On the Standard Oil debate:
At no point did Standard Oil ever have 100% of the market share. At their peak, they controlled 88% of the market. You can argue all day that they were too powerful but claiming that they were a monopoly is simply not true, unless you alter the definition of the word.
Monopolies in and of themselves are not necessarily dangerous in a market economy; they only pose a threat when they are created by government. In fact, historically classical liberal thinkers had always viewed monopoly as government-granted privilege to do business through charters, protectionist trade policy, tax laws, or other laws amounting to barrier to entry. This definition was changed later on by economists who defined "perfect competition" (an arbitrary and indefinite term) and then measured all market activity against it. Competition in the real sense means that there are no barriers to entry. Market share cannot be a sufficient barrier to entry in and of itself; as there is always the possibility that someone will enter the market
unless the existing firm keeps costs and prices down while expanding production, which benefits consumers.
If you believe Standard Oil was a danger or some kind of threat, then consider the following: during their reign at the top of the oil market they continually expanded production and lowered prices. How is this a harm to consumers? Standard economic theory on monopoly predicts that monopolistic firms raise prices and restrict production. Yet, this is exactly opposite of what was happening in the Standard Oil case. And, as the government brought action against them, their market share was continuing to diminish - evidence that as long as there are no government barriers to entry no market share is safe (look at the top 10 producing companies from 1950 and compare them with today). The oil markets, despite all the money being made by Rockefeller, were always competitive. What some people fear, however, is competition where someone wins (temporarily).
The question to ask is what is
really the fear? That a company will gouge consumers with high prices? This plainly did not happen in the case of Standard Oil, who at no point failed to have competitors. One of the few, if not the only, cases of a free market "monopoly" was Alcoa, who maintained their market share while, like Standard Oil, drastically increasing output and lowering prices, thereby contributing (also like Standard Oil) to higher living standards.
What antitrust laws do is provide an opportunity for defeated or failing market participants to use government power to stifle their competitors. As evidence, note that 95% of all antitrust cases are brought by defeated businesses (as D.T. Armentano states in
this video) who are seeking to use the laws to leverage more market share for their inefficient, failing enterprises. This drives up costs in the respected market while at the same time imposing a tax burden on all Americans. As a testament to the legitimacy of the antitrust laws, there have been few (if any - I'm not aware of any) antitrust suits brought by consumers who were harmed by a business.
But, nonetheless, Standard Oil was broken up, and ever since then the government has established heavy regulations on the industry which have served to erect
real barriers to entry and effectively cartelized the industry. How has this worked out? Happy with the results? Rockefeller was. After the case Rockefeller changed his tune completely. Instead of defending competition he began to decry it in the name of economic efficiency. Modern economies, he said, could not be efficiently planned by the "destructive chaos" of the market place. No, instead, we needed an elite group of entrepreneurs who would, with the help of government, plan production schedules, control resources, and cooperate in any way possible in order to maximize efficiency.
Sound like collusion? If it does, that's because it is - collusion between government and corporations, which we would call corporatism or even fascism. Rockefeller, Morgan, Carnegie, and others favored this system in order to protect their profits from competitive forces. Plainly stated - they did not like market competition and saw an opportunity to insulate themselves against it, using government, for the sake of "economic efficiency." They resorted to government to impose regulations and cartelize industries precisely because
all attempts at collusion for the purpose of cartelizing free markets have failed. If you want to monopolize, you need government, as the classical liberals of the 18th and 19th century repeatedly said.
And what
was economic efficiency, anyway? Whatever Rockefeller, Carnegie, Morgan, and company said it was. An astute economist, however, has a different answer. Economic efficiency is whatever the consumer says, voting with their dollars in a free market.
Antitrust laws are not needed because of robber barons. Robber barons are created because of antitrust laws.
Recommended reading: Dominick Armentano,
Antitrust and Monopoly: Anatomy of a Policy Failure.
) but isn't the computer industry one of the least regulated industries?
