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Applause for John D. Rockefeller

Posted By Don Boudreaux On December 3, 2011 @ 1:52 pm In Antitrust,Books,Competition,Creative destruction,Energy,History | Comments Disabled

Recently I read Ron Chernow’s Titan [1], his 1998 biography of John D. Rockefeller, Sr.  I enjoyed it more than I thought I would.  Not surprisingly, the economics that Chernow uses to analyze Standard Oil’s business practices is unsophisticated and uninformed.  (For example, John McGee’s classic 1958 [2] and 1980 [3] papers on Standard Oil and predatory pricing aren’t mentioned.)  But Chernow’s writing is smooth and well-paced, and his treatment of Rockefeller – the man, husband, brother, father, grandfather, businessman, philanthropist, reviled public figure – is fair.

Old John comes across – even in the telling of Chernow, who regards Rockefeller’s vigorous competitiveness as a business executive to have been a serious moral flaw – as having been a deeply good man.  Rockefeller had about him a not a whiff of arrogance or ostentation.  (If Bob Frank’s hypothesis [4] of work and consumption is correct, Rockefeller stands as a notable exception to that hypothesis.)  Rockefeller was kind, forgiving and tolerant of others’ faults, enormously generous, intelligent, prudent, loyal to friends and family, and never venal or petty or vindictive.  His employees, from top to bottom, seemed genuinely fond of him.  (At one point in the book, Chernow marvels that a man so focused on making his firm as profitable as possible also paid his employees generously, never fired them save for egregious offenses, and treated them kindly in other regards.)

The only real enemies Rockefeller had were rival oil refiners (and some of their muckraking children [5]); politicians (such as the obnoxious, and noxious, T.R.) and pundits who neither understood what Rockefeller was about nor cared except insofar as they could use him – or his image – as a whipping boy to advance their own careers and agendas; and his irresponsible, envious, and utterly ungrateful brother Frank.

I’m not sure that Rockefeller would have been exciting company.  He was, for his entire life, a devout Baptist who sternly disapproved of drinking, dancing, the theater.  (I, personally, loathe dancing – ’cause I’m lousy at it; I rather like the theater; and I’m enormously fond of drinking.)  And he seemed to have few intellectual interests.  But Rockefeller nevertheless had a genuine sense of humor and, obviously, enormous natural smarts about people and business matters (although he was, I was surprised to learn, not a very good investor).

Rockefeller is, and ought to be, one of the great monuments to the bourgeois virtues [6].

……

I conclude my little ode to J.D. Rockefeller, Sr., with the two most frustrating passages in Chernow’s book.  The first appears at the top of page 258 while the second appears in the middle of page 259; they are symptoms of the misunderstanding that still reigns about Rockefeller and Standard Oil in particular, and about competition and monopoly in general:

On balance, the [Standard Oil] trust wielded its monopolistic power to keep prices artificially low to forestall competition.

….

A very smart monopolist, Rockefeller kept prices low enough to retain control of the market and not so low as to wipe out all lingering competitors.

Re-read these above sentences; ponder what Chernow here says.

Indeed, Standard Oil drove kerosene prices down and keep them low.  But, of course, that fact screams not “monopoly!” but “competition! [7]

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URLs in this post:

[1] Titan: http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Dstripbooks&field-keywords=titan&x=0&y=0

[2] 1958: http://cafehayek.com/site/wp-content/uploads/2011/12/1958.pdf

[3] 1980: http://econpapers.repec.org/article/ucpjlawec/v_3a23_3ay_3a1980_3ai_3a2_3ap_3a289-330.htm

[4] Bob Frank’s hypothesis: http://cafehayek.com/2010/11/robert-frank-on-inequality.html

[5] their muckraking children: http://en.wikipedia.org/wiki/Ida_M._Tarbell

[6] the bourgeois virtues: http://www.amazon.com/Bourgeois-Virtues-Ethics-Age-Commerce/dp/0226556646/ref=sr_1_1?ie=UTF8&qid=1321062838&sr=8-1

[7] But, of course, that fact screams not “monopoly!” but “competition!: http://cafehayek.com/2010/03/non-standard-history.html

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