Economists and historians whose research deserves credit for challenging this myth include Dominick Armentano, Rob Bradley, Tom DiLorenzo, Burt Folsom, and John McGee.
Editor, The Economist
Editor:
Thanks for explaining that most of today’s billionaires achieved their riches, not at the expense of their fellow human beings, but rather by improving humanity’s standard of living (“The rise of the deserving rich,” July 23).
Your argument, though, is marred by your calling Standard Oil’s John D. Rockefeller, Sr., “sketchy” and lumping him in with post-Soviet Russian oligarchs. Rockefeller earned every cent that he received.
What has come down in history as Rockefeller’s insistence on “predatory pricing” – what you likely mean when you say that Rockefeller “took advantage of weak competition laws” – was nothing of the sort. Standard Oil’s price cuts reflected Rockefeller’s ability to cut costs better than his competitors, who then falsely accused him of being predatory.
Powerful evidence that these price cuts were no monopolizing scheme is found in the falling price of Standard’s principal output, kerosene. As Phil Gramm and I explain in our book, The Triumph of Economic Freedom,
Between 1870, the year of Standard’s founding, and 1885, the nominal price of Standard’s main output, kerosene, dropped by 69 percent, from twenty- six cents per gallon to eight cents. The real price of kerosene over this fifteen-year span fell 60 percent faster than the general level of prices. Five years later, kerosene’s real price had fallen by another 8 percent. Even Sen. George Edmunds (R-VT) – the principal coauthor of the Sherman Antitrust Act – admitted in 1890 that “the oil trust certainly has reduced the price of oil immensely.”*
Monopolists raise prices. Standard cut prices. Ironically, it was Rockefeller’s successful determination to cut costs and prices that led economically uninformed historians to cast him as a villain. He did indeed make life difficult for his competitors, but in the process also made life better for millions of consumers worldwide.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* Phil Gramm and Donald J. Boudreaux, The Triumph of Economic Freedom (Rowman & Littlefield, 2025), page 30.
