iPhone Price Cut – Economics at Work

I just stumbled upon this article in Reason Magazine ( be sure to read the rest of the article):

Sure, it’s good economics—even if it’s bad PR, Apple did manage to sell 1 million iPhones in 74 days-but is it fair? Is it just? To find out, we need look no farther than question posed by rubber bracelets everywhere: WWJD? Not What Would Jobs Do?, of course, since we already know: he’d give in to the whiners and offer $100 credits good for Apple products in the future.

The parable of the workers in the vineyard is the Bible’s final word on this point, and takes a much harder line than Steve Jobs. Jesus tells the story of a group of workers looking for employment. A few are hired in the morning for one denarius. As the day drags on, more and more workers were hired, with the last batch brought to the field only at the eleventh hour. Then it comes time to cash out:

The workers who were hired about the eleventh hour came and each received a denarius. So when those came who were hired first, they expected to receive more. But each one of them also received a denarius. When they received it, they began to grumble against the landowner. ‘These men who were hired last worked only one hour,’ they said, ‘and you have made them equal to us who have borne the burden of the work and the heat of the day.’

“But he answered one of them, ‘Friend, I am not being unfair to you. Didn’t you agree to work for a denarius? Take your pay and go. I want to give the man who was hired last the same as I gave you. Don’t I have the right to do what I want with my own money?”

As one writer put it: “if you’re still upset about ‘paying too much’ for your iPhone, take it up with the man upstairs.”

Or maybe this is all just an extraordinarily elaborate PR strategy after all. Consider a customer we’ll call “Katherine.” She would never wait in line for a gadget. She’s just not quite geeky/status-seeky enough. And she doesn’t track consumer electronics prices, nor does she browse in Best Buy or the Apple store for fun. But thanks to the hullabaloo about the price drop, she now knows that Apple phones are “cheap.” Hard to imagine the fact would have penetrated her consciousness so quickly or so thoroughly as it has without a controversy to reinforce the message.

Perhaps Steve Jobs did have the parable of the workers in the vineyard in mind after all. After all, the tale wraps up with that famous phrase, certainly applicable to iPhone prices today: “So the last will be first, and the first will be last.”