Virginia Postrel makes some interesting points on Microsoft, Chicken Delight and Antitrust Policy, drawing on the work of Paul Joskow. Postrel argues that transactions cost analyses will often give different answers to the game-theoretic approaches that dominate modern literature on industrial organization. She is reasonably convincing in her defence of Chicken Delight, a franchise operation that required franchisees to buy all supplies from the parent company, a requirement that was found to be an illegal tie-in. She says:
“But, Professor Joskow notes, the franchisees didn’t have to sign up with Chicken Delight in the first place. There was plenty of competition. ”
But this argument, and transactions cost economics, go the other way in the case of Microsoft. Microsoft does not have anything like “plenty of competition” And, given sufficient market power, the deliberate creation of even modest transactions costs (e.g. of switching web browsers) can from the basis of big monopoly profits.
The same thing was seen in the California electricity crisis where market power came from the fact that demand was almost totally inelastic (unresponsive to prices). Hence, Enron and others could make big profits by creating and relieving, spurious congestion.

David Morgan weighs in the question of whether the fact that John Malkovich is a well-known (and very good) actor means that it would be stupid to take seriously his death threats against George Galloway and Robert Fisk. Picking up my allusion to the initials OJS, he says ‘if Malkovich has been through a violent marriage and an acrimonious divorce with either Fisk or Galloway, I agree they have something to worry about. ‘ So, it seems that it’s only political threats that should be ignored.

My bonus question to David – how about the initials JWB?

To put my position seriously, once more. Any political death threat, whether or not there is any intention of carrying out, is an attack on democracy, and should be condemned unequivocally. Someone who uses such a threat to score points at the expense of the recipient, as The New Republic did, is little better than the person who made the threat in the first place.

What I’m reading. When the Boat Comes In by Boris Frankel. It’s a successor to his 1992 book From Prophets the Deserts Come (great title! – and a special mention for the first reader to email me with the source of this literary allusion). It’s not only an analysis of Australia’s economic and social position, but a policy program. I come in for a mixture of bouquets and brickbats, and I’m writing a review essay for Arena, which will probably be out in a couple of months.

As the Washington Post observes, Culprits Are Countless in the recent accounting scandals. But the real culprit, mentioned towards the end of the article is the efficient markets hypothesis. More on this soon!

A further round from Don Arthur on Higher education – Is it a scam?. Don makes a lot of good points, though I disagree with him on an important one. University education does produce human capital, as I argue here. Of course this term needs to be understand in a broad sense, rather than a narrowly utilitarian one, and includes things like ‘cultural capital’, which Don mentions as including an ability to understand and make appropriate cultural allusions e.g. in Glebe to Julia Kristeva and Salman Rushdie.

A very thoughtful piece on the WorldCom collapse by Polly Toynbee. As she says, the US formula of the 90s is now clearly “Yesterday’s model”. The open question is, what will replace it.

While writing my posting about TNR, I wondered who would be the first to argue that, since John Malkovich is a well-known actor, it would be stupid to to take seriously a death threat from him. The prize goes to Jason Soon who writes:

“Does the fact that John Malkovich looks like this make his threat to shoot Fisk anymore credible? Obviously a face like that guarantees Mr Malkovich lots of psycho roles but he’s an actor and no one would seriously regard his little burst of gung-ho bullshit as a serious death threat.” (emphasis added).

Do the initials OJS mean anything to you, Jason?

More seriously, I don’t regard death threats of any kind as an appropriate subject for ‘put-downs’ and point-scoring at the expense of the recipient, particularly with respect to an issue where lots of people on both sides have in fact been murdered.

A depressing post here. The New Republic Online comes about as close as you can to endorsing the use of death threats to silence anti-Israel commentators, in particular, one made by actor John Malkovich against Robert Fisk. There is one weaselly phrase –however reprehensible–, but the anonymous editorialist’s real feeling is in the summing up.

(S)he quotes Fisk
‘ “As journalists, our lives are now forfeit to the internet haters,” Fisk wrote. “If we want a quiet life, we will just have to toe the line, stop criticising Israel or America. Or just stop writing altogether.” ‘
Then observes
‘Hey, now there’s an idea. ‘

It’s easy to find similar, and, for that matter, far worse, on the other side of the wire. (For example, look at all the equivocal or even supportive responses to the fatwa on Salman Rushdie). But it’s sad to find it somewhere like TNR. The TNR article pretty much proves Fisk’s point. He writes: ‘Slowly but surely, the hate has turned to incitement, the incitement into death threats, the walls of propriety and legality gradually pulled down‘.

As Tim Blair observes, stock markets have barely moved in the wake of the great Worldcom fraud.
On the other hand,
(a) Most US indexes are already lower than they have been for years
(b) Telecom stocks took a pounding (Worldcom was suspended after falling to 20 cents)

Two possible takes on this
(1) These problems are isolated to the telecom sector (and a few others like energy trading, conglomerates, dotcoms etc). Apart from that the economy is looking good.
(2) This isn’t news. Everyone knows corporate accounts aren’t worth the bits it takes to display them on screen.

You choose!

Jason Soon responds to my post on the failure of radical free-market reform by restating the case for a competitive model in higher education. This is a complex issue, and my counterarguments are too lengthy for a blog post. You can find them in detail in my submission to a recent Senate inquiry. It’s also available as a PDF file
For now, I’ll just observe that, outside fairly narrow forms of vocational training (as exemplified by the Australian commercial VET sector and the ‘University’ of Phoenix in the US), for-profit education has never been a success.