Apple’s iPhone neutralizes the Federal Reserve’s Phillips curve

So much that we consider expensive in the present will be incredibly cheap in the future. There are so many examples of this, so many previous examples that so many readers know well (remember to call “long distances”?), but since so many readers have Apple iPhones, it’s best to locate one of the surely countless examples that come from the supercomputer that fits in our pockets. Consider iMovie.

And when you think about it, think about how when Toy Story (a Pixar production – one of Steve Jobs’ accomplishments while away from Apple) was created just over thirty years ago, the 81-minute film required a huge amount of time and money to make. Maya Phillips in New York Times exhibitions that “a single frame” of the film “could take anywhere from the better part of an hour to a full 30 hours to render, and there were over 100,000 frames to work on the film”. Lucky for Pixar and Jobs that Toy Story made $400 million at the box office.

Fast forward to the present and iMovie makes it possible for anyone with an imagination to make a real movie. At the high end, we’ve seen this through writer Steven Soderbergh and the use of three more primitive iPhone 7 phones to shoot Unreasonable in 2018. Soderbergh did it again with Bird flying high in 2019.

With Soderbergh, stop and think about what it means to use the technology available to all of us for so little money to overcome the barriers to entry in the film industry. Prohibitive costs meant that very few, very rarely, managed to make films.

Consider Brian Grazer, producer of financially successful films including Splash, Parenthood, A Beautiful Mindand Apollo 13. Despite its impressive track record, Grazer noted in his 2015 book A strange mind that it was rejected for film projects 90 percent of the time. He later said that “Instead of writing the word HOLLYWOOD on the famous sign in the Hollywood Hills, they could have spelled out: NO-NO-NO!” Which requires rotation.

The Phillips curve is in the title of this opinion piece. The Curve is widely accepted wisdom among economists, especially Federal Reserve economists. It is informed by the theory that economic growth has an inflationary downside, as rising demand exceeds supply.

At first sight the theory is absurd. This is because all demand is a result of production. If individuals demand more market goods, it is because they have produced market goods in commensurate quantities. Supply and demand mirror each other.

Beyond that, let’s never forget what economic growth is. It’s increased productivity, and the latter is a result of the combination of producers and capital figuring out all new ways to produce much more for much less. The iPhone itself looms large here: the combined technology found in them (since the very first one in 2007) would have cost literally millions of dollars not long before the supercomputer hit the market.

What the iPhone itself tells us is that economic growth (i.e. productivity) is the surest sign of falling prices for everything, far from leading to higher prices. The Phillips curve is backwards.

Bringing it back to the movies, it was prohibitively expensive for aspiring filmmakers to simply unlock an extremely expensive camera to begin the filming process, hence Grazer’s lament about what the Hollywood sign should say. No more.

iPhone owners can not only make movies on them, but they can create great trailers on the cheap, and that have hints of Soderbergh in them. Even though the Phillips curve has always been fake, it’s nice to see the iPhone eviscerate it in so many ways.