Econ101 said:
"There's a sucker born every day."
The recent Pickett decision has raised many questions but like the questions USDA Secretary Johanns is asking in his farm forums, they are the wrong questions.
In my recent postings with SH--, SH-- tried to raise doubts about the logic of the Pickett case and came up with what was probably the essence of the questions that were raised behind closed doors and in Judge Strom's mind. If you raise the wrong questions, you will get the wrong answers. SH--, care to challenge me on number 4, or is there a stripe down your back? This is the third time I have challenged you. Lets go fishing some more or do you have a bloody head in this bull session?
I responded to one of your earlier posts. I have copied it over to this forum.
Econ101 wrote:
The real loser in the Pickett verdict was the U.S. economy with its dead weight losses.
Your comment..The question put was,"Did IBP/Tyson use its market power to decrease the price of all cattle for packer benefit by breaking any of the economic rules of the Packers and Stockyards Act of 1921?" The jury of 12 were to decide the answers to that question after assessing the credibility of the witnesses and the proof offered. The jury said yes. The jury thought the cattlemen's economist was credible and awarded the verdict of 1.28 billion in actual damages over the time period in question.
Respose....The problem is that the jury got it wrong-period. Regardless what you think or the jury thought Taylor proved nothing except that he had six theories none of which he tested by his own admission. Taylor's position was dismantled by the defense. While the jury did not understand how severely his claim was dismantled Judge Strom certainly did. Thus the statement by him, "I think your expert witness is nuts". I don't believe a federal judge would make that statement without strong reasons to believe that Taylor was not a credible witness. This is especially so since his comment is a matter of court record.
I am confident that Judge Strom has much more experience with these types of cases and econometric analysis than any of the twelve jurors. Legal precedent does allow the judge to dismiss the jury verdict when it is clear that they failed to understand the testimony or his instructions. To see where the minds of the jurors were one only needs to understand that they failed to understand very concise and specific instructions given by Judge Strom.
Your commnet...This case has more to do with the exercise of market power (purchasing power) to lower prices for merchants than efficiencies gained in a particular marketing mode. In economics there are what are called dead weight losses to producers and consumers when market power is excercised. You can look this up in any good textbook with monopsony models. Market power moves are slides down the supply curve to the left and down. They change the demand curve equilibrium to either a higher point leftward and upward on the demand curve when monopsonists or oligopsonists pocket the profits or they have the potential of buying more market power if they share these ill gotten gains with consumers. When they share these gains with consumers they purchase a compettitve edge against competitors they often buy more market power. When all competitors are doing the same, an act of collusion, they are buying barriers to entry to any new entrants who do not come down to that same level. It is similar to cheating in class. Cheating in a classroom did not make the class any smarter, it just made hard for those not cheating in class to compete.
Response... Have you personally ever conducted any analysis yourself that has shown a correlation with increased captive supply and lower price? I have, and the analysis shows no correlation. There are periods of increased captive supply and prices go up. There are also periods of declining captive supply when prices go up. The converse is also true. When isolating the variables the one that holds true in all periods is the correlation of price change to production change independent of the level of captive supply.
I also find it very interesting in Taylor's own testimony, which I have all copies of, that he did not find any price depressing influence in two of the latter years. Interestingly , those years were years when total demand was increasing as opposed to previous years when demand was in a precipitous nineteen year decline. The declines in total beef demand was approximately 50% during that nineteen year period. Is it possible that Taylor mistook the influence of captive supply cattle for the impact of declining beef demand? Did he test for that condition?
Your comment...It is interesting that the argument on page 18 of the 11th circuit appeals court was used incorrectly. The appellate judges, Carnes, Cox, and Mills all showed their ignorance of economic concepts by quoting the absolute defense the Robinson-Patman Act gives to a merchant. "The Robinson-Patman Act recognizes an exception and provides an absolute defense if a merchant's lower price to a purchaser "was made in good faith to meet an equally low price of a competitor."
Since cattle ranchers are on the other side of the merchant, the merchant's purchasing side, this economic concept would provide an absolute defense if a merchant paid a higher price to a seller if it was "made in good faith to meet an equally high price of a competitor."
In the Pickett case the prices in the "captive supply" were dependent on the cash market, not on the prices other competitors paid for the products in their captive contracts. If that were the case then the captive contracts would not be dependent on the cash price but on a negotiated price with competitors involved in increasing the price. Since even the court agreed in the ruling that the total market was artificially lowered and the defendents claimed that competitors engaged in the same activity, all of the competitors should be liable also. In other words, if you are stealing from the market by breaking the economic rules set forth in Section 202 then you can not claim as a defense the fact that others are stealing too. Thus, the defense is erroneous.
Resposne... Your quote.."Since even the court agreed in the ruling that the total market was artificially lowered and the defendents claimed that competitors engaged in the same activity, all of the competitors should be liable also."
You have incorrectly interperted what the court said. The court said that even if Taylor's claims were valid, the key word is "if", the case was still lost on the other positions outlined by the court. The 11th Circuit Court expressed on page 13 footnote#7 that there were serious Daubert concerns regarding Taylor's testimony. Please note that in the five page second opinion that the 11th Circuit Court refuted the plaintiffs claim that "this was a close case." The court stated quite emphatically with no uncertainty that the case was "not a close case and furthermore the plaintiffs lost on every account."
Your comment...It should be noted that marketing agreements, however beneficial to either side, were not the issue. The issue was whether the use of marketing contracts pushed down the cash price. The jury found that it did. All of the arguments for marketing agreements are esoteric to that question.
Response...You would have a valid point if Taylor's testimony in fact supported his own claim. His testimony was simply bogus, he failed to even test his own theories as to how captive supply cattle could cause the market to go lower. I assume you have the court testimony, yes or no? You appear to be very knowledgeable regarding economics and I assume econometrics. I have a simple question for you. How valid is a result if you fail to test for the validity of that result? I expect you teach your students the pitfalls of such untested conclusions.
I have replied.
