[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

Predatory Pricing (1)

[Topics under debate]: GOOD GOVERNANCE
___Help make this manifesto better, or accept it, and propagate it!___
Dear Mr. Datt,

Im sorry if I sound a little impatient in my present reply, but it
seems to me that so far you have been quite satisfied with giving my
posts just a casual look through, continuing to misread them and going
off on a tangent. In selectively responding to my posts, you have
completely ignored the questions I asked you. Perhaps you assumed they
were rhetorical. I have no rhetorical ambitions here, merely because, as

I have repeatedly said, I am not certain about either sides
propositions. I merely wanted some doubts answered.

I presented Sowells article ONLY because it presented the STANDARD
arguments very eloquently and BRIEFLY. Not as a kind of truth by
default or even as a special challenge to your theory. Sowell need
not have come into the picture at all if he hadnt written the article.
Admittedly, it was very unlike me to use the word great so loosely,
but I can assure you I did it in haste. If I gave you a somewhat
different impression, I apologise. But Id also request you not to
assume my approach on impression.

With just two exam papers left to complete, I have found time to, in the

first post, clarify my approach (it will be clear how you have misread
it) and respond to your comments and in the next, put forward some of
the questions that have been raised against the economic theory of
predatory pricing, including those asked by Sowell in his brief article.

I hope you will be able to go through each post carefully.

Charu wrote:
Point taken.
To clarify my response,
I don't care if the words come out of a loony's mouth
if they are demonstrably valid. Likewise, a person's eminence
does not validate their utterances or writings.

Chirag writes:
I'm glad we agree and can move on. I was actually trying to preempt an
attack by you on the writers (Sowells) integrity like the one on the
hacks of Cato and Heritage. What you say now is exactly what I had said
then to you.

Chirag wrote:
> He (Sowell) does, if I remember correctly, somewhat contrary to what
you say, provide some support for his arguments.>

Charu replied:
I must have missed this. Please quote the relevant material.
I'd be happy to discuss it.

Chirag writes:
I hope it wasn't emotion that caused you to miss it. It was very clearly

there (some support). That is NOT to say that it is conclusive evidence.

I will quote the material in the next post. The earlier article from the

Cato Institute has more support. Sowells views are not new. They are
the standard arguments. That is why I presented them. NOT because they
were His Eminence's.

Chirag wrote:
No body said it was sufficient as evidence. A magazine column like this
invites you to look for the evidence yourself and see whether it
conforms to what the column says or not. It cannot provide it all. If
you do have evidence to counter his arguments, please share them with
us. As I have said before, I am not resolved on the issue and would
appreciate some enlightenment. Though you have responded to both the
articles I have pointed to, you have not argued against them, but
attacked them. If you do think that this isn't the place to discuss this

in detail, then I am willing to drop the topic.

Charu replied:
I have a problem with your approach that appears [to me] as:
"stuff written by some 'eminence' printed in a magazine is
true unless proven otherwise", meaning that if I disagree, the burden
of proof is on me, as if the mere fact that something got
published makes it true.

Chirag writes:

If you look again, my words above quite clearly do not conform to your
hasty interpretation.

1. If you look back, you will see that I have NOT said that his
"published stuff" IS TRUE or will be if you fail to provide
counter-evidence. What I have said is that you have to look for evidence

outside the article TO SEE WHETHER IT IS TRUE OR NOT. What made you leap

from there?

2. These are not His Eminence's views alone. As I have said, they are
the standard arguments which were also presented in the Cato article if
you had read it. It doesn't matter to me who expressed them. Though I
must say I do respect Sowell's intellectual integrity.

3. I do believe the burden of proof lies with you with respect to some
of his statements (see below) because it is you who claim to be certain
that price-cutting IS A CRIME and would support the government punishing

price-cutters, perhaps (going by the high standards you set others) you
already had the evidence to support your idea. But I merely wanted to
'discuss' the validity of the theory, not 'debate' it because, as I have

said many times over, I haven't been convinced either way yet.

4. I haven't asked you to disprove EVERYTHING he said (just
responsibly criticize). It was just his accusation (and again it isn't
his accusation alone) that the theory of predatory pricing is not
supported by real evidence (evidence, not static perfect-competition
models). Instead of asking for justification you could have saved us
time and energy by providing the real evidence that makes you certain
that price-cutting is a social crime.

5. What makes you assume that if YOU aren't able to provide evidence as
counter, I will take Sowell's arguments (or accusations or questions) to

be true? I will merely look elsewhere and lament the fact that you will
support legislation based on your theory without having evidence.
(Please, I am NOT saying you DONT have any evidence. ONLY if you say
you dont have it now.)

Charu wrote:
I consider it a more valid
approach to require ALL assertions regarding social organization
to present convincing arguments of their truth.

Chirag replies:

No one doubts that, but I fail to see whom you would require to do so
here. And it is surprising that you can make the above statement and
then assume that you have presented me with a convincing argument for
your stated belief when I asked you for it.

1. When did I say I was convinced already? Merely raised some doubts
over the theory of PP and hoped you would dispel those doubts. That was
my approach. With your having failed to dispel them, there was no
reason to think that my doubts would magically turn into certainty.

If you required not me but Sowell to present a
convincing argument specifically to you (or me), then you (or I) can
contact him personally and air your (our) grievances. Otherwise, I see
you (and me) doing what I had suggested earlier looking for yourself
(ouselves) to see whether the evidence that comes your (our)way conforms

to his statements. And trying to find evidence to the contrary.

2. The articles I presented in support of my doubt did not simply
assert. They also posed questions (explicitly or implicitly), which
you haven't attempted to answer, except with false analogies.

3. A theory or assertion is best tested through some sort of
falsification, or responsible criticism (not plain disbelief). I was
hoping you would provide me with that. Sowell, and (mainly) others have
attempted to question the arguments for the acceptance of the theory of
predatory pricing. The instances they provide in support of their
criticism (which you somehow missed) were enough for me to think that
they COULD be true. I was hoping you (having made up your mind) would
falsify their assertions and I would avoid the effort of having to find
any more instances in their support or against. I dont intend writing a

thesis on the subject.

Chirag had quoted Sowell:
>> "The emotional or ideological power of a theory is shown, not by how
much evidence can be amassed in its favor, but precisely by the lack of
any necessity to produce evidence.">>

Charu replied:
>This is something I entirely agree with: The percieved "truth" of a
theory does not stand on the basis ofevidence but on the basis of
emotional appeal [manufactured by the power of propaganda and

Chirag wrote:
> You might agree with Sowell's statement's in general, but remember
which side he is accusing in this particular case. You cannot turn his
accusation around like that. ....

Charu replied:
I believe that truth cannot be selective depending on sides.
If we wish to analyze the workings of governments, organizations,
political power and so on, we need to apply the same standards to
both opposing sides- at least if we want to be intellectually honest.
For example, if we consider it unfair for the GOI to drive competing
airlines out of business by subsidizing IA fares to artificially lower
prices, as market interference, we should apply the same standards to a
large corporation that is able to drive competitors out of business by
selling at unprofitable prices by subsidizing this operation from
profits made elsewhere. I consider both 'predatory pricing'.

Chirag writes:

You are being completely irrelevant here. You seem to take an
ultra-simplified view on the subject that totally misses the point. Or
are you avoiding an answer? You also seem to have a wrong idea of what
predatory pricing is.

1. You are digressing. I fail to see your argument. It is not JUST a
general truth  it is a SPECIFIC ACCUSATION. Sowell is accusing THE
THEORY itself of not being based on any "evidence amassed in its
favour". He doesn't care who it is applied to  government or bog
corporation (see below). All you needed to do was supply the evidence.
Again, if you cannot do so, I wont suddenly start believing Sowell and
the others are certainly true.

You are mixed up about which side Sowell is on. He is merely arguing
for a free-market solution rather than a government solution. Not for
giving free-play to big and corrupt corporations.

Both sides in this argument are profit-seeking companies, one asking for

government action against the competitive activities of the other. I ask

again: do you support competition or particular competitors? It seems to

me they are different things.

2. Since it asks for legal action against a perceived offender, THE
(or anybody) says there is no evidence for interfering, it is the job of

the people in favour of the interference to come up with the evidence.
Sowell doesnt NEED justification for wanting justification. You do.

3. Going by this, you dont seem to have understood the theory of
predatory pricing very well at all. The instance you provide merely
presents more support for the assertion made by economists that a true
monopoly cannot be sustained in the free market. It requires government
regulation and restrictions (that affect competition) to be sustained.

Are profits the same as government subsidies? The case against
government SUBSIDIES to inefficient companies is very different from the

perceived case against price-cutting by efficient profit-making
companies. IA's input for the subsidy isn't anything that it got
deservedly, while the other corporation's is -- it's own profits (which
means it is efficient, while IA need not be). Will IA be able to sustain

price-cutting without the government helping by not only providing
subsidies but also hindering competition? The government is an external
entity whose criteria for giving finance is very different from most
commercial sources. The case against IA would stand even without the
theory of predatory pricing.

Some economists believe that the big corporation is not likely to drive
out competitors permanently if not supported by government regulation
and restrictive practices. (see "The Myth of Predatory Pricing" for just

one version of these assertions). As I have asked you before: what
prevents new competitors from springing up when the big corporation
hikes up its prices? Please, this is not a rhetorical question.

Charu wrote:
> >This should be enshrined along with Dr Goebbels' famous statement:
> > If you repeat a lie enough times it becomes the truth.

Chirag replied:
> Perhaps, but which side is lying in this particular case?

Charu wrote:
A good question. If you accept that both sides lie and
subject each side's statemants to the same scrutiny, we have a chan

Chirag replied:
Your reply to this was cut up for some reason (it ended at a chan  I

hope it wasnt change.

In any case, if YOU accept that both sides (I am now not sure which
sides you mean) lie and that the supporters of the theory lie too, then
on what grounds do you support the assertion that predatory pricing
exists and price-cutting by a big corporation necessarily leads to
social harm and is therefore a crime?

Remember, it wasnt Sowell (or me) who said that any side was LYING. You

brought it up. He merely said that no acceptable evidence was offered.

Id rather go along with the Belgian surrealist painter Rene Magritte,
though he says it only about art:

What we call a work of art is usually defended with the same
tenacity with which one would defend  to cite an example  the subway
if it came under attack. Painters are born, live, and die for painting

(preferably abstract) as they would for France It seems to me that
it is the vision of the world that must be defended, because it cannot
be separated from the viewer.

That could certainly apply to many people on both sides of ANY debate
of this kind. Lets instead examine the issue and just avoid
side-accusations in our discussion. Saying there is no evidence for
something is not the same as saying someone is lying.

Chirag Kasbekar
Mumbai (Bombay), India.

"What is ominous is the ease with which some people go from saying that
they don't like something to saying that the government should forbid
it.  When you go down that road, don't expect freedom to survive very
                             -- Thomas Sowell

This is the National Debate on System Reform.       debate@indiapolicy.org
Rules, Procedures, Archives:            http://www.indiapolicy.org/debate/