Broken Windows and the iPhone 5

There’s been some buzz about a report suggesting that the iPhone 5 could, all by itself, give a significant boost to the US economy. I can’t judge how plausible the sales estimates are; but it’s worth pointing out how the economic logic of this suggestion relates to the larger picture.

The key point is that the optimism about the iPhone’s effects has nothing (or at any rate not much) to do with the presumed quality of the phone, and the ways in which it might make us happier or more productive. Instead, the immediate gains would come from the way the new phone would get people to junk their old phones and replace them.

In other words, if you believe that the iPhone really might give the economy a big boost, you have — whether you realize it or not — bought into a version of the “broken windows” theory, in which destroying some capital can actually be a good thing under depression conditions.

Of course, it’s nice that the reason we’re junking old capital is to make room for something better, not just for the hell of it. But you know what would also be nice? Building useful stuff like infrastructure employing labor and cash that would otherwise sit idle.