Dear Dr. Staff: I finally decided to buy a personal computer, but I noticed that a new, faster model was about to be introduced, so I decided to wait until the market stabilized so I could buy a machine that would be state-of-the-art for a while. I've been waiting since 1982, and now I feel obsolete because I still don't have a computer. How is that the darn things keep getting smaller and faster (but never seem to get any cheaper)?
Dear Confounded: To answer this question, I'll have to explain some principles of economics. Prices are often set not by how much it costs to make something, but by how much customers will pay to get it. For example, the phone company doesn't have to pay anything for you to use touch-tones on your phone; in fact, if you use an antique rotary phone, they convert the noises it makes into tones. Yet most phone companies still charge their customers for touch-tone lines. It doesn't cost airlines more to fly a plane on a weekday, but they charge their customers more.
So it is with computers. It's a little-known fact that there's been virtually no development of hardware technology in the past decade. The only difference between, for instance, a 286 and a 486 is that the 486 is painted with the "486" logo and has an internal switch set for "486." If you've ever wondered how a Pentium can run all the same software that a 386 can, it's because they're actually the same thing.
Since it costs Intel the same to manufacture a Pentium as it did a 286 (because they're really the same thing), the price of each, as it becomes the latest technology, always stays the same. That's why a new computer always costs about $2000.
Why would they deliberately slow down a computer? It takes a lot of money to develop new hardware technology--years and years of work from hundreds, if not thousands, of highly-paid engineers are required. In order to sell a product for the years it takes the engineers to develop a new product to replace the former, they've got to make it look like the computers are slowly getting better. The software that runs on a computer develops differently--it gets bigger and slower with each new version that comes out. The main reason people buy new computers is because their old one is too slow--so if Intel had released the Pentium in 1985, everybody would have bought one then, and nobody would have bought any Intel products since then, so they wouldn't have any money to develop their next line of computers.
It's also easy to see why computers keep getting smaller, too. When a new computer line (such as the 8086, which came before the 286) comes out, the chip is turned down extremely slow, so perhaps 1% of its energy is devoted to working for users. Where does the rest of the energy go? It generates heat, and to keep the computer from overheating so much, it needs to be in a big box so the computer is well-ventilated. As more and more of a computer is actually used to process what a user wants (instead of just to slow it down), less heat is generated, and so the computer's box can be smaller.