The Sherman Act is the federal antitrust statute discussed by Bob Zadek and his guests as the origin point of American antitrust regulation. In the excerpts it is dated to 1890 and described as still in force. Guests treat it less as a settled legal standard than as a vague and politically malleable instrument whose results have diverged from its stated aims.
Vagueness and the undefined monopoly
Ryan Young, of the Competitive Enterprise Institute, notes that the Sherman Act, unlike a lot of modern legislation, is two pages long, and that in those two pages it does not define what is meant by monopoly — a confusion he says persists 130 years later Antitrust 101 with Ryan Young (2019). Bob Zadek calls “monopoly” a squirrelly word: it appears in the statute, and enforcers are told to use the statute to beat down monopolies without much guidance as to what that means.
Young offers the economist’s definition — a company powerful enough to lower its supply and raise its prices, making its product harder to get and more expensive, which harms consumers — but notes that economists are not in charge of antitrust policy. Judges decide cases under what is called the “Rule of Reason” standard, using whatever definition of monopoly they find reasonable, so the meaning changes from case to case. There is, he says, no bright-line standard for what constitutes a monopoly for legal purposes, and the resulting uncertainty leaves companies unable to plan or make long-term investments.
Zadek presses the distinction between the power to act anti-competitively and the actual exercise of that power: is a company a monopoly if it can raise prices and restrict supply, or only if it does? Young answers that the question has never been definitively answered and has been answered differently in different cases. Enforcement usually rests on past actions, and the Justice Department generally does not have a “Department of Pre-Crime,” but there is an actual antitrust term, “incipiency,” under which a judge or regulator who sees market conditions that might in the future permit monopoly can act. Young says incipiency has been invoked rarely, especially in the 1950s and 1960s. Zadek compares the mere-power theory to a hypothetical criminal statute punishing people for a higher-than-average likelihood of committing a crime, and asks whether he is exaggerating in describing judge-made breakups on the basis of power alone.
Origins and the cronyism charge
Young places the Act’s passage against a decade in which 19 states passed their own state-level antitrust laws. He attributes those state laws to two new technologies — a maturing national railroad network and refrigeration — which for the first time allowed very large farm producers to ship meat and grain long distances quickly and fresh. That arrangement was good for large producers and for consumers, and as consumers chose those producers over smaller ones without the same cost advantages, the smaller farmers lobbied legislatures not to build up their own businesses but to tear down the new ones. Young’s conclusion is that the Sherman Act was essentially a national version of that, and that antitrust is cronyism all the way down; he favors getting rid of it altogether Why Trustbusting Big Tech is a Bad Idea (2020).
In the earlier episode Young gives a parallel account: monopolies were for a long time rare and essentially government-supported trade organizations, and economists did not think them worth studying if they were not propped up by government. The rise of Standard Oil, Carnegie Steel, big railroads and big banks frightened people, and other companies saw antitrust as a possible and lucrative regulatory weapon. Beginning in the late 1880s, states passed their own antitrust laws that could be used as barriers to entry for new firms or to advantage incumbents, and by 1890 that sentiment reached the federal level Antitrust 101 with Ryan Young (2019).
Zadek frames the underlying question as why bigness per se should frighten anyone, setting aside bad acts and bad actors. Young answers that concentrated power is a terrible thing, that the American Revolution and the liberal project of recent centuries were reactions against absolute centralized authority, and that people saw the same pattern possibly re-emerging in the form of robber barons — fears he says turned out to be overblown.
Cases and the consumer-welfare question
Zadek asks whether the statute, when applied, has ever accomplished an improvement in the marketplace rather than simply destroying bigness per se and helping competitors at consumers’ expense. Young says it is very difficult, indeed impossible, to make that case. On Standard Oil, he says the company was continually cutting prices and increasing supply, making its product more available and cheaper, while the oil market shifted: the electric light displaced the gas lamp, killing the kerosene-lamp market Standard Oil had supplied, and then the automobile created rising demand for gasoline, forcing the company to adapt to consumers. He calls that antitrust case a waste of time. He also cites the IBM case of the 1960s, which lasted about 13 years before the government dropped it because the technology at issue had become obsolete, and the Microsoft case of the late 1990s, mainly over the inclusion of a free browser in Windows, which ended in a settlement — neither a victory nor a defeat for either side Antitrust 101 with Ryan Young (2019).
Asked by Zadek about AT&T and Bell Labs, Young calls them a government-supported monopoly, the only kind that can endure, and says the government was right to break it up but wrong to have protected the monopoly in the first place — righting a wrong rather than affirmatively protecting consumer welfare.
Zadek invokes Milton Friedman’s Free to Choose for the proposition that the only monopoly with legs is one created or supported by government, and cites the East India Trading Company and the Boston Tea Party as an example, along with A&P, the largest retailer in the world in 1960, which no longer exists. Young agrees and adds that competitive abuses exist across the economy, but that the antitrust tool is ill-suited to the job: occupational licenses, fees, taxes and building-permit issues are the real barriers to entry, and competition policy matters, just not so much in the Sherman Act/Clayton Act sense.
Young also describes one candidate success story, which he says involved tariffs rather than Sherman Act or Clayton Act antitrust legislation, and which turned out to be a false hope: a protective tariff in the 1890s for an infant industry, later removed, which economist Doug Irwin found helped the industry reach maturity perhaps a decade faster than under market conditions, but at a cost exceeding the benefit — a net negative for the economy and for consumers.
The political marketplace and the duopoly
In the earlier episode, Mike Munger — described by Zadek as a 2008 Libertarian Party candidate for Governor — takes up the antitrust analogy in a different setting. Zadek says that if business had the same power the political parties have, it would be purely in direct violation of antitrust laws; Munger replies that it would violate the Sherman Act. Zadek extends the point: the country has denigrated new political ideas by allowing the two major parties to control the marketplace for ideas, where two major detergent manufacturers would not be allowed to do the same, and it is bizarre to value detergent more than ideas Who Wants to Buy a Politician? With Mike Munger (2015).
Munger adds that in court cases he has participated in — including an amicus brief for Citizens United that he says he helped rewrite and that Justice Roberts directly referred to — there is no explicit recognition of the conflict-of-interest problem: Democrats and Republicans are first in charge of deciding the rules for campaign finance and second participants in the game they are designing, and if the referee is also a player that is a problem. He says that is part of the basis for Citizens United: the referee does not get to play. Zadek credits the Founders’ checks and balances and the judicial system as a check on the legislative branch, which would otherwise write the rules of the game with a profound bias for incumbency.
Across episodes: the same critique, a sharper conclusion
The Sherman Act is treated in two episodes, and the later treatment sharpens rather than revises the earlier one. In the 2019 conversation, Ryan Young’s critique is structural — the statute’s brevity, its undefined monopoly, the Rule of Reason’s case-by-case uncertainty, incipiency, and a history of major cases he judges futile — and his proposed remedy is a redirection of competition policy toward the real barriers to entry rather than the Sherman Act/Clayton Act framework. In the 2020 episode he states the conclusion more bluntly, calling the Act a national version of state-level cronyism and saying he favors getting rid of it altogether, with the 19 state laws and the refrigeration-and-railroad origin story supplying the historical mechanism. Mike Munger’s contribution in the 2015 episode is separate in subject — the political duopoly rather than industry — but uses the same statute as the measure of what the two parties would be violating if they were businesses.
What the sources do not cover
The excerpts do not state the text of the Sherman Act, the names of the cases that produced the Rule of Reason or incipiency standards, or which constitutional provision antitrust legislation rests on. They do not give the outcome of Citizens United beyond Munger’s account of its reasoning, nor the disposition of the Standard Oil, IBM or AT&T cases beyond what the guests say. The Clayton Act is named but never described. The excerpts also break off mid-sentence in places, and no position is attributed to anyone beyond the speaker labeled in each excerpt.