British Economists on Competition Policy (1890-1920)

Abstract

Most late 19th-century US economists gave a rather cool welcome to Sherman Act (1890) and, though less harshly, to Clayton and FTC Acts (1914). A large literature has identified several explanations for this surprising attitude, calling into play relation between big business and competition, a non-neoclassical notion of competition and a weak understanding of anti-competitive practices. Much less investigated is reaction of British economists to passing of antitrust statutes in U.S. What we know is simply that none of them (including top dog, Alfred Marshall) championed adoption of a law-based competition policy during three decades (1890-1920) of most intense antitrust debates in U.S. The position of three prominent British economists will be examined in this paper: H.S. Foxwell, D.H. MacGregor, and, of course, Alfred Marshall – latter in two moments at extremes of our period, 1890 and 1919. It will turn out that they all shared with their American colleagues a theoretical and operational skepticism about government and judiciary interference with free working of markets. They also believed that British industrial structure and business habits were so different from those in U.S. that urge of interfering with markets in order to preserve competition was much weaker. Among paper's insights is that Marshall’s key concept of “defending a competitor’s right to compete” foreran modern characterization of goal of competition policy as the protection of competitive process. Yet Marshall developed his concept without making recourse to post-1930s neoclassical notion of competition as a static market structure which lies at foundation of most contemporary antitrust policy: a useful lesson from history of economic thought for those IO economists who still claim that classical dynamic view of competition is unsuited as a foundation for an effective competition policy.