Economic Power, Henry Simons, and a Lost Antitrust Vision of Economic Conservatism

Article excerpt

As rival antitrust catechisms contest over the one true creed (Neo-Chicago, Post-Chicago, Behavioral, Game Theoretic), as the eternal quest continues for the single economic construct capable of scientifically settling all antitrust issues (allocative efficiency, consumer welfare, wealth transfers), and while econometricians battle in court wielding hyper-sophisticated statistical techniques drawn from n-space, this conference affords an opportunity to recall that the crux of the antitrust problem is private economic power and its destructive consequences in a free society. In fact, recognition of this problem, and of the vital role of antitrust policy in combating it, comprises what can be called the lost vision of an economic conservatism from the heartland.

This certainly was the case for Senator John Sherman, rock-ribbed Republican from Ohio, along the eastern edge of the nation's middle border. In a major speech delivered in the Senate advocating passage of what would become the Sherman Antitrust Act, he pointed out that "the popular mind is agitated with problems that may disturb social order, and among them all none is more threatening than the inequality of condition, of wealth, and opportunity that has grown within a single generation out of the concentration of capital into vast combinations to control production and trade and to break down competition." (1) The problem, as he saw it, struck to the foundation of the traditional American fear of power and its abuse: "If we will not endure a king as a political power," he thundered, "we should not endure a king over the production, transportation, and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity." (2)

But, the most incisive articulation of this traditional conservative fear of economic power, the menace it poses in a free society, and the challenge of neutralizing and containing by promoting a decentralized economic system of competitive checks and balances came four decades later from the citadel of economic conservatism--at the geographic epicenter of the heartland.

I. HENRY SIMONS AND A CONSERVATIVE CASE AGAINST ECONOMIC POWER

Henry Simons has been called the "Crown Prince" of the Chicago school of economics. (3) Born in downstate Illinois, his professional life from 1928 until his death in 1946 was spent at the University of Chicago. (4) At the University, he taught economics and law, and wrote a series of articles commencing in the 1930s, which were posthumously published in a 1948 collection, Economic Policy for a Free Society. (5)

Simons's conservative economic credentials were impeccable. Profoundly skeptical of the New Deal policies and new Keynesian macroeconomic theory of his day, he condemned such government programs for amounting to a "promiscuous spreading of governmental activities ... in a mass of miscellaneous undertakings for which [government] has little competence...." (6) They invited endless government borrowing and debt, raised interest rates for the private sector while draining investment funds from it, () and they bought votes in the present at the cost of greater government debt and inflation in the future. (8) As for monetary policy, Simons advocated a strict fixed rule governing the money supply in order to avoid "discretionary (dictatorial, arbitrary) action" (9) by an independent, powerful, and unpredictable central bank. (10) Imbued with classical liberalism, he considered individual freedom the prerequisite for, and ultimate measure of, human progress, and its preservation and promotion the lodestar for all economic policymaking. (11)

Throughout, however, Simons considered private economic power to be as great a threat as government power to a free society and a free economy, both in narrow, conventional microeconomic ways, as well as in more fundamental, more far-ranging "macro" ways. …