The Corporation and the Twentieth Century

60. This was understood at least as early as Ellet (1840); it was implied in John Stuart Mill’s (1848, Book III, chapter XVI, p. 582) analysis of the joint-cost problem; it was in Lardner (1850, p. 220); and it was argued by contemporary economists like Hadley (1885) and Taussig (1891). Baumol and Bradford (1970), who are responsible for the modern formalization of this idea, refer explicitly to the debates about short-haul–long-haul price discrimination in the nineteenth century. Hovenkamp (1991) argues not only that contemporary economists understood railroad economics but also that their ideas were influential in legislation. The latter part is dubious, at least with respect to price discrimination, as Adams was the major intellectual influence on the Senate side of what became the Interstate Commerce Act (Kolko 1965). By the twentieth century, as Progressive ideas became dominant in the economics profession as well as in politi- cal discourse, it actually became dangerous to argue that railroad practices like prices discrimi- nation are economically efficient, something a naïve young Chicago economist called Hugo Meyer would learn the hard way (Giocoli 2015, 2016).

61. Ramsey (1927). We will encounter Ramsey pricing again in a different context later in the story.

62. Hilton (1966, p. 94).

63. Dewey (1935, pp. 63–64); Martin (1974, p. 344).

64. Miller (1971).

65. Benson (1955).

66. Chernow (1998, p. 135).

67. Bonbright and Means (1932, p. 61).

68. Granitz and Klein (1996).

69. Chernow (1998, p. 153).

70. Tarbell (1904, chapter 3).

71. Nash (1957, p. 182).

72. Granitz and Klein (1996, pp. 17–18).

73. Montague (1902).

74. “Utter and complete terror prevailed among the independent oilmen” (Nash 1957, p. 185). 75. Nash (1957).

76. On rebates in meatpacking and cattle, see Yeager (1981, chapter 4).

560 Notes to Chapter 2

77. Nevins (1927, pp. 399–400).

78. For accounts of the passage of the Act see Gilligan, Marshall, and Weingast (1989), Hil- ton (1966), Kolko (1965, chapter 2), and Martin (1974).

79. McCraw (1984, chapter 1).

80. Nash (1955, 1957).

81. Poole and Rosenthal (1993). These authors contend that it was the ideological differences

between the strongly pro-regulation South and the anti-regulation Northeast that were decisive in the legislative arena, not the interests of short-haul versus long-haul shippers.

82. Martin (1974, p. 262). What came out of committee, writes Martin, “was pure compro- mise in the worst American political tradition.”

83. Gilligan, Marshall, and Weingast (1989).

84. McCraw (1984, p. 62).

85. Chandler (1965, p. 162); Chernow (1990, p. 68).

86. At the end of 1888, Adams told the Commonwealth Club in Boston that the prohibition

against pooling was putting smaller lines out of business and speeding consolidation. “The Act is at this moment rapidly driving us towards some grand railroad trust scheme” (quoted in Martin [1974, p. 366n59]).

87. Hidy (1952).

88. Porter (1973, p. 65).

89. Montague (1903, p. 309).

90. Chandler (1977, p. 323).

91. Hovenkamp (1991, p. 249).

92. Sitkoff (2005, p. 32).

93. Hidy (1952).

94. Williamson and Daum (1959).

95. And, like Standard Oil, both trusts reorganized as New Jersey corporations as soon as

the option became available (Bonbright and Means 1932, p. 25; Roy 1997, pp. 199–211). 96. Hovenkamp (1991, p. 251).

97. Butler (1985); Grandy (1989); Urofsky (1982).

98. Urofsky (1982, p. 163).

99. Hovenkamp (1991, p. 258).

100. Urofsky (1982, p. 164).

101. Hidy (1952).

102. Hilt (2014); Lamoreaux (2009); Roe (2013). 103. Bonbright and Means (1932, p. 57).

104. As Grandy (1989) has argued.

105. DeLong (1991).

106. Naomi Lamoreaux (2004) and her coauthors have argued that although relatively un-

restricted by the standards of early state charters, these late nineteenth-century state charters offered a standardized set of rules useful for the large enterprise but not flexible enough for smaller businesses.

107. Sitkoff (2005) has argued at length that the law of trusts is and has been a competitor to state chartering as a source of corporate law. Legal scholars in the early twentieth century produced a spate of treatises on the subject, many arguing that the law of trusts could do the same work as the law of corporations.

Notes to Chapter 2 561

108. Crane (2008). Crane sees this choice as a manifestation of the antifederalist tradition in the US, which he traces back to the antifederalist reaction to a proposal by James Madison to include in the Constitution a provision explicitly permitting federal incorporation.

109. Hughes (1977, p. 120).

110. On the notion of monopoly arising “spontaneously”—and the alternative—see Dem- setz (1974).

111. Thorelli (1955).

112. Thorelli (1955, p. 163) takes particular aim at what he calls the “traditional view” of the “Clark School” ( J. D. Clark 1931). See also Stephenson (1930) and Fainsod and Gordon (1941).

113. Edelman (1964). See also Letwin (1965, pp. 86–88). 114. Poole and Rosenthal (1993).

115. Nichols (1934).

116. Timberlake (1978, p. 30).

117. Sherman (1895, p. 839).