3 ms·

The article has a nice example of this in the B2 bomber. The first 21 planes cost $2B each. The next one costs $700M. If, for some reason, we were to make a hu

• lmm 3y ago
  Unfortunately the military has now cottoned onto that trick with the F-35. Every time there's a budget overrun they just order another 100 planes so that "the price hasn't changed".
• cbsmith 3y ago
  The B2 bomber case isn't a precise analogy. The hammer really was purely an accounting phenomenon. It's not that the first hammer cost $600. The first hammer was part of a collection of goods, of a wide variety of different values, that were billed as a single line item... and this was resolved, from an accounting perspective, as each item cost $600. In reality, most of the items only cost a few dollars, but a few big ticket items skewed the average. Think of it like you're buying a car, and you have the dealer add in a half-dozen options & extras, and then they bill you for all of them, as a package, as a single line item. If you then said the cost of each item in the package, including the car, was worth 1/7th the price you paid for the package, that would be the equivalent of what is going on here.