Just for background: Kolko's *Triumph of Conservatism* was written largely as a left-wing attack on mainstream liberalism. Kolko's message was that most of the regulations and government interventions of the Progressive Era that supposedly gave capitalism a human face merely made matters even worse for the common man. In his related volumes *Railroads and Regulation*, for example, Kolko argued that railroad regulation was designed by railroads themselves to keep rates UP under the fig leaf of consumer protection.
Kolko was subsequently dismayed that free-market economists from Stigler to Rothbard eagerly accepted his thesis, arguing that Kolko had shown that laissez-faire would have been better than what emerged. And indeed that is largely what Kolko showed, though it scarcely occured to him that anyone would actually take the laissez-faire option seriously. Kolko's goal, rather, was to show the futility of trying to tame capitalism, in order to push mainstream liberals towards socialism.
But enough background. On my re-read, I noticed the following.
1. Kolko frequently fails to distinguish between government policies that directly helped business, as opposed to policies that directly hurt business, but reduced the risk of socialist revolution.
The whole idea of a government-enforced cartel, for example, is to raise profits above the laissez-faire level. This is rather different from business consenting to moderate welfare state policies that reduce profits below the laissez-faire level, but arguably reduce the risk of total elimination of the profit system.
Now this point is important because if you take the risk of socialist revolution seriously, then ANY welfare state measure that falls short of expropriation could be said to "help business." This in turn makes Kolko's thesis rather trivial - or, more precisely, an expression of his deluded over-estimate of the risk of socialist revolution in the U.S.
2. Kolko frequently fails to distinguish businesses' desire for *standardized* regulation as opposed to *more* regulation. Very often, if you read Kolko carefully, it becomes apparent that businesses lobbied the federal government as a reaction to the costly patchwork of state-level regulation. In other words, while the naive reading of Kolko makes business preferences look like this:
federal regulation > state regulation > laissez-faire
His accounts are often perfectly compatible with:
laissez-faire > federal regulation > state regulation
3. Kolko frequently fails to distinguish the "do something" motive from the cartelization motive. In many cases, he explains that legislators were under public pressure to "do something" about a perceived problem - say business abuses. Given these circumstances, businesses would naturally lobby to contain the damage - to push for cosmetic rather than substantive changes. Again, this does not mean that business "wanted" regulation. They could easily have had the preference ordering:
laissez-faire > cosmetic regulation > substantive regulation
4. While Kolko discusses trends in concentration ratios and the like, rarely does he come close to replicating his results for railroads. There we have a clear mechanism for increasing railroad profits - rate regulation - along with a smoking gun - railroads lobbying for precisely that.
When Kolko moves to things like the FTC, however, he has nothing comparable. What did the FTC actually DO to reduce competition? Launch some politically-motivated antitrust cases? That is hardly a plausible *mechanism* for setting up a sustainable cartel.
5. Kolko fails to consider (excusable, perhaps, given that his work predates modern information economics) some plausible market failure rationales for how regulation would indirectly help the public BY directly helping business. He goes over meat regulation in detail, for example, and shows how the meat industry lobbied heavily for federal meat regulation. The main debate, says Kolko, was over who would foot the bill for meat inspections.
Now if this were a standard asymmetric information story, the meat inspections would raise demand for meat, initially benefiting the meat suppliers. But this would attract entry, and ultimately it would be consumers who would benefit. Tax versus business finance for inspectors would ultimately be an issue not of public-to-meat interest redistribution, but meat-eating public versus non-meating-eating public.
Now Kolko gives a number of facts that cut against this story. But the idea that consumers might indirectly benefit from measures that directly benefit business is not on his radar.
6. I still like Kolko's discussion of turn-of-the-century deconcencentration trends, but the rest of his work makes me wonder how trustworthy it is. And the book has other great stuff that I strongly suspect is accurate, like his revisionist account of the hysteria surrounding Upton Sinclair's *The Jungle*. But overall, it has all of the flaws you would expect in a work of economic history by an economically semi-literate socialist.
--
Prof. Bryan Caplan
Department of Economics George Mason University
http://www.bcaplan.com [EMAIL PROTECTED]
"The game of just supposing
Is the sweetest game I know... And if the things we dream about
Don't happen to be so,
That's just an unimportant technicality."Jerome Kern and Oscar Hammerstein, *Showboat*
