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Did Amazon Just Unveil a Keynesian Smartphone?

June 21, 2014 in Economics

By Christopher Westley


Amazon’s new Fire phone is generating much buzz since being announce this week, and for good reason because it appears to be simply the latest impressive product a very impressive company has offered to consumers seeking to “alleviate the felt uneasiness” in their lives (to borrow a phrase from Mises). Will the Fire phone become as ubiquitous as the Kindle?  We’ll see.

Yet it already has detractors.  Bloomberg blogger Matt Levine disparagingly called it a “weapon of mass consumption,” which, if true, would seem to make the phone a far better contributor to civilization than nukes stockpiled by insecure nation-states.  Levine is cautious about one amazing feature of the Fire phone: the ability for brick-and-mortar shoppers to point the phone at a product to buy it from Amazon instead.  But is this such a bad thing?  The resulting downward pressure on prices will prove to be glorious for consumers, offering them relief in a persistently sluggish and uncertain economy.  Will the Fire phone provide yet another impetus for Mrs. Yellen to heat up QE to previous levels?  (Don’t think the idea has not already crossed the minds of the managers of our monopoly money.)

Still, Levine is worried:

[S]hopping convenience may come at a high cost for some people. The more removed people are from purchasing with cash the more they tend to overspend, behavioral finance experts say. Research shows that when people pay with plastic they can spend 20 percent to 30 percent more than when they use cash, says Denise Hughes, a financial coach based in San Carlos, California. Casinos use chips, behavioral experts note, to also remove the regulating “pain of paying.”

Levine’s post goes downhill from there, with the predictable Dan Ariely quote and a puritanical warning from the head of the Center for Internet and Technology Addiction that the phone may provide “an instant conduit to gratify yourself”—as though using it can lead to dirty actions that, in another context, you might confess to a priest.

So silliness abounds.  Still, it seems to me that consumers making emotional decisions in the market pose much less of a social problem than (say) voters making emotional decisions in elections, although the behavioral economists and nudge theorists appear to be much less concerned about the latter.  But hasn’t the whole point of New Keynesian monetary and fiscal policy since 2008 been to penalize saving and increase consumer demand?  If the Fire phone actually …read more


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