The Review of Austrian Economics, 15:4, 275–295, 2002.
2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
The Letters of John Sherman and the Origins
WERNER TROESKEN email@example.com
Department of History, University of Pittsburgh, Pittsburgh, PA 15260, USA
Abstract. This paper presents a survey of the letters of Senator John Sherman, who pushed for passage of the
ﬁrst federal antitrust law in the United States. By placing these letters in historical context, this paper helps resolve
a debate about Sherman’s true intentions in creating an antitrust law. In particular, Sherman’s letters reveal that
he was more concerned with protecting the interests of small and inefﬁcient businesses than with protecting the
interests of consumers.
Key Words: Sherman Antitrust Act
JEL classiﬁcation: N4.
The origin of the Sherman Antitrust Act has been the subject of much debate. A particularly
contentious issue is why, and to what degree, small businesses lobbied for antitrust. There are
three schools of thought. Traditional interpretations minimize the role of small businesses
and argue consumers and populist farmers were the dominant interest groups in the battle
for antitrust (Letwin 1965:53–70, Thorelli 1955:58–95). Revisionist interpretations suggest
small businesses were the dominant interest group and that small businesses supported
antitrust legislation because the trusts used more efﬁcient production technologies and were
better able to exploit economies of scale (Grandy 1993, Libecap 1992, Stigler 1985). Hybrid
interpretations suggest consumers and small businesses were roughly equal in political
signiﬁcance and that small businesses supported antitrust because the trusts used predatory
pricing, vertical restraints, and other exclusionary tactics that undermined the ability of
small companies to compete (Blicksilver 1985, McGraw 1981).
These competing interpretations imply three very different rationales for the Sherman
Act. Traditional interpretations suggest the act was designed to limit market power and pro-
mote consumer welfare. Revisionist interpretations suggest the act was designed to protect
inefﬁcient forms of economic organization, even if such protection reduced consumer wel-
fare. The implications of hybrid interpretations are less clear. If one believes that the vertical
restraints employed by the trusts were anticompetitive and threatened the welfare of con-
sumers as well as small businesses, hybrid interpretations suggest that the interests of small
businesses and consumers were aligned and that the Sherman Act was designed to protect
both groups. If, however, one believes that the vertical restraints employed by the trusts
served a legitimate economic goal, such as promoting quality or consumer choice, hybrid
interpretations might suggest efforts to curtail such restraints through antitrust regulation
reduced consumer welfare and served only to protect small businesses.