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Apple compared to "Soviet Russia"

October 20, 2005

Tags Production Theory

The cover story of Time ($$) this week discusses Apple and Apple CEO Steve Jobs. The basic frame of the article is that "Conventional wisdom says its strategy is wrong", but then goes on to explain how its strategy has been working. The strategy referred to here is that Apple makes its own hardware, OS, apps and consumer-electrics devices (iPods).

Here is the bit relevant to economics:

Why would anybody run a business like that? If you follow conventional wisdom, Apple is doing it all wrong. Try to do everything at once, and you won't do anything well. Worse the way Apple operates is not how you're supposed to foster innovation, or not in the U.S., anyway.

Under the traditional, capitalist, Adam Smithian model, new and better things arise as a result of freedom and open competition, but Apple is essentially operating its own closed miniature techno-economy. What is this, Soviet Russia? Why not license Mac OS X to Dell, see what hardware it comes up with and let the market decide whose ride is flyest? Is Steve Jobs afraid of a little healthy wrasslin' in the great American bazaar?

The article thus attempts to turn this story of free market entrepreneurship into a tribute to coercive central planning! (The article spends quite a bit of time describing Jobs' dictatorial style... Though as far as I know he has had no one shot. See Mises on the "chocolate king".) This is frustrating and absurd, but that is not why I'm posting this.

This excerpt seems to me an instructive example of the popular understanding of the market (and of socialism). Big companies are like socialist countries. Socialist countries, conversely, are like big companies, (one wonders why leftists tend to hate big companies and love socialist countries if they are so fundamentally similar). There are also lessons here about the damage done by neoclassical antitrust theory. The idea of "freedom and open competition" in the article sound suspiciously like the infinite price-taking firms of neoclassical theory. Please draw your own lessons in the comments.

Here is my question: If this is really how people think, how we can better communicate what really constitutes a free market? What change in thinking would make it so that no one would ever think of comparing Apple (or any other large entrepreneurial company) to the Soviet Union?

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