>>Predatory pricing is a demagocic political euphemism
not an economic notion given that price is determined
by the intersection of supply-demand curves.<<
How does the intersection of the of supply-demand curves determine the price of Microsoft's Internet Explorer 3.0. The demand is definitely high enough to command a price above zero, especially given that the supply of Active X enabled browsers are relatively low.
Classic economic theory is festering with theories which absolutely ignore human behavior due to the fact that it can not be easily quantified. You must remain cognizant that economics is a social science and not a physical one, therfore is ripe for rampant interpretation.
The folowing is an excerpt from a post that I made to another concerning economic THEORY. While not directly applicable, I feel it drives the point home.
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If you have not noticed, today's economic theory has some serious flaws. It fails to
take into account human bias in its many precepts, theories and conclusions. A
plausible basis for this exclusion is the fact that economics is a social science, which
means it endears itself to the complexities, eccentricities and often illogical
idiosyncrasies that are inherent in human behavior. Yet, being a social science, it
attempts to prove many of its theories with the same methodologies used in the
natural/physical sciences. This is impossible. Natural/physical sciences, such as
chemistry, can have experiments set up which have an observable conclusion that can
not be affected by the observation itself. For example, to observe the effects of impact
and flame on sodium nitrate, one can simply watch the combination of chemicals and
kinetic energy in an isolated chamber. If one were to conduct this experiment without
the real time observation, the end result will be the same. If one were to attempt to
observe an economic experiment, the mere act of observation itself has an effect on the
experiment. The thinking participant in an economic situation is in a self defeating
position since he is trying to understand a situation in which he is one of the
participants. We have been taught in school (at least I have, and all of my peers) that
understanding is a passive role, and participating is an active role. The two roles
interfere with each other in social sciences and in reality. This makes it impossible for
any participant to base any decision on perfect knowledge.
Reality is reflected in people's thinking - this is known as the cognitive function. On the
other hand, people make decisions that affect reality and these decisions are not based
on reality, but on peoples interpretation of reality. These two functions work in
opposite directions and in certain circumstances they can interfere with each other.
George Soros has coined this the reflexive feedback mechanism.
Classical economic theory, of which you often refer to, assumes that market
participants act on the basis that they possess perfect knowledge. It should be obvious
that this is a false assumption. In the social sciences, participants perceptions influence
the market in which they participate, but the market action also influences the
participants' perceptions. To obtain perfect knowledge of the market would be nearly
impossible since their thinking is always affecting the market and the market is always
affecting their thinking. Therefore, market analysis on the assumption of perfect
knowledge will always ultimately be rendered invalid.
IMAO, classic economic theory, as well as the conclusions that you are drawing from
it, need to be reconsidered. The undeniable element of uncertainty in economic
processes has purposely been left unaccounted for. I would presume this stems from
the difficulty of quantifying the fuzzy factors inherent in opinion and personal bias. None
of the social sciences (economics included) can be expected to yield undeniably firm
results that are comparable to that of the natural/physical sciences. This is especially
true for the economics and psychology. |
