The Wall Street Journal frequently denounces "junk science." By that they
seem to meen expert testimony that supports seeking damages from some
business.
Richard Schmalensee, an MIT economist is testifying for Microsoft
in the antitrust trial. The NY Times quoted him Thursday re whether or not
Microsoft has a monopoly in operating systems. He says they don't. The
Times said that in his written testimony Schmanesee says "A firm with
monopoly power over the operating system would charge at least 16 times
over what Microsoft charges." The Times went on to say that the price of
Windows would then be $800.
To me, that is junk science. Only somebody who internalized in
first year economics that firms charge marginal costs, and that monopolists
set prices where MC = MR could write such nonsense. I guess Schmalensee
did. But no one who has looked at the real behavior or a firm with market
power, let alone monopoly power, would ever say anything like Schmalensee
did. Firms try to develop markets, to grow over time. Every student knows
that until the professor teaches them that what they know is wrong. Only
the worst students internalize this garbage and go on to be professors at
MIT.
Junk science.
Gene Coyle
