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United States Competition Policy In Crisis, 1890-1955, Herbert Hovenkamp

Herbert Hovenkamp

UNITED STATES COMPETITION POLICY IN CRISIS,1890-1955 Herbert Hovenkamp ABSTRACT The development of marginalist, or neoclassical, economics led to a fifty-year long crisis in competition theory. Given an industrial structure with sufficient fixed costs, competition always became "ruinous," forcing firms to cut prices to marginal cost without sufficient revenue remaining to pay off investment. Early neoclassicists such as Alfred Marshall were not able to solve this problem, and as a result many economists were hostile toward the antitrust laws in the early decades of the twentieth century. The ruinous competition debate came to an abrupt end in the early 1930's, when …