Here is my Antitrust and Regulation entry forthcoming in the Oxford Handbook of American Economic History – the editors have given me permission to distribute it now. It’s a bit dry (sorry), and it’s not much given the bigger battles for American values and freedom being waged today as the men in the White House trample the Constitution and all the good it has brought the world, but it might give you some background economic history on the intertwining of american antitrust laws, regulations, and businesses that depend on natural resource extraction — think Standard Oil, Weyerhaeuser Timber, Alcoa.
As the wordle of the entry above suggests, economic growth, and its consequences, dangle from a bigger jumble of pieces and parts of the regulatory environment. (This is actually how the wordle appeared – no manipulation necessary).
I’ve excerpted some parts that are perhaps most interesting today, as we face trading off the environment and other public goods and common resources for the absurd hope of economic growth as imperfectly measured by GDP. Please note it was completed well before Trump was even the Republican nominee, let alone since the new era of alternative facts and “things you didn’t know you needed to put positive probability on occurring in American governance” (shall we call these UnknownKnowns?) so there will be more to this story soon:
Climate change is a legacy of poor property rights:
“Policies that have given polluters and extractors rights to unpriced goods and services like air and water quality have enabled the country to achieve over 200 years of continued economic growth through the consumption of fossil fuels. This is, however, in exchange for an estimated 0.15 degree C contribution to the overall increase of approximately 0.7 degrees C from 1800 to 2005 – or 21% of the global total and more than twice the next highest total emitter, China (Matthews et al, 2014). The consequences of this tradeoff are just beginning to be realized, but most indications are that the productive and absorptive capacities of the planet are not just changing but are shrinking.”
As the personal is political, the law is economic, and the two have often had each other’s backs (also known as conflicts of interest and corruption slowed the growth of needed regulations):
“The chain of production from local natural resource to market commodity might develop within the boundaries of a single state, but became more likely to cross state lines as economic integration and transportation networks evolved. Under the United States constitution, interstate trade and related interstate matters are regulated at the federal level – state statutes have precedence unless they violate free exchange with other states. Thus through the interstate commerce clause, regulation focused on interstate matters, with potential disparities in government intervention at the state and federal levels. For example, in the same time period that federal law was addressing interstate grain trade bottlenecks, Frederick Weyerhaeuser was using the legal services of R. Marshall at the state level to help formally cartelize timber extraction (and resolve a tragedy of the commons problem) on the Chippewa river in Wisconsin. Yet state level decisions tended to filter up to the federal level. Weyerhaeuser’s lawyer became a state Supreme Court Justice, and in this position, persuaded the court to rule the Wisconsin state conservationist “Forestry Law” developments of the early 1900s, which were well in line with federal developments initiating forest reserves and the US National Forest system but perhaps counter to the Weyerhaeuser philosophy at the time, unconstitutional (Ranney, 1997). In addition to the discrepancies highlighted between state and federal goals, here we witness a clear example of the common endogeneity of the evolution of industrial market power and its regulatory environment. In this case, the state’s regulatory environment set the stage for Weyerhaeuser’s organization to become a major forestry firm that over a century later would face an antitrust suit for predatory pricing (bidding) (Weyerhaeuser v. Ross-Simmons Hardwood Lumber Company, 549 U.S. 312 (2007)).”
Nature’s role in the economy is central, not just collateral damage:
“The harnessing of natural resources for economic productivity has challenged society to address bottlenecks that invite anticompetitive behavior and to develop networks for the resource transportation and resolve economic incentive problems related to natural monopoly characteristics of network goods. It has further required government solutions to public goods and commons problems stemming from resources to which it is difficult to assign complete property rights, due to multiple, potentially competing uses that vary in the level of consumptiveness, biological interactions, or other difficulties in assigning marginal values and quantifiable units. Information asymmetries and incomplete information on product quality when the freshness of nature has been packaged and transported and commodified have spurred government legislation, and even exemptions from other legislation aimed at reducing anti-competitive cooperation amongst producers. In short, placing nature at the center of the economy helps clearly elucidate the ways in which market failures are likely to appear throughout economic development and enables a coherent picture of the path dependent evolution of antitrust and regulation policy in the American economy.”
Policy has lagged behind industrialization, but the constitution’s flexibility has enabled the growth of both.
“The rapid networking and industrialization of the US, the continuing integration of markets, and the deepening of capital at the end of the 19th Century that followed in large part from the newly available and widely exploited forms of energy and other raw materials broadly enabled by rail transport (Wright, 1990) left policy to catch up. This game of catch-up focused on case-driven interventions targeting industries perceived to be engaged in the most harmful behaviors either to industrial competitors and direct consumers (primarily antitrust) or to society at large (primarily regulation).”