Rockefeller

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Arguments have raged over Standard Oil and its business practices since its prime in the 1870's and 1880's. Was it a monopoly? Did it severely impede fair competition? If it was a monopoly, did it hurt the consumer? These are the questions that have been argued in debates about Standard Oil and its practices. Whether Standard Oil was a monopoly or not, the more important question to economists is, were the practices of the Standard Oil Company efficient and did it hurt the social wealth of the country? The government's enforcement of the Sherman Antitrust Act on Standard Oil hurt the country's social wealth and efficiency.

John D. Rockefeller was the founder and owner of Standard Oil. Considered by many to be the first great businessman in the United States, he was extremely industrious and methodical. He could not stand to waste anything. He had begun working in business at the age of sixteen and had always displayed hard working and diligent qualities that impressed his superiors. He went into business for himself at the age of twenty by starting a commission merchant company trading grain, hay and meats. In the early 1860's, the oil boom struck in the eastern United State and Rockefeller wanted to get in on the ground floor. "Rockefeller began investigating the feasibility of entering the oil refinery business in 1862 and the firm of Andrews, Clark & Company was formed in 1863"(Entrepreneurs and American Economic Growth). Rockefeller bought out his partners and began to work with his brother William Rockefeller and Henry Flagler, a fellow business man, and Standard Oil was born.

At this point in the oil market, the barriers to entry were extremely low. One could buy a small refinery for $10,000 and a large...

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...h or they had a large sum of cash from the buyout. These former refiners who were entrepreneurs had this buyout money and could move on to other ventures. This would free up their human capital to help move out the production possibilities of the nation. This obviously would increase social wealth and lifestyle of the country.

Rockefeller was a business genius as seen by his use of vertical integration and economies of scale to create extremely low production costs. It is true that his dealings with the railroads, price wars and competitor buyouts did violate the Sherman Antitrust Act. Despite the fact that Rockefeller was breaking the law he was improving the social wealth and efficiency of the country. Therefore the government's enforcement of the Sherman Antitrust act in respect to Standard Oil hurt the nation's collective social wealth and efficiency.

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