Monday, September 17, 2007

The Myth of the $435 Claw Hammer

In yesterday's post about Medicaid, I casually referred to the overpriced hammer bought by the Pentagon in the 1980s--and a reader set me straight, pointing out that this was an accounting artifact of distributing R&D costs for a very complex set of equipment equally over all materials used in that project. This overstated the R&D costs for the hammer (since there were none) and understated the R&D costs of the engine. I've updated yesterday's posting, and you can read an interesting article explaining how this myth was created here.

I knew that some of the claims made back then were, at best, misleading. For example, the $8000 coffee maker was pretty quickly revealed to be not a Mr. Coffee, but the kind of coffee maker that goes into an airliner--and which were only about 15% cheaper when the airlines bought it.

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