Apple and Standard Oil: Paragons of productive virtue
One of the commenters on my recent Investor’s Business Daily op-ed argued that if antitrust law were abolished,
we’d ultimately regress to the big monopolies we had a century or so ago. Those big monopolies were a problem, to say the least. Monopolies are good only for the monopolizing entity and they are bad news for everybody else . . . .
I’m here to say that the widespread fear of monopolies is based largely on historical myths. My colleague Alex Epstein has written extensively on what is generally regarded as the biggest, baddest granddaddy of all monopolies: Standard Oil. If you’re troubled by scary notions of what might befall the consumer on a free market without antitrust laws, you should read his article, “Vindicating Capitalism: The Real History of the Standard Oil Company.”
I can’t repeat all the factual documentation Alex assembles, but here’s a passage that summarizes an important point:
The fact that Standard Oil faced such stiff competition and was driven to expand output and lower prices even further demonstrates the myth of Rockefeller’s “control” of the market. Markets are not possessions that one can acquire or control. They are dynamic, evolving systems of voluntary association, in which competing producers have no ability to force customers to buy their product, nor any ability to prevent others from offering their customers superior substitutes. The expression “control a market share,” translated into reality, means simply that at a given time one has persuaded a given group of individuals to buy one’s product—a state of affairs that can quickly change if someone offers a superior substitute.
Standard Oil enjoyed high market share because it produced a highly desirable product and offered it at a price that the vast majority of people were willing to pay. If someone else had made cheaper kerosene or a better illuminant than kerosene, or if Rockefeller had lowered his standards or raised his prices significantly, his customers would have purchased their goods elsewhere. Such is the nature of the so-called “monopolist’s” control. And such is the nature of economic power….
People have long regarded Standard Oil’s ability to maintain a 90 percent market share for twenty years as evidence of coercive evil. But if one understands what it took to achieve and maintain that share, one can see that it is evidence only of Rockefeller’s productive virtue.
Apple, like Standard Oil more than a century ago, is a paragon of productive virtue. We have nothing to fear from Apple’s success. Big profits on a free market are evidence of big consumer satisfaction. If Apple stops innovating, or stops making products that appeal to buyers, then Apple’s business will decline. Who needs antitrust law when we can have a free market?
Image: Wikimedia Commons