Would you rather pay $399 now and $20 a month for two years, or $199 now and $30 a month for two years? If you are a rational consumer, you probably prefer the $399 deal. The other one is like a $200 loan at 20% interest.
And yet, according to a long and meandering article from yesterday’s New York Times on the madness of cell phone pricing schemes, we wacky Americans preferred the iPhone at $199 with a $30 data plan over the previous deal of $399 with a $20 plan. I’m not sure I buy that. iPhone sales could have increased for a number of reasons, including the fact that the $199 phone was an upgraded version. Still, the Times piece does bring up a number of peculiarities about the economics of cell phones.
In case you live in a cave, I’ll explain that here in the Land of the Free we "buy" heavily subsidized cell phones from the companies who run the cell phone networks and in exchange agree to a service contract with that network, generally for two years. The cell phone company takes a loss on the phone and makes it up on the service end.
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This time last week I created one of my more unique posts. A commenter suggested that if I was in search of a topic I could write about what I thought of the "ballooning national debt." I usually try to keep closer to the personal 
finance theme than that, but a request is a request. Gotta keep the readers happy.
The first thing to say is that anybody who confidently predicts any particular result from borrowing so much money is full of it. Nobody really knows what the long term effects are or what will happen next. We can speculate on it, and some prognostications may be more reasonable than others, but ultimately these are all just educated guesses.
With that disclaimer out of the way, let’s start with the big picture. Below is a chart of the US Federal Debt as a percentage of GDP. I got the data from the useful site usgovernmentspending.com.
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There is a movement amongst earnest policy wonks that might be called Nanny State Light. It’s a compromise position between full-on centrally planned we-know-what’s-best-for-you 
control and you’re-on-your-own-kid libertarianism.
The idea is that instead of making people do the right thing or hoping that they do what’s best on their own, you give them a little nudge and hint in the right direction. This is, I am told, the topic of a clever and popular book, Nudge, which I haven’t yet gotten around to reading. (But I bought a copy a few weeks ago. That’s something, isn’t it?)
The latest scheme along these lines to hit the media is in today’s Wall Street Journal. Apparently, all we need to do to get people to save more money is to send them a text message reminding them to save more money.
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As I wrote on Friday, lists of lessons we have learned from the current economic troubles have been enjoying a vogue lately. A dim view of my fellow humans prevents me from being so optimistic as to believe that we are going to emerge from this fiasco meaningfully wiser. But I do have a list of lessons that we could learn from recent experience. But probably won’t.
In the best case scenario, regulators are just as smart and capable as the people they regulate. And, just to be clear, best case scenarios are rare. Many of the complaints about how the Fed, SEC, et al. blew it by not foreseeing and preventing the Wall Street meltdown are unfair. If the thousands of people making seven figures at meltdown ground zero didn’t see it coming, why would we expect the hundreds of government employees watching them from the outside to pick up on it?
25 years is not forever. Amongst my many brilliant theories is this: especially in the realm of culturally significant business phenomena, if something has been going on for more than 25 years people will mistake it for a permanent always-has-been-always-will-be thing.
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The Great Recession began, according to the National Bureau of Economic Research, on December 1, 2007. But it didn’t become Great until September 15, 2008. That’s the day Lehman Brothers filed for bankruptcy and when what might have been a garden variety slowdown became an all-out panic on Wall 
Street.
Now that the GR seems to be abating, and on the occasion of the first anniversary of the meltdown, journalists, pundits, and even bloggers have spent a lot of time lately summarizing the lessons we have learned from the experience.
Phillip Moeller at US News & World Report gave us 6 Money Lessons of the Great Recession. The first is that "the experts are often wrong." Apparently many used to think that the term expert meant an omniscient seer of the future. Moeller also tells us that "everything is negotiable."
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Economics, Media | Frank Curmudgeon | 
November 16, 2009 12:59 pm | 
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