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No, In the Late 19th Century Oil and Steel Prices Were Not Monopolistically High

Here’s a letter sent several days ago to the Washington Post:


Reporting on Google, Rachel Lerman writes that “U.S. antitrust laws were initially written in 1890 in an era where Standard Oil and, soon after, U.S. Steel, dominated their industries. They controlled so many aspects of the market that small companies had no choice but to work with them, driving up prices” (“Government kept to the sidelines as Google got big. Now regulators have the chance to rein the company back in.” Oct. 12).

Her claim about prices is mistaken. When Rockefeller founded Standard Oil in 1870, kerosene – that firm’s principal output – sold for 26 cents per gallon. By 1885, as Standard continued to grow because of Rockefeller’s unusual skill at achieving production and distribution efficiencies, the price of a gallon of kerosene had been driven down to 8 cents. By 1890 when the Sherman Antitrust Act was passed, kerosene’s price had fallen further to 7.375 cents per gallon.*

Similarly for prices of steel. Among the main uses of steel back then was making rails for railroads. The price per ton of Bessemer steel rails in 1880 was 30 percent lower than in 1870, and by 1890 the price of these rails had fallen by another 53 percent.**

These dramatic price declines – which were common also in other industries – belie the potted historical claim that the U.S. economy leading up to passage of the Sherman Act was gripped by monopolists. On the contrary, the evidence shows that the technological and organizational advances of that era made it unprecedentedly competitive.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

* Donald J. Boudreaux & Burton W. Folsom, “Microsoft and Standard Oil: Radical Lessons for Antitrust Reform,” Antitrust Bulletin, Fall 1999.

** Thomas J. DiLorenzo, “The Origins of Antitrust: An Interest-Group Perspective,” International Review of Law and Economics, June 1985; and “Andrew Carnegie,” May 2017.


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