning’s New York Times column by Paul Krugman discussed a J.P. Morgan research note that said that the release of the new iPhone could stimulate the economy over the next quarter by up to a half of a percent of GDP. Krugman then went on to explain that if you accept this concept that a bunch of people buying iPhones can stimulate the economy, then you are a Keynesian.

On the meta-level, Krugman is really punching below his weight. I think his readers are at the level that this should be obvious, but maybe I am over estimating his audience.

I have a question about the article, however, which I think is important and something we should all think about. I understand that our recession is mostly due to private debt. People are paying down their debts rather than buying stuff, and so fewer people are employed. Further, I understand that the launch of an exciting new product (Not that I really think the fifth version of anything meets this definition.) can get people to spend money that would normally go to their student loans. But I’m not sure how effective this form of stimulus will be.

The main problem is where exactly the money will go. I assume that most of the money for an iPhone gets passed straight through to Apple. This makes me think that most of the money spent on these iPhones will not go to higher wages or more employees. Instead, it will go to the wealthy owners of Apple. Sure, some of this extra wealth will be spent. But most of it will go to increasing the huge pile of money currently looking (mostly in vain) for something good to invest in.

Economics makes my brain hurt. I never know if I’m making sense or not. But it seems to me that the $399 would be better spent (as far as the economy is concerned) by throwing a party.

Afterword

I have read the J. P. Morgan research note and it doesn’t tell me anything that helps. It is possible that what I’m talking about is included in the model. Regardless, I would love it is some economist would straighten me out, but I doubt many of them come around here. Economists are known Don Quixote haters.

Update (16 September 2012 10:21 pm)

Set by a friend:

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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