¹ The vast literature on the rise of the trusts and the modern corporation defies summary. Chandler, Alfred D. Jr, The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977)Google Scholar, treats the development of new structures; Thorelli, Hans B., The Federal Antitrust Policy (Baltimore, Md., 1955)Google Scholar, provides a useful early and Sklar, Martin J., The Corporate Reconstruction of American Capitalism, 1890–1916: The Market, the Law and Politics (Cambridge, U.K., 1988)CrossRefGoogle Scholar, a useful recent treatment of the political and legal reaction to the rise of the trusts; Hannah, Leslie, The Rise of the Corporate Economy (London, 1976)Google Scholar, Chandler, Alfred D. Jr, “The Development of Modem Management Structures in the U.S. and U.K.,” in The Essential Alfred Chandler: Essays Toward a Historical Theory of Big Business, ed. McCraw, Thomas K., (Boston, Mass., 1988)Google Scholar and Freyer, Tony, “The Sherman Antitrust Act, Comparative Business Structure, and the Rule of Reason: America and Great Britain, 1880–1920,” Iowa Law Review 74 (July 1989): 991–1017Google Scholar, emphasize the legal attacks on loose business forms as a factor in the development of modern managerial structures in the U.S.

² Kovacic, William E., “Failed Expectations: The Troubled Past and Uncertain Future of the Sherman Act as a Tool for Deconcentration,” Iowa Law Review 74 (July 1989): 1105–1150Google Scholar, shows the episodic nature of antitrust for large-firm deconcentration.

³ Posner, Richard A., Antitrust Law: An Economic Perspective (Chicago, Ill., 1976), 39.Google Scholar

⁴ Stigler, George J., “Monopoly and Oligopoly by Merger,” American Economic Review (May 1950).Google Scholar Reprinted in Stigler, George J., The Organization of Industry (Chicago, Ill., 1968).Google Scholar

⁵ The idea is due to Coase, Ronald, “The Nature of the Firm,” Economica n.s. 4 (1937): 386–405.CrossRefGoogle Scholar

⁶ Haney, Lewis H., Business Organization and Combination (New York, 1914).Google Scholar

⁷ Chandler, “The Development of Modern Management Structures;” Hannah, The Rise of the Corporate Economy; and Freyer, “The Sherman Antitrust Act.”

⁸ Telser, Lester G., A Theory of Efficient Cooperation and Competition (Cambridge, U.K., 1987)CrossRefGoogle Scholar; and Gort, Michael, “An Economic Disturbance Theory of Mergers,” Quarterly Journal of Economics 83 (November 1969): 624–642.CrossRefGoogle Scholar

⁹ For example, the following faculty members at the University of Chicago signed a letter in 1952 urging repeal of the fair-trade laws: Ward Bowman, Milton Friedman, H. G. Lewis, L. A. Metzler, Margaret Reid and T. W. Schultz. Listed in Overstreet, Thomas R. Jr, Resale Price Maintenance: Economic Theories and Empirical Evidence (Washington, D.C. 1983), 8.Google Scholar

¹⁰ These developments are summarized by Bork, Robert H., The Antitrust Paradox: A Policy at War with Itself (New York, 1978)Google Scholar; and Posner, Antitrust Law.

¹¹ The idea of a competitive equilibrium is made precise by the theory of the “core.” Economic applications of core theory to a variety of circumstances, including industries with fixed costs, were pioneered by Telser, Lester G., Competition, Collusion and Game Theory (Chicago, Ill., 1972)Google Scholar; and Telser, Lester G., Economic Theory and the Core (Chicago, Ill., 1978).Google ScholarSharkey, William W., The Theory of Natural Monopoly (Cambridge, U.K., 1982)CrossRefGoogle Scholar, contains a less theoretical treatment. Telser, Lester G., “Genesis of the Sherman Act,” in Research in Finance, ed. Lanzilotti, Robert G. and Peles, Yoram C. (Greenwich, Conn., 1984)Google Scholar, and Telser, A Theory of Efficient Cooperation, discuss developments at the turn of the century in light of this theory. Bittlingmayer, George, “Decreasing Average Cost and Competition: A New Look at the Addyston Pipe Case,” Journal of Law and Economics 25 (October 1982): 201–299CrossRefGoogle Scholar; and Bittlingmayer, George, “Did Antitrust Policies Cause the Great Merger Wave?” Journal of Law and Economics 28 (April 1985): 77–118CrossRefGoogle Scholar, covers various aspects of the economic issues and provides an application to the cartel in Addyston and to the Great Merger Wave. Bittlingmayer, George, “The Economic Problem of Fixed Costs and What Legal Research Can Contribute,” Law and Social Inquiry 14 (Fall 1989): 739–762CrossRefGoogle Scholar, discusses economic and policy implications, with particular reference to the common law of restraints of trade and the judicial interpretation of antitrust law over time.

¹² See Sjostrom, William, “Collusion in Ocean Shipping: A Test of Monopoly and Empty Core Models,” Journal of Political Economy 97 (October 1989): 1160–1179CrossRefGoogle Scholar, and Pirrong, Stephen Craig, “An Application of the Theory of the Core to the Study of Ocean Shipping Markets,” Journal of Law and Economics 35 (April 1992): 89–131.CrossRefGoogle ScholarHovenkamp, Herbert, “The Sherman Act and the Classical Theory of Competition,” Iowa Law Review 74 (July 1989): 1019–1065Google Scholar, takes up the apparent simultaneous abandonment by the law of defenses for cartels and the adoption by economists of the neoclassical competitive model. He argues that thinking on the Sherman act was influenced by prevailing “economic ideology.” It seems possible, however, that economists' views also adapt to prevailing ideology, or less charitably, to politics.

¹³ Chandler, The Visible Hand, 137–143 and 315–336; and McCraw, Thomas K., “Rethinking the Trust Question,” in Regulation in Perspective, ed. McCraw, Thomas K. (Boston, Mass., 1981), 12–15.Google Scholar

¹⁴ McChesney, Fred S., “Be True to Your School: Contrasting Chicago Approaches to Antitrust and Regulation,” Cato Journal 10 (Winter 1991): 775–798.Google Scholar

¹⁵ McCraw, “Rethinking the Trast Question,” 6.

¹⁶ Pindyck, Robert S., “Irreversibility, Uncertainty, and Investment,” Journal of Economic Literature 29 (September 1991): 1141.Google ScholarDixit, Avinash K. and Pindyek, Robert S., Investment under Uncertainty (Princeton, N.J., 1994) survey the literature on uncertainty and investment.Google Scholar

¹⁷ Mitchell, Wesley Clair, Business Cycles (Berkeley, Calif., 1913) 85Google Scholar; Fisher, Irving, The Stock Market Crash—And After (New York, 1930), 101, 106 and 110Google Scholar; Roose, Kenneth, The Economics of Recession and Revival: An Interpretation of 1937–38 (New Haven, Conn., 1954), chap. 4Google Scholar; and Friedman, Milton and Schwartz, Anna J., A Monetary History of the United States, 1867–1960 (Princeton, N.J., 1963), 495–496.Google Scholar

¹⁸ Dixit, Avinash K., “Investment and Hysteresis,” Journal of Economic Perspectives 6 (Winter 1992): 123CrossRefGoogle Scholar, makes the argument that Japanese firms “are protected from the downside risk because the government supports them in various ways, including cartelization to avoid destructive competition in recessions. Then the value of waiting to invest, which is governed mainly by the downside risk, is quite small, and they invest more aggressively.”

¹⁹ Romer, Christine, “The Great Crash and the Onset of the Great Depression,” Quarterly Journal of Economics 105 (August 1990): 597–624CrossRefGoogle Scholar, makes this argument for the effects of the 1929 crash.

²⁰ Some judges explicitly recognized the courts' susceptibility to political influence. In his famous dissent in Northern Securities, Holmes accused the majority of pandering to political pressure: “Great cases, like hard cases, make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.” Northern Securities, 193 U.S. 197 (1904).

²¹ Hovenkamp, “The Sherman Act,” and Grady, Mark F., “Toward a Positive Theory of Antitrust,” Economic Inquiry 30 (April 1992): 225–241.CrossRefGoogle ScholarHazlett, Thomas, “The Legislative History of the Sherman Act Re-examined,” Economic Inquiry 30 (April 1992): 263–276CrossRefGoogle Scholar, argues that the Sherman Act was passed to deflect attention from the McKinley Tariff.

²² Even before these cases were decided, Cook, William W., The Corporation Problem (New York, 1893), 243Google Scholar, recognized where the Sherman Act would lead: “The law has decided that the trust mode of organizing a monopoly is illegal. Hence it is that the numberless trusts are hastening to adopt the other mode of organization—the corporation, the plan of the Diamond Match monopoly. Already the Sugar Trust and the American Cotton Oil Trust have dissolved and become New Jersey Corporations, and other trusts are following the example.”

²³ Mitchell, Business Cycles, 51, emphasizes uncertainty about the gold standard in 1893 and cites a number of contemporaries, including Taussig and Carnegie. Friedman and Schwartz, A Monetary History, chap. 3, also discuss this period, as well as the 1896 free silver debate.

²⁴ Bittlingmayer, George, “Price Fixing and the Addyston Pipe Case,” in Research in Law and Economics 5. ed.Zerbe, Richard O., (1983)Google Scholar, discusses the case in detail.

²⁵ Haney, Business Organization and Combination, 215.

²⁶ See Nelson, Ralph L., Merger Movetnents in American Industry, 1895–1956 (Princeton, N.J., 1959)Google Scholar, App. C, 154–162. Bittlingmayer, “Did Antitrust Policies Cause the Great Merger Wave?” sifts through the arguments and data.

²⁷ Griggs in March of 1899. Quoted in Letwin, William, Law and Public Policy in America: The Evolution of the Sherman Antitrust Act (New York, 1965), 140.Google Scholar

²⁸ U.S. v. Chesapeake & Ohio Fuel, 115 Fed. 610 (1902), filed 8 May 1899.

²⁹ Thorelli, The Federal Antitrust Policy, 405.

³⁰ Friedman and Schwartz, A Monetary History, 139–141. The worldwide growth in the stock of gold no doubt had a favorable effect, but the sluggish growth of per capita income in the U.K. over the same period suggests that real factors such as the antitrust climate may have influenced real growth either directly, or indirectly through the allocation of gold supplies across countries.

³¹ The reaction of the financial markets is covered in Pringle, Henry F., Theodore Roosevelt: A Biography (New York, 1931), 237–238 and 244–246Google Scholar; Harbaugh, William Henry, Power and Responsibility: The Life and Times of Theodore Roosevelt (New York, 1961)Google Scholar; Letwin, Law and Public Policy, 196; and Thorelli, The Federal Antitrust Policy, 417. In contrast, Kennedy's 22 November 1963 assassination was marked by a decline that daw but recovery above previous levels when trading resumed.

³² Pringle, Roosevelt, 253 and 264.

³³ Libecap, Gary D., “The Rise of the Chicago Packers and the Origins of Meat Inspection and Antitrust,” Economic Inquiry 30 (April 1992): 242–262CrossRefGoogle Scholar; and Boudreaux, Donald J. and DiLorenzo, Thomas J., “Antitrust before the Sherman Act,” in The Causes and Consequences of Antitrust: A Public-Choice Perspective, ed. McChesney, Fred S. and Shughart, William F. II (Chicago, Ill., 1995)Google Scholar analyze the rise of the Chicago packers and the political fallout.

³⁴ Thorelli, The Federal Antitrust Policy, 430.

³⁵ The Wall Street Journal, 12 August 1903, p. 1, discussed the charges, but dismissed them.

³⁶ Stock data here and below are from Alfred Cowles 3rd and Associates, Common-Stock Indexes (Bloomington, Ind., 1939).

³⁷ Bringhurst, Bruce, Antitrust and the Oil Monopoly: The Standard Oil Cases, 1890–1911 (Westport, Conn., 1979)Google Scholar, chap. 5, chronicles the unsuccessful efforts of the oil industry interests and others to have the federal government bring charges against Standard.

³⁸ Hidy, Ralph W. and Hidy, Muriel E., Pioneering in Big Business, 1882–1911: History of the Standard Oil Company (New Jersey) (New York, 1955)Google Scholar, Table 52, 683.

³⁹ Hidy and Hidy, Pioneering in Big Business, chap. 23.

⁴⁰ U.S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States: Colonial Times to the Present (Washington, D.C., 1975)Google Scholar, Series M138–M139.

⁴¹ This fine was overturned in July of 1908. Bringhurst, Antitrust and the Oil Monopoly, 139.

⁴² Pringle, Roosevelt, 434; and Mowry, George E., The Era of Theodore Roosevelt (New York, 1958), 219–220.Google Scholar

⁴³ Harbaugh, Power and Responsibility, 311; and Bringhurst, Antitrust and the Oil Monopoly, 140.

⁴⁴ Bishop, Joseph Bueklin, Theodore Roosevelt and His Time: Shown in His Own Letters (New York, 1920).Google Scholar

⁴⁵ Johnson, Arthur M., “Antitrust Policy in Transition, 1908: Ideal and Reality,” Mississippi Valley Historical Review 48 (1961): 415–434CrossRefGoogle Scholar; and Sklar, The Corporate Reconstruction, 228–285, provide the background on the Hepburn Bill.

⁴⁶ “When permanent chairman Henry Cabot Lodge referred to Roosevelt by name in a keynote address as ‘the most abused and most popular man in the United States today,’ the convention exploded with a spontaneous demonstration of support for him, interspersed with chants of ‘Four, Four, Four Years More.’ The demonstration lasted fortyseven minutes.” Anderson, Donald F., William Howard Taft: A Conservatives Conception of the Presidency (Ithaca, N.Y., 1973), 38.Google Scholar

⁴⁷ See Pringle, Roosevelt, 445, on the first episode and Harbaugh, Power and Responsibility, 314, on the second. Judge Gary and Frick claimed that U.S. Steel's acquisition of Tennessee Coal and Iron would save it from bankruptcy, Roosevelt later claimed he replied, “that while I could not advise them to take the action proposed, I felt it no public duty of mine to interpose any objection.” Both episodes gave him political trouble later.

⁴⁸ In Loewe v. Lawlor, discussed in Sklar, Corporate Reconstruction, 223–224.

⁴⁹ New York Times, 23 Sept. 1911, p. 2 col. 2; New York Times, 24 Sept. 1911, p. 1 col. 7; Pringle, Roosevelt, 669.

⁵⁰ Coletta, Paolo E., The Presidency of William Howard Toft (Lawrence, Kans., 1973), 159.Google Scholar U.S. Steel had qualified as a “good trust” in Roosevelt's eyes, and Roosevelt claimed that Taft himself had approved of the merger when he was in Roosevelt's cabinet. The suit contributed to the split in the Republican party that led Taft and Roosevelt each to enter the race against Wilson in 1912. Mowry, Era of Roosevelt, 291.

⁵¹ Anderson, Taft, 82.

⁵² Wall Street Journal, 7 Oct. 1911, p. 1 col. 4.

⁵³ Quoted in Mowry, Era of Roosevelt, 288.

⁵⁴ Sklar, Corporate Reconstruction, 369, n. 58, quoting correspondence of Frank Vanderlip.

⁵⁵ Mitchell, Business Cycles, 85. John Bates Clark (after whom a prestigious economics prize was named) and John Maurice Clark also claimed that “breaking up too many corporations at once would be highly disturbing in the realm of business.” Clark, John Bates and Clark, John Maurice, The Control of Trusts (New York, 1912), 44.Google Scholar

⁵⁶ After his defeat, Taft did however write a defense of the 1911 court decisions and argued against changing the antitrust law. William Howard Taft, The Antitrust Act and the Supreme Court (1914).

⁵⁷ McCraw, Thomas K., Prophets of Regulation: Charles Francis Adams, Louis Brandeis, James M. Landis, Alfred E. Kahn (Cambridge, Mass., 1984), 116.Google Scholar

⁵⁸ Indeed, Brandeis' muckraking on the trust issue, in articles and a popular book, Other People's Money and How Bankers Use It, helped set the stage for the Federal Reserve Act, which was viewed as an effort to rein in Wall Street, and for the 1914 antitrust legislation. McCraw, Prophets of Regulation, 114.

⁵⁹ The year 1913 also marked the temporary modification of the New Jersey corporation laws through the so-called Seven Sisters Act, which Wilson signed in January 1913 while still governor of New Jersey. It was repealed in 1920. Seager, Henry P. and Guliek, Charles A., Trust and Corporation Problems (New York, 1929), 362–365.Google Scholar

⁶⁰ McCraw, Prophets of Regulation, 116.

⁶¹ Baker, Ray Strannard, Woodrow Wilson: Life and Letters (New York, 1968), 367.Google Scholar The event was hailed as the “surrender of the Money Trust.”

⁶² Quoted in McCraw, Prophets of Regulation, 118.

⁶³ Detailed histories of these two pieces of legislation appear in Seager and Guliek, Trust and Corporation Probletns, chap. 20, and McCraw, Prophets of Regulation, 114–135.

⁶⁴ McCraw, Prophets of Regulation, 126.

⁶⁵ The “bad news principle” is due to Bernanke, Ben S., “Irreversibility, Uncertainty, and Cyclical Investment,” Quarterly Journal of Economics 98 (Feb. 1983): 85–106.CrossRefGoogle Scholar

⁶⁶ Wall Street Journal, 7 Oct. 1911, p. 1 col. 4; and Pringle, Roosevelt, 669.

⁶⁷ Chandler, Alfred D. Jr and Salsbury, Stephen, Pierre S. du Pont and the Making of the Modern Corporation (New York, 1971), 113Google Scholar and generally 112–119.

⁶⁸ Sklar, Corporate Reconstruction, 204, n. 34.

⁶⁹ National Civic Federation, Department of Regulation of Industrial Corporations, The Trust Problem: Opinions of 16,000 Representative Americans (New York, 1912), 9, 11 and 276.Google Scholar

⁷⁰ Sklar, Corporate Reconstruction, 204, n. 34, cites Vanderlip to Stillman, 3 Feb. 1910, 3 June 1910, 17 Oct. 1911; Stillman to Vanderlip, 16 Sept. 1910; Vanderlip to Lyman J. Gage, 28 Feb. 1910; Frank A. Vanderlip Papers, Rare Book and Manuscript Library, Columbia University.

⁷¹ The discussion of particular statistical results here and in the next paragraph is intended to help the reader interpret the full set of coefficients in Table 3. Clearly, none of these results represents the “true,” precise effects of an antitrust case, in particular since a count of eases is a crude though perhaps serviceable proxy for the stringency of underlying enforcement. Estimated coefficients for antitrust cases will vary depending on the period covered and on the other variables included in a regression. In regression results that I do not report here, estimates that exclude stock volatility or that focus on specific subperiods generate somewhat different results. In all cases, however, the observed correlation between major case filings and changes in industrial production remains negative. The cumulative effect of major case filings also remains statistically significant when the years 1907 and 1908 are excluded or when the regressions focus only on 1909–1914 (the period after the Panic of 1907).

⁷² Himmelberg, Robert F., The Origins of the National Recovery Administration: Business, Government, and the Trade Association Issue, 1921–1933 (New York, 1976), 5–20.Google Scholar

⁷³ Friedman and Schwartz, A Monetary History, 231–232.

⁷⁴ Himmelberg, Origins, 7.

⁷⁵ Himmelberg, Origins, 93.

⁷⁶ I discuss the 1920s policies at greater length in George Bittlingmayer, “The 1920s Boom, the Great Crash, and After,” working paper, Graduate School of Management, University of California, Davis, 1995.

⁷⁷ Bittlingmayer, George, “Output and Stock Prices When Antitrust Is Suspended: The Effects of the NIRA,” in The Causes and Consequences of Antitrust: A Public-Choice Perspective, ed. McChesney, Fred S. and Shughart, William F. II (Chicago, III, 1995)Google Scholar covers the NIRA and analyses its economic and financial effects.

⁷⁸ Bittlingmayer, George, “Stock Returns, Real Activity and the Trust Question,” Journal of Finance 47 (Dec. 1992): 1701–1730CrossRefGoogle Scholar, offers a brief historical treatment of this period, as well as an extended statistical investigation of the stock market effects of antitrust enforcement for 1904–1944.

⁷⁹ George Bittlingmayer, “Industry Investment and Regulation,” working paper, Graduate School of Management, University of California, Davis, 1995.