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Brand Names At Work

Here’s a letter to the Wall Street Journal:

The core argument of L. Gordon Crovitz’s recent column “Tim Cook’s Bad Apple” (Feb. 20) is accurately described by its subtitle: “Refusing to cooperate with the FBI is about protecting the brand, not iPhone users.”  But this argument is mistaken.

The value of any brand depends upon consumers’ perceptions of what that brand stands for.  If Apple’s refusal to cooperate with the government to unlock the contents of an iPhone will indeed protect its brand – that is, if this refusal will maintain or increase the market value of Apple’s brand – then it must be true that current and prospective iPhone users willingly pay a premium for the assurance that Apple can be trusted to keep its customers’ private information secure from even the government.  In short, by protecting its brand Apple protects its users.

Whether you do or don’t share this particular consumer preference, Apple’s refusal to cooperate with the F.B.I. is a splendid demonstration of the often-ignored role that brand names play in giving producers strong incentives to consistently supply levels of quality that consumers find attractive.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030


On the economics of brand names, see this essay by Ben Klein.  (It’s ironic, by the way, that the economist who is perhaps best known for explaining the beneficial functions of brand names – Ben Klein – shares a last name with the person – Naomi Klein – who is best known for trashing brand names.  [N. Klein is apparently allergic to economics.])


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