In the opinion of Judge James Zagel, the science of economics isn't just dismal, it's pseudo.
Zagel, a federal judge in Chicago, has refused to allow an economist to testify as an expert in a personal injury case. No economist, he says, can put an accurate dollar value on the life of an accident victim. "Expert" calculation, he suggests, is no better than a guess.
Economists, who agree on nothing else, have long insisted that their discipline is a science. Zagel isn't buying. "There is no unanimity on which studies ought to be considered. There is a lack of reliability," he wrote. "The risk to justice from pseudo-science is substantial." The judge even suggests that the jury's own forecasts are likely to be as accurate as that of a professional economist. Hey, maybe that's how the Bush Administration and Congress could settle their many economic disputes: Just pick 12 random citizens, and ask them.
It's game over in the spat between the Federal Trade Commission and Nintendo of America. On Apr. 10, Nintendo agreed not to fix the prices at which dealers can sell its popular video game systems. Under the agreement, Nintendo will pay $5 million in damages and costs and advise all its dealers that they're free to sell Nintendo products at whatever price they choose. The company also will provide $25 million in coupons to 9 million customers who have bought its popular products.
Nintendo didn't admit to any wrongdoing. Instead, it said it was settling the charges to end a costly battle that could turn off customers. The agreement settles price-fixing charges brought by the FTC and a few states, including New York and Maryland.
Edsel B. Ford II has finally gotten away from auto marketing. On May 1, the senior Ford family representative on the Ford Motor board will become president and chief operating officer of Ford Motor Credit, the carmaker's financing arm. He will be the No. 2 executive at an $82 billion unit that last year posted a net profit of $563 million, up 25%. The executive director of Ford's marketing staff for nearly two years, Edsel Ford had expressed his desire to show his managerial mettle at an operating unit.
Bank of Boston lost $395 million last year and is one of New England's weaker big banks. But that isn't stopping some of the region's wealthiest companies from helping their hometown bank attempt to buy its biggest competitor, failed Bank of New England. On Apr. 5, General Cinema, Fidelity Investments, Raytheon, and a slew of insurance companies agreed to invest $500 million in newly issued stock to help BoB bid for BNE, which is being auctioned off by the Federal Deposit Insurance Corp.
Cost savings of as much as $375 million may give BoB the edge over Bank of America and the tandem of Kohlberg Kravis Roberts and Fleet/Norstar Financial Group. But the FDIC may be wary of the management record at BoB. Moreover, it wants to avoid repeating its miscues in the Southwest, where it combined weak banks, only to watch them fail later.
The concept of profit is just beginning to catch on in the Soviet Union. Houghton Mifflin is out to speed up the process. The Boston publisher's undergraduate accounting tome, the 1,300-page Principles of Accounting, will soon become the first Western accounting textbook sold in the Soviet Union.
On Apr. 10 in Moscow, government-run publisher Finansy I Statistika signed an agreement with Houghton to translate and distribute the book to the country's 320,000 accounting majors. They should take particular note of Chapter 3, which is all about calculating business income.
The Federal Communications Commission, after months of acrimonious internal debate, finally agreed to relax--but not eliminate--the rules that bar the television networks from owning and selling reruns of the shows they broadcast. The Apr. 9 decision was the climax of a decade-long battle between Hollywood and the TV networks.
Under the new rules, which go into effect on June 15, the networks will be allowed to acquire full resale rights to as much as 40% of their prime-time programming and will be able to buy the rights to sell reruns overseas. But they won't be able to distribute first-run shows exclusively for syndication, a lucrative market that includes such hits as Wheel of Fortune. Both sides are expected to challenge the decision in court.
Insider trading may be making a comeback--this time in the bond market. Following suspicious surges in the junk bonds of Harcourt Brace Jovanovich and Fort Howard, among others, the Securities & Exchange Commission is looking into whether some junk-bond investors have been trading on advance inside knowledge of bullish corporate news.
A number of legal experts--and some SEC staffers--wonder if the agency's probe will pay off. At issue is whether the securities laws that apply to stock traders also apply to bondholders.