#Plastic Fantasy

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My son has been saving money to buy a new flat panel TV... He's going to replace his 19" flat panel, which is about a year old now, with a 32" flat panel...

I can't complain too much because I will become the recipient of a 19" HD wide screen flat panel monitor for my trading platform ;)

But here's what I find interesting... The fact that electronics in our society/culture seem to follow different rules, economically speaking, than most everything else we use.

Of course I am speaking of the constant deflationary environment that exists in the electronics field... While the government and the federal reserve tell us that deflation is the biggest enemy in the world, capable of destroying our economy, electronics seem to thrive in a deflationary environment...

Deflation, 'they' say, could potentially spiral out of control and cause consumers to put off purchases while seeking ever lower prices. And that this self feeding cycle of destructive deflation could doom us, potentially, to a depression...

So why does the electronics sector not suffer this fate? Could it be that somehow the electronic sector is different 'by design'?

Lets take flat panel TVs as an example, though this applies to just about everything electronic, from iPods to stereos to GPS systems and cell phones, etc...

My son paid 300.00 about a year ago for his 19" flat panel HD wide screen TV... Currently the low end price for those TVs is closer to 150.00 / 160.00... That is a HUGE one year price decline, in my book. It seems now he can buy a brand new 32" HD wide screen flat panel TV for just about the same amount of fiat currency that a year ago he had to pay for a 19"

So the apparent lesson here is that one can upgrade electronic devices frequently and keep paying the same 300.00 or 500.00 or 800.00 over and over again for the same product but each time you buy one for the same amount of money it's just a little bigger, or just a little smaller, a little more 'full featured', a little faster or a little fancier...

The more people who 'want' a HD wide screen flat panel TV the cheaper they seem to become... How does that supply and demand work anyway?

"The power of supply and demand was understood to some extent by several early Muslim economists, such as Ibn Taymiyyah who illustrates:"

"If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down."[12]

"Firms will produce additional output as long as the cost of producing an extra unit of output is less than the price they will receive."

"The demand schedule is defined as the willingness and ability of a consumer to purchase a given product in a given frame of time."

Ok... here's something important, in my opinion...

"At least two assumptions are necessary for the validity of the standard model: first, that supply and demand are independent; and second, that supply is "constrained by a fixed resource"; If these conditions do not hold, then the Marshallian model (of supply and demand) cannot be sustained."

It is my own theory that the entire electronics industry is a grand experiment in economic, and consumer, manipulation...

One in which prices drop with an increase in demand and rise with a decrease in demand... Which, if I understand this correctly, is pretty much the opposite of what should happen... The opposite of what happens with say oil...

Again, IMO, this is important...
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"Firms will produce additional output as long as the cost of producing an extra unit of output is less than the price they will receive."

supply must/should be "constrained by a fixed resource"

So just what is it that 'they' sell us over and over again at ever lower prices regardless of demand?

When it comes to electronics it's normally a chunk of 'formed' plastic with a few electronics attached...

WTF?! Who are we anyway The Jetsons?

If you think about that wonderful 'stuff' called plastic you quickly realize that it can be melted and formed into almost any shape imaginable by man... It can even be melted down, reshaped into something totally different and sold again... So that, in essence, not ONLY can 'they' sell us the same product over and over again but, in theory, you could end up buying the exact same plastic that was in the last one you bought!

Plastic and electronics are cheap... I, personally, do not believe they are "constrained by a fixed resource"...

My main point here is that it seems, to me, that much of our economy is based on selling consumers the same products over and over again, all made from plastic with scant electronics attached. As in toys, cell phones, video game systems, DVD players, computers, printers, faxes, TVs... I think you see where I'm going with this... Hell... an ever larger percentage of our cars are even made from the magic, highly profitable, 'stuff'...

I worry that the science of economic & consumer manipulation is all over us and that breaking it's grip would be a very difficult, if not impossible, undertaking...

Brought to us by GovCorp... As my friend @EmergentCulture likes to call it...

Greg