Mason Gaffney was critical of the review of my book.  I really take
issue with Professor Gaffney, but I actually appreciated Richard
Vedder's review.  He presented the basic thesis fairly well.  He makes
several points in his rebuttal, which I regard as wrong, but they did
not strike me as unfair.

He suggests that fixed costs are relatively small for Microsoft or the
pharmaceutical industry.  He would be correct if fixed costs only
included plant and machinery, but research and development expenses are
part of fixed costs.  He suggests that phone and cable companies are
becoming more competitive.  The business press tells a different story
-- one of increasing consolidation.  AT&T is a case in point.

I'm not sure what moved Richard Vedder to suggest that I was trying to
give the impression that economists were unaware of information costs
and imperfect competition.  A large part of the book concerns the late
19th century economists who recommended imperfect competition for the
railroads.

Richard Vedder suggests that the post-World War II stabilization record
indicates that the US economy is on a solid footing.  I'm sympathetic to
the Schumpeterian view that the absence of downturns leaves an economy
more vulnerable, much like a forest protected from fires over a long
period becomes more susceptible to a dangerous fire.

I will leave aside his discussion of labor conditions since my answers
would be lengthy and probably not interest the list.

Although I expressed disagreement with some of Richard Vetter's
critique, I still consider his review to be a model of fairness, except
for a few allusions to the his notion that leftish analysis is almost a
nature defective and typically hysterical.


Michael Perelman