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From: nrh@inmet.UUCP
Newsgroups: net.politics
Subject: Re: Standard Oil and anti-trust - (nf)
Message-ID: <199@inmet.UUCP>
Date: Sun, 17-Jul-83 05:41:43 EDT
Article-I.D.: inmet.199
Posted: Sun Jul 17 05:41:43 1983
Date-Received: Sun, 17-Jul-83 13:33:21 EDT
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#R:houti:-34800:inmet:7800008:000:2431
inmet!nrh    Jul 17 03:27:00 1983

Anyone wanting a Libertarian slant on the "dangers" of monopoly if 
regulation is left to the market can read about it in 
David Friedman's "The Machinery of Freedom" [Arlington House, 1973 &78]
On the subject of Standard Oil, Friedman claims that JDR was
not very successful at maintaining the monopoly.  Two examples:

	1. When JDR tried to threaten a price war if Cornplanter
	Refineries did not raise their prices, Cornplanter laughed
	at them: 
		"Well, I says `Mr. Moffett, I am very glad
		you put it that way because if it is up to you the
		only way you can get it [the business] is to cut the
		market [reduce prices], and if you cut the market
		I will cut you for 200 miles around and I will make you
		sell the stuff,' and I says, `I don't want a bigger
		picnic than that; sell it if you want to,' and I bid
		him good day and left"
		<Quote from John S. McGee "Predatory Price Cutting:
		 The Standard Oil [NJ] case">
		
	2. "Another strategy, which Rockefeller probably did employ,
	is to buy out competitors.  This is usually cheaper than spending
	a fortune trying to drive them out --  at least, it is cheaper in
	the short run.  The trouble is that people soon realize they can
	build a new refinery, threaten to drive down prices, and sell out to
	Rockefeller at a whopping profit.  David P. Reighard apparently made
	a sizable fortune by selling three consecutive refineries to 
	Rockefeller.  There was a limit to how many refineries Rockefeller
	could use."

			[ Reprinted without permission ]

Friedman's basic point is that most monopoly is gleefully undercut
by chislers, and that governments are often the only means by which
monopolies become possible.  Even natural monopolies cannot (dare not)
keep their prices too high because


	"... [A natural monopoly] retains the market only 
	so long as its price stays low enough that other firms cannot 
	make a profit.  This is what is called potential competition.

	A famous example is Alcoa Aluminimum.  One of the charges
	brought against Alcoa during the antitrust hearings that resulted
	in its breakup was that it had kept competitors out of the
	aluminum business by keeping its prices low and by taking advantage
	of every possible technological advance to lower them still further."


			[ Reprinted without permission ]


"The Machinery of Freedom" is, I'm told, available from Laissez-Faire
books in New York City.  No, I don't work for them.