Корпорация и двадцатый век. История американского делового предпринимательства

mended the interstate highway system was retired general Lucius D. Clay, who had been in charge of German reconstruction after the war. By this time, he was a member of the board of directors of GM.

387. Jackson (1987, p. 232).

388. Glaeser (2011, pp. 174–76); Halberstam (1993, pp. 131–42).

389. So long, of course, as the buyers were white. The FHA, along with all other government

agencies, had a conscious policy of discriminating against African Americans. The FHA would refuse to guarantee any homes in a development if even one was sold to blacks. The agency also refused to guarantee mortgages in segregated all-black developments (Rothstein 2017).

390. Halberstam (1993, pp. 153–54).

391. Levinson (2011, p. 249).

392. Gordon (2016, p. 341).

393. Halberstam (1993, pp. 173–79); Kaszynski (2000, pp. 156–61). 394. Love (1995, pp. 14–22).

395. In the movie The Founder (2016), the brothers outline the kitchen in chalk on a tennis court to optimize the layout as the staff simulates production. This actually happened, though in reality an overnight rain erased the design before a draftsman could copy it down.

396. Galbraith (1958, p. 123).

397. Mumford (1961, p. 486).

398. Reynolds was inspired by the Westlake district of Daly City, California, south of San

Francisco, which was developed along the lines of Levittown, albeit more densely. A glance at Zillow suggests that the Westlake district today is an attractive and indeed charming neighbor- hood, and that a box of ticky tacky will now set you back at least $1 million.

399. Galbraith (1958, pp. 154, 159). This kind of observation sounds like the tropes of someone who knows his Veblen by heart but has never lived in a suburb. William H. Whyte (1956, pp. 313– 14), another prominent contemporary critic of 1950s suburbia, is far more astute in observing that the “other-directedness” of suburbanites actually caused them to “keep down” rather than keep up with the Joneses—to refrain from conspicuous purchases that would make them stand out as different, largely out of a concern not to be seen as upstaging the neighbors.

400. Riesman (1950).

401. Mumford (1961, p. 486).

402. Marcuse (1964, p. 32). Marcuse and his followers were fortunate that they themselves

were exempted from false consciousness. 403. Packard (1957).

Notes to Chapter 8 643

404. Sterling and Kittross (1978, pp. 271–72).

405. Goodwin (1988, p. 46).

406. Fastow (1977, p. 521).

407. Noll, Peck, and McGowan (1973, p. 15).

408. Quoted, among many other places, in Hazlett (2017, p. 13). 409. Noll, Peck, and McGowan (1973, pp. 97–120).

410. For example, high-powered stations could have been set up in, say, New Haven to reach viewers from Boston to Philadelphia. This would have created the scale necessary for multiple networks to operate. The FCC chose instead to locate lower-powered stations in each North- eastern city of any size, thus idling available channels because of geographical interference (Ha- zlett 2017, p. 93). By using repeater stations, abandoning all localism in broadcasting might have allowed all homes in the country to receive at least six VHF stations, as many as were actually available only in New York and Los Angeles (Noll, Peck and McGowan 1973, p. 116).

411. White (1988, pp. 104–11).

412. Sterling and Kittross (1978, p. 296).

413. White (1992).

414. Edgerton and Pratt (1983).

415. Fastow (1977); Noll, Peck, and McGowan (1973, pp. 63–67).

416. Edgerton and Pratt (1983, pp. 15–18). Using antitrust threats against the networks had

been first suggested by Jeb Stuart Magruder in a memo to H. R. Haldeman in 1969.

417. Sterling and Kittross (1978, p. 288).

418. Shlaes (2019, p. 35). See also William Safire, “The Cold War’s Hot Kitchen,” New York

Times, July 23, 2009.

419. Halberstam (1993, p. 707).

420. Haynes and Klehr (1999, pp. 8–16).

421. The episode ruined the careers and tainted the reputations of some of America’s most

creative minds, a great many of whom were in fact or had at one time been Communists or Communist sympathizers. Some 10,000 people lost their jobs, about 2,000 of them in govern- ment. More than a hundred people were convicted of subversion under the 1940 Smith Act, and a handful were convicted of being spies. Precisely two were executed for espionage: Julius and Ethel Rosenberg (Herman 2000, pp. 4–5).

422. Yates ([1961] 2008, p. 61).

423. Yates ([1961] 2008, p. 207).

424. Whyte (1956, p. 12, emphasis original).

425. In fact, a 1983 survey of Harvard MBAs, going back to classes of the early 1940s, found

that a third were self-employed. Half worked for companies of fewer than 500 workers, and only 6 percent worked for companies with more than 100,000 employees. Another survey in the 1960s showed that no more than 55 percent wanted an administrative career and many were interested in entrepreneurship (Bhidé 2000, p. xii).

426. Whyte (1956, pp. 64, 68).

427. Arnold (1937, pp. 38–39).

428. Schumpeter (1950).

429. For an extended discussion of this claim—and an argument that it is wrong—see Lan-

glois (2007).

644 Notes to Chapter 8

430. Burnham (1941, p. 80).

431. Burnham (1941, p. 104).

432. Orwell (1949). In one reading, the Trotskyesque McGuffin within Orwell’s novel, The

Theory and Practice of Oligarchical Collectivism by Emmanuel Goldstein, is actually The Manage- rial Revolution (Kelly 2002, p. 99).

433. Galbraith (1967, p. 62).

434. Galbraith (1967, p. 71).

435. Galbraith (1967, p. 33).

436. Sutton et al. (1956, pp. 35–36).

437. Cyert and March (1963); March and Simon (1958). 438. Baumol (1959); Williamson (1964).

439. Galbraith (1967, p. 39); see also Bell (1960, pp. 43–44). 440. Marris (1966).

441. Graham and Leary (2018, p. 4295).

442. Calomiris and Raff (1995).

443. Drucker (1978, pp. 277–78). Both Charlie Wilson and Walter Reuther had wanted a defined-contribution plan rather that a defined-benefits plan, but they were overruled by the GM Finance Committee; and other companies would follow suit (Drucker 1986, pp. 16–17). This would lead to severe problems later in the century when many of these companies started going out of business.

444. Calomiris and Ramirez (1996, p. 161).

445. Brownlee (2016, pp. 150–51); Piketty and Saez (2007, p. 11). Economists understand that federal tax receipts from these sources are completely fungible and that there is no meaningful sense in which the payroll tax is a “contribution” being set aside specifically for Social Security and Medicare. It is simply a tax on wage income.

446. Bank (2010, pp. 191–92).

447. Piketty and Saez (2007, pp. 12–13).

448. Galbraith (1958, p. 191).

449. Galbraith (1967, pp. 360–61). What Galbraith is advocating here, and what was in fact

put into practice in American urban policy, is a domestic variant of the “big push” theory of economic development that Western economists and planners imposed on developing coun- tries in the same era—with the same disastrous results (Easterly 2006).

450. Jackson (1987, p. 248); Kaszynski (2000, pp. 131–32).

451. Moses’s unsympathetic biographer Robert Caro judges him “America’s, and probably the world’s, most vocal, effective and prestigious apologist for the automobile” (Caro 1974, p. 927).

452. Caro (1974, p. 623).

453. Caro (1974, p. 19).

454. Flint (2009, pp. 253–74).

455. Jackson (1987, pp. 223–29).

456. Franck and Mostoller (1995).

457. Teaford (2000, p. 445).

458. Although, as Tom Wolfe would point out in his scathing lampoon From Bauhaus to Our

House (1981), the wealthy bourgeoisie were also anxious to adopt the unornamented style of

Notes to Chapter 9 645

what had originally been conceived of in the 1920s as socialist worker housing. In midcentury America, it was only the workers who did not occupy worker housing. They lived in kitchy houses in the suburbs.

459. Newman (1972).

460. Wilson (1987, p. 7).

461. Chyn (2018).

462. Galbraith (1958, p. 359).

463. Jacobs (1961, p. 324, emphasis original).

464. Glaeser (2011, pp. 192–93).

465. Mettler (2011); Prasad (2012); Sheingate (2010).

466. Cogan (2017, p. 178).

467. Halberstam (1993, pp. 446–52). The technology had many sources, the most notable

of which was a determined lone inventor called John Rust. 468. Lemann (1991, pp. 70, 6, and 287).

469. Halberstam (1993, p. 687).

470. Cogan (2017); Levine (1970).

471. Meyer and Sullivan (2013, figure 1). 472. Cogan (2017, p. 203).

473. Moynihan (1967, p. 31).

474. Cannato (2001, pp. 267–352).

475. Meyer and Sullivan (2013, pp. 23–27).

476. Wilson (1979, p. 41).

477. Melnick (2005, p. 391).

478. In the view of Elizabeth Hinton (2016), it was these Great Society anti-crime networks

that were the true beginning of the “carceral state.”

479. Years after Watergate, John Ehrlichman would admit this with astounding candor. “The

Nixon campaign in 1968, and the Nixon White House after that, had two enemies: the antiwar left and black people. You understand what I’m saying? We knew we couldn’t make it illegal to be either against the war or black, but by getting the public to associate the hippies with mari- juana and blacks with heroin, and then criminalizing both heavily, we could disrupt those com- munities. We could arrest their leaders, raid their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course we did” (quoted in Dan Baum, “Legalize It All,” Harper’s, April 2016).

480. National Research Council (2014, p. 34). 481. Moynihan (1993, pp. 161–62).

Chapter 9: The Undoing

1. “‘We Are All Keynesians Now,’” Time, Volume 86, Issue 27, December 31, 1965, pp. 64–67B. What Friedman really said was: “In one sense, we are all Keynesians now; in another, no one is a Keynesian any longer” (Friedman 1968, p. 15). “We all use the Keynesian language and ap- paratus,” he elaborated; “none of us any longer accepts the initial Keynesian conclusions.”

2. Chandler (1977, p. 495). 3. Chandler (1967, p. 100).

646 Notes to Chapter 9

4. Chandler (1977, p. 496).

5. “Both nominal and real variables exhibited the most stable behavior in the past century under the Bretton Woods system, in its full convertibility phase, 1959–71” (Bordo 1993, p. 4).

6. Romer and Romer (2002).

7. Triffin (1946).

8. Wilkins (1974, p. 310).

9. “Direct investment used to be thought of by economists as an international capital move-

ment . . . But economists trying to interpret direct investment as a capital movement were struck by several peculiar phenomena. In the first place, investors often failed to take money with them when they went abroad to take control of a company; instead they would borrow in the local market. Capital movement would take place gross . . . but not net. Or the investment would take place in kind, through the exchange of property—patents, technology, or machinery—against equity claims, without the normal transfer of funds through the foreign exchange associated with capital movements . . . Direct investment may thus be capital move- ment, but it is more than that” (Kindleberger 1969, pp. 1–3).

10. Jones (2005, pp. 95–95).

11. Eichengreen (2019, p. 113).

12. Servan-Schreiber (1969, p. 39). “American industry has gauged the terrain,” he added

(p. 29), “and is now rolling from Naples to Amsterdam with the ease and speed of Israeli tanks in the Sinai desert.”

13. Bordo (1993); Eichengreen (2019, pp. 112–23). 14. Shlaes (2019, p. 44).

15. Eichengreen (2019, pp. 121–22).

16. Rockoff (2012, pp. 280–84).

17. Rockoff (2012, p. 296). Rockoff gives the figure as $1,697 billion in 2008 dollars.

18. “I don’t know much about economics,” David Halberstam quotes him as saying, “but I do know Congress. And I can get the Great Society through right now—this is a golden time. We’ve got a good Congress and I’m the right President and I can do it. But if I talk about the cost of the war, the Great Society won’t go through and the tax bill won’t go through. Old Wilbur Mills will sit down there and he’ll thank me kindly and send me back my Great Society, and then he’ll tell me that they’ll be glad to spend whatever we need for the war” (Halberstam 1972, p. 606). Wilbur Mills was chair of the House Ways and Means Committee.

19. Meltzer (2009, p. 484).

20. Bordo (1993, p. 76).

21. Meltzer (2013, p. 491).

22. Meltzer (2005, p. 150).

23. Address before the Investment Bankers Association of America, October 19, 1955,

FRASER, https://fraser.stlouisfed.org/title/448/item/7800, p. 12 (accessed August 23, 2022). Martin attributes the analogy to an unnamed writer.

24. Meltzer (2009, pp. 485, 529). 25. Meltzer (2005, pp. 153–54). 26. DeLong (1997).

27. Meltzer (2009, p. 486).

28. “Nixon Reportedly Says He Is Now a Keynesian,” New York Times, January 7, 1971, p. 19.

Notes to Chapter 9 647

29. Although broadly speaking an economic liberal, Burns was a student and follower of the Institutionalist Wesley Clair Mitchell, who largely rejected economic theory in favor of statisti- cal analysis (Rutherford 1987). Arthur F. Burns is not to be confused with Arthur R. Burns, also an Institutionalist economist and author of The Decline of Competition (1936). Apparently the two were forced to share a mailbox when they were both on the same faculty at Columbia (Stigler 1988, p. 95).

30. Humphrey (1998); Nelson (2005, p. 14).

31. Jim Tankersley and Alan Rappeport, “As Prices Rise, Biden Turns to Antitrust Enforcers,” New York Times, December 25, 2021.

32. Safire (1975, p. 491).

33. Drawing on the Nixon tapes, Abrams (2006) shows that the president put strong pres- sure on Burns after the Camp David meeting, though it unclear whether Burns’s policies were the result of that pressure or of his own views, especially since he may have felt that the “incomes policies” he had championed absolved the Fed of its responsibility to rein in inflation.

34. The details of the Bretton Woods exit had already been worked out by Treasury officials, and the purpose of the meeting at Camp David was not to formulate policy but to get the ad- ministration’s economic team on the same page (Butkiewicz and Ohlmacher 2021).

35. Eichengreen (2019, p. 120).

36. Stein (1988, p. 165).

37. Safire (1975); Stein (1988).

38. All inflation figures in this section from World Bank, Inflation, consumer prices for the

United States, FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series /FPCPITOTLZGUSA (accessed December 31, 2020).

39. Neal (2015, p. 271).

40. Although the oil-price shock was an event with roots in political economy, there remains a sense in which the US inflation and the fall of Bretton Woods were also partly to blame. The OPEC increase was a real relative-price change for those paying for oil in dollars. But for those receiving depreciating dollars in exchange for oil, the situation looked rather different. If the price of oil had been stipulated in gold rather than dollars just before the price increase, OPEC would have received $1.62 more a barrel than it actually received in dollars after the price increase (Hammes and Wills 2005).

41. Rockoff (1984, p. 214).

42. Ravenscraft and Scherer (1987, p. 21).

43. Labor productivity in the US began declining hand-in-hand with inflation after 1965

(Clark 1982), though it is hard to assign causality to the inflation itself, since resources were being diverted from private to public use during this period for war and redistribution (Meltzer 2009, p. 483).

44. As Boudreaux and Shughart (1989) find.

45. This was one of the central issues in play during the so-called socialist calculation debate that took place among economists between the wars. Even fully socialist central planning would still need to rely on market signals, especially for capital goods, in order to allocate resources rationally (Lavoie 1985, p. 60).

46. Carlton (1982).

47. Galbraith (1967, p. 2).

648 Notes to Chapter 9

48. Rumelt (1986, p. 65).

49. Roe (1996, p. 113).

50. Penrose (1959).

51. “The M-form begot the monster of the conglomerate” (Shleifer and Vishny 1991, p. 56). 52. Sobel (1982).

53. Sobel (1982, p. 173).

54. Shleifer and Vishny (1991).

55. Gertner, Scharfstein and Stein (1994); Rajan, Servaes, and Zingales (2000); Williamson

(1985, p. 142).

56. Lang and Stulz (1994).

57. In addition, a conglomerate might be able to reduce its total corporate tax bill by offset-

ting gains in one division with losses elsewhere (Bhidé 1990, p. 71).

58. Jensen (1986); Mueller (1969).

59. Geneen (1970, p. 727)

60. Ling (1969, p. 19). Ling also noted that diversification was forcefully urged upon contrac-

tors by the defense establishment, another example of the divergent industrial policies pursued by the Defense Department and the antitrust authorities. The defense agencies liked the insur- ance of diversification because it helped preserve capabilities in the technologies they might need.

61. Alchian (1969); Williamson (1975, p. 156).

62. Hubbard and Palia (1999, p. 1133).

63. Bhidé (1990, p. 77).

64. Geneen (1970, pp. 738–39). Technically speaking, of course, a conglomerate is not a

cooperative of its constituent divisions because it is owned by the stockholders of the apex firm not by the (stockholders of) the divisions.

65. Chandler (1977, p. 9).

66. Weston (1973, p. 310).

67. Edwards (1955).

68. Kaysen and Turner (1959, p. 134). 69. Turner (1965, p. 1322).

70. Turner (1965, p. 1346).

71. Williamson (1995, pp. 56, 63).

72. Sobel (1982, pp. 219–33).

73. Address by Honorable John N. Mitchell, Attorney General of the United States, delivered

before the Georgia Bar Association, DeSoto Hilton Hotel, Savannah, Georgia on June 6, 1969, 11:00 a.m., US Department of Justice, https://www.justice.gov/sites/default/files/ag/legacy /2011/08/23/06-06-1969b.pdf (accessed August 9, 2022).

74. Sobel (1982, p. 259).

75. United States v. International Tel. & Tel., 1971 Trade Cas. 90, 530 (N.D. Ill. July 2, 1971). 76. United States v. International Tel. & Tel. and Grinnell Corp., 324 F. Supp. 19 (D. Conn.

1970); United States v. International Tel. & Tel. and The Hartford Fire Insurance Company, Civil Action No. 13320 (D. Conn., filed August 1, 1969).

77. As Robert Bork observed, the doctrine of reciprocity is the “leverage fallacy in yet an- other context” (Bork 1978, p. 278).

Notes to Chapter 9 649

78. P. H. White (1971b, p. 210).

79. Rosen (2008, p. 184).

80. Rosen (2008, pp. 184–85).

81. Transcript prepared by the impeachment inquiry staff for the House Judiciary Commit-

tee of a recording of a meeting among the president, John Ehrlichman, and George Shultz on April 19, 1971 from 3:03 to 3:34 p.m., Richard Nixon Presidential Library and Museum, https:// www.nixonlibrary.gov/sites/default/files/forresearchers/find/tapes/watergate/wspf/482-017 _482-018.pdf (accessed August 9, 2022).

82. Sobel (1982, p. 286–90).

83. Mussa (1994, p. 86).

84. Samuel H. Williamson, “Daily Closing Values of the DJA in the United States, 1885 to

Present,” Measuring Worth, https://www.measuringworth.com/datasets/DJA/index.php (ac- cessed August 23, 2022).

85. Bhidé (1990, p. 81).

86. Sobel (1984, p. 191).

87. Ravenscraft and Scherer (1987, pp. 21, 41).

88. The second of these czars, the great regulation economist Alfred Kahn miscast in a thankless

role, did resort to comedy: he took to referring to recessions as “bananas” because, he believed, the term made people less nervous. (“Yes, We’ll Have No Banana,” Washington Post, December 3, 1978.) This did make banana growers nervous, so Kahn switched to “kumquat.”

89. Mussa (1994).

90. Vietor (1987, p. 7).

91. Roe (1994).

92. Bhidé (1990); Smith and Sylla (1993); Vietor (1987).

93. Vietor (1987, p. 35).

94. Weingast (1984).

95. Jarrell (1984). The institutional investors had also begun to use cheaper off-board alterna-

tives, and some of the larger regional exchanges had begun to accept institutional investors as members. All of these factors made the existing NYSE cartel arrangement untenable.

96. Bhidé (1990, pp. 77–78).

97. Smith and Sylla (1993, p. 44). Daily trading volume on the NYSE today is in the multiple billions of shares.

98. Jones and Seguin (1997).

99. Bhidé (1990, p. 78).

100. Manne (1965).

101. Donaldson (1993, p. 81).

102. Baker and Smith (1998, p. 19). Shortly before merging with Raytheon in 2019, United

Technologies would spin off as separate companies both Otis and its Carrier air-conditioning business. Dana Mattioli and Thomas Gryta, “United Tech to Break Itself into Three Companies,” Wall Street Journal, November 26, 2018.

103. Pickens (1987, p. 136).

104. Blair and Litan (1990, pp. 47–48).

105. Baker and Smith (1998, p. 22).

106. Bhagat, Shleifer, and Vishny (1990); Bhidé (1990); Shleifer and Vishny (1991).

650 Notes to Chapter 9

107. Jensen (1988, p. 21). Jensen estimates that over the period 1976–1990, value to target shareholders was $650 billion.

108. Rohatyn (1986, p. 31).

109. Lavoie (1984).

110. Bhidé (1989); Jensen (1988); Palepu (1990); Shleifer and Vishny (1988).

111. Jensen (1991).

112. Davis et al. (2014).

113. Drucker (1986, pp. 14–15).

114. Jensen (1988); Roe (1994).

115. Baker and Smith (1998); Kaufman and Englander (1993).

116. Auerbach (1990, p. 91).

117. Baker (1992).

118. Burrough and Helyar (2008).

119. That shipping company was called Sea-Land, which we will meet presently.

120. “RJR Nabisco Chief Considering Buy-Out of Concern for $17.6 Billion, or $75 a Share,”

Wall Street Journal, October 21, 1988.

121. Jensen (1991, p. 14). Lou Gerstner, the American Express executive whom KKR installed

as CEO, is on record as believing that KKR paid too much for the company (Gerstner 2002, p. 5). 122. Jensen (1991, pp. 22–23).

123. Miriam Gottfried, “KKR Has Quietly Built an Investment-Banking Contender,” Wall

Street Journal, September 25, 2019.

124. Branson (1980, p. 183).

125. Alder, Lagakos, and Ohanian (2014).

126. Irwin (2017, p. 534).

127. Branson (1980, p. 196).

128. Irwin (2017, p. 506).

129. Irwin (2017, p. 511).

130. Branson (1980, p. 186); Irwin (2017, pp. 565–69).

131. Jensen (1993, p. 841).

132. Feyrer, Sacerdote, and Stern (2007).

133. Warren (2001, p. 215).

134. Vatter (1963, p. 154); Tiffany (1984).

135. Tiffany (1984, p. 411).

136. O’Brien (1992).

137. Calder (1993, pp. 113–14).

138. Yamawaki (1988, p. 294).

139. Calder (1993, pp. 183–95); Yonekura (1994, pp. 198–213).

140. Ankli and Sommer (1996).

141. Rogers (2009, p. 136). For example, producers of beer and soft drinks transitioned com-

pletely from steel to aluminum for their containers. 142. Iverson (1997, p. 6).

143. Crandall (1981, pp. 20–23).

144. DeAngelo and DeAngelo (1991, p. 4).

145. Warren (2001, pp. 309–39).

Notes to Chapter 9 651

146. Nohria, Dyer and Dalzell (2002, pp. 172–77).

147. Warren (2008, p. 248).

148. United States v. Bethlehem Steel Corporation, 168 F. Supp. 576 (S.D.N.Y. 1958).

149. Barnett and Crandall (2002, p. 130).

150. Warren (2008, p. 228).

151. Warren (2008, p. 238).

152. Warren (2008, p. 262).

153. Barnett and Crandall (1986).

154. Warren (2008, p. 250).

155. Barnes and Tyler (2010).

156. Ghemawat (1994, pp. 689–90).

157. Christensen (2015, pp. 90–91).

158. Ghemawat (1994); Iverson (1997).

159. Barnett and Crandall (1986, pp. 20–21).

160. Barnes and Tyler (2010, p. 17).

161. White (1982, p. 418).

162. Hyde (2003, p. 181).

163. Ingrassia (2010, p. 36).

164. Halberstam (1972, p. 292).

165. Libecap (1989).

166. Copp (1976); Nash (1968). The oil-depletion allowance, in force since the 1920s, permit-

ted oil producers to deduct up to 27.5 percent of gross revenues, on the theory (or pretext) that the oil in the ground was a capital good that was “depleting.” Many have argued that this favored vertically integrated firms by allowing them to “squeeze” independents; but the counterargu- ments are persuasive that absent an ability to fudge transfer prices, there was little differential benefit to vertically integrated firms (Levin 1981).

167. Irwin (2017, p. 517).

168. Hammes and Wills (2005, p. 501).

169. Jimmy Carter, “The Moral Equivalent of War,” Time, Monday, Oct. 18, 1982. 170. Ingrassia (2010, p. 55).

171. Rubenstein (1992, pp. 155–57).

172. Hammes and Wills (2005, p. 501).

173. Irwin (2017, p. 572).

174. Train and Winston (2007), Tables 1 and 2.

175. Ingrassia (2010, p. 80).

176. Halberstam (1986, p. 557).

177. Hyde (2003, pp. 220, 240).

178. Levin (1995, pp. 43–47).

179. Rubenstein (1992, p. 203).

180. Reich and Donahue (1985, pp. 91–92).

181. Ingrassia (2010, p. 80).

182. Cusumano (1985, pp. 19–20).

183. Cusumano (1985, pp. 28–57); Halberstam (1986).

184. Halberstam (1986, p. 307).

652 Notes to Chapter 9

185. Sakiya (1982).

186. Cusumano (1985, pp. 58–72).

187. Cusumano (1985, pp. 137–43); Halberstam (1986).

188. Cohen (1987).

189. Womack, Jones and Roos (1990, pp. 54–55).

190. Helper and Henderson (2014).

191. Cusumano (1985, pp. 262–80).

192. Womack, Jones and Roos (1990).

193. Cusumano (1985, p. 331).

194. Halberstam (1986, p. 312).

195. MacDuffie and Helper (2007, p. 424).

196. Flugge (1929, p. 163); Murray and Schwartz (2019, pp. 50–55).

197. Alexander (1961).

198. It is often claimed that the automakers adopted arm’s-length sourcing as a way of exercising

their monopsony power to force down prices (Helper 1991). In fact, they discovered that multiple sourcing increased prices. All the suppliers knew that they would get contracts even if they were not the low bidder (Rubenstein 1992, p. 169). It was arguably in Japan, where supplier productivity gains were passed on to the assemblers, that monopsony power was more effective.

199. Cusumano (1985, pp. 241–61).

200. Smitka (1991, p. 193).

201. Womack, Jones, and Roos (1990, p. 61).

202. Cusumano and Takeishi (1991, p. 565).

203. Fujimoto (1995, pp. 186–87).

204. Takeishi and Fujimoto (2001).

205. Clark and Fujimoto (1991, p. 68).

206. Irwin (2017, pp. 574–77).

207. In 1983 dollars. Berry, Levinsohn, and Pakes (1999).

208. Reich and Donahue (1985).

209. Ingrassia (2010, pp. 67–77).

210. Ingrassia (2010, p. 64). In another telling, the deal fell apart because Soichiro Honda

refused to sell the engines (Yates 1996, p. 24). 211. Kenney and Florida (1993).

212. Klepper (2016, p. 187).

213. Halberstam (1986, pp. 604–5).

214. Ingrassia (2010, p. 86).

215. “The K Car: Variations on a Theme Helped to Save Chrysler,” New York Times, Janu- ary 29, 1984, Section 12, Page 17.

216. Hyde (2003, pp. 249–51).

217. Hyde (2003, pp. 265–69); Yates (1996, pp. 17–35). 218. Adler (1993).

219. Rubenstein (1992, pp. 256–57).

220. Keller (1989, p. 131).

221. Womack, Jones, and Roos (1990, p. 83).

222. Adler (1993, p. 121).

Notes to Chapter 9 653

223. Keller (1989, pp. 133–36).

224. Womack, Jones, and Roos (1990, p. 87).

225. Pil and Rubinstein (1998); Taylor (2010, p. 81–91).

226. Ingrassia (2010, p. 128).

227. David Hanna, “How GM Destroyed Its Saturn Success,” Fortune, March 8, 2010.

228. Irwin (2017, p. 605).

229. Berry, Levinsohn, and Pakes (1999).

230. “Total Vehicle Sales,” FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed

.org/series/TOTALSA (accessed February 24, 2021).

231. Train and Winston (2007), Table 2.

232. Ingrassia (2010, p. 90).

233. Keller (1989, p. 196). Michael Jensen (1993, p. 858) estimated that GM’s investments in

automation and R&D in this period were so unproductive that the company could have earned $100 billion more by putting its money in a bank account of equivalent risk.

234. Levin (1995, p. 76). Both GM and Chrysler also bought car-rental companies, which they used to dump their least-popular cars and to try out new models (Yates 1996, p. 11).

235. Ingrassia (2010, pp. 80–89).

236. Levin (1995, p. 93).

237. Yates (1996, p. 37).

238. Levin (1995, pp. 100–103).

239. Greenspan (2008, pp. 111–12).

240. Ingrassia (2010, pp. 96–97).

241. Helper and Henderson (2014, p. 65). 242. Porac et al. (2001, pp. 240–41).

243. Ingrassia (2010, pp. 114–16). Light trucks were and are subject to CAFE fuel-economy standards, but the targets are set lower than for car fleets. Light trucks were and are also subject to a 25 percent tariff, the so-called chicken tariff, imposed in 1962 in retaliation against a Euro- pean levy, long since revoked, on American poultry (Irwin 2017, pp. 525–26). As a result, Euro- pean automakers exited this market; and all Japanese light trucks for the American market are made in North America. In the early twenty-first century, the NUMMI plant was cranking out Toyota pickup trucks. Since 2010, the plant has been owned and operated by Tesla Motors.

244. Yates (1996, pp. 75–79).

245. Levin (1995, pp. 238–39).

246. Hyde (2003, p. 283).

247. Ingrassia (2010, p. 109).

248. Helper and Sako (1995).

249. Jacobides, MacDuffie, and Tae (2016, p. 1951). 250. Fine and Raff (2002, pp. 428–29).

251. Yates (1996, pp. 291–301).

252. Ingrassia (2010, p. 113).

253. Fine and Raff (2002, p. 429).

254. Ingrassia (2010, pp. 131, 168–73).

255. Dertouzos, Lester, and Solow (1989, pp. 216–18). 256. Chandler (2001, pp. 32–34).

654 Notes to Chapter 9

257. Cowie (1999, pp. 12–40). 258. Graham (1986, pp. 74–75). 259. Shimotani (1995)

260. Fruin (1992, p. 149).

261. Cusumano, Mylonadis, and Rosenbloom (1992, p. 63).

262. Cohen (1987, p. 360).

263. Shimotani (1995, p. 58).

264. Matsushita (by then Panasonic) would ultimately acquire Sanyo, but not until the

twenty-first century. At the same time, the company also reacquired Matsushita Electric Works (by then Panasonic Electric Works), the electrical-equipment unit that had been spun off during the occupation.

265. Nathan (1999).

266. Tilton (1971, p. 154).

267. Nathan (1999, pp. 46–48).

268. Gregory (1986, p. 174).

269. Goldstein (1997, pp. 181–84).

270. Klepper (2016, pp. 198–99).

271. Chandler (2001, pp. 40, 68).

272. Sobel (1986, p. 212).

273. Jimmy Carter, “Proclamation 4511—Implementation of Orderly Marketing Agreement

on Certain Color Television Receivers,” June 24, 1977, The American Presidency Project, https://www.presidency.ucsb.edu/node/243984 (accessed August 9, 2022). Similar agreements were soon put in place for Korea and Taiwan as well (Gregory 1986, p. 174).

274. Gregory (1986, p. 14).

275. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986).

276. Elzinga (1989).

277. Cusumano, Mylonadis, and Rosenbloom (1992).

278. JVC was the Japan Victor Company, which had separated from RCA during the war,

though it was still permitted to use the Victor trademarks. During this period it was majority owned by Matsushita.

279. Nathan (1999, pp. 151–55). The audio cassette tape on which the Walkman relied had been invented in 1963 by Philips. Neil Genzlinger, “Lou Ottens, Father of Countless Mixtapes, Is Dead at 94,” New York Times, March 11, 2021.

280. Graham (1986).

281. Cusumano, Mylonadis, and Rosenbloom (1992, p. 62).

282. Sobel (1986, p. 254).

283. Graham (1986, p. 213).

284. Sobel (1986).

285. Chandler (2001, p. 37); Sobel (1986, pp. 199–209).

286. Sobel (1986, p. 259).

287. John Crudele, “G.E. Will Purchase RCA in a Cash Deal Worth $6.3 Billion,” New York

Times, December 12, 1985, p. 1.

288. Nohria, Dyer, and Dalzell (2002, p. 19). Thomson was GE’s French counterpart, also

springing from the tree of Elihu Thomson.

Notes to Chapter 9 655

289. Nohria, Dyer, and Dalzell (2002, pp. 1–14).

290. Fortune 500 Archive, https://archive.fortune.com/magazines/fortune/fortune500 _archive/assets/1980/1.html (accessed August 23, 2022).

291. Nohria, Dyer, and Dalzell (2002, p. 15).

292. Gryta and Mann (2020). In November 2021, GE announced that it was breaking what remained of the company into three more specialized pieces. Over the course of the twenty-first century, the GE shed almost half its workforce and plummeted in value from a high of $600 billion in the year 2000—the equivalent today of nearly $1 trillion, making it the most valuable company in the US that year—to $120 billion at its breakup. Thomas Gyrta, “‘The End of the GE We Knew’: Breakup Turns a Page in Modern Business History,” Wall Street Journal, Novem- ber 9, 2021.

293. Gabor (2000, pp. 314–21).

294. In 2015, through the agency of KKR (which retained a 10 percent share), GE sold the Appliance Park, along with the whole of its appliances business, to the Chinese firm Haier. An earlier proposal to sell the unit to Sweden’s Electrolux fell apart when the antitrust division threatened action. Laurie Burkitt, Joann S. Lublin, and Dana Mattioli, “China’s Haier to Buy GE Appliance Business for $5.4 Billion,” Wall Street Journal, January 15, 2016.

295. Nohria, Dyer, and Dalzell (2002, pp. 15–24).

296. Gabor (2000, p. 291).

297. Slater (1993, p. 173).

298. Leslie Wayne, “G.E. Credit: Financial Hybrid,” New York Times, October 28, 1981, p. D1. 299. Drucker (1985, p. 23).

300. Nohria, Dyer, and Dalzell (2002, p. 20).

301. Gryta and Mann (2020). After the financial crisis of the early twenty-first century, GE capital would become more a liability than an asset, and the company would slowly divest the entire operation. Joann S. Lublin, Dana Mattioli, and Ted Mann, “GE Seeks Exit from Banking Business,” Wall Street Journal, April 10, 2015.

302. Slater (1993, pp. 170–72). 303. Slater (1993, p. 161).

304. Drucker (1988, p. 3). 305. Drucker (1969, p. 43). 306. Drucker (1985, p. 12). 307. Drucker (1988, p. 11). 308. Gabor (2000, p. 322). 309. Jackson (2012a).

310. Lippmann (1937).

311. Steel (1980, p. 322).

312. Reinhoudt and Audier (2017). In one telling, the French began using the word after the

Colloque to denote those beneath the liberal tent who, like Lippmann himself, upheld some- thing close to the Ordoliberal view of an active protective state, as distinguished from the more traditional classical liberals who wanted to limit the role of the state largely to defending the rule of law (Denord 2015). Even those in the latter camp generally supported some redistributive and safety-net functions of the state.

313. Caldwell (2020).

656 Notes to Chapter 9

314. In the view of the Nobel-winning Peruvian novelist (and member of the Mont Pèlerin Society) Mario Vargas Llosa, neoliberalism is “a caricature made by its enemies,” invented “not to express a conceptual reality, but rather to semantically devalue, with the corrosive weapon of derision” (Vargas Llosa 2018, p. 153).

315. The most-cited definition is this: “Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices” (Harvey 2005, p. 2). Harvey is also a good source for the thesis that neoliberal ideology underpinned, and maybe even caused, the deregulation and globalization of the late twentieth century.

316. Mirowski (2014).

317. Jackson (2012b) uses the phrase “think-tank archipelago” in the context of Britain under Margaret Thatcher, though he sees it as applying elsewhere as well. Jackson notes that the in- teraction between the liberal intellectuals and their funders was a two-way street: they did not so much take instruction from the business community as help business to better understand liberal ideas and to see those ideas as in their interest.

Phillips-Fein (2009, p. 112); Shlaes (2019, pp. 35–36).

Caldwell (2020); Phillips-Fein (2015).

Slobodian (2018, pp. 73, 77).

Phillips-Fein (2015, p. 288).

Hejeebu and McCloskey (1999, p. 286); Marcuse (1964); Polanyi (1944, p. xiii).

This model of institutional change was advanced most clearly by Ruttan and Hayami

(1984).

324. Peltzman (1989, p. 33).

325. Derthick and Quirk (1985, pp. 66–67); Rothenberg (1994, p. 234).

326. Saunders (2003, pp. 24–31).

327. Salsbury (1982, p. 47).

328. Hiner (2006, pp. 38–39).

329. Saunders (1978, pp. 181–82).

330. Salsbury (1982).

331. The destruction of Penn Station led to the passage of a landmarks-preservation statute

in New York. Thus when the Penn Central was plunging into bankruptcy, it was not allowed to sell the air rights above Grand Central Terminal, which it had hoped to turn into a skyscraper designed by Marcel Breuer. The case went all the way to the Supreme Court. Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).

332. Sobel (1984, p. 170).

333. Hiner (2006, p. 40).

334. Saunders (1978).

335. Saunders (1978, pp. 199, 261).

336. Salsbury (1982, p. 140); Saunders (1978, p. 280). 337. Saunders (2003, p. 14).

338. Saunders (2003, pp. 46–50). Railroad cases came under Section 77 of the Bankruptcy Act, which gave the ICC wide discretion in sorting among claimants while keeping the roads running.

Notes to Chapter 9 657

339. Hiner (2006, pp. 57–60); Saunders (1978, p. 293). 340. Saunders (1978, p. 295).

341. Hiner (2006, pp. 51–56).

342. Hiner (2006, pp. 95–111).

343. Saunders (1978, pp. 308–14).

344. Saunders (2003, p. 111).

345. Congressional Record, 94th Congress, 1st Session, v. 122, pt. 2, 2245 (1976).

346. Ralph Blumenthal, “Conrail: Some Success, Measured by the Lack of Failures,” New

York Times, December 26, 1976, p. E3.

347. Hiner (2006, p. 373); Saunders (2003, p. 187).

348. This meant in practice that roughly 60 percent of railroad traffic would move at market

rates. The remaining 40 percent flowed on routes considered subject to “market dominance,” and the complex regulation of those rates would be transferred to a Surface Transportation Board when the ICC was abolished in 1995 (Burton and Hitchcock 2019).

349. Saunders (2003, pp. 189–219).

350. The privatized Conrail was taken over by the CSX Corporation and Norfolk Southern Railway in 1999.

351. Aldrich (2018, p. 6).

352. Winston et al. (1990, p. 11).

353. Saunders (2003, p. 26).

354. Winston et al. (1990, p. 7).

355. Rothenberg (1994, p. 214).

356. Moore (1983, p. 37).

357. Winston et al. (1990, p. 4).

358. Rothenberg (1994, pp. 216–17).

359. US Senate (1980, p. 3).

360. Carole Shifrin, “Carter, Kennedy Send Trucking Bill to Congress,” Washington Post,

June 22, 1979.

361. Rothenberg (1994, pp. 238–39).

362. Moore (1991, p. 52).

363. Moore (1983, p. 37).

364. Rose (1985, 1987).

365. Winston et al. (1990, p. 41).

366. Moore (1991, p. 53).

367. Stone (1991, p. 156).

368. Levinson (2016, p. 206).

369. ICC Docket No. 21723, In the Matter of Container Service, 173 I.C.C. 377, April 14, 1931,

at 384.

370. Saunders (2003, p. 206).

371. Levinson (2016).

372. Pettus et al. (2017, p. 389).

373. Bernhofen, El-Sahli, and Kneller (2016).

374. Borenstein and Rose (2014); Vietor (1994, pp. 23–90). 375. Breyer (1982, p. 433); Vietor (1994, pp. 51–57).

658 Notes to Chapter 9

376. Keeler (1972).

377. Vietor (1994, p. 81).

378. With the coming of the Internet in the twenty-first century, consumers found it increas-

ingly easy to game the yield-management system. The airlines were forced to turn to an older style of price discrimination—charging separate fees for services like meals and checked baggage.

379. Borenstein and Rose (2014, p. 82).

380. Gooslbee and Syverson (2008).

381. According to Airlines for America, the industry trade group. The figure today is

87 percent. See “Air Travelers in America: Annual Survey,” June 23, 2022, https://www.airlines .org/dataset/air-travelers-in-america-annual-survey/.

382. Morrison and Winston (1986, p. 51). 383. Borenstein and Rose (2014, p. 77). 384. Hummels (2007, p.152).

385. Carron (1981).

386. Lovelock (2004). This Frederick W. Smith is no relation to the Frederic Smith who ran the Olds Motor Works early in the century.

387. Saunders (2003, p. 129).

388. In fact, Smith claimed not to remember what grade he got (Dumaine 2002). The point of the paper was less the idea of a hub-and-spoke system than an argument that the high-tech businesses of the future would need an extremely fast and reliable system of parts delivery.

389. Gompers (1995, p. 1465).

390. Among the most important services FedEx offered was the overnight delivery of letters and documents. This brought the company into contact with another manifestation of federal regulation, the Private Express Statutes. Were these overnight missives first class mail, which only the US Postal Service was permitted to deliver? Fearing legislation after FedEx and other courier companies instigated hearings in the House of Representatives in 1979, the USPS pro- mulgated a regulation (39 CFR Sec. 320.6C) that permitted the shipment of “time sensitive” documents if they were priced at more than twice the applicable first-class rate.

391. Bailey (2010, p. 193).

392. Carron (1981).

393. Hummels (2007, p. 152).

394. Besen and Crandall (1981); Hazlett (2017, pp. 102–18).

395. The broadcasters also complained that the CATV operators were violating copyright

by rebroadcasting their signals. The Supreme Court twice ruled against the broadcasters, but in 1976 Congress passed a bill mandating compulsory licensing at a low fee (Besen and Crandall 1981, p. 103).

396. Wu (2010, p. 181).

397. Hazlett (2017, pp. 106–10).

398. Home Box Office v. FCC, 567 F.2d 9 (1977). 399. Wu (2010, pp. 184–85).

400. Horwitz (1989, p. 256).

401. Wu (2010, pp. 101–14, 190–91).

402. Temin with Galambos (1987, pp. 41–54).

Notes to Chapter 9 659

403. Vietor (1994, pp. 194–202).

404. Temin with Galambos (1987).

405. Temin with Galambos (1987, pp. 200–64).

406. “Baxter on AT&T,” New York Times, April 12, 1981, Section 3, p. 18.

407. Temin with Galambos (1987, p. 116).

408. Temin with Galambos (1987, p. 282).

409. United States v. American Tel. and Tel. Co., 552 F. Supp. 131 (D.D.C. 1983).

410. Crandall (1988).

411. Gertner (2012, pp. 280–83).

412. Drucker (1984, p. 18).

413. Gertner (2012, pp. 285–97); Hazlett (2017, pp. 173–91).

414. Hazlett (2017, pp. 192–211).

415. McAfee, McMillan, and Wilkie (2010, p. 169).

416. Coase (1959).

417. Coase (1960).

418. Herzel (1998).

419. McAfee, McMillan, and Wilkie (2010).

420. Meehan and Larner (1989, pp. 182–83).

421. Kaysen and Turner (1959).

422. Shepherd (1996, p. 948).

423. Meehan and Larner (1989, p. 186).

424. Williamson (1983, p. 292). This was based on Turner’s remark that he approached a

certain kind of vertical contracting “not hospitably in the common law tradition, but inhospi- tably in the tradition of antitrust law.”

425. Simons (1934).

426. Stigler (1988, p. 97).

427. Stigler (1952).

428. Dewey (1979a).

429. Director and Levi (1956). Although they had absorbed the Director and Levi point

that tying is really often about price discrimination, Kaysen and Turner still maintained that “tying tends to spread market power into markets where it would not otherwise exist” (Kaysen and Turner 1959, p. 157). They called for it to be illegal per se. Although they explicitly consider only the simple punched-card case, Kaysen and Turner do mention (but do not explore) possible dynamic effects. Whether tying might have negative effects in much more complex dynamic settings is a question to which we return.

430. Posner (1979, p. 928).

431. Coase (1972, p. 67).

432. Boettke and Candela (2014), citing Becker (1976, p. 5).

433. McCloskey (1997).

434. Demsetz (1982).

435. Coase (1937).

436. Hovenkamp (2010, p. 628).

437. Areeda and Turner (1978). The first three volumes appeared in 1978. Subsequent vol-

umes appeared in 1980 and, with Areeda as sole author, in 1986.

660 Notes to Chapter 9

438. Hovenkamp (2005, p. 37).

439. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977).

440. Preston (1989).

441. Eisner and Meier (1990).

442. White (2000).

443. Fisher, McGowan, and Greenwood (1983, p. 344).

444. Barnaby J. Feder, “End of Action on I.B.M. Follows Erosion of its Dominant Position,”

New York Times, January 9, 1982, p. 1.

445. Schumpeter (1950, p. 127).

446. US Bureau of the Census, Statistical Abstract of the United States, 1960 and 1980.

447. Roszak (1969, p. 34).

448. Shlaes (2019, pp. 36–40).

449. Roszak (1969, p. 13).

450. Turner (2006).

451. Roszak (1986, p. 33, emphasis original).

452. Roszak (1986, p. 15).

453. Lécuyer (2006).

454. Leslie (1993); Wright (2020).

455. Langlois and Robertson (1995, p. 114).

456. Marshall ([1920] 1961, IV.x.3, p. 271).

457. Lécuyer (2006, p. 5). This does not mean, however, that it was somehow inefficient for

the Route 128 region to have organized around integrated systems firms, which possessed con- siderable advantage in the era of the minicomputer, the region’s most important high-technology product (Robertson 1995).

458. Klepper (2016).

459. In both cases, these transaction costs are often what I like to call dynamic transaction costs (Langlois 1992b).

460. Klepper (2016, pp. 112–28).

461. Lécuyer (2006, pp. 200–207).

462. Nicholas (2019, pp. 195–96).

463. Lécuyer (2006, pp. 259–60).

464. Sporck (2001, p. 139).

465. Lécuyer (2006, p. 257).

466. Klepper (2016, p. 123).

467. Noyce and Hoff (1981).

468. Hitzlik (1999, p. xxi).

469. Freiberger and Swaine (2000, pp. 36–53). This account of the early history of the mi-

crocomputer industry generally follows Langlois (1992a).

470. Indeed, the 100-wire bus of the Altair, the S-100 bus, would eventually be enshrined as the

IEEE 696 bus by the Institute of Electrical and Electronics Engineers (Noyce and Hoff 1981, p. 16). 471. Levering, Katz, and Moskowitz (1984, p. 351).

472. Langlois (1992a); Langlois and Robertson (1992).

473. Freiberger and Swaine (2000, pp. 111–24).

474. Isaacson (2014, p. 266).

Notes to Chapter 9 661

475. Moritz (1984, p. 191).

476. L. R. Shannon, “A Decade’s Progress,” New York Times, September 8, 1987, p. C7. The TRS-80 was built around the Zilog Z80, essentially a clone of the Intel 8080. Zilog was a spinoff from Intel, founded by Federico Fagin, a onetime Fairchild employee who had headed develop- ment of the 4004 and the 8080.

477. The machine was designed by former Motorola employee Chuck Peddle, using the MOS Technology 6502 microprocessor, a clone of a Motorola chip, which Peddle had also designed. Commodore had absorbed MOS Technology, Peddle’s spinoff from Motorola.

478. Isaacson (2011, p. 57).

479. Moritz (1984, p. 29).

480. Freiberger and Swaine (2000, pp. 261–70); Moritz (1984).

481. Moritz (1984, p. 126).

482. Data from Apple Computer, cited in “John Sculley at Apple Computer (B),” Harvard

Business School Case no. 9-486-002, May 1987, p. 26. Baldwin (2019, p. 19) cites IDC data that put Apple’s 1983 revenues at $1.1 billion.

483. Isaacson (2011, p. 71).

484. Moritz (1984, pp. 200–201).

485. Scott Mace, “Assembling Micros: They Will Sell No Apple before Its Time,” Infoworld,

March 8, 1982, p. 16.

486. Levering, Katz, and Moskowitz (1984, p. 132).

487. Bresnahan, Greenstein, and Henderson (2012, p. 218).

488. Chposky and Leonsis (1988, p. 9).

489. “How the PC Project Changed the Way IBM Thinks,” Business Week, October 3, 1983, p. 86. 490. Baldwin (2019, p. 2).

491. Chposky and Leonsis (1988, pp. 43–53); Freiberger and Swaine (2000, pp. 330–37). 492. In the end, three operating systems were available for the IBM PC, including a 16-bit

version of CP/M; but PC-DOS was the only operating system initially available, and IBM priced it at only $60, one-third the price of the cheapest alternative. Scott Mace, “IBM Releases CP/M- 86 for the Personal Computer after Delay,” InfoWorld, April 26, 1982, p. 8.

493. Gates (1995, p. 48).

494. Chposky and Leonsis (1988, pp. 88, 68).

495. “Personal Computers: And the Winner Is IBM,” Business Week, October 3, 1983, p. 78. 496. Chposky and Leonsis (1988, p. 24).

497. IDC, cited in Baldwin (2019, p. 19).

498. Langlois and Robertson (1992).

499. Baldwin (2018, p. 3).

500. Gerstner (2002, pp. 110–20).

501. Baldwin (2019, p. 20).

502. US Bureau of the Census, Current Population Survey, various years. Today far more

than 90 percent own a computer, although that term has been defined—as it should be—to include smartphones and tablets.

503. “Computer Use at Work in 2003,” Bureau of Labor Statistics, US Department of Labor, The Economics Daily, https://www.bls.gov/opub/ted/2005/aug/wk1/art03.htm (accessed June 8, 2021).

662 Notes to Chapter 9

504. Computer and Business Equipment Manufacturers Association, 1992 Information Tech- nology Industry Data Book, p. 94.

505. Matt Hamblen, “Update: PC Market Declines in 2001; Slow Turnaround Expected,” Computerworld, January 18, 2002.

506. Merchant semiconductor firms are those that sell into the market rather than producing for their own consumption. In fact, some 30 percent of American production in 1986 was captive, most of that internal production by IBM, by far the largest producer of semiconductors in the world at the time. If captive production is counted, US production was some 30 percent higher than Japanese production in 1986 (Langlois, Pugel, Haklisch, Nelson, and Egelhoff 1988, p. 27).

507. Borrus (1988); Ferguson (1988); Prestowitz (1988).

508. MIT Commission (1989, p. 20).

509. Semiconductor Industry Association 2021 Factbook, April 21, 2022, https://www

.semiconductors.org/resources/factbook/, p. 3.

510. Lécuyer (2006, p. 282).

511. Burgelman (1994, p. 33).

512. Irwin (1996, p. 28). Both the US and Japan had tariffs on imported semiconductors.

These were reduced in 1978 and ultimately eliminated in 1985. 513. Moore and Davis (2004, p. 20).

514. Burgelman (1994, pp. 32–34).

515. Pillai (2020).

516. Borrus (1988, p. 144).

517. Prestowitz (1988, pp. 146, 135–36).

518. Dataquest, cited in Methé (1991, p. 69).

519. Irwin (1996, p. 15); Irwin and Klenow (1994).

520. Irwin (1996, p. 42).

521. Japan would indeed be successful in developing a computer industry to rival IBM—just

in time for the “competitive crash” of the mainframe and minicomputer industries that, as we will soon see, would throw IBM itself into crisis.

522. Callon (1995, p. 37).

523. Fransman (1990, p. 80).

524. Sigurdson (1986, p. 53).

525. Callon (1995, p. 119); Sigurdson (1986, p. 83).

526. Prestowitz (1988, pp. 148–61).

527. Flamm (1996, pp. 159–226); Irwin (1996).

528. Flamm (1996, p. 240).

529. Irwin (1996, pp. 38–39). DOD was generally liberal on trade issues because its client

defense contractors tended to be export oriented.

530. Grindley, Mowery, and Silverman (1994).

531. In 1984, Congress had passed the National Cooperative Research Act, which limited

antitrust liability for research joint ventures. 532. Langlois (2006).

533. Irwin and Klenow (1996).

534. Langlois and Steinmueller (1999). 535. O’Mara (2019, p. 106).

Notes to Chapter 9 663

536. Macher, Mowery, and Hodges (1998); Lécuyer (2019).

537. Gordon Moore, “Cramming more Components onto Integrated Circuits,” Electronics, April 19, 1965. Bloom et al. (2020, p. 1116) calculate that the doubling time was actually two years—and was remarkably constant over some fifty years, representing an implied exponential rate of growth of 35 percent per year.

538. Lécuyer (2020).

539. Macher, Mowery, and Hodges (1998, p. 127).

540. Flamm (1996, p. 435). In early 1985, it took 260 yen to buy a dollar. In 1988, it took half that. 541. Kuriko Miyake, “Japanese Chip Makers Suspect Dumping by Korean Firms,” Computer-

world, October 24, 2001.

542. Langlois and Steinmueller (1999).

543. Burgelman (1994).

544. Intel Corporation Annual Report 1986, p. 2

545. Lécuyer (2019, p. 370).

546. Isaacson (2011, pp. 94–101); Hiltzik (1999, pp. 329–45).

547. Isaacson (2011, pp. 164–65).

548. Moritz (1984, p. 130).

549. John Markoff, “Apple Computers Used to Be Built in the U.S. It Was a Mess,” New York

Times, December 15, 2018.

550. I most recently heard this claim voiced by a distinguished Ivy League historian at an

international conference in 2019.

551. Andrew Pollock, “In Unusual Step, I.B.M. Buys Stake in Big Supplier of Parts,” New York

Times, December 23, 1982, p. A1. In 1982, Intel was still supplying chips for IBM’s larger comput- ers not just the PC.

552. Langlois (1997).

553. Williamson (1985, chapter 6).

554. Bresnahan, Greenstein, and Henderson (2012).

555. Carroll (1993, p. 109).

556. Windows 95, the first version of the software to offer a genuine challenge to the Mac,

was not merely a GUI on top of MS-DOS, but it still relied heavily on MS-DOS code. In the early 1990s, after the personal computer had begun destroying the minicomputer industry, Microsoft hired engineers from DEC (and from the failing IBM OS/2 project) to rewrite Windows from scratch and sever its connection to MS-DOS (Zachary 1994). The result was Windows NT, which became the basis of twenty-first-century versions of Windows. Microsoft spent $150 million on the project but was careful to give the design team free rein without corporate interference.

557. Nicholas (2019, pp. 127–31); Rifkin and Harrar (1988).

558. Baldwin and Clark (1997); Garud and Kumaraswamy (1993).

559. Bresnahan and Greenstein (1999).

560. Gerstner (2002).

561. Abbate (1999); Hafner and Lyon (1996). Over the years the agency, which I have previ-

ously referred to as DARPA, would oscillate between the acronyms ARPA and DARPA. At its founding and again now it is ARPA.

562. Abate (1999, pp. 108–9).

664 Notes to Chapter 9

563. Abate (1999, p. 186).

564. Hiltzik (1999, pp. 184–93).

565. Fishback (2007, pp. 519–20).

566. Greenstein (2015, pp. 167–68); Russell, Pelkey, and Robbins (2022).

567. Yet the victory of the TCP/IP standard does not reflect the unerring prescience and

planning of ARPA. The Defense Department simultaneously backed a competing standard, and TCP/IP emerged victorious in a protracted standards battle that involved many private as well as public players (Russell, Pelkey, and Robbins 2022).

568. Greenstein (2015, pp. 84–86).

569. Crandall (2005). At the same time, however, the Act contained pages of detailed re- quirements for how those interconnections were to be made and paid for, throwing telecom- munications into unnecessary confusion for decades.

570. Greenstein (2015, p. 49).

571. McCullough (2018, pp. 52–68).

572. Abbate (1999, pp. 214–16).

573. Vannevar Bush, “As We May Think,” The Atlantic, July 1945.

574. Abbate (1999, pp. 216–18); McCullough (2018, pp. 7–17).

575. McCullough (2018, pp. 17–37).

576. Molly Baker, “Technology Investors Fall Head over Heels for their New Love,” Wall

Street Journal, August 10, 1995.

577. Haigh (2008a, pp. 188–89).

578. Haigh (2008b).

579. McCullough (2018, pp. 108–19).

580. McCullough (2018, pp. 94–107).

581. Brynjolfsson, Hu, and Smith (2003).

582. Fields (2004, pp. 178–219).

583. Fields (2004, p. 187).

584. Baldwin and Clark (2006).

585. Fields (2004, p. 166).

586. Fine (1998).

587. Basker (2007). In 2012, the four largest big-box firms sold more than 50 percent more

than all online sales (Hortaçsu and Syverson 2015, p. 90). 588. Hausman and Leibtag (2007).

589. Blinder and Yellen (2001).

590. Kelly et al. (2018).

591. Robert Solow, “We’d Better Watch Out,” New York Times Book Review, July 12, 1987, p. 36. 592. Stiroh (2002).

593. David (1990).

594. Bresnahan and Greenstein (1996).

595. Gates (1995, p. 95).

596. Cusumano and Yoffie (1998, pp. 108–11); McCullough (2018, pp. 38–51). 597. Cusumano and Yoffie (1998, pp. 98–99).

598. Cusumano and Yoffie (1998, p. 146).

599. Cusumano and Yoffie (1998, p. 40).

Notes to Chapter 9 665

600. Lopatka and Page (1999, pp. 172–76). During this period, the government also chal- lenged, and ultimately prevented, Microsoft’s acquisition of Intuit, the maker of personal- finance software; and it initially questioned the bundling of MSN with Windows, though MSN’s lack of success made that issue moot.

601. United States v. Microsoft Corporation, Civil Action No. 98–1232 (Antitrust), complaint filed May 18, 1998, US Department of Justice, https://www.justice.gov/atr/complaint-us-v -microsoft-corp (accessed June 26, 2021). The suit was joined by the governments of 20 states and the District of Columbia. I will refer to the plaintiffs as “the government.”

602. Evans (2002, p. 7).

603. Melamed and Rubinfeld (2007, pp. 291–92).

604. For a much more careful discussion of these issues in the antitrust context, see Langlois

(2001).

605. Note that like all real barriers to entry, the applications barrier is the end traceable to a

property right: Microsoft owned the copyright on the operating system’s source code (a de jure property right) and the company also refrained from making the source code publicly available (a de facto property right).

606. The meaning of a “competitive price” in software is far from clear. Because software is a high-fixed-cost industry, marginal-cost pricing would not cover the fixed costs of software development. A firm that did not price at least at average cost would not stay in business long, all other things equal. By one calculation, Microsoft charged far less for Windows than a profit- making monopolist should have in theory, suggesting that the firm did not consider the applications barrier to offer all that much protection (Reddy, Evans and Nichols 2002).

607. The analogy is far from perfect and may be misleading. If a firm tries to drive a rival out of business by lowering its price below cost, that lower price benefits consumers in the short run (and often in the long run as well if, as is often the case, the would-be predator cannot keep new competi- tors from coming back into the market once it raises the price back up). In this case, the government argued, Microsoft’s behavior harmed Netscape without conferring any benefits on consumers. Notice also that in a normal predatory-pricing case, the would-be predator is trying to drive a rival out of the relevant market. Yet in charging Microsoft with monopoly, the government examined only Microsoft’s share of the existing operating-system market and did not consider browsers and other potential non–operating system competitors as part of the relevant market.

608. Melamed and Rubinfeld (2007). For a description of the arguments of the govern- ment’s testifying economists, see Bresnahan (2002); and for those of Microsoft’s economists, see Evans, Nichols, and Schmalensee (2001).

609. William Saletan, “Microsoft Plays Dead,” Slate, January 28, 1999.

610. United States of America, Appellee v. Microsoft Corporation, Appellant, 253 F.3d 34 (D.C. Cir. 2001). Importantly, the appeals court left standing the finding that Microsoft had a mono- poly in the market for Intel-compatible personal computers—on the grounds that Microsoft had never offered rebuttals to the government’s claims. This opened the door to a welter of private antitrust suits against Microsoft. (Disclaimer: I was a testifying expert for the plaintiff in one of these private cases, Bristol Technology, Inc. v. Microsoft Corp., 127 F. Supp. 2d 85 (D. Conn. 2000).) Opening a playbook it would use repeatedly in the twenty-first century, the Eu- ropean Union also sued when a European firm that made audio-player software complained that Microsoft had included an audio player in Windows.

666 Notes to Epilogue

611. The appeals court also removed Jackson from the case because he had “engaged in im- permissible ex parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality.”

612. Stipulation, Civil Action No. 98-1232 (CKK), November 6, 2001, https://www.justice .gov/atr/case-document/stipulation-65 (accessed June 27, 2021).

613. “AOL Says Deal to Acquire Netscape Has Been Completed,” Wall Street Journal, March 18, 1999. AOL was interested in Netscape’s server-software business, not in the browser.

614. Hovenkamp (2005, p. 298).

Epilogue: Then and Now

1. Although applied to the conspicuously rich at the end of the nineteenth century, the term actually comes from the title of an early novel by Mark Twain and Charles Dudley Warner (1873) that has nothing to do with that era. The novel takes place in the years immediately after the Civil War, and it deals with low-level greed and political corruption rather than anything remotely resembling industrial capitalism. The title is almost certainly meant ironically.

2. Nicholas (2019, p. 288). Thirty-two percent by value of these investments were in Silicon Valley.

3. Ofek and Richardson (2003).

4. NASDAQ OMX Group, NASDAQ Composite Index, FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/NASDAQCOM (accessed August 26, 2021).

5. Samuel H. Williamson, “S&P Index, Yield and Accumulated Index, 1871 to Present,” Mea- suring Worth, https://www.measuringworth.com/datasets/sap/ (accessed August 9, 2022).

6. Mallaby (2016, pp. 580–81).

7. Nanda and Rhodes-Kropf (2017).

8. Greenspan and Wooldridge (2018, p. 382).

9. Greenspan (2008, p. 228).

10. US Bureau of Labor Statistics, Unemployment Rate, FRED, Federal Reserve Bank of

St. Louis, https://fred.stlouisfed.org/series/UNRATE (accessed August 26, 2021).

11. World Bank, Inflation, consumer prices for the United States, FRED, Federal Reserve BankofSt.Louis,https://fred.stlouisfed.org/series/FPCPITOTLZGUSA(accessedAugust27,

2021).

Williamson (2006, p. 232).

US Department of Homeland Security, 2019 Yearbook of Immigration Statistics, Table 1.

Autor, Dorn, and Hanson (2016).

Pan, Xu, and Zhao (2020).

Selgin, Beckworth, and Bahadir (2015).

Mallaby (2016, pp. 595–96).

Greenspan (2008, pp. 228–29).

Bernanke, Gertler, and Gilchrist (1996).

20. Rajan (2010, p. 109).

21. Drechsler, Savov, and Schnabl (2019). 22. Lewis (2010).

Notes to Epilogue 667

23. Rajan (2010, pp. 132, 160).

24. Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rate, FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/FEDFUNDS (ac- cessed September 2, 2021).

25. Dang, Gorton, and Holmström (2020).

26. Gorton (2010).

27. Pew Research Center, Internet/Broadband Fact Sheet, https://www.pewresearch.org

/internet/fact-sheet/internet-broadband/ (accessed September 4, 2021).

28. US Federal Communications Commission, Industry Analysis and Technology Division, Wireline Competition Bureau, “Internet Access Services,” various years, https://www.fcc.gov

/internet-access-services-reports (accessed September 4, 2021).

29. Pew Research Center, Mobile Fact Sheet, https://www.pewresearch.org/internet/fact

-sheet/mobile/ (accessed September 4, 2021).

30. Kushida, Murray, and Zysman (2015).

31. Brynjolfsson and McAfee (2014, p. 50).

32. Kushida, Murray, and Zysman (2015, p. 16).

33. Michael DeGusta, “Are Smart Phones Spreading Faster than Any Technology in Human

History?” MIT Technology Review, May 9, 2012. The speed of the smartphone revolution also depended on the widespread availability of relatively fast 3G and 4G cellular technology (Evans, Chang and Joyce 2019).

34. In the view of the technology columnist of the New York Times, the smartphone “was the only thing that mattered in tech in the 2010s.” As Jobs predicted, PCs would become like trucks—heavy-duty machines used only for a shrinking set of tasks. Farhad Manjoo, “Steve Jobs Was Right: Smartphones and Tablets Killed the P.C.,” New York Times, November 13, 2019.

35. McCullough (2018, pp. 196–207).

36. Isaacson (2011, pp. 332–57).

37. Isaacson (2011, p. 361).

38. McCullough (2018, pp. 208–16).

39. Isaacson (2011, pp. 465–74); McCullough (2018, pp. 304–20). 40. Evans and Schmalensee (2016, p. 189).

41. Bresnahan, Greenstein, and Henderson (2012).

42. Greenstein (2015, pp. 371–91); McCullough (2018, pp. 227–37).

43. Greenstein (2015, p. 583). As in print newspapers and magazines—but unlike on radio

and television, where ads interrupt and supplant content—ads placed on the edges of search pages can be easily skipped, and thus impose at worst negligible cognitive costs on the reader even if the reader doesn’t value the ads (Anderson and Gabzewicz 2006, p. 586).

44. McCullough (2018, pp. 234–35).

45. In the pandemic year of 2020, some 30 million Chromebooks shipped, roughly 10 percent of the PC market. Maria Armental, “PC Sales Notch Strongest Growth in a Decade,” Wall Street Journal, January 11, 2021.

46. Baldwin (2021); Pon, Seppälä, and Kenney (2014).

47. Android is open source, so firms can create their own “forked” versions. But those that do so are banished from the world of Google Play Android. Because of government restrictions on the use of Google apps in China, major noncompliant forks have emerged there. Amazon

668 Notes to Epilogue

has also created a fork of Android for its Kindle e-readers and tablets. Google is increasingly moving functionality out of the standard OS and into the apps themselves, over which it has greater control (Baldwin 2021).

48. Nick Wingfield, “A $7 Billion Charge at Microsoft Leads to Its Largest Loss Ever,” New York Times, July 21, 2015.

49. Baldwin (2021, p. 4).

50. Langlois and Garzarelli (2008).

51. McCullough (2018, pp. 247–58).

52. Evans (2012, pp. 1226–31); McCullough (2018, pp. 258–64).

53. Akerlof (1970).

54. Milgrom, North, and Weingast (1990).

55. Evans, Hagiu, and Schmalensee (2008, pp. 124–25). Google Play also vets app developers.

But because system openness is part of Android’s competitive model, it reportedly vets develop- ers less rigorously than does Apple.

56. Evans and Schmalensee (2016, pp. 146–48); McCullough (2018, pp. 265–93). 57. Evans (2012, p. 1230).

58. McCullough (2018, pp. 217–21).

59. Lehr (2019).

60. Waldfogel (2017).

61. Joshua P. Friedlander, “Year-end 2020 RIAA Revenue Statistics,” Recording Industry Association of America, https://www.riaa.com/wp-content/uploads/2021/02/2020-Year-End -Music-Industry-Revenue-Report.pdf (accessed September 18, 2021).

62. This account of Airbnb and Uber follows Stone (2017).

63. In San Francisco, medallions are not tradeable, causing long queues for medallions akin to those for rent-controlled apartments (Stone 2017, p. 41).

64. Tullock (1975). It is also an illustration of Harold Demsetz’s point that barriers to entry are always property rights never market structures (Demsetz 1982). In this case the market is perfectly competitive—it has many small powerless participants—yet there is an inefficiently low level of industry output resulting from what is clearly a barrier to entry.

65. Holcombe (2019).

66. Brian M. Rosenthal, “‘They Were Conned’: How Reckless Loans Devastated a Genera- tion of Taxi Drivers,” New York Times, May 19, 2019. See also Winnie Hu, “Taxi Medallions, Once a Safe Investment, Now Drag Owners into Debt,” New York Times, September 10, 2017.

67. Josh Barro, “Under Pressure from Uber, Taxi Medallion Prices Are Plummeting,” New York Times, November 27, 2014.

68. Downs (1957). Schumpeter (1950, p. 261) recognized this even earlier. The voter, he ar- gued, is a “member of an unworkable committee, the committee of the whole nation, and this is why he expends less disciplined effort on mastering a political problem than he expends on a game of bridge.”

69. Stone (2017, pp. 311–15).

70. Cohen et al. (2016).

71. Preetika Rana, “Uber Says First Adjusted Profit Possible This Quarter,” Wall Street Jour-

nal, September 21, 2021. In March 2022, Uber reached an agreement to list all New York City taxis on its app, and both Uber and Lyft are moving to include taxis in other cities as well.

Notes to Epilogue 669

Preetika Rana, “Uber Reaches Deal to List All New York City Taxis on Its App,” Wall Street Journal, March 24, 2022.

72. Bronnenberg and Huang (2021). 73. Goolsbee and Klenow (2018). 74. Brynjolfsson et al. (2019).

75. Nordhaus (2004).

76. In 2015, Google created an M-form corporation called Alphabet to separate its lucrative existing businesses from its more speculative bets. In 2021, Facebook made a similar move, creat- ing Meta Platforms, Inc., which separated its existing businesses from a project to create a new platform based around virtual reality. Laura Forman and Dan Gallagher, “Facebook’s Four New Letters Won’t Spell Alphabet,” Wall Street Journal, October 29, 2021. I will continue to refer to these firms as Google and Facebook.

77. If the Saudi state oil company is excluded, these were also the largest in the world. The market caps subsequently went higher, inflated both by the real shift toward Internet businesses during the COVID-19 pandemic and by the extremely low interest rates the Fed has (once again) marshalled to fight the economic effects of the pandemic (Kroen, Liu, Mian and Sufi 2021).

78. Pinkovskiy and Sala-i-Martin (2009).

79. Lahoti, Jayadev, and Reddy (2015, Figure 2).

80. Milanovic (2016, Figure 1.1).

81. Piketty and Saez (2014). Today, however, the incomes of the richest Americans come far

more from salaries and business income, and far less from capital income, than in the original Gilded Age (Atkinson, Piketty and Saez 2011).

82. Garfinkel and Smeeding (2015).

83. Elwell, Corinth, and Burkhauser (2021, Table 4.1).

84. In announcing the War on Poverty, Lyndon Johnson asserted in 1964 that 20 percent of

the American population was in poverty. By the absolute standard that implies, only 1.6 percent of Americans are now in poverty (Burkhauser, Corinth, Elwell, and Larrimore 2021).

85. Corinth, Meyer and Wu (2022).

86. Sacerdote (2017).

87. Case and Deaton (2020). It is now understood that the spike in opioid-related deaths

resulted not from increased despair but from the development of Oxycontin, originally—and wrongly—believed to be impervious to abuse (Cutler and Glaeser 2021). In a perfect storm of public-private dysfunction, the drug was hyperactively marketed, wildly over prescribed, and often subsidized by health plans. When control began to be imposed on Oxycontin, many now- addicted users turned to the illegal market, mainly for heroin. In this respect, the opioid epidemic resembles other overdose spikes touched off by technological change in drugs of abuse, including the crack-cocaine epidemic.

88. US Bureau of Labor Statistics, All Employees, Manufacturing, FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/MANEMP (accessed October 2, 2021).

89. Vollrath (2020).

90. Autor et al. (2013).

91. Autor, Dorn, and Hanson (2021).

92. Acemoglu et al. (2016, pp. S144-S145). Even while trade with China was decreasing

manufacturing jobs in the US, it was actually increasing the total number of jobs, many of them

670 Notes to Epilogue

in services, both preformed at home and exported (Feenstra and Sasahara 2018). Between the end of the financial crisis and the beginning of the COVID-19 pandemic, the negative effects of Chinese trade on manufacturing jobs in the US disappeared, and manufacturing jobs began to increase steadily ( Jakubik and Stolzenburg 2020).

93. Autor, Levy, and Murnane (2003); Autor (2013). Although abandoned until recently by labor economists, the task approach remained central to economic historians of technology. Ames and Rosenberg (1965) is an underappreciated gem that repays attention even today.

94. Langlois (2003a).

95. Goldin and Katz (2009).

96. Acemoglu and Autor (2012, p. 440).

97. This is implied in the very idea of comparative advantage. There is evidence that even

with advances in artificial intelligence, humans and machines will remain complementary. In activities like medical diagnosis and even chess, humans and computers working together outperform either humans by themselves or computers by themselves. (Agrawal, Gans, and Goldfarb 2018, p. 65; Brynjolfsson and McAfee 2014, pp. 189–90). The complementarity, and the advantage, appear to come from the division of labor within the team: machines can do the parts that require high-speed rule following and humans can do the parts that require judgment.

98. Acemoglu and Autor (2012); Autor (2013, p. 189). 99. Piketty (2020, pp. 807–18).

100. Abramowitz (2018).

101. Autor et al. (2020).

102. Mutz (2018).

103. Fukuyama (2018, p. 89).

104. Tabellini (2020).

105. Bisceglia (2021). Just as online music downloads eroded the concept of the “album.” 106. Derek Thompson, “The Print Apocalypse and How to Survive It,” The Atlantic, Novem-

ber 3, 2016.

107. Pew Research Center, Newspapers Fact Sheet, June 29, 2021, https://www.pewresearch

.org/journalism/fact-sheet/newspapers/.

108. Ben Smith, “Why the Success of The New York Times May Be Bad News for Journalism,”

New York Times, March 1, 2020.

109. As economic theory would predict (Anderson and Gabzewicz 2006, p. 596).

110. One widely cited source defines populism as “a thin-centered ideology that considers

society to be ultimately separated into two homogenous and antagonistic camps, ‘the pure people’ versus ‘the corrupt elite,’ and which argues that politics should be an expression of the volunté générale (general will) of the people” (Mudde and Rovira Kaltwasser 2017, p. 6).

111. Hawley (2021); Klobuchar (2021).

112. It is of course characteristic of populism to lionize a powerful figure who fights uncon- strained for the true interests of the people and rough-rides over the vested interests (and over political norms and standards). The two senators do disagree about Woodrow Wilson, however. Wilson gets Klobuchar’s (somewhat tepid) endorsement because of his Brandeisian influences, whereas Hawley sees Wilson as the progenitor of rule by a professionalized elite of experts. As we saw, they are both right.

Notes to Epilogue 671

113. Klobuchar (2021, p. 175).

114. Hawley (2021, p. 5).

115. The index of Hawley’s book contains no entry for Microsoft. Unsurprisingly, he substi-

tutes Twitter as a target.

116. Epic Games, maker of a popular game that runs as an iPhone app, sued because Apple

would not allow it to use its own payment system for in-app purchases (and thus bypass the cut that Apple takes from such payments). The court found largely in Apple’s favor, but both firms are appealing. (Tim Higgins, “Apple Filing Notice of Appeal in Epic Antitrust Case, Looks to Stay In-App Injunction,” Wall Street Journal, October 8, 2021.) Although large firms like Epic would earn rents by using their own payment systems, small developers actually benefit from the one-stop shopping of the Apple payment system and would arguably be harmed by a policy that required Apple to permit the use of other payment systems (Kim 2021). Both Apple and Google have cut in half the fees they charge to small developers, who account for the vast major- ity of all apps in their app stores. (Tripp Mickle and Sarah E. Needleman, “Google to Cut Com- mission It Charges App Developers,” Wall Street Journal, March 16, 2021.)

117. This is much to the chagrin of Facebook, whose advertising relies importantly on data from tracking the Facebook iPhone app. The beneficiary of the new policy has been Google, whose ad revenues depend less on app tracking. Patience Haggin, “Why Apple’s Privacy Changes Hurt Snap and Facebook but Benefited Google,” Wall Street Journal, October 27, 2021.

118. Sam Schechner, “EU Charges Apple with App Store Antitrust Violations in Spotify Case,” Wall Street Journal, April 30, 2021. The Commission also brought self-preferencing charges against Google when European shopping sites complained. Sam Schechner, “Google Loses Appeal of $2.8 Billion EU Shopping-Ads Fine,” Wall Street Journal, November 10, 2021.

119. Cecilia Kang, David McCabe and Daisuke Wakabayashi, “U.S. Accuses Google of Ille- gally Protecting Monopoly,” New York Times, October 20, 2020.

120. Goldman (2006, pp. 195–96).

121. Jack Nicas, “Google to Bar Fake-News Websites from Using its Ad-Selling Software,” Wall Street Journal, November 14, 2016.

122. Section 230 of the Communications Decency Act, Electronic Frontier Foundation, https://www.eff.org/issues/cda230 (accessed October 30, 2021).

123. Nicholas Carr, “How to Fix Social Media,” The New Atlantis, Fall 2021, https://www .thenewatlantis.com/publications/how-to-fix-social-media.

124. Volokh (2021). Nadine Strossen (2018), a former president of the American Civil Liber- ties Union, has argued that Facebook and other social networks should adopt the same rules the US federal government must follow under the First Amendment, even though, like private universities, social networks are voluntary organizations not directly subject the Amendment. It is far from clear whether a private network could implement such a policy without the en- forcement mechanisms of a state.

125. Keach Hagey and Jeff Horwitz, “Facebook Tried to Make Its Platform a Healthier Place. It Got Angrier Instead,” Wall Street Journal, September 15, 2021.

126. Sam Schechner, Jeff Horwitz, and Emily Glazer, “How Facebook Hobbled Mark Zuck- erberg’s Bid to Get America Vaccinated,” Wall Street Journal, September 17, 2021.

127. Evans and Schmalensee (2016, p. 110).

672 Notes to Epilogue

128. Mark Zuckerberg, “The Internet Needs New Rules. Let’s Start in these Four Areas,” Washington Post, March 30, 2019.

129. Mandel (2017a).

130. Mandel (2017b).

131. Sebastian Herrera, “Amazon Builds Out Network to Speed Delivery, Handle Holiday

Crunch,” Wall Street Journal, November 29, 2021.

132. Mandel (2017b).

133. Khan (2017). Among the other sins: whereas most critics of the post-1970s American

corporation see a dangerous short-termism and inclination to please shareholders at the ex- pense of investment, Khan faults Amazon for suspiciously doing the opposite—investing in capacity at the expense of short-term profits. This recalls the complaint of the Dodge brothers that Henry Ford was running his enterprise as a “semi-eleemosynary institution” by setting low prices and plowing retained earnings into capacity expansion instead of maximizing short-term profits and handing them out to shareholders as dividends.

134. Khan (2017, p. 737). This assault set off alarm bells among mainstream antitrust scholars (Hovenkamp 2019, 2021; Melamed and Petit 2019; Shapiro 2018). What can it possibly mean to promote competitive markets without promoting welfare (or vice-versa)? What exactly are “our interests as workers, producers, entrepreneurs, and citizens”? How can agencies and courts decide whether those interest are being served?

135. “Memo from Chair Lina M. Khan,” Federal Trade Commission, https://www.ftc.gov /public-statements/2021/09/memo-chair-lina-m-khan-commission-staff-commissioners -regarding-vision (accessed October 31, 2021).

136. On this “Post-Chicago” approach and its relation to the original Chicago School, see for example Kobayashi and Muris (2012).

137. Wu (2018, p. 136, emphasis original). Cecilia Kang, “A Leading Critic of Big Tech Will Join the White House,” New York Times, March 5, 2021.

138. Brandeis (1913). Of course, Brandeis got many things wrong. He bought completely into the leverage fallacy, arguing in one case that the holder of a patented ice box could leverage its market power into dry ice by tying: “The owner of a patent for a product might conceivably monopolize the commerce in a large part of unpatented materials used in its manufacture. The owner of a patent for a machine might thereby secure a partial monopoly on the unpatented supplies consumed in its operation” (Carbice Corp. v. Patents Development Corp., 283 U.S. 31 (1931).) Indeed, Brandeis feared, the patent holder might even leverage its monopoly into ice cream. In reality, the patent almost certainly didn’t even give Carbice a monopoly over ice boxes (Hovenkamp 2005, p. 33).

139. Sandel (1996, p. 236). Bruce Yandle (1983) famously suggested that many instances of government regulation arise from the teamwork of bootleggers and Baptists. Baptists want li- quor sales on Sunday to be illegal for high-minded religious and social reasons; the bootleggers want it to be illegal for reasons of narrow self-interest. In this respect, the Romantic communi- tarian tradition has long supplied the anti–chain-store movement with its Baptists.

140. Khan (2018, p. 131). As Daniel Crane (2019) points out, the new Brandeisians—unlike Brandeis himself—appear to have no corresponding fear of autocracy in the public sphere.

141. Khan (2019, p. 981). 142. Khan (2019, p. 1016).

Notes to Epilogue 673

143. Khan (2019, p. 1080).

144. Wu (2012).

145. John D. McKinnon, “Effort to Bar Tech Companies From ‘Self-Preferencing’ Gains

Traction,” Wall Street Journal, October 15, 2021. 146. Petit (2020); Varian (2021).

147. Teece (1986).

148. Gilbert (2021, p. 12).

149. So say internal Facebook documents. Keach Hagey and Jeff Horwitz, “Facebook Tried to Make Its Platform a Healthier Place. It Got Angrier Instead,” Wall Street Journal, September 15, 2021.

150. Jin, Leccese, and Wagman (2022).

151. On the many start-ups Amazon needed to acquire and integrate for the Alexa project, see Stone (2021, pp. 21–53).

152. Phillips and Zhdanov (2013).

153. Kenney and Zysman (2019).

154. Doidge et al. (2018, p. 8).

155. Ben Worthen, Ian Sherr, and Shira Ovide, “Dell to Sell Itself for $24.4 Billion,” Wall Street Journal, February 5, 2013.