The chain that owns the SF Weekly brought its star witness to court today, a Harvard economist with a stack of academic credentials who typically works for oil companies and who charges $1,075 an hour. He delivered quite a lecture on his own economic theory of predatory pricing – and then was laid low by a little newspaper called the Bodega Bay Navigator.
Some background before we get into the juicy details.
I was an economics major way back when. I have sat through many lectures by learned economists, have read their learned papers, and have tried to keep up somewhat on the dismal science. And I can say without hesitation that most academic economists live in a world devoid of reality.
Economists try to study human behavior as it’s manifested in markets, but they don’t want to be confused with people who actually study human behavior. They will tell you they aren’t (gasp) sociologists; they want to make everything fit in nice little mathematical theories.
To do that with such non-mathematical concepts as the actions of a small business and its owners in a community, you have to make a lot of assumptions. That’s what economists do; they make assumptions. They assume, for example, that all the participants in a market have the necessary knowledge and information to make the proper decisions. They assume that random factors like politics, love, passion, pride, anger, envy or simple nastiness are never part of the economic equation. They assume that everyone in a marketplace acts “rationally.”
That, of course, is an irrational assumption, particularly when it comes to small businesses (and even more so when it comes to the alternative press). If all of us in this business had acted rationally, there would be no Bay Guardian. There would be no SF Weekly, New Times or Village Voice Media. The entire alternative press exists because some utterly irrational people with little background in business and no rational hope for success decided to start little newspapers. They were – and many still are – motivated by politics, community service, excitement and a lot of other things, but rational business motives were never really high on the list.
Which brings us to the eminent Dr. Joseph Kalt.