As my fiancee and I are shopping around for a new smart phone plan, AT&T just dropped a bombshell as far as the cell phone world goes: it’s getting rid of unlimited data plans for smartphones.  From the WSJ:

AT&T said Wednesday it will eliminate its $30 unlimited data plan for new smartphone subscribers starting June 7, when Apple Inc. is expected to announce its latest iPhone. The plan will be replaced by new offerings costing $15 an month for 200 megabytes of data traffic or $25 a month for 2 gigabytes. AT&T says 98% of its customers use less than those amounts. Users who exceed 2 gigabytes of usage will pay $10 a month for each additional gigabyte.

Logically, it would seem to make a lot of sense for customers to like this.  If 98% of them don’t use this much data, then that’s $5 (or more) per month cheaper for them to use.  Moreover, it captures the negative externality that some cell phone users place on others – that is, they’re overconsuming the network bandwidth and not paying for it.

On the other hand, I see serious potential backlash.  First, those that develop media-heavy applications, particularly the MLB’s baseball game streaming application and other such developers will likely use a ton of their users.  Second, many users will psychologically face some stress now in deciding what to do with their phones, and may potentially spend time and energy considering which applications to use at which times.  One of the joys people seem to get out of smartphones (I don’t have one myself, but what I observe) is that you can do whatever you want with it, whenever you want to.  If all of a sudden you have to keep a close eye on the bandwidth meter, things become a little more constrained.  Now having a smartphone may require keeping an eye on a variety of different meters – you’ve got to check the battery frequently since these things are power-hungry devices, and you also need to keep an eye on your bandwidth meter.

Anyway, I see some pros and cons here.  Logically this makes a lot of sense, but I can see that some people would be pretty uncomfortable about this.  I am sure that Verizon and the other networks will have an interesting choice to make: either take this opportunity to hop on board with AT&T or take this opportunity to claim that AT&T’s network is so weak and overused that it had to start charging for bandwidth usage.  I hope, at the very least, that this will spur a bit more price competition from all of the major carriers.

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The following is a quote from Adam Smith (the economist) that I had never read before.  It’s a very apt way of describing a vast majority of politicians and “political” people in the modern era.  Though the quotation is quite libertarian, I think it applies just as precisely to Tea Partiers (who aren’t necessarily libertarian, but often portrayed that way) as it does to hard left Democrats.

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

For an interesting article applying this quotation, see this excellent article about a terrible proposed law.

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The Washington Post reports:

It sounded like a good idea: Provide a little government money to convert wood shavings and plant waste into renewable energy.

But as laudable as that goal sounds, it could end up causing more economic damage than good — driving up the price of raw timber, undermining an industry that has long used sawdust and wood shavings to make affordable cabinetry, and highlighting the many challenges involved in decreasing the nation’s dependence on oil by using organic materials to create biofuels.

In a matter of months, the Biomass Crop Assistance Program — a small provision tucked into the 2008 farm bill — has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation’s composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets.

This sounds a lot like the dumbest idea of 2009: “Cash for Clunkers.”  First, find a process that is relatively efficient (say, using leftover wood to make useful products, or, selling used cars to people who need them).  Next, make that process less efficient and more exciting (for instance, by taking the wood away from making useful products and instead using it in a relatively inefficient biomass-to-energy conversion, or, taking used cars and permanently immobilizing them so that no one will ever drive them again).  In both cases the government increases the price of products people need (wood products, cars) but claims it is doing something “green” while improving the economy.  Bogus.

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Greg Mankiw is looking for a new car for his teenage daugther.  He described the most recent findings of Consumer Reports:

Dead last was Chrysler. CU recommended zero percent of the Chrysler vehicles they tested. That’s right–zero. Second to last was General Motors. CU recommended 17 percent of GM models. By contrast, most other companies had half or more of their models get the thumbs up. Honda was the top ranked brand; CU recommended 95 percent of its models.

Is it any surprise that Chrysler and GM are now in the process of going out of business? From the perspective of the Consumer Reports advice, it looks like their business model was to count on the ignorance of the buying public about the quality of their products. Their bankruptcy should perhaps be viewed as a success of the market system. (emphasis added).

bankruptcy, car, chrysler, consumer reports, gm

Greg Mankiw writes, and I wholeheartedly agree:

The AIG bonuses now being debated in Congress and everywhere else represent about .001 percent of annual GDP. If a typical Congressman spent that fraction of a 2000 hour work year on the topic, it would consume only about 1 minute of his or her time.

Yes, I know, that calculation is silly in many ways, but here is my point: Regardless of how outraged you are about the AIG bonuses, it is probably not an optimal allocation of resources for our elected leaders to spend large amounts of time and energy on the topic. The economy has bigger problems right now, and it would be better to focus attention on those.

aig, congress, credit crisis, economy, Politics