forms of price discrimination are the results of market power not the cause. Price discrimination also tends in general to militate in favor of economic efficiency, since it encourages welfare- enhancing transactions that would not take place in a single-price regime.
254. Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).
255. Be careful to note that this discussion is about voluntary RPM contracts. These are often confused with so-called fair-trade laws that legally require RPM. Fair-trade laws, pushed strongly by small retail druggists who faced competition from discounters (Hawley 1966, pp. 254ff.), would be among the many pro-cyclical policies ushered in during the Depression by the New Deal.
256. Breit (1991). On the other hand, Oliver Wendell Holmes dissented in the Dr. Miles case on the sensible grounds that perhaps businesspeople know more about business practices than courts do.
257. Brandeis (1913). Brandeis redefined not RPM but price cutting below manufacturer’s suggested retail price as the “unfair” practice, which, like all instances of price cutting, he be- lieved, would lead to monopoly as small businesses tried to protect themselves through combination.
258. Telser (1960).
259. Marvel and McCafferty (1984).
260. McCraw (1981, p. 47). Thus in many ways Brandeis “was less the ‘People’s Lawyer’ than
the ‘petite bourgeoisie’s lawyer.’” 261. Mowry (1946, p. 159). 262. Solvick (1963).
263. Barfield (1970).
264. Rosen (2018, p. 66).
265. Mowry (1946, pp. 188–89).
266. Roosevelt (1911, p. 652).
267. Manners (1969); Morris (2010); Mowry (1946).
268. Mowry (1946, p. 236).
269. Bragdon (1967, pp. 340–43).
270. Sklar (1988, p. 409). “The key to Wilsonian ideology during the war, as before, lay in his
organic, historical, evolutionary view of society and social change” (Cuff 1974, p. 143). 271. Thies and Pecquet (2010).
272. Wiebe (1967, p. 218).
273. Kolko (1963, pp. 204ff.); Sklar (1988, pp. 383ff.)
274. Mowry (1946, p. 280). “In fact the New Nationalism, in almost every instance, was the antithesis of the physiocratic, low-tariff, trust-busting doctrines of the farming West.”
576 Notes to Chapter 3
275. Link (1951).
276. In his History of the American People, Wilson had asserted that in contrast to the intel- ligent and hard-working Chinese coming to the West Coast, Southern and Eastern Europe were “disburdening themselves of the more sordid and hapless elements of their population,” sending to the East Coast people with “neither skill nor energy nor any initiative of quick intelligence” (Wilson 1903, pp. 212–14). As he turned to politics, Wilson distanced himself from those pas- sages and adopted a “melting pot” view (Vedder, Gallaway and Moore 2000). As president, he vetoed an immigration-restriction bill strongly supported by organized labor, largely to honor campaign promises to urban ethnics, even though he was not opposed in principle to restriction (Link 1956, pp. 275–76).
277. Mowry (1946, p. 280).
278. Wolgemuth (1959). Historians have often portrayed this maneuver as strictly a matter of political expediency to satisfy Southern constituents (Link 1951, p. 324). In fact, Wilson was “primarily inspired by the fear that blacks carried contagious diseases and secondarily moved by the feeling that blacks had become disrespectful to their white superiors” (Friedman 1970, p. 160).
279. Hofstadter (1964, p. 209); Seltzer (1977, p. 190).
280. Urofsky (2009, pp. 342–43).
281. Link (1954, p. 22).
282. For example Chernow (1993) and Lowenstein (2015). 283. Calomiris and Haber (2014); White (1983).
284. Calomiris and Haber (2014, p. 181).
285. Sylla (1969).
286. Calomiris and Haber (2014, p. 182).
287. Calomiris and Haber (2014, pp. 184–85). 288. Miron (1986).
289. Hanes and Rhode (2013).
290. Friedman and Schwartz (1963, p. 158).
291. Neal (1971).
292. Trust companies were chartered by the state, but until 1906 in New York they were not
required to hold reserves, and after 1906 were held to less severe reserve requirements than banks (Moen and Tallman 1992, p. 614).
293. Moen and Tallman (1992, p. 612).
294. Gorton (1985).
295. Gorton (1985); Timberlake (1984).
296. Wicker (2000, pp. 88ff.); Bruner and Carr (2007, pp. 83ff.). 297. Moen and Tallman (1992, p. 621).
298. Andrew (1907); Timberlake (1993, pp. 183–95). 299. Timberlake (1993, p. 195).
300. Wicker (2000, p. 96).
301. Chernow (1990, pp. 127–28).
302. Roosevelt (1911, pp. 650–51). Frick and Gary portrayed the deal as incidental and moti- vated only by a desire to help in the Panic. In fact, U.S. Steel got a steal, and TCI&R made money for the company for decades.
Notes to Chapter 3 577
303. Wicker (2000, p. 100–102).
304. Bruner and Carr (2007, p. 135).
305. Gorton (1985, pp. 280–81).
306. Andrew (1908, p. 515).
307. Stephenson (1930, pp. 322 and 173). His grandson Nelson Aldrich Rockefeller would be
Gerald Ford’s vice president.
308. Lowenstein (2015); Stephenson (1930); White (1983, pp. 89–90).
309. Paul Warburg, “Defects and Needs of Our Banking System,” New York Times, January 6,
1907, p. 14. Chernow (1993) erroneously gives the date of this article as November 1907, confus- ing it with the date on which the Chamber of Commerce report was written up. The two were not unconnected. As early as 1904, Jacob Schiff had brought Warburg’s ideas to the attention of James J. Stillman, the president of National City and Vanderlip’s mentor. Stillman was initially dismissive, but the seeds were planted.
310. “Leading Financiers for Central Bank,” New York Times, November 12, 1907, p. 2.
311. Stephenson (1930, p. 338).
312. Stephenson (1930, p. 375). So great is the mythos surrounding the Jekyll Island meeting
that phantom attendees have appeared in the literature. Many sources think Benjamin Strong was there, others that Charles Norton, president of First National Bank of New York, was there. It is most likely that neither was.
313. In a well-thought-out treatise a few years earlier, Morawetz (1909) had advocated a na- tionwide clearinghouse association. He actually opposed the idea of a central bank, fearing that it would inevitably become politicized.
314. Calomiris and Haber (2014, chapter 9).
315. Cleveland and Huertas (1985, p. 44).
316. Cleveland and Huertas (1985, pp. 62–67).
317. Vanderlip’s real interest was in international banking, and the Federal Reserve Act of
1913, in which he had had a hand, would officially legalize foreign branching by national banks. 318. Kolko (1963, p. 186).
319. Kolko (1963, p. 189).
320. Carosso (1970, pp. 136–55); Chernow (1990, pp. 149–56).
321. Urofsky (2009, p. 321).
322. DeLong (1991).
323. Kolko (1963, p. 218); Lowenstein (2015, p. 131).
324. Friedman and Schwartz (1963, pp. 168–69).
325. Lowenstein (2015, pp. 86–87).
326. Humphrey (1982); Mints (1945); Timberlake (2007). The problem with these “real
bills” is that they are not in fact real but nominal: the value of the collateral the loans offer varies endogenously with prices. The result is dynamic instability not a self-limiting process. Happily, under a gold standard, also baked into the Federal Reserve Act, this process could not lead to unlimited inflation because gold served as a real anchor to prices, and note creation backed by commercial paper provided “elasticity” only at the margin between notes and demand deposits, which is exactly what the Panic-shaken reformers wanted (Friedman and Schwartz 1963, pp. 190–91). Laughlin was actually a strong proponent of the gold standard, but it is far from clear what role gold was supposed to have played in his system (Mints 1945, p. 207). In his
578 Notes to Chapter 3
monumental history of the Federal Reserve, Allan Meltzer (2003, p. 70) lists both Paul Warburg and Piatt Andrew as proponents of the real-bills doctrine. Both certainly favored a currency based on commercial paper. But Warburg did not invoke the real-bills doctrine nor think that the system was self-limiting; he wanted a central bank that would intervene in the market for commercial paper, which is the direction in which the Fed ultimately evolved (Mehrling 2002, p. 212; White 1983, p. 116). Andrew (1905) was in fact a critic of the real-bills doctrine who pointed to the dynamic-instability problem.
327. Link (1954, pp. 45–53).
328. Urofsky (2009, pp. 282–84).
329. Link (1954, p. 50); Lowenstein (2015, p. 213). The caucus also made sure that loans for
agricultural purposes were included among the “real” bills that were eligible for discount.
330. Wiebe (1962, pp. 130–37).
331. In the original set up, the Secretary of the Treasury, the Comptroller of the Currency,
and the Secretary of Agriculture were ex officio members of the board.
332. Congressional Record, 63d Cong., 2d sess., p. 1446.
333. Chernow (1990, p. 158).
334. Carosso (1970, p. 179); Chernow (1990, pp. 180–81). Kuhn, Loeb had already done so
years earlier in response to New York hearings on the insurance industry.
335. DeLong (1991, p. 218).
336. Woodrow Wilson, “Address to a Joint Session of Congress on Trusts and Monopolies,”
January 20, 1914, The American Presidency Project, https://www.presidency.ucsb.edu /documents/address-joint-session-congress-trusts-and-monopolies (accessed August 14, 2022). 337. He wasn’t so sure about communities of interest—the Northern Securities problem again. The entire passage is worth quoting. “Enterprises, in these modern days of great individual fortunes, are oftentimes interlocked, not by being under the control of the same directors, but by the fact that the greater part of their corporate stock is owned by a single person or group of persons who are in some way ultimately related in interest. We are agreed, I take it, that holding companies should be prohibited, but what of the controlling private ownership of individuals or actually coöperative groups of individuals? Shall the private owners of capital stock be suf- fered to be themselves in effect holding companies? We do not wish, I suppose, to forbid the purchase of stocks by any person who pleases to buy them in such quantities as he can afford, or in any way arbitrarily to limit the sale of stocks to bona fide purchasers. Shall we require the owners of stock, when their voting power in several companies which ought to be indepen- dent of one another would constitute actual control, to make election in which of them they will exercise their right to vote? This question I venture for your consideration” (emphasis
original).
338. Martin (1959, p. 25).
339. The language of Section 7 made it illegal for one company to acquire the stock of an-
other “where the effect of such acquisition may be to substantially lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition” (emphasis added). “Thereby, the use of the holding company as a device for combining competing con- cerns was virtually outlawed (where interstate commerce was involved), even when monopoly was not the aim” (Bonbright and Means 1932, pp. 75–76).
340. Link (1954, p. 70); Urofsky (2009, p. 119).
Notes to Chapter 4 579
341. In the January 20 address, Wilson expressed sympathy with “the individuals who are put out of business in one unfair way or another by the many dislodging and exterminating forces of combination.”
342. McCraw (1984, pp. 120–21); Urofsky (2009, pp. 289–92).
343. Link (1954, pp. 71–72); McCraw (1984, pp. 122–25); Urofsky (2009, pp. 389–95). The author of the FTC bill was actually Brandeis’s associate George Rublee, who was a fervent sup- porter of the Bull Moose Party and a proponent of the strong commission Roosevelt favored.
344. Young (1915, p. 326).
Chapter 4: The Seminal Catastrophe
1. Kennan (1979, p. 3, emphasis original).
2. Eisner (2000); Leuchtenburg (1964, p. 84).
3. Angell (1912).
4. The definitive recent account of the events leading to the war is Clark (2013). See also
Meyer (2006). “Strikingly,” writes Mark Harrison (2016, p. 138), “the decision makers in every country were subscribers to a virtual world where the zero-sum game of power was being played out, not the positive-sum game of commerce and development.”
5. Scheidel (2017, p. 142).
6. Eichengreen (1996, pp. 68–70); Meltzer (2003, p. 82).
7. Eichengreen (1996, p. 70).
8. Friedman and Schwartz (1963, p. 198).
9. Eloranta and Harrison (2010, p. 145); Friedman and Schwartz (1963, p. 200).
10. Eisner (2000, p. 52).
11. Burk (1989, p. 127).
12. Glaser (2006, p. 231).
13. Chernow (1990, p. 191).
14. Forbes (1974). Originally the Export Department was a separate operation working on
contract with Morgan. But very quickly Stettinius was made a senior partner and the operation was formally moved in-house, probably because of the large commissions Stettinius was receiving.
15. Glaser (2000, p. 390).
16. Glaser (2006, p. 232).
17. Forbes (1974, p. 62).
18. Chernow (1990, p. 190).
19. Chernow (1990, p. 202); Glaser (2006, p. 233). 20. Koistinen (1997, p. 266).
21. Chandler and Salsbury (1971, pp. 360–63); Hatch (1956, pp. 213–25); Williamson (1952, chapter 19). Connecticut’s third iconic gun-maker, the Colt Patent Firearms Company of Hartford, was also immediately engaged in work for the Allies, notably making Vickers machine guns.
22. Williamson (1952, p. 228). This despite the fact that the British Enfield Armoury had been set up to emulate the so-called American System of manufacturing (Hounshell 1984, p. 4).
23. Koistinen (1997, p. 130). The transfer did not become official until the US entered the war.
580 Notes to Chapter 4
24. Hatch (1956, pp. 220 and 222). The Czar sent some 1,500 inspectors to Bridgeport to oversee the Remington order, including one kitted out as a Cossack captain in full regalia.
25. Crowell (1919, p. 181). The American Enfields were rechambered to accept 0.30-caliber Springfield shells and thus complemented the existing stock of Springfields available to Ameri- can troops (Grotelueschen 2006, p. 28).
26. Chandler and Salsbury (1971, pp. 363 ff.). 27. Crowell (1921, p. xxi).
28. Koistinen (1997, p. 121).
29. Nasaw (2006, p. 585).
30. McCraw and Reinhardt (1989).
31. Schwab’s departure from U.S. Steel and his acquisition of Bethlehem is a tangled story, on which see Hessen (1975).
32. Warren (2008, pp. 77–78). In hard-driving Bethlehem, Schwab insisted on retaining earn- ings to plow into new investment and refused to issue dividends. This angered the company’s second-largest stockholder—none other than Samuel Untermyer, soon to be of Pujo fame. When Untermyer threatened to sue, he was placated with a seat on the board (Hessen 1975, p. 226).
33. Urofsky (1969, p. 89). “In 1904 Bethlehem’s armor sales had produced nearly half of the company’s income. By the time of the outbreak of World War I, the armor plant represented only five percent of the company’s total investment, and armor sales accounted for only three percent of its annual income” (Hessen 1975, p. 226).
34. On Schwab’s ambition to emulate Krupp, see Warren (2008, p. 102). Bethlehem Steel Cor- poration was the parent of the shipyards (and other holdings) and of the Bethlehem Steel Com- pany, which in turn had a variety of subsidiaries. In 1917, the Corporation’s shipyards were merged into the Bethlehem Shipbuilding Corporation, a 100 percent subsidiary. Bethlehem Mines Cor- poration and Ore Steamship Corporation followed soon thereafter (Swaine 1946, p. 198).
35. Hessen (1975, pp. 211–12). The White Star liner Olympic, on which Schwab and a col- league were sailing, was diverted north of Ireland because of submarine activity. There the liner came to the aid of the dreadnought H. M. S. Audacious, which had struck a mine. After rescuing the crew, the Olympic (sister ship of the Titanic) attempted unsuccessfully to tow the battleship, but was forced to seek refuge in Lough Swilly when a German submarine appeared. The subma- rine finished off the Audacious. Not wanting the news of the sinking to get out immediately, the British sequestered the passengers in Ireland, and Schwab (but not his colleague) was allowed to proceed to London only after the commanding admiral had been informed of his mission. Whether Americans should be permitted to travel on British-flag ships, some of them carrying armaments, would become a central issue of the American neutrality.
36. Urofsky (1969, p. 90n16). Bethlehem continued to fulfill direct contracts as late as 1918. 37. Urofsky (1969, p. 93).
38. Hessen (1975, p. 231); Urofsky (1969, p. 85).
39. Hessen (1975, p. 231); Urofsky (1969, pp. 93–95); Warren (2008, p. 107). Frederick Win-
slow Taylor had cut his teeth at Midvale in the late nineteenth century. Midvale was also a profit opportunity in 1915 because the previous owner had refused to sell to the Allies: one of his daughters had married a Briton, the other a German, and he was strictly neutral.
40. Jones (1921, p. 475). 41. 223 Fed. 35 (1915).
42. Urofsky (1969, p. 98).
43. James (1911).
44. The issue of Germany epitomized this tension. Progressives had long looked to Germany
as the avatar of enlightened civilization, but they now had to struggle to reconcile this vision with the retrograde behavior of a Prussian-dominated empire—especially when, in 1914, many of the foremost German intellectuals signed an open letter justifying the invasion of Belgium and professing intellectual solidarity with the German regime. As many as 100 intellectuals signed the letter, including Gustav Schmoller, Johannes Conrad, Friedrich Naumann, and Lujo Brentano (Rodgers 1998, p. 278).
45. Hirschfeld (1963); Kennedy (1980, p. 50).
46. Ekirch (1974, p. 266).
47. Rodgers (1998, p. 279); Weinstein (1968, p. 214).
48. Ekirch (1974, p. 266).
49. Bourne (1917).
50. Link (1954, p. 179). Link believes that it was the Lusitania crisis that changed Wilson’s mind,
although, as “he was ever mindful of the desirability of keeping the Democratic Party in power, the significance of the preparedness agitation could not have been lost upon the President.”
51. Link (1954, p. 239).
52. Devlin (1974, p. 631).
53. Ekirch (1974, p. 255); Link (1954, p. 267).
54. Devlin (1974, p. 632).
55. Higgs (1987, p. 131); Koistinen (1997, pp. 182–84).
56. Kennedy (1980, p. 147); Schaffer (1994, p. 186).
57. Kennedy (1980, p. 147); Meyer (2017, p. 235). The British even had to order soldiers back
to their civilian jobs.
58. Kennedy (1980, pp. 144ff.); Meyer (2017, p. 244).
59. Kennedy (1980, p. 17).
60. Dos Passos (1962, pp. 217–19 and 300–302); Meyer (2017, chapter 12); Nagler (2000);
Peterson and Fite (1957); Schaffer (1994, pp. 3–30); Scheiber (1960).
61. Schaffer (1994, p. 5). Without a hint of irony or embarrassment, Creel titled his memoir
of this period How We Advertised America (1920).
62. Commons argued, among other things, that workers were not paying the bulk of war
taxes; that the war would result in significant gains for labor, including the eight-hour day; and that price controls would prevent rising consumer prices (Commons 1918a, 1918b). On the first two points he was largely correct, but price controls could only disguise temporarily the significant monetary inflation that helped pay for the war.
63. They had actually had such powers from the beginning of the European war in 1914; but until the American involvement, they were instructed to censor missives only on grounds of non-neutrality.
64. Scheiber (1960, p. 20).
65. Mock (1941, p. 111). The words are those of Creel, who was a member of the Censorship Board, which Burleson oversaw. Even Teddy Roosevelt joked that he was wary of criticizing in writing the administration’s conduct of the war, as one could never tell which letter might be opened.
582 Notes to Chapter 4
66. Meyer (2017, p. 278).
67. Schaffer (1994, p. 15). Haywood skipped bail in 1921 and fled to the Soviet Union.
68. Murray (1955, p. 22). Even after the Court overturned the conviction, Congress refused
to seat Berger.
69. Scheiber (1960, p. 43). In Schenk v. United States (29 U.S. 47 [1919]), Holmes articulated
the famous criterion of “clear and present danger,” which he and other judges quickly proceeded to read in the broadest possible terms (Kennedy 1980, pp. 84–86).
70. Mock (1941, pp. 35–37).
71. In 1917, “a twenty-three-year-old Bristol [Connecticut] man was sentenced to three months in jail, having shown the temerity the day before not to stand for the playing of the National Anthem at a local theater, instead remarking, ‘To hell with the flag’” (Drury 2015, p. 50).
72. Williams (1996).
73. The American Anti-Trust League was almost certainly an association of small and medium-sized independent businesses threatened by the larger concerns (Thorelli 1955, p. 351). 74. Eleventh Annual Report of the Bethlehem Steel Corporation (December 31, 1915),
pp. 16–18.
75. During World War II it was run by the Homestead works of U.S. Steel. The facility was
closed again immediately after the war and was used largely for storage until the 1960s, when it was sold to private interests, becoming at one point a stamping plant for the American Motors Corporation. “Charleston Ordnance Center,” West Virginia Encyclopedia, last revised Janu- ary 16, 2019, https://www.wvencyclopedia.org/articles/1107.
76. Chandler and Salsbury (1971, p. 391).
77. “Agree on Army of 206,000 Men,” New York Times, May 14, 1916, p. 6.
78. Brand (1945, p. 104).
79. Ernest Hemingway, “Cheaper Nitrates Will Mean Cheaper Bread,” Toronto Star Weekly,
November 12, 1921.
80. Johnson (2016).
81. Cooper (1969, pp. 165–66).
82. Williams (1996). When the US entered the war, all existing American shipyards were at
capacity, 75 percent of them engaged in naval construction (Tyler 1958, p. 106). 83. Williams (1996).
84. Tyler (1958, p. 106).
85. Hessen (1975, chapter 12).
86. Tyler (1958, pp. 106–8).
87. Lauterbach (1942).
88. Eichengreen (1996, p. 88).
89. Koistinen (1967, 1997).
90. Koistinen (1967, p. 389)
91. Koistinen (1997, p. 137).
92. Chernow (1990, p. 202).
93. Edward Marshall, “Edison’s Plan for Preparedness,” New York Times, May 30, 1915, p.
SM6.
94. This account draws on Cuff (1973) and Koistinen (1997).
Notes to Chapter 4 583
95. Werking (1978). Contrary to what most imagine, the Chamber was not an endogenous expression of the interests of private enterprise but an organization created by the federal gov- ernment to help prosecute American foreign trade.
96. 40 Stat. 276, P.L. 41, 65th Cong., 1st sess., August 10, 1917.
97. Herbert Hoover, “Introduction” (written in 1920) to Mullendore (1941, p. 3).
98. Cuff (1977, 1978); Hawley (1974).
99. Higgs (1987, pp. 135–38).
100. Mullendore (1941, p. 61).
101. Mock (1941, p. 28).
102. Meyer (2017, p. 251).
103. Timberlake (1963, p. 179).
104. Cuff (1978, p. 46).
105. Carosso (1970, pp. 219ff.); Martin (1971).
106. Schaffer (1994, p. 33).
107. Higgs (1987, pp. 116–21).
108. The Railroad Administration kept rates low and wages high, necessitating a transfer
of some $1.4 billion from the Treasury during the 27 months of federal control (Healy 1944, p. 536).
109. Rockoff (2005, p. 329).
110. Cuff (1978, p. 47); Higgs (1987, p. 138); Kennedy (1980, p. 124).
111. Koistinen (1997, p. 211).
112. Eisner (2014, pp. 59 and 61).
113. Koistinen (1997, p. 198).
114. Koistinen (1997, p. 233).
115. Eisner (2000, pp. 64–65).
116. Cuff (1973, p. 225).
117. Rockoff (2005, p. 238).
118. Cuff and Urofsky (1970, p. 295); Tugwell (1927, p. 365).
119. Miron and Romer (1990, p. 337).
120. Rockoff (2012, p. 133). Note also that national income is calculated in dollar terms, not
in terms of physical units, and it is far from clear how meaningful are the wartime prices used to make the calculation.
121. Rockoff (2005, p. 238).
122. Rockoff (2012, p. 140).
123. To put that in perspective: US GDP in 1919 was $79 billion. The $32 billion expenditure
would be something like $444 billion in 2016 dollars. The (much-longer-lasting) US incursion into Afghanistan and Iraq in the twenty-first century has been costing disputed numbers of trillions of dollars, against US GDP in 2016 of $18.6 trillion. See Louis Johnston and Samuel H. Williamson, “What Was the U.S. GDP Then?,” Measuring Worth, http://www.measuringworth .org/usgdp/ (accessed November 19, 2017).
124. Friedman and Schwartz (1963, p. 221); Rockoff (2005, p. 316). 125. J. M. Clark (1931).
126. For instances of this, see for example Frothingham (1927, p. 131).
127. Link (1954, p. 195). The tax on munitions makers was made retroactive to the beginning of 1916 to make sure that the firms could not raise their prices to compensate. Almost all of the tax was paid by Du Pont (Chandler and Salsbury 1971, p. 402).
128. Gilbert (1970, p. 79).
129. Rockoff (2005, p. 321). See also Federica Genovese, Kenneth Scheve, and David Stasav- age, “Comparative Income Taxation Database,” Stanford University Libraries, February 28, 2014, http://data.stanford.edu/citd.
130. Rockoff (2012, p. 329).
131. Scheidel (2017); Scheve and Stasavage (2016).
132. Kennedy (1980, pp. 100ff.).
133. Meyer (2017, p. 288).
134. Kennedy (1980, p. 104).
135. Friedman and Schwartz (1963, p. 205).
136. Friedman and Schwartz (1963, p. 220); Meltzer (2003, pp. 73 ff.).
137. Friedman and Schwartz (1963, p. 216).
138. Samuel H. Williamson, “The Annual Consumer Price Index for the United States,
1774–2015,” Measuring Worth, http://www.measuringworth.com/uscpi/ (accessed Novem- ber 20, 2017).
139. Much of this portrait of the early American automobile industry follows Langlois and Robertson (1995, chapter 4).
140. Goddard (2000); Maxim (1937). Pope attempted to reestablish itself as a maker of gasoline-powered vehicles, but this met with little success. The firm collapsed in 1914 following the death in 1909 of founder Colonel Albert A. Pope, though bicycle operations were acquired by the Westfield Manufacturing Company, whose new facilities in Massachusetts made bicycles and even munitions for the war effort. Pope’s Hartford plant was taken over by a machine-tool company called Pratt & Whitney. The company’s signature brand—the Columbia bicycle— lives on as intellectual property, nowadays in the form of a retro-design for enthusiasts.
141. Pound (1934, chapter 4).
142. Klepper (2016).
143. Langlois (2018, pp. 1059–60).
144. Klepper (2016, pp. 75–76).
145. Hounshell (1984, p. 224).
146. Hounshell (1984).
147. Ames and Rosenberg (1965). On this see also Langlois (2003a).
148. Hounshell (1984, p. 252).
149. Raff and Summers (1987).
150. Older factories had been laid out for centralized water or steam power. Paul David
(1990) has argued that the redesign of factories was essential to the productivity improvements implied by the development of small electric motors. In David’s story, the delay in adapting factories accounts in large part for the slow pace at which industry, and the economy as a whole, benefited from the nineteenth-century innovation of electric power.
151. Williams et al. (1993).
152. A widely repeated, if perhaps apocryphal, anecdote illustrates the point. Ford engineer Charles Sorenson “recalled that when Charles Morgana sent out specifications for a
Notes to Chapter 4 585
Ford-designed machine tool to machine tool manufacturers, the latter often came back to Mor- gana saying that there must have been an error because the machine could not do what it was supposed to do. Morgana would then show the tool builders that no mistake had been made because the Ford-designed and Ford-built prototype could indeed turn out the specified num- ber of units within the specified limits of precision. ‘So it went with the thousand pieces of machinery that we bought,’ concluded Sorensen” (Hounshell 1984, p. 231).
153. Nevins and Hill (1954, pp. 458–61). Ford turned the now-empty Keim facility in Buffalo into an assembly plant.
154. “Ford Must Distribute $19,000,000, but May Build Smelting Plant,” Automotive Indus- tries, February 13, 1919, p. 391.
155. Nevins and Hill (1954, pp. 568–69).
156. Spence (1981).
157. Nevins and Hill (1954, p. 282, emphasis original).
158. Goddard (2000); Maxim (1937).
159. EVC did in fact make some gasoline-powered vehicles, a legacy of Pope’s sideline.
160. In 1916 “Automobile” was changed to “Automotive” to bring on board engineers working
with other self-propelled vehicles like airplanes and boats.
161. Barnes (1921); Thompson (1954).
162. Thompson (1954, p. 9).
163. Nevins and Hill (1954, pp. 211–13). Leland had been brought in before Ford left, and the
rivalry this created was one motivation for Ford’s departure. 164. Leland and Millbrook (1966).
165. Arnold and Faurote (1915).
166. Hounshell (1984, p. 260).
167. “Exposition Auto Show the World’s Greatest,” Los Angeles Times, May 2, 1915, p. VII6. More than 4,000 Model Ts were made at the Exposition; all sold rapidly.
168. A term generally traced to the 1930s Prison Notebooks of the Italian Marxist Antonio Gramsci (Hoare and Nowell Smith 1971).
169. Tugwell (1927, p. 364). Of course, Ford certainly did worry about markets, and for him costs not just output were at center stage.
170. Baruch (1921, p. 69).
171. Hutchins (1948, p. 53).
172. Williams (1996, pp. 28–33).
173. Hutchins (1948, p. 54).
174. Dos Passos (1962, pp. 149–51).
175. Nevins and Hill (1957, p. 63).
176. Ford with Crowther (1922, p. 246).
177. Beasley (1947, pp. 81–89); Williams (1996, p. 33).
178. They were also used in World War II. The last American vessel sunk by a German tor-
pedo was an Eagle boat. Neil Vigdor, “U.S. Ship Sunk in World War II by German Sub Is Found Off Maine Coast,” New York Times, July 19, 2019.
179. Ford with Crowther (1922, p. 247).
180. DeWeerd (1968, p. 236).
181. Chandler and Salsbury (1971, p. 402–27); DeWeerd (1968, pp. 237–38).
586 Notes to Chapter 4
182. Crouch (2000).
183. Katznelson and Howells (2014).
184. Bittlingmayer (1988, pp. 230–32).
185. Johnson (2004, p. 28).
186. Trimble (1990).
187. Katznelson and Howells (2014, p. 22). NACA had been formed under the Naval Appro-
priation Bill of March 2015 as a research and development organization for aeronautics.
188. Katznelson and Howells (2014, p. 45). By comparison, in 1915 approximately 100 car- makers had voluntarily created an agreement, through the National Automobile Chamber of Commerce, to cross-license “non-revolutionary” patents without royalty (Epstein 1928, pp. 236–39). By then, of course, the Selden patent, analogous to but legally much weaker than
the Wright and Curtiss patents, had expired. 189. Johnson (2004, p. 31).
190. Bilstein (1983, p. 29).
191. Morris (2017, p. 37).
192. Holley (1953, p. 29).
193. Nelson and Langlois (1983).
194. Crowell (1919, p. 235). Crowell was Assistant Secretary of War and Director of
Munitions.
195. Holley (1953, p. 36).
196. DeWeerd (1968, p. 236–37); Holley (1953, pp. 41–45).
197. Dickey (1968); Marcosson (1947).
198. Along with Thomas J. Watson Sr., the future founder of IBM, and others at National
Cash Register, Deeds also narrowly avoided a one-year jail term for a conviction under one of William Howard Taft’s late-term Sherman antitrust suits. The verdict was overturned on appeal in 1913, and the Wilson administration declined to push the matter further.
199. Crowell (1919, p. 267).
200. Dickey (1968, p. 97).
201. Beasley (1947, pp. 83–84).
202. Nevins and Hill (1957, pp. 66–68). 203. Dickey (1968, p. 66).
204. Dickey (1968, p. 95). As a result, the engines made by Packard were some of the lowest-quality produced. This harmed Packard’s reputation, which in turn harmed postwar sales because the company’s business model was to sell a high-price but high-quality vehicle.
205. Beasley (1947, pp. 82–83). Du Pont complained of the same micromanagement in its contract to build the Old Hickory plant (Chandler and Salsbury 1971, p. 423).
206. Dickey (1968, p. 68).
207. Trimble (1990, p. 22).
208. Dickey (1968, p. 68).
209. Dickey (1968, p. 101).
210. “Backward Airplane Production,” New York Times, March 20, 1918, p. 12.
211. Mooney and Layman (1944, p 31). A subcommittee of the Senate Committee on Military
Affairs also undertook hearings.
212. Holley (1953, pp. 68ff.); Mooney and Layman (1944, pp 31–35).
1. Mitchell (1920, p. 143).
Notes to Chapter 5 587 Chapter 5: Interlude
2. These latter included John Maurice Clark (1944) and a young Paul Samuelson (Samuelson and Hagen 1943).
3. J. M. Clark (1931, p. 53).
4. Kennedy (1980, p. 251). Samuelson and Hagen (1943, p. 6) use a similar image, albeit with a less elegant turn of phrase.
5. J. M. Clark (1931, p. 54); Samuelson and Hagen (1943, p. 6).
6. J. M. Clark (1931, p. 121).
7. Samuel H. Williamson, “Annualized Growth Rate of Various Historical Economic Series,”
MeasuringWorth, 2022, https://www.measuringworth.com/calculators/growth/ (accessed August 17, 2022).
8. Kennedy (1980, p. 264). Although Kennedy made this assertion in 1980, it is almost cer- tainly still true.
9. Samuelson and Hagen (1943, p. 31). 10. Murray (1955, chapter 4).
11. Coben (1964).
12. Kennedy (1980, pp. 278–84).
13. Allen (1931, p. 43).
14. Murray (1955, chapter 5).
15. Urofsky (1969, chapter 7).
16. Soule (1947, pp. 194–96).
17. Murray (1955, chapter 8); (1955); Shlaes (2013, chapter 6); Sobel (1998, chapter 6).
18. Murray (1955, chapters 12 and 13).
19. Friedman and Schwartz (1963, pp. 221–31); Meltzer (2003, pp. 98–109).
20. “Governor Harding,” New York Times, April 8, 1930, p. 22.
21. Friedman and Schwartz (1963, pp. 228).
22. Chandler (1958, p. 148).
23. Bordo et al. (2007, p. 8).
24. Friedman and Schwartz (1963, pp. 131–39).
25. Meltzer (2003, pp. 109–11). “WE MUST DEFLATE,” Strong told an official of the Trea-
sury Department as early as February 6, 1919. “Notwithstanding the hardships and losses result- ing, I believe you will agree that it is inevitably necessary that our banking position must be gradually deflated. If this is not done, we must face the necessity of either continuing the gold embargo . . . or else lose a large amount of gold at a time when it would be inconvenient for us to do so” (Chandler 1958, p. 139).
26. Wicker (1966).
27. Romer (1988, p. 109).
28. Bordo et al. (2007, p. 10).
29. Alston et al. (1994, p. 414); Lauterbach (1942, p. 515).
30. Soule (1947, p. 100).
31. Romer (1988, p. 109).
32. Samuel H. Williamson, “The Annual Consumer Price Index for the United States, 1774–2015,”
Measuring Worth, http://www.measuringworth.com/uscpi/ (accessed February 19, 2018).
588 Notes to Chapter 5
33. Christopher Hanes, “Wholesale and Producer Price Indexes, By Commodity Group: 1890–1997 [Bureau of Labor Statistics],” Table Cc66-83 in Carter et al. (2006), https://dx.doi .org/10.1017/ISBN-9780511132971.Cc66-204 (accessed August 17, 2022).
34. Genung (1983, pp. 890–91; 1954, p. 10).
35. Lauterbach (1942, p. 515).
36. Johnson (1973).
37. Alston (1983); Alston et al. (1994); (Alston, Grove and Wheelock 1994). 38. Meltzer (2003, p. 116).
39. Kennedy (1980, pp. 333–34).
40. Genung (1954, p. 10; 1960); Pusey (1974, chapter 17). What had been the War Finance Corporation eventually wound down in 1924, only to be revived again in the New Deal.
41. Hoffman and Libecap (1991); Libecap (1998). 42. Genung (1954).
43. Libecap (1998, pp. 185–87).
44. Irwin (2017, pp. 350–51).
45. Lauterbach (1942, p. 516). 46. Irwin (2017, pp. 347–56). 47. Frieden (2006, p. 145). 48. Goldin (1994).
49. There is some evidence, however, that on the whole, immigration then as now may actu- ally have raised productivity to such an extent that it increased both the quantity and quality of jobs for the native born (Tabellini 2020).
50. Goldin (1994, pp. 238–39). 51. Abramitzky et al. (2019). 52. Eichengreen (1996, p. 119). 53. Meltzer (2003, p. 118).
54. Allen (1931, p. 52).
55. Pound (1934, pp. 78–79); Rae (1958).
56. Pound (1934, p. 88).
57. Gustin (2012, p 43).
58. Chandler (1962, p. 117); Pound (1934, p. 111); Sloan (1941a, pp. 44–45).
59. Rae (1958, p. 260).
60. Pound (1934, p. 87). Buick produced 8,487 cars that year; Ford 6,181; Cadillac 2,380
(Seltzer 1928, p. 150).
61. Gustin (2012, pp. 97–110).
62. Rae (1984, p. 44).
63. Gustin (2012, p. 112).
64. Pound (1934, p. 109).
65. Pound (1934, p. 120); Rae (1984, p. 45); Seltzer (1928, pp. 153–54).
66. Chandler (1962, p. 119).
67. Langlois and Robertson (1995, p. 57); Seltzer (1928, p. 157); Sloan (1964, p. 6).
68. Olds had essentially been run into the ground by Frederic Smith. So parlous was the
company’s state that it had no plans for a new model. In a famous episode, Durant had the unpainted body of a Buick Model 10 trucked to the Olds facility. He told the workmen to cut
Notes to Chapter 5 589
the frame in half lengthwise and then in half again the other way. He then had them separate the four quarters by a few inches. Put your regular hood and radiator on it, Durant told them. There’s your new Oldsmobile for the coming year (Gustin 2012, pp. 112–13; Sloan 1941a, p. 84; Szudarek 1996).
69. Rae (1984, p. 45); Seltzer (1928, p. 158–60). 70. Pound (1934, p. 127).
71. Rae (1958, p. 260).
72. Curcio (2000, pp. 219–24).
73. General Motors Annual Report 1913, p. 10.
74. Chandler (1962, p. 122).
75. General Motors Annual Report (1913, p. 9; 1915, p. 8); Hounshell (1984, p. 224). Some
43,946 of the cars GM sold were Buicks (Curcio 2000, p. 224). 76. Gustin (2012, chapter 8); Rae (1958, pp. 261–63).
77. Seltzer (1928, p. 175).
78. Seltzer (1928, pp. 178–86).
79. Although GM announced that the Chevrolet Motor Company (Delaware) had been dissolved, in fact the holding company continued to exist as a vehicle (as it were) for holding GM stock (Seltzer 1928, p. 197). There is evidence that Durant tunneled resources among GM, Chevrolet, and United Motors, and it was only at the insistence of John Jakob Raskob and Du Pont (on which see below) that he agreed to merge the three into a single operating com- pany (Chandler and Salsbury 1971, p. 461; Farber 2013, p. 132).
80. Pelfrey (2006, pp. 211–13).
81. Louis P. Cain, “Motor Vehicle Registrations, By Vehicle Type: 1900–1995,” Table Df339- 342 in Carter et al. (2006), https://dx.doi.org/10.1017/ISBN-9780511132971.Df184-577 (ac- cessed August 17, 2022).
82. Klepper (2016, p. 18).
83. Abernathy and Utterback (1978).
84. Klepper and Simons (1997).
85. Pound (1934, p. 183); Seltzer (1928, p. 191).
86. Gustin (2012, p. 199).
87. Chrysler (1950, p. 161; 2000, pp. 250–55).
88. Chandler and Salsbury (1971); Farber (2013).
89. Farber (2013, pp. 133–43).
90. Chandler and Salsbury (1971, p. 451).
91. Chandler and Salsbury (1971, p. 475–91).
92. Livesay (1979, p. 232).
93. Over the period 1912 to 1920, GM retained $128 million in earnings out of total net earn-
ings before taxes of $285 million (GM Annual Report 1920, p. 9).
94. Seltzer (1928, pp. 200 and 204).
95. A central component of which was the Chevrolet holding company, which still owned
substantial amounts of GM stock (Chandler and Salsbury 1971, p. 489).
96. GM’s 1922 Annual Report explicitly blames Durant for the tractor fiasco and excoriates
the division managers for ignoring the Finance Committee’s orders to cut back investment. 97. In addition to Sloan’s two autobiographies (Sloan 1941a, 1964), see Farber (2002).
590 Notes to Chapter 5
98. Sloan (1964, pp. 47–48).
99. Sloan (1964, p. 31).
100. Sloan (1964, p. 53).
101. Chandler (1962, chapter 2).
102. The functions of purchasing and engineering reported to the general manager not the
president (Chandler 1962, p. 62).
103. Sloan (1941a, pp. 115–16).
104. Sloan (1941a, p. 107).
105. Rationality properly understood means that agents do the best they can with what they
know. It is not the ability to make rational decisions in this sense that is bounded. It is knowl- edge and cognitive processing capacity that are bounded (Langlois 1990).
106. Hayek (1945).
107. Coase (1937).
108. Hayek (1945); Jensen and Meckling (1992).
109. Drucker (1946, p. 46, emphasis original).
110. Drucker (1954, p. 205).
111. Chandler (1956). For Chandler’s own account of the genesis of Strategy and Structure
and his collaboration with Sloan, see Chandler (2009, pp. 239–42).
112. Sloan (1964).
113. My Years with General Motors was actually written before Strategy and Structure (Chandler
1962) even though it was published two years later. The reason is that Sloan initially decided not to publish the book on advice from General Motors attorneys, who feared that information from the GM archives could be used against the company in the protracted set of antitrust suits the government was litigating (on which more later). In 1962, however, McDonald successfully sued GM to permit publication, retaining an attorney who would go on to become the head of the American Civil Liberties Union. Peter Drucker was asked to provide a forward to the 1972 reprint of My Years with General Motors. Entirely ignorant of the actual genesis of the book, he expresses his dismay that it mentions him and The Concept of the Corporation not at all. Sloan’s book, he thinks, was written as a response to his own. It is ironic, then, that Sloan’s book is actually a de- velopment of Drucker’s ideas, by way of Alfred Chandler (McDonald 2002; McKenna 2006).
114. It is incorrect to say that governments exist to provide public goods, meaning goods that are both nonrivalrous and nonexcludable. Private firms often provide public goods—Google search is an example. For the most part, what governments provide are goods that are nonrival- rous but potentially excludable. Principles of economics textbooks struggle to find a name for these kinds of goods. Some call them natural monopolies or quasi-public goods, both of which terms strike me as tendentious. Elinor Ostrom called them “toll” or “club” goods (Ostrom, Gardner and Walker 1994, p. 7). On this see also Hansmann (2014).
115. Chandler (1962, p. 12).
116. Drucker (1946, p. 51). Oliver Williamson would give this account a cybernetic spin. Citing W. Ross Ashby and Herbert Simon, he located the logic of the M-form in its “capacity to respond to a bimodal distribution of disturbances”: both disturbances in degree and distur- bances in kind. The M-form assigns each type of disturbance to its own feedback loop. It rep- resents a modularization in which “the higher-frequency (or short-run) dynamics are associated with the operating parts while the lower-frequency (or long-run) dynamics are associated with
Notes to Chapter 5 591
the strategic system” (Williamson [1985, pp. 282–83], citing Ashby [1960, p. 131] and Simon [1962, p. 477]).
117. Williamson (1985, pp. 281).
118. Freeland (2001, pp. 43–68).
119. Chandler and Salsbury (1971, pp. 553).
120. Delco had become part of United Motors in 1918, but in 1920 GM bought the rest of Ket-
tering’s Dayton companies, which manufactured rural power systems and airplanes rather than automotive parts, in order to secure Kettering’s services full time (Pound 1934, pp. 270–74).
121. Freeland (2001, p. 61). See also Leslie (1979).
122. Pierre du Pont remained as chairman of the board until 1929.
123. Freeland (2001, p. 64).
124. Sloan (1941a, pp. 132–33).
125. Freeland (2001, pp. 64–65).
126. This is the point of Klepper and Simons (1997), even if they tend to talk in terms of
“research and development” rather than innovation more broadly. 127. Sloan (1941a, pp. 139–40).
128. Sloan (1964, p. 153).
129. Chrysler (1950, pp. 186–88); Schwartz (2000, pp. 82–83). 130. Thomas (1973).
131. Farber (2002, p. 98).
132. Hounshell (1984, p. 264). After the introduction of a six-cylinder model, Chevrolet sold almost 1.5 million units. Raff (1991) gives even higher figures.
133. Sloan (1964, p. 167).
134. Farber (2002, pp. 100–103); Schwartz (2000, p. 66). William Abernathy showed that although annual model changes were a central competitive factor in this period, their impor- tance to competition declined significantly after World War II (Abernathy 1978, p. 43).
135. Katz (1977, p. 295); Thomas (1973). 136. Raff (1991).
137. Knudsen (1927).
138. Raff (1991, p. 734).
139. Hounshell (1984, pp. 267–301); Nevins and Hill (1957, pp. 379–436). 140. O’Brien (1997).
141. Hounshell (1984, p. 273).
142. Nevins and Hill (1957, p. 389).
143. Hounshell (1984, p. 278).
144. Nevins and Hill (1957, p. 429).
145. Hounshell (1984, p. 288). Unlike the approach at GM, however, the new machines Ford
installed for the Model A were in the main single-purpose tools once again. 146. Langlois and Robertson (1995, p. 58–67); Schwartz (2000).
147. Flugge (1929, p. 166).
148. Heldt (1933).
149. Schwartz (2000, p. 69). According to the Census of Manufactures, there were 197,728 people working for auto assemblers in 1925, compared with 228,382 workers in the parts industry (Seltzer 1928, p. 77).
592 Notes to Chapter 5
150. Katz (1977, p. 266).
151. Flugge (1929, p. 163).
152. Indeed, Sears, Roebuck and Company did a brisk business in add-ons that owners could
use to customize the Model T (Nevins and Hill 1957, p. 417). 153. Ford with Crowther (1922, pp. 83–84).
154. Nevins and Hill (1957, p. 533).
155. Abernathy (1978, p. 142); Katz (1977, p. 252).
156. Abernathy (1978, p. 64).
157. Curcio (2000, pp. 261–335); Schwartz (2000).
158. Curcio (2000, p. 368).
159. Schwartz (2000, p. 69).
160. Katz (1977, pp. 269–71).
161. Wilson (1975).
162. Hoover (1922, p. 37).
163. Hoover (1922, p. 53). Of course, Adam Smith never uttered the word “capitalism,” a
terminological invention adumbrated by Karl Marx and his followers and first used systemati- cally by German-language writers like Werner Sombart and Max Weber at the beginning of the twentieth century.
164. Hawley (1974, p. 118). 165. Hawley (1974).
166. Murray (1981, p. 24). 167. Hawley (1974, p. 125). 168. Baird (1923).
169. Galambos (1966, p. 74).
170. Carrott (1970); Himmelberg (1976).
171. American Column and Lumber Company v. United States, 257 U.S. 377 (1921).
172. In an era before “commercial” speech had decisively lost the protection of the First
Amendment, both Brandeis and Holmes also wondered why the injunction did not violate the free-speech rights of the AHMA.
173. Dewey (1979b).
174. Galambos (1966).
175. Quoted in Montague (1927, p. 665).
176. These are the words of Homer Hoyt (1919), a young economist with the soon-to-be-
dismantled War Trade Board. On the one hand, as a faithful war planner, Hoyt applauded stan- dardization and reduced variety, including the standardization of consumer goods. This would manifestly increase “efficiency,” since consumer tastes for variety are mere “eccentricities” not worthy of serious consideration. On the other hand, such standardization would lead to massive industrial concentration, against which antitrust policy would have vigorously to defend. Hoyt would go on to become a prominent real-estate economist and, as the chief economist of the Federal Housing Administration, arguably the father of redlining (Rothstein 2017, pp. 93–94).
177. Hawley (1989); Himmelberg (1976). 178. Hawley (1989, p. 1079).
179. Quoted in Barber (1985, p. 11).
180. Carrott (1970); Hawley (1989).
Notes to Chapter 5 593
181. Maple Flooring Manufacturers’ Assn. v. United States, 268 U.S. 563 (1925). The court dis- tinguished this case from the hardwood case in that the data provided were averages rather than specific figures for specific firms, and the data came without exhortations to stabilize output. At about the same time, the Court also overturned the ruling against the cement manufacturers: Cement Manufacturers’ Assn. v. United States, 268 U.S. 588 (1925).
182. United States v. United States Steel Corporation, 251 U.S. 217, 40 Sup. Ct. 293 (1920).
183. Montague (1927, p. 670–71).
184. The FTC challenged these acquisitions, but Bethlehem proceeded anyway, and the
commission suspended the cases in 1927 after its defeat in the Kodak case, though it would not officially drop the cases for twelve more years (Winerman and Kovacic 2010, p. 190). The Kodak decision barred the FTC from instituting divestiture procedures under Section 5 of the Clayton Act (FTC v. Eastman Kodak Co., 274 U.S. 619 [1927]).
185. Warren (2008, pp. 112–15).
186. The Supreme Court would soon make clear that Section 7 did not apply to asset mergers (Martin 1959).
187. The FTC investigation of Alcoa would result in a report but no litigation (Waller 2007, p. 125).
188. Federal Trade Commission v. Gratz, 253 U.S. 421, 427, 40 Sup. Ct. 572, 575 (1920).
189. Davis (1962).
190. Himmelberg (1976, p. 51).
191. Hofstadter (1964, p. 193). Winerman and Kovacic (2011) challenge this characterization
of the FTC, though they do paint a picture of a commission limited by the courts and the low competence of its commissioners.
192. Himmelberg (1976, p. 51).
193. United States v. Trenton Potteries Co., 273 U.S. 392 (1927).
194. McCarty (1930).
195. Himmleberg (1976, p. 63).
196. Boies (1968, pp. 608–13); Hoogenboom and Hoogenboom (1976, pp. 84–118). 197. Hoogenboom and Hoogenboom (1976, p. 99).
198. Miranti (1989).
199. Hoogenboom and Hoogenboom (1976, pp. 106–7).
200. Williamson (1975, p. 14).
201. Cohen (1991, pp. 63–64).
202. Janson and Yoo (2012).
203. Stehman (1925, p. 177).
204. Janson and Yoo (2012, pp. 1012–17).
205. Douglas (1987, p. 281).
206. Douglas (1987, p. 229).
207. Minasian (1969, p. 393).
208. Douglas (1987, pp. 267–74).
209. Mock and Larson (1939, pp. 239–41).
210. Aitken (1985, p. 287).
211. Aitken (1985, pp. 252–54).
212. US House of Representatives (1919, p. 36).
594 Notes to Chapter 5
213. US House of Representatives (1919, p. 207).
214. US House of Representatives (1919, p. 11).
215. Unless otherwise noted, this account of the formation of RCA follows the definitive
treatment by Aitken (1985).
216. An alternator is a generator of alternating current (AC) whereas a dynamo is a generator
of direct current (DC).
217. Case and Case (1982, p. 179).
218. Reich (1977, p. 214).
219. Merges and Nelson (1990, p. 891–93).
220. Maclaurin (1949, p. 97).
221. Reich (1977, p. 214); Sterling and Kittross (1978, p. 46).
222. Aitken (1985, p. 433). Although Hooper wrote the letter, it was signed by his superior,
Captain A. J. Hepburn, the acting chief of the Navy’s Bureau of Engineering. 223. Aitken (1985, pp. 457–81).
224. Maclaurin (1949, p. 107).
225. Aitken (1985, pp. 474).
226. Barnouw (1966b, pp. 28–38); Douglas (1987, pp. 292–314). 227. Rosen (1980, p. 32).
228. Quoted in Lewis (1991, p. 139).
229. Barnouw (1966b, pp. 64–72).
230. Sterling and Kittross (1978, p. 510). 231. Sterling and Kittross (1978, p. 62). 232. Lewis (1991, p. 78).
233. Wenaas (2007).
234. Graham (1986, pp. 38–39).
235. Sterling and Kittross (1978, p. 533).
236. Archer (1939); Reich (1977, pp. 221–30).
237. Aitken (1985, p. 449).
238. Despite its name, the Postal Telegraph System was a private competitor to Western
Electric. The two companies consolidated in 1938.
239. In 1931, the Supreme Court would reverse this and rule the patent invalid (DeForest
Radio Co. v. General Electric Co., 283 U.S. 664 [1931]).
240. Temin and Galambos (1987, p. 13). At the same time, AT&T sold its international opera-
tions to ITT and soon backed out of ventures in movies and TV. The new CEO was the same Walter S. Gifford who, as a young statistician, had worked with Howard Coffin and then on the staff of the War Industries Board during the war.
241. Rosen (1980, p. 91).
242. Maclaurin (1949, p. 134).
243. Reich (1977, p. 226). In fact, some radios were made by a third outfit, the Wireless
Specialty Apparatus Company, which had been owned by United Fruit. Units produced by Wireless Specialty counted against GE’s 60 percent allotment. The entire process of standardiza- tion ultimately took almost five years (Wenaas 2007, p. 130).
244. Maclaurin (1949, pp. 127–29). It was also possible to buy some technology from inven- tors like Armstrong and de Forest, who had retained some rights in their own inventions, but the amounts involved were small.
Notes to Chapter 5 595
245. Barnouw (1966b, pp. 115–17).
246. Aitken (1985, p. 498).
247. Winerman and Kovacic (2011, p. 734). Once again the issue was nonstandard contract-
ing practices, and once again these weren’t the point. Because it controlled the patents on the vacuum tube, RCA had a property right to exclude others, and presumably it was already charg- ing a price for tubes that it believed would generate the largest rents. Putting pressure on the distributors was simply an attempt (not, it must be said, entirely successful) to price discrimi- nate by effectively raising the price of tubes to competitors while not at the same time raising the price of replacement tubes. The ability to extract rents caused the nonstandard contracting, not the other way around. As with the Bethlehem Steel acquisitions, the FTC dropped the case in light of its defeat in the Kodak case, expecting that the Department of Justice, with stronger enforcement powers, would pick it up. The DOJ did just that, initiating a Sherman suit in May 1930. This resulted in a consent decree in 1932 that forced the company’s erstwhile owners to divest and set up a patent cross-licensing agreement with them (Anonymous 1933). RCA became a fully independent company.
248. Maclaurin (1949, pp. 111–36).
249. Sterling and Kittross (1978, pp. 67–68).
250. Graham (1986, p. 41). On this point see also Reich (1977).
251. Chandler (2001, p. 5).
252. And I have (Langlois 2013b).
253. Nelson and Winter (1977). It is for this reason, Merges and Nelson (1990) argue, that
patents in complex-systems products should always be construed narrowly not broadly.
254. Baldwin and Clark (2000, 2006) make the argument more formally when they suggest that a given set of innovative activities—of economic experiments—are more valuable in a market than in a single firm: the value of a portfolio of options is always greater than the value
of an option on a portfolio.
255. Using contemporary data from the Census of Manufactures, Scott and Ziebarth (2015)
show that there were essentially no economies of scale in manufacturing radios. 256. Langlois and Robertson (1992).
257. Maclaurin (1949, p. 140).
258. Lueck (1995).
259. Minasian (1969).
260. Hoover v. Intercity Radio Co., 286 Fed. 1003 (App. D.C. 1923). 261. Minasian (1969, p. 397).
262. Barnouw (1966b, pp. 174–75).
263. Hazlett (1990, pp. 149–52).
264. Rosen (1980).
265. Rosen (1980, pp. 72–73).
266. Twight (1998, p. 261).
267. United States v. Zenith Radio Corp., 12 F.2d 614 (N.D. Ill. 1926). 268. Rosen (1980, p. 94).
269. Twight (1998, p. 256).
270. Rosen (1980, p. 102).
271. Rosen (1980, p. 99).
272. McChesney (1993, p. 17).
596 Notes to Chapter 5
273. In 1943, some Texas station owners had been waiting three years for the Commission (by then called the Federal Communications Commission) to allow them to transfer ownership of their station. When the wife of a young congressman offered to buy it, authorization was forthcoming in 24 days. The congressman soon intervened to save the FCC’s budget request. His name was Lyndon Baines Johnson, and he and his wife Lady Bird became rich as owners of radio and later television licenses (Caro 1990, pp. 88–94).
274. Barnouw (1966b, p. 215).
275. McChesney (1993, p. 25).
276. Barnouw (1966b, p. 216).
277. Pool (1983, chapter 6).
278. Quoted in McChesney (1993, p. 27). 279. Allen (1931, p. 69).
280. Samuel H. Williamson, “What Was the U.S. GDP Then?” Measuring Worth, https:// www.measuringworth.com/datasets/usgdp/ (accessed September 20, 2018).
281. Robert A. Margo, “Hourly and Weekly Earnings of Production Workers in Manufactur- ing: 1909–1995,” Table Ba4361-4366 in Carter et al. (2006), http://dx.doi.org/10.1017/ISBN -9780511132971.Ba4214-4544 (accessed August 17, 2022). These are nominal figures, but in fact the CPI was essentially the same in 1919 as in 1929.
282. Fogel (2000, p. 126).
283. Jacoby (1985, p. 172).
284. Wright (1987, p. 335).
285. Bakker, Crafts, and Woltjer (2017, Table 7, p. 34). Gordon (2010, Table 4) does not break
the data down exactly by decade but has comparable numbers. 286. Jovanovic and Rousseau (2005).
287. Kendrick (1961, Table D-1, p. 464).
288. David (1990); Devine (1983).
289. Bakker, Crafts, and Woltjer (2017).
290. Gras (1939, p. 281).
291. Lebergott (1993, p. 113). The idea that the “wash line”—owning a washing machine—
demarcates the relatively well off from the poor is associated with Hans Rosling. See “The Magic Washing Machine,” TED, https://www.ted.com/talks/hans_rosling_and_the_magic_washing _machine (accessed September 27, 2018).
292. Lebergott (1993, p. 130).
293. Gordon (2016, pp. 108–10).
294. Lebergott (1993, p. 113).
295. Barr (2016, chapter 9). “Robert J. Gordon has noted that more skyscrapers higher than
250 feet tall were built in New York between 1922 and 1931 than in any ten-year period before or since” (Field 2014, p. 51; no citation to Gordon provided by Field).
296. This very much included African Americans, who benefited from the anonymity of mail order in an era during which they were discriminated against in face-to-face transactions. Lauretta Charlton, “Back When Sears Made Black Customers a Priority,” New York Times, Oc- tober 20, 2018.
297. The 1905 Sears catalog described it this way. “Miles of railroad tracks run lengthwise through, in and around this building for the receiving, moving and forwarding of merchandise;
Notes to Chapter 5 597
elevators, mechanical conveyors, endless chains, moving sidewalks, gravity chutes, apparatus and conveyors, pneumatic tubes and every known mechanical appliance for reducing labor, for the working out of economy and dispatch is to be utilized here in our great Works” (Emmet and Jeuck 1950, p. 132).
298. Raff and Temin (1999).
299. Levinson (2011).
300. Kim (2001). A brand name is an intangible asset whose value depends on the good will
of customers. It is hostage capital in the sense that its value is thus dependent on keeping cus- tomers happy.
301. Levinson (2011, p. 94).
302. Levinson (2011, pp. 107 and 110).
303. Levinson (2011, p. 113). $1 billion, about $14 billion in 2017 dollars, was roughly 1 percent
of GDP. To put that in some perspective, multiple sources give Amazon’s 2017 revenue as $178 billion, about 0.9 percent of GDP.
304. Dumenil (1995, p. 72).
305. Lippmann (1929, p. 62).
306. Lewis (1922, p. 52).
307. Lewis (1922, p. 100).
308. Although they were a generation apart in age, Lewis and Veblen were well aware of each
other’s work and often riffed on each other in print. Some scholars have seen Lewis’s contribu- tion largely as having popularized Veblen for the generation of the 1920s (Eby 1993, pp. 5–6).
309. Yet Doane cannot hide a grudging suspicion that standardized American cities might be more dynamic and ultimately more pleasant places to live than the textured and idiosyncratic cities of Europe. His interlocutor, the European-born scientist Yavitch, probably also a voice of Lewis, quickly disabuses him of the idea. “‘You,’ said Dr. Yavitch, ‘are a middle-road liberal, and you haven’t the slightest idea what you want. I, being a revolutionist, know exactly what I want—and what I want now is a drink’” (Lewis 1922, p. 101).
310. Skidelsky (1994, p. 240).
311. Lippmann (1929, p. 51); Schumpeter (1950). In Schumpeter’s account, of course, the norms being etched away were not in fact bourgeois in character: they were premodern residues that served to protect bourgeois society. By contrast, as we will see, Keynes became obsessed with overthrowing a Victorian norm that was very much bourgeois: thrift.
312. Commager and Nevins (1976); Morison (1965); Schlesinger (1957). See also Hicks (1960).
313. Shlaes (2013); Silver (1982); Sobel (1998).
314. Scheiber (1960, p. 35). Ironically, perhaps, Hays became better known as the head of the Motion Picture Producers and Distributors of America who enforced the famous “Hays Code” of self-censorship on the movie industry. The code had in fact been devised by the American Catholic Church, and the MPPDA embraced it as a way of eluding not only threatened federal censorship but also actual government censorship at the state and local level (Black 1996).
315. Sobel (1998, p. 221).
316. Sobel (1998, p. 250).
317. Hawley (1979, p. 72). 318. Weinstein (1968, p. 230).
598 Notes to Chapter 6
319. Brownlee (2016, p. 113); Cannadine (2006, p. 281).
320. Brownlee (2016, pp. 100–108).
321. “Just as labor cannot be forced to work against its will, so it can be taken for granted that
capital will not work unless the return is worth while. It will continue to retire into the shelter of tax-exempt bonds, which offer both security and immunity from the tax collector” (Mellon 1924, p. 79).
322. Sobel (1998, p. 311). For inflation conversion see Samuel H. Williamson, “Seven Ways to Compute the Relative Value of a U.S. Dollar Amount, 1790 to Present,” MeasuringWorth, 2022, https://www.measuringworth.com/uscompare/ (accessed August 17, 2022).
323. Kennedy (1980, p. 112).
324. Desai, Dharmapala, and Fung (2007).
325. Means (1930, p. 586).
326. Means (1930, p. 572).
327. Lipartito and Morii (2010, pp. 1056–57).
328. Ott (2011, pp. 156–57).
329. Even after the Depression destroyed many family empires, only 30 percent or so of the
largest two hundred corporations in the US were not owned by large blockholders or by other corporations, and there is reason to think that coalitions of stockholders had potential control even in many of the firms with diffuse ownership (Leech 1987).
330. Hughes (1979, p. 160).
331. Bonbright and Means (1932, p. 226). 332. Neufeld (2016).
Chapter 6: The Real Catastrophe
1. Galbraith (1955, p. 168).
2. “Time has not been kind to the school of thought that blames the Depression on the stock-market crash” (Temin 1989, p. 43).
3. Romer (1990, p. 597).
4. Whaples (1995, p. 143).
5. Keynes actually had little or no influence on American policy during the Depression,
which was in fact animated by a homegrown folk Keynesianism. I treat Keynes more carefully later in the postwar context.
6. Edwards (2018); Romer (1992). Faced with the new consensus among economic historians, Eric Rauchway has recently attempted to resuscitate the conventional view that Keynes and Roosevelt saved capitalism—now, astoundingly, because of the monetarist policies they advocated and enacted (Rauchway 2015).
7. Bernanke (1983).
8. Meltzer (2003, pp. 144–45).
9. Chandler (1958, p. 329).
10. Ahamed (2009, p. 171).
11. Toma (2013).
12. Ahamed (2009, pp. 173–74); Meltzer (2003, pp. 145–54). 13. Eichengreen (1996).
Notes to Chapter 6 599
14. Timberlake (2007, p. 339). Miller was well-acquainted with fellow Laughlin student H. Parker Willis, who was still advising Carter Glass, now head of the Senate Banking Committee. When Glass had been on the Fed Board ex officio as Treasury Secretary, Willis was the Board secretary.
15. Chandler (1958, pp. 291–331).
16. White (1990, p. 69).
17. Ahamed (2009, pp. 274–75). Contrary to popular belief, however, margin requirements
were not low during this period, and they were generally on the increase over the decade, espe- cially in the months before the crash (Smiley and Keehn 1988).
18. Hoover (1952b, p. 9).
19. Meltzer (2003, pp. 203–5).
20. Ahamed (2009, pp. 278).
21. Field (2012, p. 46).
22. White (1990).
23. Ahamed (2009, pp. 295–300).
24. Chandler (1958, pp. 454–55).
25. Romer (1993, p. 27).
26. Friedman and Schwartz (1963, pp. 279–84).
27. Miller (1935, p. 453).
28. Miller (1935, p. 454).
29. Friedman and Schwartz (1963, pp. 254–63); Meltzer (2003, pp. 235–41).
30. Bordo and Wheelock (2013, p 84); Toma (2013, pp. xii-xix).
31. Eichengreen (1996, pp. 222–23).
32. Chandler (1971, pp. 72–73).
33. Meltzer (2003, p. 243).
34. Meltzer (1976, p. 462).
35. Samuel H. Williamson, “Daily Closing Value of the Dow Jones Average, 1885 to Present,”
Measuring Worth, https://www.measuringworth.com/datasets/DJA/index.php (accessed April 7, 2019).
36. Allen (1931, p. 286). “There has been a little distress selling on the Stock Exchange,” Lamont calmly explained to reporters.
37. An epithet due not to Keynes (as one might expect) but to Alan Greenspan during the dot-com crash of the late century. “Remarks by Chairman Alan Greenspan at the Annual Dinner and Francis Boyer Lecture of the American Enterprise Institute for Public Policy Research, Washington, D.C., December 5, 1996,” Federal Reserve Board, https://www.federalreserve.gov /boarddocs/speeches/1996/19961205.htm (accessed April 7, 2019).
38. Smith, Suchanek, and Williams (1988).
39. Ahamed (2009, pp. 349–50); White (2012, p. 68). Fisher had put his money where his mouth was. In 1925 he sold Remington Rand his patent on an early version of the rolodex and invested the proceeds in the stock market on margin. He was worth some $10 million at the time of the crash and lost everything, including his house in New Haven.
40. Fisher (1930, pp. 35 and 89).
41. McGrattan and Prescott (2004); Nicholas (2007). 42. Eichengreen and Mitchener (2004).
600 Notes to Chapter 6
43. To those who hold this view, it is a delicious irony that Winston Churchill, who always seemed to gravitate to the important historical events of the century, was present in the observa- tion gallery of the New York Stock exchange on Black Tuesday. Churchill himself lost more than $50,000 in the crash and was wiped out (Ahamed 2009, p. 300; Galbraith 1955, p. 100).
44. Ahamed (2009, p. 300); (Galbraith 1955).
45. US Senate (1931, p. 134).
46. Hoover (1952b, p. vi). Of course, it was Strong who lowered rates, not the Board. Perhaps
in a wry allusion to his travails during the Midwestern flood, Hoover sarcastically referred to the events of 1929 as a second “Mississippi bubble.”
47. The most important contemporary proponent of this view was Robbins (1934). For an intellectual history, see White (2012, chapter 3). Inflation as measured by the CPI was actually low in the 1920s. But proponents of the malinvestment theory point out that as happened in the late nineteenth century, an economy with rapidly growing productivity and a stable money supply ought to have been experiencing mild deflation. A stable price level in such circum- stances actually indicates an inflationary policy. In this theory, the downturn in 1929 was caused by a productivity shock as entrepreneurs realized that some of their investments were valueless (Vedder and Gallaway 1997, p. 89).
48. Friedman and Schwartz (1963, p. 298); Hamilton (1987); Meltzer (2003, pp. 253–57). Temin (2011; 1989, p. 7) places even Keynes in that camp, at least putting aside the small matter of Keynes’s fallacious belief that investment opportunities were diminishing, which would have constituted a real supply shock.
49. Chandler (1971, pp. 78–82).
50. Fishback (2010, p. 390).
51. Meltzer (2003, pp. 304–5).
52. Between the beginning of September 1929 and the end of April 1930, industrial produc-
tion had fallen 15 percent. Board of Governors of the Federal Reserve System (US), Industrial Production: Total Index, FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org /series/INDPRO (accessed August 19, 2022).
53. Cargill (1992, pp. 1275–76). Meyer, the father of Katharine Graham, would soon go on to become the owner-publisher of the Washington Post.
54. Cecchetti (1998, p. 184). As we have seen, the idea that interest rates have to be corrected for expectations about inflation or deflation is associated with Irving Fisher.
55. “The economies of the United States and much of the rest of the world became victims of the Federal Reserve’s adherence to an inappropriate theory [the real-bills doctrine] and the absence of basic economic understanding such as that developed by [Henry] Thornton and Fisher” (Meltzer 2003, p. 321). Fisher’s work was not entirely unknown at the Fed, and Fisher and Strong were well acquainted. In the 1920s Fisher testified in favor of a bill that would have required the Fed to maintain the price level. Unsurprisingly, Strong, who did not want the Fed bound by legislation, testified against it, rightly worrying that such legislation would be used by agricultural interests to force the Fed to prop up commodity prices (Fisher 1934, pp. 162–63). In general, officials at the Fed rejected any purely “academic” basis for policy, believing that the complexities of markets called for the on-the-ground skills of bankers responding to situations as they arose (Barber 1985, pp. 23–27).
56. Calomiris (2013, p. 208).
Notes to Chapter 6 601
57. Fisher (1933).
58. Bernanke (1983). See also Chandler (1970, p. 11). More generally, as Clower and Leijon- hufvud (1975, p. 187) put it, “sustained and serious coordination failures might occur because insolvency of trade specialists would temporarily eliminate from the economy market homeo- stats that are essential for effective coordination of the notional economic plans of individual agents.”
59. Ahamed (2009, pp. 3384–90); Chernow (1990, pp. 326–27); Friedman and Schwartz (1963, pp. 309–11); Meltzer (2003, pp. 323–25).
60. It may be suggestive of the atmosphere of the times that the hapless superintendent of banks who ordered the Bank of United States closed, one Joseph Broderick, was subsequently indicted for having failed to shut the bank down quickly enough. After two trials, he was acquitted.
61. Bordo and Wheelock (2013); Calomiris (2013).
62. Quoted in Kennedy (1999, p. 70). Wilson (1975, p. 163) attributes the quote White’s father.
63. Nash (1959).
64. Friedman and Schwartz (1963, p. 317).
65. Friedman and Schwartz (1963, p. 320).
66. Calomiris (2013, p. 217); Mason (2001).
67. Friedman and Schwartz (1963, p. 321); Meltzer (2003, pp. 357–58). The Senate sponsor
of the bill was none other than Carter Glass, and it was not lost on him that expanding “eligible” paper flew in the face of his beloved real-bills doctrine. This bill was also backed by Henry B. Steagall on the House side, but it is the Banking Act of 1933 (on which more below) that people nowadays mean when they refer to the Glass-Steagall Act.
68. Wilson (1975).
69. Hawley (1981a, p. 48).
70. Hawley (1981a, p. 48); Metcalf (1975, p. 69). This amounts to what the French after World
War II would call indicative planning.
71. Barber (1985, pp. 15–22).
72. Hawley (1981a, pp. 64–65); Leuchtenburg (2009, pp. 61–62).
73. Hoover (1952b, p. 42).
74. Holcombe (2002, p. 195).
75. Brownlee (2016, pp. 117–19).
76. Brown (1956); Chandler (1970, pp. 139–40); Fishback (2010).
77. Ford (1926, p. 9).
78. Filene (1923, p. 411).
79. Foster and Catchings (1928); Hobson (1930).
80. Taylor and Selgin (1999, p. 448).
81. New York Times, November 22, 1929, p. 1; Washington Post, November 22, 1929, p. 1.
82. Hoover (1952b, pp. 43–44).
83. New York Times, November 22, 1929, p. 1.
84. Yeager (1956). I am indebted to the lucid exposition of this idea by George Selgin in his
introduction to Yeager (1997, pp. xv–xvi). 85. Hawtrey (1947, p. 140).
602 Notes to Chapter 6
86. Eichengreen (2002).
87. Hoover (1952b, p. 30). Mellon was far from alone in this view. “When he lectured on the economy at Harvard in the midst of the depression,” recalled Robert Heilbroner, “Joseph Schumpeter strode into the lecture hall, and divesting himself of his European cloak, he an- nounced to the started class in his Viennese accent, ‘Chentlemen, you are vorried about the depression. You should not be. For capitalism, a depression is a good cold douche.’ Having been one of those startled listeners, I can testify that the great majority of us did not know that a douche was a shower” (Heilbroner 1999, p. 291).
88. Leijonhufvud (1968, pp. 75–81).
89. Yeager (1997, p. xvi).
90. Garrett (1952, p. 16). By 1931, Ford had reduced the highest wage back down to $6. Aver-
age employment at Ford had been more than 100,000 in 1929; by 1932 it was little more than 56,000 (Nevins and Hill 1957, p. 588).
91. Margo (1993, p. 43).
92. O’Brien (1989a, pp. 719–20).
93. Jensen (1989, p. 558).
94. Rose (2010).
95. Even Alfred P. Sloan was a believer. “We must pay higher wages to stimulate purchasing
power,” he wrote in his first autobiography (1941a, p. 193). “We must reduce prices to stimulate consumption,” he quickly and more sensibly added.
96. Margo (1993, p. 44), citing unpublished work by Stanley Lebergott. 97. Chandler (1970, p. 39).
98. Jensen (1989, p. 558).
99. Libecap (1998).
100. Irwin (2017, pp. 371–410).
101. “I am told that never before in history have so many economists been able to agree upon anything,” said Franklin Roosevelt to an audience in St. Paul, Minnesota on April 18, 1932.
102. Steel (1980, p. 288).
103. Irwin (2017, p. 390).
104. Madsen (2001).
105. Hoover (1952b, p. 48).
106. Leuchtenburg (2009, p. 128). 107. Norpoth (2019).
108. McGirr (2016, p. 5).
109. Okrent (2010, p. 26).
110. Okrent (2010, p. 98).
111. Miron and Zwiebel (1991)
112. A teetotaler wasn’t someone who drank tea in preference to spirits. It was someone who
believed in abstinence—or prohibition—totally with a capital T.
113. Gordon (2016, p. 314).
114. Fisher (1927). The sobriety of the American workforce, still to make itself fully felt, was
one of the reasons Fisher had been so bullish on the stock market. In fact, however, such benefits were almost certainly illusory on the aggregate level, and local company-sponsored temperance programs were more effective (Gordon 2016, p. 314). Present-day research, which takes into
Notes to Chapter 6 603
account the endogeneity of alcohol consumption, tends to find that returns are higher to moder- ate drinkers than to those who abstain completely (MacDonald and Shields 2001).
115. Okrent (2010, p. 39). He matched at a rate of 10 percent.
116. Geisst (1997, p. 166). Prohibition had destroyed some $150 million worth of British as- sets in the American liquor industry, in some of which Churchill had personally had a stake.
117. McGirr (2016, p. 237).
118. Okrent (2010, p. 350). He had already cut off funding to the ASL by 1926. Rockefeller himself pointedly did not drink. Indeed, in 1933 the Rockefeller family ordered removed the socialist-realist mural it had commissioned from Diego Rivera for the lobby of the RCA Build- ing in Rockefeller Center, then under construction, because the mural depicted Rockefeller Jr. with a martini in hand. Of course, it didn’t help that Rivera’s hero, Vladimir Ilyich Lenin, was also prominently depicted. “Rockefellers Ban Lenin in RCA Mural and Dismiss Rivera,” New York Times, May 10, 1933, p. 1.
119. Leuchtenburg (2009, p. 95). 120. Okrent (2010, p. 350).
121. Schlesinger (1957, p. 99). 122. Shannon (1948, p. 466). 123. Wicker (1996, pp. 110–29). 124. Wigmore (1987).
125. Chandler (1970, p. 59).
126. Wigmore (1987, p. 747).
127. Kennedy (1999, p. 466).
128. After the inauguration, the Board did begin to enforce interdistrict rediscounting. 129. Wicker (1996, p. 128).
130. The bill was in fact written by George Harrison and officials from the Hoover treasury department, including Arthur Ballantine, who would stay on as undersecretary in the Roosevelt administration. “The emergency banking bill represented Roosevelt’s stamp of approval for decisions made by Hoover’s fiscal advisors” (Leuchtenburg 1963, p. 43). The bill also called for the issue of what were derisively called “greenbacks”: bank notes that looked like ordinary Federal Reserve Notes but included fine print specifying that they were not redeemable in gold (Edwards 2018, p. 38).
131. This account of devaluation and the abrogation of the gold clauses follows Edwards (2018).
132. The amendments also authorized the printing of greenbacks to pay off federal debt and made some gestures toward monetizing silver.
133. Edwards (2018, pp. 208–13).
134. John Maynard Keynes, “From Keynes to Roosevelt: our Recovery Plan Assayed,” New York Times, December 31, 1933, section 8, p. 2.
135. Taylor and Neumann (2016, p. 54).
136. Temin and Wigmore (1990); Jalil and Rua (2016).
137. Taylor and Neumann (2016, p. 55).
138. Meltzer (2003, pp. 458–59).
139. Meltzer (2003, pp. 477–78). Attempting to use monetary policy, he told Congress, would
be like “pushing on a string.”
604 Notes to Chapter 6
140. Calomiris (2013, pp. 199–200).
141. Friedman and Schwartz (1963, pp. 445–49); Meltzer (2003, pp. 463–86).
142. Calomiris (2010, p. 554).
143. Meltzer (2003, p. 459).
144. At least until 1936–1937, when sterilization motivated by a fear of inflation caused a
significant but short-lived recession. That recession has often been blamed on the president’s decision to tighten fiscal policy or the Fed’s decision to increase bank reserve requirements, but in fact these effects were small compared with those of the Treasury’s gold-sterilization program (Irwin 2012).
145. Romer (1992).
146. Louis Johnston and Samuel H. Williamson, “What Was the U.S. GDP Then?” Measur- ing Worth, http://www.measuringworth.org/usgdp/ (accessed May 23, 2019). Since population hadn’t changed much, the story is much the same for GDP per capita.
147. Jensen (1989, p. 556).
148. Ahamed (2009, p. 298).
149. McGirr (2016, p. 246); Okrent (2010, p. 352).
150. Fishback (2010, p. 403); Okrent (2010, p. 361).
151. Eisner (2000); Leuchtenburg (1964, p. 84).
152. Namorato (1988).
153. Tugwell (1932, p. 76).
154. Berle and Means (1932). Born in South Windham, Connecticut, Means was also the son
of a Congregationalist minister. As we will see, he held views on planning very similar to those of Tugwell.
155. Quoted in Barber (1996, p. 6).
156. Leuchtenburg (1963, p. 35).
157. Astonishingly, this speech was written largely by the newspaper reporters who accom-
panied the Roosevelt campaign, especially Ernest K. Lindley of the Herald Tribune and James M. Kieran of the New York Times (Moley 1939, p. 24; Tugwell 1957, p. 219). Tugwell considered this Roosevelt’s best speech, in part because it “represented the high tide of collectivism.”
158. The speech was based on a draft by Berle, with input from Moley, Bernard Baruch, and others in addition to Roosevelt himself (Moley 1939, p. 58).
159. See for example Stigler and Friedland (1983).
160. Lipartito and Morii (2010); Wells (2010).
161. Ripley (1927). Ripley was in fact a man of many interests. His widely influential first
major work used cranial measurements to argue that there was not just one Aryan race in Eu- rope but three: Teutonic, Alpine, and Mediterranean. Of the Jewish “race” he warned that this “swamp of miserable human beings . . . threatens to drain itself off into our country” (Ripley 1899, p. 372). Gardiner Means took Ripley’s course on the economics of the corporation as a graduate student at Harvard in the mid-1920s, just as Ripley was writing the articles that became Main Street (Lee 1990b, p. 675). Two decades earlier, an undergraduate Franklin D. Roosevelt had taken the same course from Ripley (Fusfeld 1954, p. 25).
162. Ripley (1927, pp. 85–86). As we saw, Walter Chrysler would acquire Dodge only months after Ripley’s book appeared.
163. Berle and Means (1930, p. 69).
Notes to Chapter 6 605
164. Lipartito and Morii (2010, pp. 1028–37). 165. Berle and Means (1930, p. 60).
166. Lee (1990b, p. 679).
167. Holderness, Kroszner, and Sheehan (1999). 168. Lee (1990b, p. 680).
169. Lamoreaux and Rosenthal (2006).
170. Kroszner and Rajan (1994).
171. Rosenberg (1983).
172. Perino (2010); Seligman (1982, pp. 9–38).
173. The public would be shocked a few years later when Whitney was found guilty of having
embezzled from the Exchange (Perino 2010, p. 295).
174. The encounter was not entirely unmemorable. After the proceedings were described as
a “circus” in the press, a promoter for Ringling Brothers brought in a dwarf called Lya Graf and, before testimony for the day began, sat her on the lap of Jack Morgan. Morgan’s grandfatherly treatment of the young woman actually burnished his image. A German national of Jewish descent, Graf would ultimately perish at Auschwitz (Perino 2010, pp. 283–86).
175. Calomiris and Ramirez (1996, p. 155).
176. Kennedy (1973, pp. 103–28); Perino (2010); Seligman (1982, pp. 13–38).
177. Cleveland and Huertas (1985).
178. Kroszner (1996, p. 74). Between 1922 and 1929, the share of the total assets of American
financial institutions held by commercial banks dropped from more than 60 percent to 54 percent. At the same time, the share grew for investment companies, securities brokers and dealers, finance companies, and insurance companies.
179. There were two other ways commercial banks could organize securities affiliates: (1) the bank could own the affiliate as a subsidiary or (2) a holding company could own both the bank and the affiliate. Legal restrictions prevented banks from selling equity and many other kinds of securities through their own internal departments; even the sale of bonds by a bank was considered ultra vires until the McFadden Act of 1927 (White 1986, p. 35).
180. Cleveland and Huertas (1985, p. 156).
181. Seligman (1982, p. 24).
182. Perino (2010, p. 145). A populist Republican, Couzens had been a ground-floor investor
in and former general manager of the Ford Motor Company. After a falling out with Henry Ford, he turned to politics and philanthropy. Ultimately Ford bought him out for $30 million.
183. Cleveland and Huertas (1985, p. 185). 184. Benston (1990, p. 110).
185. Huertas and Silverman (1986, p. 96). 186. Kroszner and Rajan (1994, p. 829). 187. Pecora (1939, p. 71).
188. Cleveland and Huertas (1985, p. 169). This instantiation of the Bank of America was an old New York bank that had been bought by A. P Giannini’s Transamerica Corporation in 1928 as part of Gianinni’s effort to engage in interstate branch banking through a bank holding com- pany. It would evolve circuitously into the Bank of America of today.
189. White (1986).
190. Hoover (1952b, p. 121).
606 Notes to Chapter 6
191. Kelly (1985).
192. Cleveland and Huertas (1985, p. 197).
193. “Aldrich Hits at Private Bankers in Sweeping Plan for Reforms,” New York Times,
March 9, 1933, p. A1.
194. Schlesinger (1958, pp. 434–35); Tabarrok (1998). National City had been the principal
bank of William Rockefeller, the brother of John D. Rockefeller Sr.; and the William Rockefeller family had intermarried with the family of National City president James Stillman. Winthrop Aldrich was the son of Senator Nelson Aldrich and the brother-in-law of John D. Rockefeller Jr. He had only recently taken charge of Chase, which had grown through mergers and acquisitions. Aldrich was in the process of remaking the bank and purging older directors and officers, including those with Morgan associations. (One particularly lavish golden parachute raised eyebrows at the Pecora hearings.) Aldrich’s proposals for the Glass-Steagall Act were arguably part of this process, as the Act’s provisions would give banks authority to limit the number of their direc- tors. Amusingly, in the year 2000 Chase would merge with J. P. Morgan & Co. to form today’s JPMorgan Chase.
195. Kelly (1985, p. 53).
196. Chernow (1990, p. 375).
197. Tabarrok (1998, p. 11).
198. Chernow (1990, pp. 384–87).
199. Carosso (1970, pp. 371–75).
200. DeLong (1992, p. 22).
201. The “firewall” provisions would be repealed in 1999. After the financial crisis of 2008,
there were calls for a “new Glass-Steagall Act.” This despite the fact that most of the entities that failed in the crisis—including Bear Stearns, Lehman Brothers, Merrill Lynch, and Morgan Stanley—were pure investment houses, whereas the entities called upon to bail them out—like JPMorgan Chase and Bank of America—were integrated operations. William D. Cohan, “Bring Back Glass-Steagall? Goldman Sachs Would Love That,” New York Times, April 21, 2017.
202. Gilbert (1986). The Banking Act of 1933 covered only Fed member banks; the ceilings were extended to all commercial banks by the Banking Act of 1935.
203. In the 1960s, the Vietnam War inflation and the rise of mutual funds combined to in- duce savers to withdraw their funds from the banking system. Commercial banks were reduced to giving away steak knives and toasters to attract depositors, and they clamored for repeal (Calomiris and Haber 2014, p. 194). Regulation Q was eventually phased out in the 1980s.
204. Kennedy (1973, pp. 205–8).
205. Calomiris and White (1995).
206. Deposit insurance of the kind set up under the Glass-Steagall Act also creates serious
problems of moral hazard: because premiums aren’t tied to the riskiness of a bank’s loans and because the bank’s liability is limited to the value of its net worth, the system encourage risky lending; and because deposits are insured, it eliminates the incentive for depositors to monitor the quality of banks. This is why the earlier state experiments with deposit insurance failed. In the 1980s, a similar insurance system would take down the entire American savings-and-loan industry (White 1989).
207. Chernow (1990, p. 374). 208. Brandeis (1914, p. 92).
Notes to Chapter 6 607
209. Keller and Gehlmann (1988); Schlesinger (1958, pp. 440–42); Seligman (1982, pp. 39–72).
210. Landis (1959, p. 32).
211. Keller and Gehlmann (1988, p. 339); Seligman (1982, p. 54).
212. Mahoney (2001).
213. Parrish (1970, pp. 108–44); Seligman (1982, pp. 73–100).
214. Seligman (1982, p. 99).
215. McCraw (1984, pp. 153–209).
216. The code had been devised as one of many industry codes under the National Industrial
Recovery Act (on which more below), and indeed the SEC agreed to administer the code just days before the NIRA was declared unconstitutional by the Supreme Court.
217. Easterbrook and Fischel (1984).
218. Mahoney (2015, p. 98); Neal and White (2012, p. 111).
219. McCraw (1984, p. 191).
220. Kandel et al. (2015).
221. Cudahy and Henderson (2005, pp. 41–71); Hughes (1983, pp. 201–26).
222. Indeed, Insull’s sympathetic biographer attributes the downfall of the Chicago empire
not to the crash or to Insull’s own missteps but to the House of Morgan, which was attempting though its United Corporation to create a nationwide monopoly in electricity akin to the Bell monopoly in telephony (McDonald 1962, p. 250).
223. In fact, revenue in the electricity sector declined only 6 percent during the early years of the Depression. Reductions in demand from industry were partly counterbalanced by in- creases in the consumer sector, where those workers still employed spent their increased real incomes on energy-using appliances (Ramsay 1975, p. 78).
224. Perino (2010, pp. 118–20). The elder Insull was extradited back to the US from Turkey in 1934 to face charges that included federal mail fraud. He would be acquitted of all the charges. 225. “Franklin D. Roosevelt’s Political Ascension,” The Master Speech Files, 1898, 1910–1945, Franklin D. Roosevelt Presidential Library and Museum, http://www.fdrlibrary.marist.edu/
_resources/images/msf/msf00530 (accessed August 9, 2022). 226. Mahoney (2012, p. 39).
227. Mahoney (2012, p. 44).
228. Leuchtenburg (1963, pp. 154–56).
229. Leuchtenburg (1963, p. 157).
230. Katznelson (2013, p. 162).
231. Kandel et al. (2015, p. 17).
232. Morck (2005); Roe (1994, p. 107). 233. Prasad (2012, p. 19).
234. The yardstick claim was manifestly untrue, of course, as the very different costs struc- tures of federal power facilities made them entirely incommensurate with private utilities (Mc- Craw 1971, p. 73; Neufeld 2016, p. 180). Based archival records of the TVA, the Federal Power Commission, the Rural Electrification Administration, the National Electric Light Association, and the Edison Electric Institute, Kitchens (2014) determined that the average monthly bills paid by TVA residential consumers differed little from what consumers paid private firms op- erating in the same area.
608 Notes to Chapter 6
235. McCraw (1971); Neufeld (2016, pp. 155–202).
236. Between 1920 and 1929, the US farm population declined by more than 4 percent. Between 1929 and 1933, it actually increased by almost 6 percent, not returning to 1929 levels until the beginning of war mobilization in 1939 and 1940. Joseph P. Ferrie, “Change in the Farm Population Through Births, Deaths, and Migration: 1920–1970,” Table Ac414-418 in Carter et al. (2006), http://dx.doi.org/10.1017/ISBN-9780511132971.Ac1-436 (accessed August 19, 2022).
237. Danbom (1991, p. 9); Scott (2006, p. 12). 238. Scott (2006).
239. Selznick (1966, pp. 112–13).
240. Hart (1998, p. 70).
241. McCraw (1971, p. 138).
242. Fishback (2017, p. 1455). Even counting those on work relief as “employed,” unemploy- ment in 1933 was more than 20 percent; 16 percent in 1934; 14 percent in 1935; 10 percent in 1936; and 9 percent in 1937 (Margo 1993, p. 43). Economist generally do not count those on work relief as employed because they were not in fact employed in the private economy. In view of their level of compensation, relief workers have more in common with today’s recipients of unem- ployment benefits.
243. Fishback (2017, p. 1459–60); Field (2012, p. 72).
244. Namorato (1988, p. 45). Tugwell called his idea the Advance Ratio Price Plan.
245. Namorato (1988, p. 63).
246. Namorato (1988, p. 77).
247. Blakey (1967).
248. Leuchtenburg (1963, p. 73).
249. Barber (1996, p. 50).
250. Depew et al. (2013); Whatley (1983).
251. Loth (1958, pp. 204–5).
252. Johnson (1935).
253. Leuchtenburg (1963, pp. 57–58).
254. Schlesinger (1958, p. 108).
255. John Maurice Clark and Paul Douglas, neither of whom could be considered laissez-
faire economists, also made this point (Leuchtenburg 1964, p. 128).
256. John Maynard Keynes, “From Keynes to Roosevelt: our Recovery Plan Assayed,” New
York Times, December 31, 1933, section 8, p. 2. Needless to say, Keynes thought that Roosevelt ought to focus on deficit spending.
257. Schlesinger (1958, pp. 112–15). 258. Taylor (2019, p. 8).
259. Johnson (1935, pp. 250–51). 260. Johnson (1935, p. 264).
261. Taylor (2019, pp. 56–57).
262. Johnson (1935, p. 264).
263. “1,500,000 Cheer Vast NRA Parade; March of 250,000 City’s Greatest; Demonstration
Lasts Till Midnight,” New York Times, September 14, 1933, p. 1. 264. Taylor (2019, pp. 70–72).
265. Chicu et al. (2013).
Notes to Chapter 6 609
266. Hawley (1966, pp. 114–15).
267. Hawley (1966, p. 70).
268. Hawley (1966, p. 83).
269. A. L. A. Schechter Poultry Corp. v. U.S., 76 F. (2d) 617; 295 U.S. 495 (1935). For a lively
account of the legal proceedings and the personalities involved, see Shlaes (2007, chapter 8). 270. Schechter also charged that “in certain provisions, [NIRA] was repugnant to the due process clause of the Fifth Amendment,” but the Court held that having found the law uncon-
stitutional on other grounds, it didn’t have to rule in the merits of this claim.
271. U.S. v. Butler, 297 U.S. 1 (1936).
272. Hawley (1966, pp. 192–93); Leuchtenburg (1963, pp. 172–73). This was, of course, a
period of severe drought in many parts of the country, and the collective-action problems of small farmers had led to the massive soil erosion of the “dust bowl.” These problems were ame- liorated after 1937 by the implementation of soil-conservation districts (Hansen and Libecap 2004). The allotment system had little effect on soil erosion.
273. Bernanke and Gertler (1995); Calomiris and Hubbard (1990).
274. Hunter (1982, p. 884).
275. Graham and Leary (2018, p. 4296). After the war, cash holdings slowly returned to pre-
Depression levels by about 1970.
276. Calomiris and Ramirez (1996, p. 157).
277. Bernstein (1987, p. 53).
278. Bresnahan and Raff (1991, pp. 320–21); Scott and Ziebarth (2015, p. 1103).
279. Bresnahan and Raff (1991).
280. This was so even though continuing plants had lower-than-average labor productivity,
probably because they rendered unemployed fewer workers relative to output declines than did failed firms. The larger firms were engaging in “labor hoarding.”
281. Lee (2015).
282. Bresnahan and Raff (1991, p. 329).
283. Scott and Ziebarth (2015).
284. Bernstein (1987, pp. 134–35).
285. Cooper and Haltiwanger (1993).
286. Field (2012).
287. See also Bakker et al. (2017) and Watanabe (2016).
288. He also cites the supply-side benefits of the build-out of the US highway system in the
1920s. I return to this in the context of rail and trucking below.
289. Field (2012, p. 56).
290. In these models, product innovation is compressed into process innovation. Whereas
process innovation is the ability to produce an existing product at lower costs, product innova- tion is represented as the ability to extract greater value from an existing product without in- creasing costs. Paul Romer recently won a Nobel Prize for thinking about the production of knowledge in this way. See for example Romer (1994).
291. Kline and Rosenberg (1986). 292. Hoddeson (1981, p. 516). 293. Mowery (1995, p. 149).
294. Kendrick (1961).
610 Notes to Chapter 6
295. Watanabe (2016, p. 919).
296. Holland and Spraragen (1933, p. 2).
297. Nanda and Nicholas (2014).
298. Lamoreaux and Sokoloff (1999).
299. Lamoreaux et al. (2011).
300. On the distinction between science-based products and complex-systems products, and
the importance of this distinction for intellectual property rights, see Merges and Nelson (1990). 301. Cohen and Levinthal (1989).
302. Nicholas (2009).
303. Lamoreaux et al. (2011).
304. Mowery (1983).
305. Lamoreaux et al. (2011, p. 236).
306. Holland and Spraragen (1933, p. 3).
307. Baldwin (2008); Langlois (1992b); Nelson and Winter (1977); Teece (1986).
308. For example, as we shall see, in the case of the personal computer. In order for systemic
innovation to proceed through market interfaces, the design involved has to be relatively modu- lar and the market has to be dense and sophisticated enough to provide the necessary components.
309. Mowery (1981, p. 113).
310. Lamoreaux et al. (2011); Mowery (1995).
311. Penrose (1959).
312. Chandler (1977, p. 467).
313. As we will see, this would be a central thesis of John Kenneth Galbraith (1967, p. 62)
among others.
314. Chandler (1962, p. 44).
315. Mowery (1983, p. 964).
316. Chandler (1962, pp. 79–83).
317. Chandler and Salsbury (1971, p. 381).
318. Hounshell and Smith (1988, pp. 119–23).
319. Mueller (1962). The company did accidentally invent what became Duco enamels for
automobiles, and it put concerted effort into developing a moisture-proof version of cellophane.
320. Hounshell and Smith (1988, p. 287).
321. Hounshell and Smith (1988, p. 313).
322. Beginning in 1932, however, the Chemical Department admitted the changed circum-
stances of the Depression and put aside fundamental research in favor of explicitly commercial projects (Hermes 1996, p. 158).
323. Hounshell and Smith (1988, p. 135, emphasis original).
324. Hounshell and Smith (1988, p. 242).
325. Carothers suffered from severe depression and committed suicide in 1937 at age
forty-one.
326. Mueller (1962, p. 333).
327. Hounshell and Smith (1988, pp. 236–37); Mueller (1962, pp. 334–37). 328. Hounshell and Smith (1988, p. 258).
Notes to Chapter 6 611
329. Postrel (2020, p. 221). It is, wrote Schumpeter, “the cheap cloth, the cheap cotton and rayon fabric . . . that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort” (Schumpeter 1950, p. 67). Writing before 1942, he probably had not yet even heard of nylon. During the war, nylon would be diverted to making parachutes and other mili- tary products. It would not be until after 1945 that women would genuinely be able to enjoy the innovation.
330. Mueller (1962).
331. J. K. Smith (1988, p. 314).
332. Gibb and Knowlton (1956, p. 541). Leaded gas was, of course, one of the great public-
health disasters of the century. The toxicity of lead was well known at the time, but industrial researchers viewed it largely as an occupational-health problem—dozens of workers were killed or driven insane by exposure early on—not as an environmental problem. Yet many contem- poraries in public health did speak out against lead. In 1925, the Surgeon General opened an investigation, and, despite wildly conflicting testimony, declared that there was no reason to ban the additive (Leslie 1983, p. 541). Jersey Standard became a co-owner (along with GM and Du Pont) of the Ethyl Gasoline Corporation to market the product, but initially Jersey itself refused to use the additive in its own gasoline (Gibb and Knowlton 1956, p. 543).
333. Enos (1962, p. 104); Gibb and Knowlton (1956, p. 525).
334. Williamson et al. (1963, p. 203).
335. Enos (1962, chapter 1); Giddens (1955, p. 152).
336. Enos (1962); Williamson et al. (1963, pp. 375–89). Universal Oil Products was founded
by meatpacker J. Ogden Armour, who believed that refining should emulate the continuous- process (rather than batch) approach to production meatpacking had pioneered.
337. Enos (1962, p. 118); Gibb and Knowlton (1956, pp. 554–55).
338. US Senate (1923).
339. Gibb and Knowlton (1956, pp. 555–59); Giddens (1955, pp. 266–80); Williamson et al.
(1963, pp. 389–91).
340. Standard Oil Co. (Indiana) v. United States, 283 U.S. 162 (1931). Harlan Fiske Stone—
who as Attorney General had initiated the case—recused himself.
341. Enos (1962, chapter 4).
342. As we will see, by the war the oil companies had taken advantage of the license for joint
research the Court had given them to improve on the process (and thus avoid Houdry’s pat- ents). Much of the wartime aviation fuel would come from the new continuous-process refineries.
343. Adelman (1972, p. 43).
344. Adelman (1972, p. 44).
345. Libecap and Wiggins (1984, p. 90).
346. Libecap (1984). One ironic outcome of the Teapot Dome scandal was that all federal
leases after 1930 would require unitization.
347. Ise (1926, pp. 402–22). In 1920, the director of the US Bureau of Mines predicted that
oil would run out in eighteen to twenty years.
612 Notes to Chapter 6
348. Libecap (1989, p. 835).
349. MacMillan v. Railroad Commission of Texas, 51 F.2d 400 (W.D. Tex. 1931).
350. Olien and Olien (2002, p. 186).
351. Libecap (1989, p. 837).
352. Nash (1968, pp. 128–52).
353. Hawley (1966, pp. 217–19); Libecap (1989).
354. Knoedler (1993).
355. Warren (2001, p. 124).
356. McCraw (1989).
357. Hogan (1971a, pp. 847–56).
358. This short-lived Columbia Steel Company is not to be confused with the West-Coast-
based Columbia Steel Company acquired by U.S. Steel in 1929 (Hogan 1971a, p. 894). 359. Aylen (2010).
360. Gold et al. (1970).
361. Baker (1989).
362. Bertin et al. (1996).
363. Warren (2008, pp. 132–43).
364. Hogan (1971a, pp. 1216).
365. Mowery (1981, p. 113).
366. Warren (2001, pp. 144–63).
367. Warren (2001, p. 156).
368. Chandler (1962, p. 334). Although Stettinius had come from GM, his duties as an as-
sistant to Sloan had been largely in the realm of public and government relations (Farber 2002, p. 152). Chandler credits the “highly rational business school graduate” Enders M. Vorhees with actually spearheading the change to the multidivisional structure at U.S. Steel.
369. Nicholas (2019, p. 64).
370. Graham and Pruitt (1990, p. 214)
371. FTC (1939, p. 7). Motor vehicle registrations dropped only 10 percent, meaning that
Americans largely kept their old cars in service instead of buying new ones. Between 1930 and 1937, registrations increased by 20 percent, most of that after 1933 (p. 17).
372. FTC (1939, p. 13).
373. Rae (1984, p. 80).
374. Ford (1931, p. 74); Sward (1968, p. 220).
375. “Ford to Maintain High Wages,” Barron’s, May 4, 1931, p. 26.
376. FTC (1939, p. 653).
377. This model became a favorite of hot-rodders in the 1950s and 1960s, immortalized by
the Beach Boys as the Little Deuce Coupe—“deuce” referring to the 1932 model year. My father owned one of these in the late 1940s, having won it, he claimed, in a game of craps. (He always called it a Model B, but the B was the four-cylinder version; the V-8 was the Model 18.) Family lore has it that he would tour around with my uncle in the passenger seat and my mother and my aunt consigned to the rumble seat.
378. Abernathy (1978, p. 105); Hounshell (1984, p. 300).
379. Nevins and Hill (1957, p. 594). This was as against bolting to the crankcase two separate castings of four pistons each.
Notes to Chapter 6 613
380. O’Brien (1989b, p. 86).
381. “Ford to Make Eight and Four,” Barron’s, January 11, 1932, p. 24.
382. Nevins and Hill (1962, pp. 59–60).
383. FTC (1939, pp. 27, 536, 602, 653); Kennedy (1941, p. 235).
384. Chrysler (1950, p. 200).
385. “There Are No Automobiles,” Fortune, vol. 2, issue 4, October 1930, pp. 73–77.
386. Schwartz (2000, p. 88).
387. “Chrysler,” Fortune, vol. 12, issue 2, August 1935, p. 114.
388. Abernathy (1978, p. 37); Schwartz (2000, p. 90).
389. Curcio (2000, p. 501); FTC (1939, pp. 27 and 602).
390. Sloan (1964, p. 177).
391. Kuhn (1986, p. 151).
392. Sloan (1964, p. 253).
393. Leslie (1983, p. 184).
394. Jewkes, Sawers, and Stillerman (1969, p. 231).
395. Leslie (1983, pp. 218–26).
396. General Motors Corporation (1975); Leslie (1983, pp. 229–75); Marx (1976).
397. Leslie (1983, p. 268). An alternative account claims that it was H. L. Hamilton, head of
GM’s Electro-Motive Division, who brought the engine to Budd’s attention (Overton 1965, p. 394).
398. In Jovanovic and MacDonald (1994).
399. Field (2012, pp. 300–311); Hawley (1966, p. 229); Hoogenboom and Hoogenboom (1976, pp. 119–21); O’Brien (1989c).
400. Chrysler was, of course, the exception, and it began the Depression indebted from its purchase of Dodge. But the company’s countercyclical success in the product market allowed it to retire all of its debt by 1935 (Chrysler and Sparkes 1950, p. 201).
401. Schiffman (2003).
402. Field (2012, p. 300).
403. Schiffman (2003, p. 806).
404. Overton (1965, pp. 369–82).
405. Schiffman (2003, p. 804).
406. Mason and Schiffman (2004).
407. Overton (1965, pp. 377).
408. O’Brien (1989c).
409. Hawley (1966, p. 230).
410. Field (2012, pp. 70–78).
411. Vinsel (2019, p. 61).
412. Glaeser (2011, p. 173).
413. Hawley (1966, pp. 231–34); Rothenberg (1994, pp. 42–44).
414. At about the same time he owned the Ford V-8, my father and a buddy got hold of a
used truck and briefly tried their hand at the trucking business. No ICC permit was applied for. He continued to drive trucks of various sorts for most of his career, eventually at the end snag- ging a unionized position driving a tractor-trailer for a small secondary steel plant. But my father was a Steelworker not a Teamster: the truck belonged to the plant itself. This was really a mild
614 Notes to Chapter 6
instance of tapered integration, as most of the plant’s shipping was handled by a (recently de- regulated) contract carrier.
415. Moore (1978).
416. Rae (1968, p. 3).
417. Nevins and Hill (1957, pp. 238–47).
418. Immortalized (among many other places) in Indiana Jones and the Temple of Doom
(1984).
419. Freudenthal (1968, pp. 76–83); Rae (1968, pp. 28–29 and 39–48).
420. Sullivan (2008, p. 6).
421. Rae (1968, p. 15). In 1931, the crash of a TWA Fokker transport killed the famed Notre
Dame football coach Knute Rockne, on his way to Hollywood to consult on a movie. The result- ing adverse publicity is said to have helped motivate the developments in aircraft technology that led to the DC-3 and later mature airliners.
422. Rae (1968, p. 63).
423. Jaworski and Smythe (2018, p. 624).
424. Also on the Board was Connecticut Senator Hiram Bingham, a Yale political scientist,
aviator, and the amateur archaeologist who brought to modern worldwide attention the ancient Inca ruins of Machu Pichu. He is often alleged to have been an inspiration for the character Indiana Jones, though it is not known whether he ever flew a Ford Trimotor.
425. Rae (1968, p. 23).
426. Hawley (1981b, pp. 108–15).
427. Hawley (1981b, p. 113).
428. Hanlon and Jaworski (2019); Holley (1964, p. 85).
429. Phillips (1971, pp. 116–21).
430. “All together the NACA boasted 11 wind tunnels, among which were a 60-by-30-foot
full-scale tunnel, an eight-foot, 500-miles-per-hour tunnel, and other equipment such as vertical and refrigerated tunnels for specialized types of aerodynamic research” (Holley 1964, p. 23). By 1932, the Hungarian-born engineer Theodor von Karman had also set up a sophisticated wind tunnel at the California Institute of Technology in Pasadena, which was used by Boeing as well as by the increasing number of airframe-makers congregating in Southern California (Irving 1993, pp. 21–22).
431. Holley (1964, pp. 114–31).
432. Hanlon and Jaworski (2019).
433. Rae (1968, p. 59).
434. Phillips (1971, p. 119).
435. Mowery and Rosenberg (1998, p. 62).
436. Sutton (2002, p. 426).
437. Irving (1993, pp. 28–29).
438. Jaworski and Smythe (2018, pp. 619–20).
439. Hoover (1952a, pp. 243–44).
440. Eventually Trans-World Airlines.
441. Mowery and Rosenberg (1982); Rae (1968, pp. 52–54). 442. Hawley (1966, pp. 240–44).
443. Vietor (1994, pp. 23–90).
Notes to Chapter 6 615
444. Reich (1985); Wise (1985).
445. Tenth Annual Report of the General Electric Company, January 31, 1902, p. 13.
446. Rees (2013, pp. 147–52).
447. Coe (2000).
448. Bright (1949); Reich (1992).
449. U.S. v. General Electric Co. et al. (1911), 1 D&J 267.
450. Implying that the real sin was thought to be secretive ownership rather than market
power. In fact, National was well-run company with its own research lab, and it almost certainly generated more value for GE as an independent subsidiary than as an internal division (Rogers 1980, pp. 97–98). GE continued to give its National division free rein for years after the consent decree.
451. U.S. v. General Electric Company (1926), 272 U.S. 476.
452. Rogers (1980, p. 113).
453. Wise (1985, pp. 134–35).
454. Bright (1949, p. 269). That’s a decline by two-thirds in real terms, from roughly $9.60
of today’s dollars in 1920 to $3.96 in 1933 to $2.73 in 1938. At the same time, the reliability of the bulb had improved.
455. Wise (1985, p. 246).
456. Hounshell (1996, p. 23).
457. Reich (1992, p. 331).
458. O’Sullivan (2006, p. 635).
459. Kline and Lassman (2005).
460. Reich (1992, p. 316).
461. O’Sullivan (2006, p. 636).
462. Kline and Lassman (2005, p. 637).
463. Bright (1949, pp. 388–95).
464. Reich (1985, p. 177).
465. Galambos (1992).
466. Hoddeson (1981).
467. Russell and Vinsel (2017, p. 126). As we will see, after Congress initiated an investigation
of AT&T in 1935, the Federal Communications Commission found plenty to complain about. But it had only good words to say about the company’s efforts in standardization. “The equip- ment and methods used in the Bell System have been standardized to a remarkable extent with resulting economies in manufacture of equipment and operation of telephone plant; flexibility in the interchange of equipment and trained personnel between different parts of the System; and a uniformly high quality of service” (US Federal Communications Commission 1939, p. 584).
468. American Telephone and Telegraph Company, Annual Report of the Directors to the Stockholders for the Year Ending December 31, 1924, pp. 18–19; Hoddeson (1981, p. 541). AT&T in turn owned 98 percent of the stock of Western Electric.
469. Temin and Galambos (1987, p. 13). The spinoff of Bell Labs was part of a larger restruc- turing in which AT&T sold off its international operations to ITT and, as we saw, divested itself of radio broadcasting.
470. Adams and Butler (1999, p. 132); Brooks (1976, pp. 188–92).
616 Notes to Chapter 7
471. Feigenbaum and Gross (2022).
472. When he was an official of the Post Office Department, Daniel C. Roper, Roosevelt’s commerce secretary, had drafted a report calling for telephone to be incorporated into the US Post Office. By 1934, however, he was a supporter of regulation rather than nationalization ( John 2010, p. 411).
473. Brooks (1976, pp. 202–3). 474. Clark (1993).
Chapter 7: Arsenal Again
1. Phillips-Fein (2009, p. 10).
2. In the view of historian Frederick Rudolph, the “Liberty League represented a vigorous and well-stated defense of nineteenth-century individualism and liberalism, a more explicit and determined elaboration of that position than will be found elsewhere in American history” (Rudolph 1950, p. 20).
3. Thomas J. Watson Sr. of IBM is not to be confused with the Thomas A. Watson who aided Alexander Graham Bell.
4. Ferguson (1984, p. 87). 5. Irwin (2017, pp. 413–33). 6. Burns (1956, p. 226).
7. Brinkley (1983).
8. Schlesinger (1960, p. 247). Alan Brinkley (1983, p. 269) argued that Coughlin did not be- come unambiguously antisemitic until 1938.
9. Brinkley (1983, p. 133).
10. “You Have Nothing to Fear But Fear Itself,” The Master Speech Files, 1898, 1910–1945, Franklin D. Roosevelt Presidential Library and Museum, http://www.fdrlibrary.marist.edu/ _resources/images/msf/msf00903 (accessed August 9, 2022).
11. Schlesinger (1960, p. 631).
12. Irwin (2012).
13. Traditional accounts typically saw the episode through the usual Keynesian lenses and
blamed the recession on contractionary fiscal policy—the end of the veterans bonus and the beginning of payroll taxation for Social Security. In fact, fiscal multipliers during this period were small, and these events would have had a much smaller effect than monetary factors (Romer 1992). Just as Roosevelt has been credited with ending the Great Depression for the wrong reason, he has been blamed for the 1937–1938 recession for the wrong reason.
14. The end of the sterilization program was in fact an afterthought. Morgenthau proposed it as an alternative to running a budget deficit, an idea he vehemently disapproved of. To Mor- genthau’s displeasure, desterilization was simply tacked on to the spending proposals (Hawley 1966, p. 410).
15. Bateman and Backhouse (2011).
16. On April 14, 1938, Roosevelt asked Congress for $3 billion worth of lending and spending, which Congress granted in June; these expenditures weren’t actually made until well after the economy had already begun turning up.
17. Hawley (1966, pp. 387–414); Leuchtenburg (1963, pp. 245–57).
Notes to Chapter 7 617
18. Lee (1988).
19. Carliss Baldwin (1983) points out that this assertion flies in the face of another, more plausible, assertion about corporate planning: that large enterprises need to coordinate high- throughput production through capital-intensive processes and would therefore be loath to channel adjustment onto the output margin. She suggests that inflexible prices have more to do with the need for inflexible contracting in underdeveloped markets and that—as we will see— the development of markets has increasingly impelled firms to use market hedges and greater price flexibility to coordinate production. On this see also Carlton (1982).
20. “The presence of administered prices does not indicate the presence of monopoly nor do market prices indicate the absence of monopoly. In many highly competitive industries, such as the automobile industry, prices are made administratively and held for fairly long periods of time” (Means 1935, p. 1).
21.FranklinD.Roosevelt,PressConference,TheAmericanPresidencyProject,https://www .presidency.ucsb.edu/node/209472 (accessed August 7, 2022). Although it was written almost entirely by Means (Barber 1996, p. 113), the statement claimed to have been “prepared at the President’s request by Henry Morgenthau Jr., secretary of the Treasury; Henry A. Wallace, Sec- retary of Agriculture; Frances Perkins, Secretary of Labor; Marriner Eccles, Chairman of the Board of Governors of the Federal Reserve System; and economists of various executive departments.”
22. Lee (1990a). The NRPB would be unwound during World War II. 23. Roosevelt (1942, p. 122).
24. Roosevelt (1942, p. 121).
25. Hawley (1966, pp. 412–13).
26. Brinkley (1989, p. 92). This is one of many estimates. No two sources agree on the exact numbers, though they are all in the same ballpark.
27. Miscamble (1982).
28. Waller (2005, p. 81).
29. For Arnold, “the antitrust laws were the answer of a society which unconsciously felt the
need of great organizations, and at the same time had to deny them a place in the moral and logical ideology of the social structure. They were part of the struggle of a creed of rugged indi- vidualism to adapt itself to what was becoming a highly organized society” (Arnold 1937, pp. 211–12).
30. Arnold (1937, p. 217).
31. Brinkley (1993, p. 571). Like Veblen, we might say, Arnold was a practitioner of semiotics who derided the very enterprise of making signs and symbols and who preferred instead a cool efficiency.
32. Gressley (1977, p. 47).
33. Arnold (1935).
34. Brinkley (1993, p. 569).
35. In a revealing remark in 1940, Arnold wrote that the “maintenance of a free market is as
much a matter of constant policing as the free flow of traffic on a busy intersection. It does not stay orderly by trusting to the good intentions of the drivers or by preaching to them. It is a simple problem of policing, but a continuous one” (Arnold 1940, p. 122). This is, of course, a bizarre alteration of precisely the kind of anecdote that economists typically use to persuade
618 Notes to Chapter 7
students that markets work without constant policing. (See for example Klein [2012].) Of course, economists believe that markets work without constant direction from above not in the abstract but rather to the extent that there are rules and institutions, notably property rights, that channel rent-seeking behavior in positive-sum directions. Policing is required to make sure drivers follow what are clear abstract rules, not to micromanage traffic.
36. Brinkley (1989, p. 91).
37. The ideas of Arnold and of the Chicago School law-and-economics approach to antitrust are related forms of legal realism: they both believe that legal decisions should be driven not by abstract rules but by consideration of social outcomes (Posner 1992). The principal difference is that although the Chicago School is loosely described as demanding a criterion of consumer benefit, their criterion is really economic efficiency. Efficiency typically results in greater con- sumer surplus; but, strictly speaking, the efficiency criterion requires maximizing of the sum of both consumer and producer surplus.
38. Gressley (1964, p. 230).
39. Lee (1988, p. 184).
40. The NRA had contained a Consumer Advisory Board, chaired by Mary Rumsey, the
daughter of Edward Harriman and sister of Averill Harriman. But its role was entirely symbolic in an agency driven by producer interests.
41. Hawley (1966, p. 203).
42. Brinkley (1993, p. 571).
43. Arnold (1940, p. 9).
44. Edwards (1943, p. 342).
45. Arnold (1940, pp. 192–95).
46. “The milk farmer still maintained a floor under his prices because of special legislation,”
Arnold admitted. “However, this was done by an orderly process under public control and the question of whether this legislation was wise or unwise is a subject for public debate and not for the deliberations of private conspiracies” (Arnold 1940, p. 195).
47. Brinkley (1993, p. 566). One of Arnold’s favorite examples was the union restriction that paint brushes could be no wider than 41⁄2 inches.
48. Edwards (1943, p. 346).
49. United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940).
50. Crane (2007, p. 97).
51. As we saw, price fixing had been illegal per se since the Trans-Missouri Freight decision of
1897. But the Appalachian Coals decision (Appalachian Coals v. United States, 288 US 344 [1933]) had introduced some elements of a rule-of-reason doctrine. On this see Kimmel (2011), who disputes the conventional reading of these cases.
52. United States v. Alcoa, 148 F.2d 416 (2d Cir. 1945).
53. United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948).
54. Waller (2005, pp. 91–92).
55. Hamilton (1941); Hart (1998, pp. 91–92). On this distinction see also Hovenkamp
(2008).
56. Hartford-Empire Co. v. United States, 323 U.S. 386 (1945); United States v. Pullman Co., 50 F.
Supp. 123 (E.D. Pa. 1943). In the Hartford-Empire case, the district court ordered royalty-free licensing, but the Supreme Court altered the verdict to licensing at “reasonable” rates.
Notes to Chapter 7 619
57. Gressley (1977, p. 50).
58. United States v. Hutcheson, 312 U.S. 219 (1941).
59. Skidelsky (1994, p. 14).
60. Keynes (1920, p. 251).
61. See for example Jonathan Kirshner, “The Man Who Predicted Nazi Germany,” New York
Times, December 7, 2019.
62. Harrison (2016, p. 154).
63. Tooze (2007, p. 17).
64. Doerr et al. (2019).
65. Galofré-Villà et al. (2019).
66. Tooze (2007, p. 47). In the event, it turned out to be more efficient to transport war
materiel across Germany by rail rather than by road. The Autobahnen were highly successful as propaganda, however, as they provided a powerful symbol of the end of austerity and of political instability, thus helping to entrench the new regime (Voigtländer and Voth 2014).
67. Burns (1956, p. 263).
68. Kennedy (1999, p. 387).
69. Koistinen (1998, chapter 14); Wiltz (1961). The chair was a Republican despite the fact
that the Democratic Party was in majority in the Senate.
70. Much has been made of Hiss’s role on the committee, even though he was actually a rela-
tively minor figure. The chief counsel was Stephen Raushenbush, the son of Walter Rauschen- busch, a famous theologian and founder of the Social Gospel Movement.
71. Burns (1956, p. 318).
72. Ickes (1953, p. 302); McBride (2000, chapter 7).
73. Koistinen (1998, p. 265). The Vinson-Trammell Act itself had limited the profits of private
shipyards to 10 percent, a level none would actually approach, and followed a long-standing policy of requiring half of all building to take place in government-owned shipyards.
74. Bernstein (1971, chapter 11). Dies for the all-metal Chevrolet were at the Fisher plant in Cleveland, which was also struck. GM headquarters had centralized final assembly in those two plants, but had left labor policies to the divisions, where, to the displeasure of labor, Fisher re- mained a stronghold of piece-rates. Alfred Sloan responded to the strike by centralizing GM labor policies (Freeland 2001, p. 99).
75. Nevins and Hill (1962, p. 235). 76. McBride (2000, pp. 177–78). 77. Levine (1988, pp. 438–68). 78. Kennedy (1999, p. 401).
79. The British and French feared the “utter destruction of European civilization,” which would then be replaced by Soviet domination (Tooze 2007, p. 322).
80. Reynolds (2002, pp. 44–46).
81. Kennedy (1999, p. 429).
82. Although the legislation creating the WPA had forbidden military activities, the agency
routinely constructed airports and other facilities that had deliberate strategic objectives (Sher- wood 1948, pp. 75–76).
83. Black (2003, p. 482); Kennedy (1999, p. 421). 84. Black (2003, p. 502); Wilson (2016, p. 49).
620 Notes to Chapter 7
85. Kennedy (1999, p. 429); Koistinen (1998, p. 197). 86. Craven and Cate (1955, p. 173).
87. Holley (1964, p. 131); Koistinen (1998, p. 184). 88. Craven and Cate (1955, p. xii).
89. Koistinen (1998, pp. 305–16). 90. Ickes (1954, p. 629).
91. Koistinen (2004, pp. 17–18). 92. Beasley (1947, p. 235).
93. Lacey (2019, p. 79).
94. Higgs (1993, pp. 173–74).
95. Sloan (1941b, p. 240). “We haven’t got enough ‘economic royalists’ among us to do this job
for national defense,” Sloan said even more sarcastically in a radio interview (Baime 2014, p. 87). 96. I. F. Stone, “Labor’s Plan: 500 Planes a Day,” The Nation, December 21, 1940, pp. 624–25. 97. Sloan (1941b, p. 242).
98. Higgs (1993); Wilson (2016).
99. Rockoff (2012, p. 167).
100. Higgs (1993, p. 186); Rose et al. (1946, pp. 27–32).
101. Koistinen (2004, p. 86); US Civilian Production Administration (1947, p. 101).
102. US Civilian Production Administration (1947).
103. Janeway (1951, pp. 156–57); Kennedy (1999, pp. 478–79).
104. Koistinen (2004, p. 127).
105. Koistinen (2004, p. 97).
106. Nelson (1946, p. 67).
107. Nelson (1946, p. 85).
108. Nelson (1946, p. 125).
109. Koistinen (2004, pp. 132–36).
110. Nelson (1946, p. 122).
111. Dunn (2018); Kennedy (1999, p. 479).
112. Koistinen (2004, p. 177).
113. Using prices to allocate resources in this kind of setting is not as absurd as it may sound.
In 1942, Abba Lerner wrote an article, never published in his lifetime but widely circulated, argu- ing that prices should in fact be used to allocate materials in war mobilization. “Perhaps the greatest single contribution to the unprecedented growth of productive efficiency in modern times,” Lerner wrote, “was the establishment of the price calculus . . . as a governor of the mode of production. Yet now, when efficiency in production is more urgent than it has ever been before, we can observe a kind of sabotaging of the price mechanism as an instrument of social cooperation and its replacement over larger and larger sections of our economy by demonstra- bly less efficient devices such as rationing, priorities and allocations, not the least of whose disadvantages is their need for bureaucratic hordes who inevitably tie up the whole economy, including themselves, in ever more complex confusions of red tape” (Lerner 2013). Lerner was known as a proponent of “market socialism,” the idea that a socialist economy could be operated by a central planning agency if that agency used prices to allocate resources. On Lerner and his role in the so-called socialist calculation debate, see Lavoie (1985).
114. Nelson (1946, p. 142).
Notes to Chapter 7 621
115. Koistinen (2004, pp. 182–83).
116. “Knudsen was a member of the Supply Priorities Allocation Board and in that capacity superior to Nelson whose job was to implement the Board’s decisions; but Nelson as executive director of the Supply Priorities and Allocation Board then gave orders to the Office of Produc- tion Management, making him, in that capacity, superior to Knudsen!” (Rockoff 2012, p. 185).
117. Goodwin (1994, p. 315).
118. Rockoff (2012, p. 185).
119. Novick et al. (1949, pp. 105–6).
120. Novick et al. (1949, p. 109).
121. Novick et al. (1949, pp. 129–35).
122. Novick et al. (1949, pp. 163–204).
123. Kennedy (1999, p. 629).
124. Janeway (1951, p. 242).
125. Rockoff (2012, pp. 188–91).
126. Edelstein (2001, p. 64).
127. Lacey (2011, p. 115).
128. Rockoff (2012, p. 188).
129. Novick et al. (1949, pp. 130–49).
130. Cuff (1990, p. 110). Cuff argues that Nelson had chosen the original “horizontal” ap-
proach to avoid a structure of industry associations that might look to Americans too much like the cartels of Germany or the zaibatsu of Japan.
131. Rose et al. (1946, pp. 27, 32, 37); US Civilian Production Administration (1947, p. 146). 132. Day (1956, p. 23).
133. Holley (1964, p. 319).
134. Wilson (2016, pp. 114–20).
135. Heath (1972).
136. Rockoff (1984, p. 86–98; 2012, pp. 175–79).
137. Deep in the bowels of the OPA, in the division that rationed tires, a young lawyer from
California would form the opposite opinion. Yet his distaste for what was going on at the OPA would not stop him from one day setting up his own regime of price controls. His name was Richard M. Nixon (Yergin and Stanislaw 2002, p. 42).
138. Koistinen (2004, p. 428).
139. Goodwin (1994, p. 384).
140. Koistinen (2004, p. 422).
141. Kennedy (1999, pp. 629–30); Koistinen (2004, pp. 336–41). 142. Rockoff (2012, p. 192–94).
143. Wendt (1947).
144. Solo (1954); Tuttle (1981).
145. Wells (2002, pp. 73–80).
146. Already by December 19, 1941, Standard had come to a cross-licensing and patent-
sharing agreement with the RRC and the tire makers. The March consent decree postponed determination of any royalties until six months after the end of hostilities (Koistinen 2004, p. 154).
147. Hart (1998, p. 93).
622 Notes to Chapter 7
148. Polenberg (1980, p. 78).
149. Goodwin (1994, pp. 355–59).
150. Doris Kearns Goodwin crows that the drive netted seven pounds of rubber for every
man, woman, and child in the country. That sounds like a lot, but it constituted on the order of one-tenth of one percent of the existing stockpile.
151. After having failed to reach a patent agreement with IG Farben in the early 1930s, both B. F. Goodrich and Goodyear had independently set up pilot plants in an effort to produce synthetic rubber in a way that wouldn’t infringe existing patents (Morris 1989, pp. 8–9).
152. Solo (1954); Tuttle (1981).
153. Solo (1953, p. 33).
154. Solo (1954, p. 67); Williamson et al. (1963, p. 791).
155. Wendt (1947, pp. 213–14).
156. Solo (1953).
157. Hart (1998, pp. 135–36).
158. J. K. Smith (1988, p. 312).
159. Enos (1962). Initially, IG Farben was also part of the group, but after the war broke out,
the German concern became, in Enos’s phrase, ausgeschlossen. 160. Enos (1962, p. 188).
161. Zachary (1997).
162. Stewart (1948, p. 7).
163. Bush (1949, p. 6).
164. Owens (1994, p. 525).
165. Stewart (1948, pp. 10–12).
166. Owens (1994, p. 526).
167. Baxter (1946, pp. 169–92); Jewkes, Sawers, and Stillerman (1969, pp. 283–86); Peck and
Scherer (1962, pp. 31–37).
168. Kennedy (2013, p. 61). Half of all American radar units were produced by Western Elec-
tric, working closely with Bell Labs (Gertner 2012, p. 70).
169. Baxter (1946, pp. 221–36).
170. In conjunction with magnetron-based radar and an analog computer devised at Bell
Labs to predict the V-1 trajectory.
171. Baxter (1946, p. 222).
172. Baxter (1946, pp. 337–59); Kingston (2000); Klepper (2016, pp. 149–63).
173. Klepper (2016, p. 154).
174. Baxter (1946, p. 350).
175. Bush (1949, p. 27).
176. Hart (1998, p. 126).
177. Warren (2001, p. 193).
178. Hogan (1971b, pp. 1209–11); Warren (2008, pp. 143–44).
179. Lane (1951).
180. These would technically be authorized through the Treasury Department’s Procure-
ment Division, which was still in charge of buying for the British. 181. Lane (1951, p. 68).
182. Foster (1989, pp. 72–73).
Notes to Chapter 7 623
183. Lane (1951, pp. 202–15).
184. Lane (1951, p. 231).
185. Foster (1989, p. 84); Lane (1951, p. 210).
186. Lane (1951, p. 203).
187. Thompson (2001). The principal quality problem was the cracking of hulls, sometimes
dramatically, when welds failed. How much of this was the result of shoddy workmanship and how much merely system-wide ignorance about the application of welding to shipbuilding is subject to dispute.
188. Walton (1956, pp. 7–15).
189. Although a million and half M1s would be ready by Pearl Harbor, it had taken Win- chester a year to tool up, which forced the military to keep the Springfield in production. Some of that production was taken up by the Smith Corona typewriter company—until it was dis- covered that the military also needed typewriters, and Smith Corona had to switch back. Win- chester tooled up for its own carbine in thirteen days.
190. Hyde (2013, pp. 162–68).
191. Nelson (1946, p. 226). As would happen in almost all cases in which mass production reduced costs significantly below the contract price, the company voluntarily returned money to the government out of fear of being deemed a war profiteer.
192. Murphey (1993).
193. Hyde (2013, pp. 165–66). The Navy may have been dissatisfied with aspects of Hudson’s management other than the production of the Oerlikon, and it wanted to consolidate opera- tions with other GOCO facilities Westinghouse was operating.
194. Nelson (1946, pp. 260–68).
195. Walton (1956, pp. 87, 232).
196. Hyde (2013, pp. 117–43); Stout (1946); Walton (1956, pp. 234–37).
197. Tanks destined for Britain would indeed be made by the railroad firms.
198. Beasley (1947, pp. 277–85).
199. Overy (1995, p. 225).
200. Nevins and Hill (1962, pp. 110–17).
201. In his memoirs, Charles Sorenson (2006) is adamant that Henry Ford always called the
shots.
202. Nevins and Hill (1962, p. 141).
203. Meier and Rudwick (1979).
204. This problem only grew worse as Southern whites streamed in to fill defense jobs during
the war. Although he was personally supportive of the advancement of African Americans, Franklin Roosevelt would go no further than practical politics allowed. But when A. Philip Randolph, the head of the largely black Brotherhood of Sleeping Car Porters, threatened a massive march on Washington, Roosevelt signed an executive order forbidding discrimination in war production (Katznelson 2013, p. 186). As manufacturers began promoting African Ameri- cans to the kinds of jobs held by whites, union locals periodically stopped production in a series of “hate strikes” throughout the defense sector (Hyde 2013, pp. 179–88).
205. Nevins and Hill (1962, pp. 161–64).
206. Charles Sorenson attributes this about-face entirely to the influence of Henry’s wife Clara, though Nevins and Hill give some of the credit to Edsel.
624 Notes to Chapter 7
207. Baime (2014, pp. 75–82); Sorenson (2006, pp. 274–76).
208. This was a policy that apparently applied only to Ford’s American operations. Ford Canada was already aiding the war effort, and by June 1940 a new Ford plant outside Manchester in the UK had produced the first of many Merlin engines. During the 1930s, Ford’s European operations had been consolidated under the British unit based in Dagenham. But the politics of Depression had led France as well as Germany to impose such intrusive controls that Ford was forced to spin both those units off from Dagenham. In the Third Reich, of course, Ford’s Cologne plant and other operations had come under the regime’s control early on. They were forced to produce war materiel and to conform to the Reich’s draconian policy of autarchy. By the fall of 1940, essentially all of Ford’s facilities on the Continent were under German control, and after Pearl Harbor they became German property (Nevins and Hill 1962, pp. 273–93).
209. Hyde (2013, pp. 48–52); Walton (1956, pp. 89–91).
210. A 12-cylinder Liberty Engine generated 400 horsepower. The base 12-cylinder Merlin would produce 1,500 horsepower, and much more in later versions. The engine was named not after the Arthurian magician but after a species of small falcon. Packard’s iconic campus in Detroit, now a crumbling symbol of the city’s dereliction, was one of the earliest and greatest designs of Albert Kahn.
211. Hyde (2013, pp. 52–57); Lilley et al. (1947, pp. 52–56). 212. Sullivan (2008, p. 27).
213. Walton (1956, p. 283).
214. Hyde (2013, p. 65).
215. Lilley et al. (1947, p. 36).
216. Lilley et al. (1947, p. 17).
217. Kennedy (1999, p. 431).
218. Holley (1964, p, 540); Mishina (1999).
219. It was a source of fear in Washington and around the country that America’s aircraft
industry was located so near the coasts, where it would be vulnerable to hypothetical enemy strikes. The industry was becoming increasingly concentrated in Southern California, whose imagined vulnerability to Japanese attack generated frequent hysteria directed against Japanese Americans. Soon, like the aircraft plants, they too would be relocated to the interior. “A Jap’s a Jap,” said Eleanor Roosevelt (Kennedy 1999, pp. 748–56).
220. Holley (1964, pp. 308–9).
221. Baime (2014); Hyde (2013, pp. 87–105); Sorenson (2006, pp. 278–300).
222. Sorenson (2006, p. 280).
223. Nevins and Hill (1962, p. 218).
224. Baime (2014, pp 167–73); Sorenson (2006, pp. 292–94). The inspection trip would also
place the Roosevelts at the launch of Edgar Kaiser’s ten-day Liberty Ship in Portland. 225. Nevins and Hill (1962, p. 218).
226. Hyde (2013, pp. 102–3).
227. Holley (1964, p. 565).
228. In a widely cited 1936 article, an aeronautical engineer called Theodore P. Wright de- scribed this empirical regularity and explained it in terminology that would have been familiar to Adam Smith: not only can workers themselves learn by doing, but a producer can also take advantage of more specialized tooling (implying less-skilled labor) and of less-variable tasks
Notes to Chapter 7 625
(Wright 1936, p. 124). (Although apparently not related to the Wright brothers, Theodore P. Wright was working for the Curtiss-Wright Corporation at the time he published the article. By 1940, he was an associate of George Mead in the Aeronautical Section of the NDAC (Craven and Cate 1955, p. 308).) At the RAND Corporation after the war, Armen Alchian (1963) also examined this phenomenon. The detailed history and economics of the idea of “learning curves” or “experience curves” would take us too far afield. But on some aspects see Langlois (1999) and Thompson (2012).
229. US Army Air Forces (1952, p. 64). 230. Holley (1964, pp. 326–27).
231. Mishina (1999, p. 167).
232. Holley (1964, p. 547).
233. Collison (1945, p. 3).
234. Vander Meulen (1995).
235. Beasley (1947, pp. 366–72).
236. Gurney (1963, p. 12).
237. Vander Meulen (1995, pp. 50–51).
238. Holley (1964, p. 547).
239. Holley (1964, pp. 529–38).
240. Hyde (2013, pp. 65–70); Vander Meulen (1995, pp. 86–98).
241. Beasley (1947, p. 369).
242. Vander Meulen (1995, p, 54).
243. Boyne (1994, pp. 364–74); Kennedy (2013, pp. 326–28); Overy (1995, pp. 126–27). As
we saw, the pressurized-cabin B-29 was designed as a high-altitude precision bomber. But as in Europe, precision bombing almost never achieved its objectives, and in the end Japanese home defenses were so weak by the spring of 1945 that the planes could strike from as low as 7,000 feet. Like the atomic bombs, the napalm bombs were the creation of American applied science during the war (Gladwell 2021).
244. Kennedy (2013, pp. 21–22).
245. Boyne (1994, pp. 199–202); Overy (1995, pp. 50–62).
246. Kennedy (2013, p, 54).
247. Boyne (1994, p. 202).
248. Boyne (1994, pp. 287–300); Overy (1995, pp. 105–109).
249. Rockoff (2012, pp. 199–210).
250. Kennedy (2013, p. xx).
251. Although the raid is portrayed somewhat triumphally rather than as the disaster it was,
the movie as a whole is very much a depiction of the terrible losses suffered by the American B-17 fleet during this period.
252. Kennedy (2013, pp. 116–30). 253. Sorenson (2006, p. 273). 254. Hughes (1989, pp. 249–94). 255. Overy (1995, p. 185).
256. Hughes (1989, p. 251). 257. Recall: Tugwell (1927). 258. Overy (1995, p. 185).
626 Notes to Chapter 8
259. Kennedy (2013, pp. 362, 171).
260. Harrison (1988, p. 179).
261. Werth (1964, pp. 425–29). Stalin even found himself forced to back away from the official
anti-religion stance of Marxism and to reunite with the Orthodox Church, using for propaganda purposes such Christian figures as the medieval saint Alexander Nevsky, who had repulsed the Teutonic Knights in the thirteenth century.
262. Harrison (1998).
263. Nevins and Hill (1962, p. 95).
264. Overy (1995, p. 198).
265. Kennedy (1999, p. 648)
266. Zeitlin (1995).
267. In the words of one German historian, the Third Reich “was made up of a plurality of
rather autonomous authorities, which could under specific conditions come into conflict with one another” (Waarden 1991, p. 295).
268. Overy (1995, p. 201).
269. Tooze (2007).
270. Kennedy (1999, p. 726).
271. For a recent example of the business-won-the-war narrative, see Herman (2012); for the
critique see Wilson (2016).
272. Hooks (1991b, p. 95).
273. Rose, Houghton, and Blair (1946, p. 48). 274. Wilson (2016, p. 153).
275. Janeway (1951, p. 169).
276. Hooks (1991a, pp. 146–47).
Chapter 8: The Corporate Era
1. Clark (1944, p. 5).
2. Goodwin (1989).
3. The literature on Keynes is of course massive. I recommend the analysis of Axel Leijon-
hufvud (1968), who provides his own distinctive interpretation. For a concise and accurate treatment, see White (2012, pp. 126–54).
4. Goodwin (1989, p. 94).
5. Skidelsky (1979, p. 32).
6. White (2012, p. 136).
7. Skidelsky (1979, p. 32).
8. Backhouse (2017, p. 383).
9. Meltzer (2003, p. 609).
10. Taylor, Basu, and McLean (2011, p. 445).
11. Samuelson (1943, p. 51, emphasis in original). In the same edited volume, Samuelson’s
former Harvard professor Joseph Schumpeter predicted the opposite. Consumer wants would be “so urgent and calculable that any postwar slump that may be unavoidable would speedily give way to a reconstruction boom. Capitalist methods have proved equal to much more diffi- cult tasks” (Schumpeter 1943, p. 121).
Notes to Chapter 8 627
12. Wilson (2016, pp. 193–94).
13. Although the military was generally seen as favoring big business, in many cases contract terminations had the opposite effect. GM’s Frigidaire Division gladly stopped making the .50 caliber machine gun so it could return to making refrigerators, leaving the military market to small players like Colt and Savage Arms (Wilson 2016, p. 195).
14. Friedman and Schwartz (1963, p. 574).
15. Gordon (2016, p. 536).
16. Louis Johnston and Samuel H. Williamson, “What Was the U.S. GDP Then?” Measuring
Worth, http://www.measuringworth.org/usgdp/ (accessed August 9, 2022). 17. Rockoff (1998, p. 82).
18. Higgs (1992).
19. Rockoff (1998, p. 83).
20. In the event, Americans consumed slightly less literal butter in 1944 than in 1939, but they consumed more ice cream (Rockoff 1998, p. 93).
21. Mitchener and Mason (2010).
22. Gordon (2016, p. 537).
23. Higgs (1999).
24. Taylor, Basu, and McLean (2011, p. 446).
25. I return below to arguments about urbanization and human-capital formation.
26. The pipelines were crucial during the war because German submarines had effectively
shut down the coastal tankers that carried oil from the Gulf to the Northeast. After the end of the submarine threat, however, oil companies once again began to ship the vast majority of the oil in tankers despite the availability of the pipelines (Field 2022).
27. Field (2008, p. 692).
28. Lilley et al. (1947, pp. 54–55).
29. Levinson (2016, p. 25).
30. Wilson (2016, p. 196).
31. Gordon (1969, p. 234).
32. Wilson (2016, p. 200).
33. Hooks (1991, p 159).
34. Morris (1989); Solo (1953).
35. Chapman (1991, p. 75).
36. Morris (1989).
37. Solo (1954). Although General Tire ran GOCO facilities, the company made sure not to
install its innovations at government-owned facilities to avoid having to share the intellectual property. General contracted with a Canadian company instead. Even when innovations re- sulted from government contracts, firms were reluctant to use them in the GOCO plants.
38. The extent to which we can consider atomic energy a civilian technology is open to question.
39. Davies and Stammers (1975) provide one list. As Mowery (2010, p. 1225) notes, “most economic historians assess the effects of war on technological innovation as largely negative.”
40. Graham (1986, p. 59). The NDRC funded television research by RCA and others in the hope of using the technology for guided missiles and bombs, little of which was ready by the end of the war. For this purpose, RCA developed the image orthicon tube with government
628 Notes to Chapter 8
funding. But after the war, it turned out that the older prewar orthicon tube was superior for commercial uses (Bannister 2001, pp. 133–66).
41. It is true, however, that wartime work on crystal rectifiers proved useful in transistor research after the war (Hoddeson 1994).
42. Zachary (1997, pp. 270–71).
43. Stern (1981, p. 15).
44. It took anywhere from a half hour to an entire day to “replug” the machine for a new
calculation (Campbell-Kelly and Aspray 1996, p. 91).
45. The machine had been proposed by Howard Aiken of Harvard for use in scientific cal-
culation. IBM supported it largely to further its research connection with Harvard, and did not expect it to lead to a commercial product (Cohen 1999, p. 83).
46. Ridley (2020, p. 196).
47. Gross (2020).
48. Bush (1945).
49. Kevles (1977, p. 344); Zachary (1997, p. 327). 50. Kevles (1977, p. 358).
51. Rosenberg and Nelson (1994, pp. 334–35). 52. Mowery (2010, p. 1229).
53. Merges and Nelson (1990).
54. Nelson and Wright (1992, p. 1953).
55. Field (2008, p. 673). Field (2022) elaborates on this point. 56. Higgs (1999, pp. 609–10).
57. Friedman and Schwartz (1963, p. 561)
58. Rockoff (1998, p. 108).
59. Friedman and Schwartz (1963, pp. 569, 557–58). 60. Friedman and Schwartz (1963, p. 561).
61. Eichengreen and Garber (1991).
62. Friedman and Schwartz (1963, pp. 583–84).
63. Rockoff (1984, pp. 177–99; 2012, pp. 252–54).
64. Brownlee (2016, pp. 157–58).
65. Hetzel and Leach (2001); Meltzer (2003, pp. 699–712); Stein (1988, pp. 241–80).
66. “[We are making] it possible for the public to convert Government securities into money
to expand the money supply. . . . We are almost solely responsible for this inflation. It is not deficit financing that is responsible because there has been surplus in the Treasury right along; the whole question of having rationing and price controls is due to the fact that we have this monetary inflation, and this committee is the only agency in existence that can curb and stop the growth of money. . . . We should tell the Treasury, the President, and the Congress these facts, and do something about it. . . . We have not only the power but the responsibility. . . . If Congress does not like what we are doing, then they can change the rules” (Minutes of the Federal Open Market Committee, February 6, 1951, pp. 50–51, quoted in Hetzel and Leach [2001, p. 47]). President Truman had declined to reappoint Eccles as chair of the Board of Governors when his term ended in 1948, but Eccles was still on the Board as vice-chair and continued to be the Board’s intellectual leader.
67. Stein (1988, pp. 272).
Notes to Chapter 8 629
68. The rapid improvement of cataract surgery—beginning about the time Snyder entered the hospital—must count as one of the most dramatic feats of technological change in the twentieth century. Cataract removal is ancient, but quite apart from its danger and long- recuperation time, removal left sufferers with no lens in the eye. Harold Ridley of the Moorfields Hospital in London had noticed that wounded aviators during the war tolerated fragments of windshield plastic in the eye. In 1949, he pioneered the implant of acrylic lenses to replace the clouded natural lenses. Despite determined opposition from the medical establishment, Ridley and other practitioners—whom Stanley Metcalfe and his collaborators call “hero surgeons”— improved surgical techniques and materials over decades of trial-and-error learning within the professional community, eventually aided by private firms in the 1970s and 1980s (Metcalfe, James and Mina 2005). Cataract surgery today is a quick outpatient procedure that typically improves the patient’s visual acuity.
69. Irwin (2019).
70. Van Dormael (1978, p. 95).
71. Boughton (2019).
72. Steil (2013, p. 3).
73. The unpublished paper that Currie and White coauthored in 1932 has been portrayed as
proto-Keynesian, but it was in fact an argument for the monetary causes of the Great Depres- sion (Laidler and Sandilands 2002). Of course, by 1937, White was a convinced Keynesian. The names of Currie and White (or, rather, their codenames) appear conspicuously in the Venona Project decrypts and opened Soviet files, and many scholars consider them, especially White, to have been Soviet spies. Boughton and Sandilands (2003) attempt to cast doubt on this by suggesting that the legitimate words and doings of two important New Dealers were simply being transmitted to Moscow by actual spies, whom they concede to have been numerous among the friends and underlings of Currie and White. Benn Steil (2013) unearthed a document in White’s handwriting that heaped praise on the Soviet economic system, finishing with the exclamation “And it works!” But in fact the entire postwar Keynesian mainstream was fulsome in its praise for the supposed efficiency of the Soviet system (McCloskey 2010, pp. 441–42).
74. Bordo (1993).
75. Keynes (1980, p. 17).
76. Eichengreen (2019).
77. Helleiner (1996, p. 58).
78. This is the title of the reissued e-book version. The original had the more sedate title The
Marshall Plan: The Launching of the Pax Americana (Mee 1984).
79. Cowen (1985); DeLong and Eichengreen (1993).
80. White (2012, pp. 321–35).
81. Steil (2018, pp. 361–62). The traditional account is that Erhard forced the decontrol of
prices on a reluctant Clay. A widely reprinted anecdote has Erhard telephoning Clay to request permission to lift price controls. “Professor Erhard, my advisors tell me that you are making a big mistake,” said Clay. “So my advisors also tell me,” Erhard replied. By contrast, Steil portrays Clay as imposing decontrol on a reluctant Erhard. The truth is probably that both favored de- regulation (White 2012, p. 231).
82. Morck and Nakamura (2005).
83. Miwa and Ramseyer (2002b, p. 172).
630 Notes to Chapter 8
84. Okazaki (1994).
85. Miwa and Ramseyer (2002a, p. 132).
86. Yamamura (1967).
87. Hamada and Kasuya (1993); Kosai (1988).
88. Minford (1993); White (2012, pp. 174–87). The Labour Party largely occupied the politi-
cal space once filled by the rapidly declining Liberal Party. In this period the Conservative Party had not (yet) allied itself with liberal economic ideas, and thus the occasional postwar Conser- vative governments did little to change the economic regime Labour had installed.
89. Yergin and Stanislaw (2002, p. 8).
90. Waller (2005, p. 111).
91. His law partner was future Supreme Court Justice Abe Fortas. Now called Arnold &
Porter, the firm has become one of the largest in the world. In a kind of reverse-Brandeis, Arnold in private practice discovered a good corporation, Coca-Cola, which he extolled in academic lectures as a paragon of what the American corporation should be. Rather than hegemonically owning its own bottling plants, Coke operated though market contracts with independent bot- tlers in the countryside, thus creating “wealth in outlying communities.” Coke also “created wealth” with its competitor Pepsi, presumably by not competing too hard (Freyer 2009, p. 361).
92. Berge (1944).
93. Wells (2002, p. 99).
94. Wells (2002, p. 104). In the end, courts found against the government on this and related
prosecutions.
95. Graham (2001, pp. 292 and 325); Hounshell (1996).
96. Wilkins (1974, pp. 300–310).
97. “Before World War Two the typical international investor was a bondholder or banker
who lent money to foreign governments and corporations. In the Bretton Woods era the typical international investor was a corporation that built factories in foreign nations” (Frieden 2006, p. 293).
98. Jones (2005, p. 101).
99. “The Enemy of Abundance,” The New Republic, February 15, 1943, p. 197.
100. “Message to the Congress on the State of the Union and on the Budget for 1947,”
Harry S. Truman Library and Museum, https://www.trumanlibrary.gov/library/public-papers /18/message-congress-state-union-and-budget-1947 (accessed August 9, 2022). As we saw, of course, the American private sector was at that moment engaged in precisely the opposite of restricting output. Truman’s speechwriters were well aware of this, and that the country’s main macroeconomic problem was inflation. Yet “no backlog of demand can exist very long in the face of our tremendous productive capacity. We must expect again to face the problem of shrink- ing demand and consequent slackening in sales, production, and employment. This possibility of a deflationary spiral in the future will exist unless we now plan and adopt an effective full employment program.”
101. G. D. Smith (1988).
102. Chandler (1977, p. 363). This hydropower was small in comparison to the output even of existing government-owned hydro facilities let alone of all potential hydropower, and bauxite was in fact plentiful around the world (Lopatka and Godek 1992). The contemporary economist Donald H. Wallace (1937) argued that Alcoa’s vertical integration was motivated
Notes to Chapter 8 631
by efficiency considerations, including better quality control and more effective coordination between stages. He anticipates some of the famous arguments made by Ronald Coase in the same year.
103. Peck (1961, p. 125). This is, of course, an example of vertical integration because of dy- namic transaction costs.
104. G. D. Smith (1988, pp. 139–46). Rates under the Fordney-McCumber tariff were five cents a pound for ingot and nine cents a pound for sheet. The rates actually came down a penny in the Hawley-Smoot Tariff. Alcoa had almost entirely exited European markets by the Depres- sion, not because of cartel market division but because the company saw export as overreaching its core competences, a not implausible reason given the firm’s functional organizational form. The Canadian subsidiary, which, as we will see, would evolve into the competitor Alcan, held and managed all of Alcoa’s earlier foreign interests.
105. Kolasky (2013, p. 87). Mellon was cleared of fraud but made to pay $800,000 in taxes. Much of the case turned on whether Mellon could deduct $40 million in paintings, many of which he had acquired from the Hermitage collection that Joseph Stalin, desperate for foreign exchange, was selling off to foreign capitalists. The paintings would form the founding collection of the National Gallery of Art in Washington.
106. G. D. Smith (1988, pp. 191–249); Waller (2007).
107. United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945).
108. United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945), at 430–31.
109. Winerman and Kovacic (2013).
110. United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945), at 429. In crafting
the Sherman Act, Congress “did not condone ‘good trusts’ and condemn ‘bad’ ones; it forbad all. Moreover, in so doing it was not necessarily actuated by economic motives alone. It is pos- sible, because of its indirect social or moral effect, to prefer a system of small producers, each dependent for his success upon his own skill and character, to one in which the great mass of those engaged must accept the direction of a few. These considerations, which we have sug- gested only as possible purposes of the Act, we think the decisions prove to have been in fact its purposes” (427).
111. G. D. Smith (1988).
112. Arnold (1940, p. 239).
113. Hawley (1966, pp. 247–69); Levinson (2011); Schragger (2004).
114. Ross (1984).
115. Levinson (2011, p. 232).
116. Hawley (1966, pp. 254–58); Phillips Sawyer (2018).
117. Telser (1960); Marvel and McCafferty (1984).
118. Levinson (2011, p. 210).
119. As those of us of a certain age remember, you can trust your car to the man who wears
the star. The big, bright Texaco star. Brand-name capital is especially valuable to consumers in markets like repair services, where there is asymmetric information between the customers and the providers. Applying brand-name capital from one product (gasoline) to other products (repair and maintenance) in situations of asymmetric information is an example of what Wer- nerfelt (1988) calls “umbrella branding.”
120. Marvel (1982).
632 Notes to Chapter 8
121. Blair and Lafontaine (2006, p. 55) observe that “the main advantage of franchising over vertically integrated operations arises from its unique combination of (1) the chain’s compara- tive advantages in creating brand recognition and capturing economies of scale in production, product development, and advertising with (2) the independent entrepreneur’s drive and knowledge of the local market. In other words, in the ideal franchise relationship, each party is allowed to specialize in what it does best.”
122. Standard Oil Co. v. United States, 337 U.S. 293 (1949).
123. Standard Oil Co. v. United States, 337 U.S. 293 (1949), at 315. For Douglas, the issue was less lack of competition than “the effect on the community when independents are swallowed up by the trusts and entrepreneurs become employees of absentee owners. Then there is a seri- ous loss in citizenship. Local leadership is diluted. He who was a leader in the village becomes dependent on outsiders for his action and policy. Clerks responsible to a superior in a distant place take the place of resident proprietors beholden to no one.” Robert H. Jackson dissented separately, on the grounds that the court had not bothered to consider the economics of the case. The decision was “but a guess in the dark” (322).
124. Marvel (1995).
125. Olney (1989).
126. Still under the hegemony of the real-bills doctrine, the Fed refused to rediscount the
collateral notes of the independent finance companies, giving the in-house operations a lower cost of capital (Olney 1989, p. 388). The manufacturers wanted the dealers to use the in-house com- panies in large part because they wanted to be able to manage the supply of credit for automobiles during economic downturns.
127. GMAC had its own board of directors and was not a division of GM. After the suit, com- pany officials toyed with the idea of completely internalizing GMAC as a division, but they finally decided that would merely make the Justice Department even angrier (Freeland 2001, p. 162).
128. United States v. General Motors Corporation, 121 F.2d 376 (7th Cir. 1941). 129. Waller (2005, p. 92).
130. L. J. White (1971, pp. 136–64).
131. Fine and Raff (2002, p. 430).
132. Wallace (1999).
133. Gil and Spiller (2007). This was understood at the time. In 1946, Edgar Sullins Vaught, a district-court judge in Oklahoma, threw out a related case against a local theater chain. “There is a vast difference between ingots and moving picture films,” he declared, referring to Hand’s decision in Alcoa. “Ingots of aluminum are a staple and fixed product. Moving picture films are a fluctuating and uncertain product. Until a film has been exhibited no one knows or can ac- curately estimate its value as a box-office attraction, either as a first-run exhibition or a subse- quent run exhibition. What the demand for its exhibition may be by the public is an unknown factor” (United States v. Griffith Amusement Co., 68 F. Supp. 180 [W.D. Okla. 1946], at 196).
134. De Vany and Eckert (1991); Hanssen (2010).
135. In what remains the preeminent economic account, Kenney and Klein (1983) argued that absent block booking, studios would have had to invest significantly more resources in presorting movies, something in which they did not have the comparative advantage. As we will see, this is essentially what happened. Hanssen (2000) points to the more mundane transaction costs that arose whenever studios tried to lease movies on an individual basis.
Notes to Chapter 8 633
136. Aberdeen (2000); Conant (1960).
137. In re Famous Players-Lasky Corp., 11 F.T.C. 187 (1927).
138. Paramount Famous Corp. v. U.S., 282 U.S. 30, 51 S. Ct. 42 (1930).
139. Conant (1960, p. 32).
140. Aberdeen (2000, p. 55).
141. “35 Groups to Fight Blind Film Booking,” New York Times, October 5, 1934, p. 29.
142. Conant (1960, pp. 94–106).
143. “Arnold Demands a Movie New Deal,” New York Times, April 22, 1940, p. 19.
144. United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948).
145. De Vany and Eckert (1991); Gil (2010).
146. Conant (1981, p. 82).
147. Gil (2015); Hanssen (2010).
148. Masten and Snyder (1993).
149. Leasing capital goods goes back at least to Platt Brothers of Oldham and other textile-
equipment makers during the first Industrial Revolution. As we will see, IBM would lease and not sell its mainframe computers.
150. Capital costs are a (short-run) barrier to entry only when capital markets are not work- ing well. In fact, however, because United knew far more about shoemaking than a bank would, it was in a better position than the banking system to effectively supply the shoemaking industry with capital.
151. United States v. United Shoe Machinery Corp., 110 F. Supp. 295 (D. Mass. 1953), at 352. 152. United States v. United Shoe Machinery Corp., 347 U.S. 521 (1954).
153. Masten and Snyder (1993, p. 66).
154. Crandall and Elzinga (2004, p. 283).
155. United States v. United Shoe Machinery Corp., 391 U.S. 244 (1968).
156. “Truman’s development in the public mind from the colorless ‘ordinary man’ into the symbolic ‘common man’ is one of the major political facts of our time” (Podhoretz 1956, p. 473). 157. Freyer (2009, p. 349). George Bittlingmayer (2001, p. 366) wondered whether this late- term revival of antitrust might not have been linked to Eisenhower’s well-known growing fear
of the military-industrial complex.
158. Kovaleff (1976, pp. 593–94).
159. Hofstadter (1964, p. 114).
160. Lochner v. New York, 198 U.S. 45 (1905), at 75.
161. “The Legal Realists were, in essence, the lawyer branch of institutionalism” (Hovenkamp
2015, p. 110). See also Williamson (1996).
162. Shackle (1967).
163. “The New Competition,” Fortune, June 1952, p. 186.
164. Loasby (1976, pp. 173–92); Moss (1984).
165. Citing economists, the Supreme Court would explicitly refer to the theory of perfect com-
petition in United States v. Philadelphia Nat’l Bank, 374 U.S. 321 (1963), at 363: “Competition is likely to be greatest when there are many sellers, none of which has any significant market share.”
166. Clark (1940); Mason (1939).
167. Bain (1959, pp. 8–15). That “performance” in the S-C-P paradigm was understood in terms of aggregate outcomes was very much in keeping with the Progressive Keynesian spirit
634 Notes to Chapter 8
of the postwar years. Significantly, the preservation for its own sake of a class of small local businesses was not among the outcomes in the performance metric.
168. Meehan and Larner (1989, pp. 182–83).
169. Hovenkamp (2005, p. 35).
170. Kaysen and Turner (1959).
171. Barnes and Oppenheim (1955). Stanley Barnes was the cochair of the committee, and
Robert Bicks was the executive secretary.
172. Barnes and Oppenheim (1955, p. 317).
173. Barnes and Oppenheim (1955, p. 320).
174. Martin (1959, p. 54).
175. “Shall we permit the economy of the country to gravitate into the hands of a few corpo-
rations, even though they may have very widespread stockholder distribution, with central- office managers remote from the places where their products are made, and the destiny of the people determined by the decisions of persons whom they never see, or even know of?” (Ke- fauver, 96 Cong. Rec. 16450 (1950), quoted in Bok [1960, p. 246n53]).
176. United States v. Bethlehem Steel Corporation, 157 F. Supp. 877 (S.D.N.Y. 1958).
177. Warren (2008, pp. 172–77).
178. Bison (1966).
179. United States v. Von’s Grocery Co., 384 U.S. 270 (1966), at 276–77. In a blistering dissent,
Potter Stewart accused the majority of playing a “counting of heads” game. “In any meaningful sense,” wrote Stewart, “the structure of the Los Angeles grocery market remains unthreatened by concentration. Local competition is vigorous to a fault, not only among chain stores them- selves, but also between chain stores and single store operators. The continuing population explosion of the Los Angeles area, which has outrun the expansion plans of even the largest chains, offers a surfeit of business opportunity for stores of all sizes” (287). Stewart was joined in the dissent by John Marshall Harlan II. Both had been appointed by Eisenhower.
180. Bison (1966, p. 231).
181. Peterman (1975).
182. Brown Shoe Co., Inc. v. United States, 370 U.S. 294 (1962), at 344.
183. Murray and Schwartz (2019, p. 91).
184. Markham (1957, p. 884).
185. Because the case was filed before the passage of the Celler-Kefauver amendments, this
would mean the “old” Section 7, which had never been successfully used against a vertical merger let alone an ancient ex post merger. The new Section 7, by contrast, was explicit that it covered vertical mergers. Section 7 was merely incidental to the government’s case, but it would be the focus of the Supreme Court’s decision.
186. United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586 (1957). One seat on the Su- preme Court was vacant during deliberations and two justices recused themselves, Tom Clark because he had been the Attorney General when the suit was filed and Harlan because he had once represented Du Pont. Harold Hitz Burton and Felix Frankfurter were in dissent. The one- time dean of Brandeisian trustbusting had evolved into a stickler for precedent and judicial restraint.
187. Dewey (1974, p. 13).
188. Freeland (2001, pp. 100–26); Kuhn (1986, pp. 134–35).
Notes to Chapter 8 635
189. Drucker (1946, p. 65).
190. Freeland (2001, p. 136).
191. Drucker (1946, p. 82).
192. Freeland (2001, pp. 174–222).
193. Wilson himself would resign in 1953 to become Eisenhower’s defense secretary. It is he
who was famously misquoted as having said, at his confirmation hearings, that “what’s good for General Motors is good for the country.” (He actually said more or less the opposite—what’s good for the country is good for General Motors.) Charles Erwin Wilson (Engine Charlie) is not to be confused with Charles Edward Wilson (Electric Charlie), the president of General Electric, who served on the WPB and was head of Truman’s Office of Defense Mobilization during the Korean War.
194. Sloan (1964, p. 374). In the postwar period, GM would unload essentially all of the subsidiaries in which it had minority holdings, including Bendix (23 percent), Greyhound (3 percent), Kinetic Chemicals (49 percent), and the Ethyl Corporation (which it had co- founded with Du Pont). The company also sold Hertz car rental, which had been a wholly owned subsidiary (L. J. White 1971, p 89). The other carmakers also reduced their unrelated diversification in this period.
195. Freeland (2001, p. 217).
196. Freeland (2001, p. 225). Owners did attempt to assert control again after the district court found in GM’s favor, but the uprising was quickly quashed by the Supreme Court ruling.
197. Kuhn (1986, p. 341).
198. Cray (1980, pp. 444–47).
199. Freeland (2001, p. 278).
200. Cray (1980, p. 448).
201. Lichtenstein (1982, pp. 133–35).
202. Vatter (1963, p. 231).
203. Lichtenstein (1997, pp. 232–80).
204. Drucker (1978, p. 275). According to Drucker, Wilson—who had grown up a socialist
and had campaigned for Eugene V. Debs as a young man—had long wanted to implement the ideas of the 1950 agreement, but he felt it necessary to wait until those concessions became union demands before appearing reluctantly to concede.
205. Bell (1950).
206. Zetka (1995, p. 113).
207. Katz (1977, p. 263).
208. L. J. White (1971, pp. 79, 83).
209. Alexander (1961).
210. Helper (1991).
211. Murray and Schwartz (2019).
212. Nevins and Hill (1962, pp. 228–72, 294–345).
213. Halberstam (1986, p. 99).
214. US Civilian Production Administration (1947, p. 482). 215. Drucker (1978, p. 267).
216. Drucker (1978, p. 292).
636 Notes to Chapter 8
217. Nevins and Hill (1962, p. 323).
218. Halberstam (1986, pp. 201–3).
219. Hounshell (1995, 1999).
220. 1955 Ford Motor Company Annual Report, p. 13.
221. 1956 Ford Motor Company Annual Report, pp. 5 and 12. 222. 1957 Ford Motor Company Annual Report, p. 9.
223. Hyde (2003).
224. L. J. White (1971, Table A.2).
225. Jefferys (1986, p. 128).
226. Hyde (2003, p. 165). Founder Walter Briggs had died in 1952, and his family sold the
company in order to pay the estate taxes.
227. L. J. White (1971, Table A.2).
228. Timothy Bresnahan (1987) argues that the surge in output, which he shows was driven
by the low end of the market, was caused by a one-year collapse of a system of tacit collusion among the manufacturers. But he can’t explain why carmakers chose that year suddenly to compete. This was indeed the period during which the manufacturers were tussling with their dealers and “forcing” quotas upon them before the passage of the Dealer’s Day in Court Act in 1956 (Cray 1980, p. 364). The introduction of the two paradigmatic new models at the low end is a far more plausible explanation for the supply shock. The most compelling evidence is that Ford, which had no comparable new model, was the clear loser to both GM and Chrysler, drop- ping 3 percentage points in market share in 1955. GMAC also loosened its credit requirements that year (Banner 1958, p. 244), which suggests that the surge could have been partly a demand shock not just a supply shock.
229. Cray (1980, pp. 364–65). 230. Hyde (2003, pp. 172–73). 231. L. J. White (1971, pp. 7–18). 232. Mowery (2015, p. 3).
233. Rae (1968, p. 198).
234. Mowery and Rosenberg (1982, p. 116).
235. Mrozek (1974).
236. Rae (1968, p. 196).
237. Constant (1980, pp. 218–26).
238. Rae (1968, pp. 218–26).
239. Simonson (1964).
240. Nelson and Langlois (1983, p. 816).
241. Mowery (2015, p. 10).
242. Eads and Nelson (1970); Horwitch (1982).
243. Contrary to the popular meme, McNamara was not responsible for developing or push-
ing the Edsel, but he was responsible for canceling it.
244. Jordan (1970, pp. 34–56). As we will see, airlines that were unregulated because they
operated within a single state like California or Texas offered much lower fares, and used far more turboprop planes, than did regulated interstate airlines on comparable routes.
245. Mowery (2015, p. 12).
246. Nelson (1962); Riordan and Hoddeson (1997).
Notes to Chapter 8 637
247. Peters (1985); Temin and Galambos (1987).
248. U.S. v. Western Electric Co., CA No. 17–49, U.S. Dist. Ct., Dist. of New Jersey, Complaint, January 14, 1949.
249. Brock (1981, pp. 187–91).
250. This kind of cross-subsidy is sometimes called inverse Ramsey pricing, after the British mathematician Frank Ramsey, who first developed the theory of optimal multiproduct pricing (or taxation). For an entrée to the large literature on the theory and political economy of the cross subsidy, see Kaserman and Mayo (1994).
251. Anthony Lewis, “AT&T Settles Antitrust Case; Shares Patents,” New York Times, Janu- ary 25, 1956, p. 1.
252. Peters (1985, p. 265).
253. Grindley and Teece (1997, p. 12).
254. Quotation attributed to Jack Morton, in “The Improbable Years,” Electronics 41: 81 (Feb-
ruary 19, 1968), quoted in Tilton (1971, pp. 75–76).
255. Nagler, Schnitzer, and Watzinger (2021); Tilton (1971, p. 75).
256. Mowery and Steinmueller (1994)
257. Indeed, Bell’s alacrity in diffusing the transistor was motivated in part by a fear that the
government would classify the technology (Levin 1982, p. 58). See also the interview of John Bardeen by Lillian Hoddeson on February 13, 1980. Niels Bohr Library & Archives, American Institute of Physics, College Park, MD USA, February 13, 1980, www.aip.org/history-programs /niels-bohr-library/oral-histories/25488 (accessed August 9, 2022).
258. Tilton (1971, p. 91).
259. Langlois and Steinmueller (1999).
260. Teal (1976).
261. Sparkes (1973, p. 8).
262. Holbrook et al. (2000, p. 1026).
263. Berlin (2005, pp. 88–89); Nicholas (2019, pp. 194–95).
264. Malone (1985, p. 88).
265. Braun and Macdonald (1982, p. 85).
266. Sparkes (1973, p. 8).
267. Reid (1984, pp. 94–95).
268. Langlois and Steinmueller (1999, p. 32).
269. Lécuyer (2006, pp. 171–73).
270. The principal exception was Motorola, which had begun as a maker of car radios (hence
the name) before World War II. But, as in the case of TI, Motorola’s semiconductor business came to dominate its systems business and was not a small part of the overall operation. As we will see, Motorola’s other main business would eventually be mobile telephones, and the two very different parts of the company would eventually go their separate ways.
271. Kraus (1971, p. 91).
272. Aspray (1990, pp. 34–48).
273. The stored-program idea was also implied in the work of Alan Turing, who had inter-
acted with von Neumann when Turing was a visitor at the Institute for Advanced Study in 1938. Explicitly modeled on the EDVAC, the first functioning stored-program computer was run for the first time on June 21, 1948 at the University of Manchester (Flamm 1988, p. 51).
638 Notes to Chapter 8
274. Norberg (1993); Fisher, McKie, and Mancke (1983, pp. 4–10); Flamm (1988, pp. 43–51). 275. Flamm (1988, pp. 53–58).
276. Flamm (1988, pp. 61–65); Fisher, McKie, and Mancke (1983, p. 11).
277. IBM did not possess a major lab like those of AT&T or GE in this period. The Endicott
lab in particular “was aimed chiefly at immediate product needs” (Buderi 2000, p. 135). 278. Bashe et al. (1985, pp. 240–48).
279. Usselman (1993, 2007).
280. Cortada (1993).
281. Maney (2003, p. 145).
282. Cortada (1993, p. 146).
283. Usselman (2007, pp. 322–38).
284. Katz and Phillips (1982, pp. 177–78).
285. Fisher, McKie, and Mancke (1983, p. 17).
286. Bashe et al. (1985, p. 288).
287. Fisher, McKie, and Mancke (1983, p. 65).
288. Sobel (1983, p. 160).
289. Bresnahan and Malerba (1999, pp. 101–2).
290. Bresnahan and Malerba (1999, p. 90). Executive-branch departments generally tried
their best to evade Congressional requirements and buy IBM anyway.
291. Cortada (1993, p. 116). The administration also sued Remington Rand, but that company
left he litigation to IBM, stipulating that it would agree to whatever finding the court determined against IBM.
292. International Business Machines Corp. v. United States, 298 U.S. 131 (1936).
293. As the Supreme Court would declare in 1953, the “essence of illegality in tying agree- ments is the wielding of monopolistic leverage.” Times-Picayune Pub. Co. v. United States, 345 U.S. 594 (1953).
294. Bowman (1957); Director and Levi (1956).
295. The Court argued that IBM could ensure quality control simply by conditioning leases on the use of cards that met quality specifications. But the Court did not consider the monitoring-cost implications of that alternative.
296. International Business Machines Corp. v. United States, 298 U.S. 131 (1936), at 134. 297. Usselman (2009, p. 259).
298. U.S. v IBM Corp., Civil Action No. 72–344 S.D.N.Y (1956).
299. Fisher, McKie, and Mancke (1983, pp. 34–35); Sobel (1983, pp. 135–40).
300. Usselman (2009, p. 261).
301. Henderson and Clark (1990).
302. Usselman (1993, pp. 7–8).
303. Baldwin and Clark (2000, pp. 162–63).
304. Baldwin and Clark (2000, p. 171).
305. Ferguson and Morris (1993, p. 7).
306. Baldwin and Clark (2000, pp. 169–94); Fisher, McKie, and Mancke (1983,
pp. 125–28).
307. Langlois and Robertson (1992). 308. Bresnahan (1999, p. 159).
Notes to Chapter 8 639
309. Fisher, McKie, and Mancke (1983, pp. 130–42).
310. In fact, IBM created software to emulate the 1401 and other legacy machines, and many early 360s were indeed run in emulator mode. Although the 360 was a modular system, the design of the operating system was decidedly nonmodular, leading to the problems that its creator, Fred Brooks, famously recounted in The Mythical Man Month (1975).
311. Pugh, Johnson, and Palmer (1991, pp. 368–95).
312. Sobel (1983, pp. 220–21).
313. Fisher, McKie, and Mancke (1983, p. 257).
314. Fisher, McKie, and Mancke (1983, pp. 170–79).
315. The complaint is reprinted in Fisher, McGowan, and Greenwood (1983, pp. 353–59). 316. Although the timing of the announcement of the unbundling decision was motivated
by the impending litigation, the decision itself was something IBM had long been contemplat- ing. It reflected market conditions, and it would have happened independent of antitrust policy (Humphrey 2002).
317. Robert H. Bork, quoted in “U.S. vs. I.B.M.,” New York Times, February 15, 1981, Section 3, p. 22.
318. Craig (2000, pp. 92–93).
319. Barnouw (1966a, p. 31).
320. Dawson (1934, p. 267).
321. Steele (1985, pp. 127–46).
322. Barnouw (1966a, p. 170). Although the FCC put a temporary halt to the acquisition of
radio stations by newspapers in 1941 (Sterling 1968, p. 345), in the end the commission would not bar cross-ownership of broadcast stations and newspapers until 1975. It would rescind that ruling in 2017. See “FCC Broadcast Ownership Rules,” Federal Communications Commission, https://www.fcc.gov/consumers/guides/fccs-review-broadcast-ownership-rules (accessed October 4, 2020). Roosevelt was by no means the only president to use the FCC as a political weapon. By the 1960s, the rise of television had lowered the value of many small radio stations, which were increasingly bought up by right-wing Christian broadcasters. Alarmed, Attorney General Robert F. Kennedy asked Walter Reuther for help. Reuther’s notorious 24-page memo recommended that the administration use the IRS and the FCC against the broadcasters. In due course, many of these broadcasters lost their tax-exempt status after IRS audits, and the FCC demanded that stations give equal amounts of free airtime to views opposing their own (Matzko 2018). In a unanimous 1969 decision, the Supreme Court affirmed the FCC’s right to impose the Fairness Doctrine (Red Lion Broadcasting Co. v. Federal Communications Commission 395 US 367 [1969]).
323. Robinson (1943, pp. 63–74).
324. National Broadcasting Co. v. United States, 319 U.S. 190 (1943). In view of this ruling, the antitrust cases were rescinded. In effect, the ruling transferred antitrust jurisdiction over broad- casting to the FCC.
325. Lessing (1969); Lewis (1991).
326. Sterling and Keith (2008, p. 18).
327. Radio Corporation of America et al. v. Radio Engineering Laboratories, Inc., 293 U.S. 1
(1934).
328. Lessing (1969, p. 169).
640 Notes to Chapter 8
329. Hazlett (2017, p. 64).
330. At about the same time, RCA was also experimenting with VHF relay for television programming (Udelson 1982, p. 93).
331. Bannister (2001); Fisher and Fisher (1996); Udelson (1982).
332. Bannister (2001, p. 91).
333. Fisher and Fisher (1996, p. 197).
334. Radio Corporation of America Annual Report for the Year 1930, p. 26. 335. Udelson (1982, pp. 99–127).
336. Fisher and Fisher (1996, pp. 191–93, 212).
337. Farnsworth’s California backers had taken his venture public in early 1929. At Philco, his research expenses were considered prepaid royalties. After a couple of years, Philco decided that the experiment was costing too much, and Farnsworth was then left with only the support of his California stockholders. To raise more funds, the venture acquired two Indiana-based radio companies and went into the business of making radios (Maclaurin 1949, pp. 207–9).
338. Graham (1986, p. 53)
339. Bilby (1986, pp. 131–37).
340. Maclaurin (1949, p. 206).
341. Wu (2010, p. 144).
342. Lessing (1969, pp. 199–200); Sterling and Keith (2008, pp. 31–33). Since FM encodes
information by varying the frequency of the waveform, the width of the channel in frequency space determines how much information can be encoded. Wider channels mean more informa- tion and thus higher fidelity and a higher signal-to-noise ratio. RCA had wanted to limit FM channels to 40 kHz, but the FCC granted the full 200 kHz Armstrong requested. Television needs to transmit far more information, and a TV channel would be six MHz wide (Maclaurin 1949, p. 229).
343. Sterling and Keith (2008, p, 54). 344. Lessing (1969, p. 207).
345. Slotten (2000, pp. 115–44).
346. Slotten (2000, p. 125).
347. Lessing (1969, p. 214); Lewis (1991, pp. 304–5).
348. The commission rescinded its 1940 requirement that every FM station air at least two hours of original programming. Some 80 percent of applicants for FM licenses in 1945 were owners of AM stations in the same market (Boddy 1990, p. 37).
349. Already by 1934, Armstrong had demonstrated multiplexing, the ability to broadcast multiple streams of information on the same channel. From his experimental station on the 85th floor of the Empire State Building, he was able to transmit simultaneously the programs of both the Red and Blue networks, along with a facsimile of the front page of the New York Times.
350. Sterling (1968); Inglis (1990, pp. 141–45).
351. Lessing (1969, pp. 231–48); Lewis (1991, pp. 309–27).
352. Graham (1986, p. 59). The NDRC let numerous contracts for the development of tele-
vision itself, principally in connection with a program for guided missiles that never reached fruition during the war. That research did indeed yield a more sensitive camera tube. But after the war, the new tube was discarded because its characteristics were unsuited to commercial broadcasting (Bannister 2001, pp. 133–66).
Notes to Chapter 8 641
353. Levy (1981, p. 99).
354. Levy (1981, p. 116).
355. “RCA’s Television,” Fortune, September 1948, p. 83.
356. Levy (1981, p. 124).
357. Klepper and Simons (2000).
358. Graham (1986).
359. Langlois and Robertson (1995, pp. 77–84).
360. Graham (1986, p. 61).
361. Bilby (1986, pp. 175–98); Fisher and Fisher (1996, pp. 309–27).
362. Coy was an executive of the Washington Post Company, which owned stations affiliated
with the CBS network. The outgoing chair, a New Dealer called Charles Denny, had left to become chief counsel of NBC. This raised enough hackles in Washington that Congress was forced to pass a law requiring that thenceforth FCC staff would have to wait a year before cash- ing in with industry.
363. Bilby (1986, p. 184).
364. Klepper (2016, p. 42).
365. Levy (1981, p. 116).
366. Levy (1981, pp. 129–30).
367. United States v. Radio Corporation of America, 1958 Trade Cas. ¶69, 164 (S.D. N.Y. 1958). 368. Levy (1981, pp. 159–60).
369. Johnstone (1999, p. 12). A similar compulsory-licensing order against Xerox would give Japan access to copier patents as well (Scherer 1992, p. 187).
370. Louis Johnston and Samuel H. Williamson, “What Was the U.S. GDP Then?” Measur- ing Worth, https://www.measuringworth.com/datasets/usgdp/ (accessed October 19, 2020).
371. Goldin and Katz (2009, p. 84).
372. This point has long been recognized in the context of Europe and Japan, whose even more rapid growth reflected “the catch-up for ground lost in two world wars and in the most severe economic depression to date” (Crafts and Toniolo 1996, p. 3).
373. “Table 1: Persons Obtaining Lawful Permanent Residence Status: Fiscal Years 1820 to 2018,” US Department of Homeland Security, https://www.dhs.gov/immigration-statistics /yearbook/2018/table1 (accessed October 19, 2020).
374. Jones and Tertilt (2008, p. 177). Replacement level is 2.1 children per female.
375. Goldin and Katz (2009) understand the fall in the returns to schooling in terms of the increased supply of skilled labor attendant on the high-school movement of the early century. But it is far from clear that the precipitous fall in those returns between 1939 and 1949 can be accounted for solely by a supply-side effect. The American workforce would become more edu- cated over the postwar era, continuing the upward trend: in 1948, 12.3 percent of male workers had had at least a year of college; by 1959, that number was 18.3 percent; and by 1976, it was 32.5 percent. The G. I. Bill, which subsidized college education for veterans, accounts for some of the increase in schooling. On the whole, however, it “can at most explain only a small share of the postwar prosperity in the United States” (Rockoff 1998, pp. 112–13).
376. Jones and Tertilt (2008).
377. US National Center for Health Statistics (1966, Table 1–7). 378. Schweitzer (1980, p. 90).
642 Notes to Chapter 8
379. Zhao (2014). For tax rates see “SOI Tax Stats: Historical Table 23,” Internal Revenue Service, https://www.irs.gov/statistics/soi-tax-stats-historical-table-23 (accessed October 22, 2020).
380. Rockoff (1998, p. 98).
381. Greenwood, Seshadri, and Vandenbroucke (2005).
382. Lebergott (1993, Tables II.14, II.19).
383. Gordon (2016, Table 10–3).
384. Gordon (2016, p. 361).
385. Lebergott (1993, Table II.26).
386. Glaeser (2011, p. 173); Jackson (1987, p. 249). The chair of the committee that recom-
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