The Sherman Act

by Don Boudreaux on July 2, 2014

in Antitrust, Competition, Creative destruction, Crony Capitalism, History, Myths and Fallacies, Seen and Unseen

Today is the anniversary of one of the many regrettable yet famous pieces of national legislation in the U.S.: the Sherman Antitrust Act.  This statute was signed into ‘law’ 124 years ago today by President Benjamin Harrison.  The Sherman Act is often described as the world’s first antitrust (or ‘competition’) statute, but that description is mistaken.  It is (as far as I know) the first national antitrust statute, but a number of U.S. states, starting in 1889, enacted antitrust legislation.

Years ago, Tom DiLorenzo, Steve Parker, and I did research into the these state antitrust statutes.  (Our paper is included in this 1995 volume edited by Fred McChesney and Bill Shughart.)  We found that the purpose of these state statutes – in many cases quite explicitly – was to suppress competition rather than to promote it.  The Sherman Act grew out of the same protectionist movement (a movement that was sparked mainly by local-butchers’ opposition to the rapid success of centralized butchering in Chicago).  The point of the Sherman Act was not to promote consumer-welfare-enhancing competition but, instead, to protect politically influential producers from the new forms of competition that emerged in the decades immediately following the U.S. Civil War.

I was reminded of the anniversary of this sorry piece of national legislation by David Henderson’s post today on competition.  The popular understanding of economic competition today is not much better than was the popular understanding of competition in the late 19th century.

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