The Robber Barons: Historical Fact vs. Progressive Mythology

The standard theory of monopoly within the mainstream of the economics profession is that monopolies increase prices and reduce production levels compared to competitive industries. So I gathered historical economic data on prices and production for seventeen of the industries accused of monopolization during the congressional debates over the Sherman Act. Surprisingly, no other economist had apparently ever done this! What I found was that while real (inflation-adjusted) gross domestic product (GDP) increased by about 24 percent from 1880 to 1890, the industries accused of “restricting output” increased their production by 175 percent on average, seven times more than the economy in general. For example, steel production rose by 258 percent, zinc 156 percent, coal 153 percent, steel rails 142 percent, petroleum 79 percent, and sugar 75 percent. And during that same time period, as the consumer price index (CPI) fell by 7 percent, the “trusts” that were accused of monopolization dropped their prices by far more. The price of steel rail fell by 53 percent, refined sugar became 22 percent cheaper, lead declined in price by 12 percent, and zinc by 20 percent, for example. This trend of production in these industries dominated by “trusts”—the supposed “natural monopolies”—outstripping GDP as a whole and prices declining faster in these industries than the CPI continued on for the next decade as well.

– Thomas J. DiLorenzo, Ph.D., The Politically Incorrect Guide to Economics