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Epstein on Standard Oil

tos cover


Vindicating Capitalism
The Real History of the Standard Oil Company

by Alex Epstein

This article is published at no charge online by The Objective Stnadard (Summer 2008, Vol. 3, No. 2).

Though portrayed by some biased historians as a plundering "robber barron," John D. Rockefeller succeeded by revolutionizing his industry's production and management and by relentlessly lowering prices, thereby dramatically enriching the lives of his customers.

This reading works well for a single meeting. Suggested review questions follow.

Review Questions for Epstein

1. Describe the views of John D. Rockefeller expressed by:‎
a) Henry Demarest Lloyd, 1881 (Pages 29-30)
b) Ida Tarbell, 1904 (Page 30)
c) Howard Zinn, 1980 (Page 31)
d) Paul Krugman, 1998 (Page 31)

2. What is the view of free markets expressed by Ron Chernow and John Sherman? (Pages 31-32)

The "Pure and Perfect" Early Refining Market

3. What is the theory of "pure and perfect competition?" (Pages 32-33)

4. What is Epstein's basic economic critique of the doctrine of "pure and perfect competition?" (Page 33)

5. What were the benefits of kerosene to human life? (Page 33)

6. What caused the dramatic increase in kerosene refineries from 1859 to 1864? What were some of the problems with earlier refineries? (Pages 33-35)

7. What was the trend in refineries from 1865 to 1870? (Page 35)

The Phenomenon

8. What regional advantages contributed to Cleveland's oil refineries of 1863? (Page 36)

9. What were the characteristics of Rockefeller's first refinery? (Page 36)

10. What in Rockefeller's background contributed to his success in business? (Pages 36-37)

11. In what specific ways did Rockefeller improve efficiency, expand markets, and advance technology in his industry? (Pages 37-39)

12. What is "vertical integration," how did Rockefeller practice it, and what are the benefits? (Page 38)

13. What was the state of Rockefeller's venture in 1870? (Page 40)

The Virtuous Rebates

14. What was Ida Tarbell's view of the railroad rebates granted to Rockefeller, and what is Epstein's criticism of Tarbell? (Page 41)

15. Why did railroads grant Rockefeller rebates? (Pages 41-42)

16. Were Rockefeller's practices "anticompetitive?" (Pages 42-43)

The Missing Context of Standard's Rise to Supremacy

17. From 1870 to 1880, what challenges did oil refineries face, what was the growth of Standard Oil, and what was the shift in oil prices? (Pages 43-44)

18. Why doesn't Epstein believe that cartels can succeed? (Pages 44-45)

19. What was the strategy of the South Improvement Company, and what were the results? (Pages 45-46)

20. What was the Pittsburgh Plan, and what were the results? (Pages 45-46)

From 10 to 90 in Eight Years

21. According to Epstein, what motivated Rockefeller to buy out various competitors? (Pages 46-47)

22. Did Rockefeller's treatment of some competitors to "a good sweating" constitute "predatory pricing?" (Pages 47-48)

23. What was the state of Standard Oil in 1873 and 1874? (Pages 48-49)

24. What arguments did Rockefeller make to competitors to persuade them to sell their businesses to him? (Pages 47, 49)

25. How did the Pennsylvania Railroad attempt to compete with Standard Oil, and what was the result? (Pages 49-50)

26. How did Standard Oil operate from 1870 to 1880, and what happened to the level of oil production and to kerosene prices? (Pages 50-51)

The 1880s and the Peril of the "Monopolist"

27. Did Standard Oil operate according to standard antitrust theory in the 1880s? (Page 52)

28. What was the "peak oil" theory articulated in the mid 1880s? Was was the problem with this theory? (Sound familiar?) (Page 52) 29. Why did Rockefeller expand oil production in the 1880s, what did he find, how did he cope with "skunk oil," and what did this do for Standard Oil? (Pages 52-53) 30. What new competitors did Standard Oil face in the 1880s? (Pages 53-54)

31. What was the difference between Standard Oil and government monopolies? (Pages 54-55)

The Standard Oil Trust and the Science of Corporate Productivity

32. What was a trust, and what legal problems did it overcome? (Page 56)

33. What were Standard Oil's successes as a trust? (Pages 57-58)

34. What were Rockefeller's skills as a business manager? (Pages 59-60)

35. What changing market conditions did Standard Oil face from 1899 to 1914, and what happened to the company's output and market share? (Page 60)

36. What were the journalistic and political responses to the successes of Standard Oil? What was the motivation of this reaction? (Pages 61-62)

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