Speaking Precisely Is Useful

Writing to be understood is the name of the game, but there is a limit to dumbing down non-dumb ideas.

Speaking precisely is essential in rational—logical or scientific—discourse. (Poetry is different because the words and their combinations are meant to generate music, images, and emotions.)

In reporting on the increase in the prices of memory chips, the Wall Street Journal writes (Rolfe Winkler, “Apple to Raise Prices Due to Memory Chip Crunch, Tim Cook Says,” June 17, 2026):

“But now AI servers are gobbling up rapidly increasing volumes of those chips, so even a company as rich and powerful as Apple is struggling to secure supply.”

Memory chips have not somehow ceased to exist and Apple is not “struggling to secure supply”—although, like any private producer, it is always looking for lower input prices. The company will get the supplies it is willing to pay for, given that AI-server operators and builders have bid up memory-chip prices. The opportunity cost of producing memory chips for computers and smartphones has thus risen. If Apple is not willing to pay more than it did before, chip manufacturers will allocate their current or future production capacity to other chips. Although memory chips for electronic devices (such as Apple’s) and those for AI servers are not identical, there is some substitutability in production. When the price of AI-server memory chips rises, the opportunity cost of producing Apple-bound memory also rises, and it will now need to be paid by Apple to purchase memory chips.

Of course, Apple could absorb the cost increase to keep its customer base, but its Board of Directors and shareholders would stop that when the marginal cost increase exceeds the expected increase in the discounted future marginal revenues. In fact, the CEO of the company warned customers that price increases for its products are coming soon.

This is an example of how markets coordinate, through prices, the production and consumption decisions of millions of individuals. Except perhaps in exceptional cases, governments—politicians and bureaucrats, or even democratic mobs—cannot provide better coordination through central planning or industrial policy, as economic history shows. A further benefit of market coordination is that it respects consumer sovereignty and does not require constant government coercion. Coordination by government requires continuing commands contrary to the rule of law. (The last two sentences are perhaps difficult to understand in the current zeitgeist. Low-risk antidotes can be found in Friedrich Hayek’s The Road to Serfdom and The Constitution of Liberty. The links refer to my Regulation reviews of these books.)

Although the rest of the WSJ report is not inconsistent with the explanations above, the phrase “struggling to secure supply” may leave some readers (the least economically literate) thinking that there is, in some warehouse, a large stock of memory chips to be purchased at a predetermined price, and the evil chip manufacturers are allocating more of them to evil AI-server owners than to the good people in computer and smartphone manufacturing. But I confess it is not the worst example of economic illiteracy one can find even in the financial press.