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The free-market response to trusts
A while back, I was talking to a guy who insisted that “trusts were the ultimate hypocrisy of lassiez-faire capitalism” and pointed at Vanderbilt’s railroad empire as a prime example of this. I’m not much of a rhetorician, so I wanna hear how you guys would refute this claim. What would the free market do in response to trusts? Also, was Vanderbilt (and other historical characters like Rockefeller) a product of unfettered capitalism, or was there an oversimplification being made?
Concerning Rockefeller, and Vanderbilt and the like I recommend that you read “The Myth of the Robber Barons” by Burton Folsom. Most of those guys (with some exceptions like Leland Stanford) were extremely productive and admirable men.
Concerning trusts, I recall a required history course I took in college whose purpose was to discredit capitalism by recounting the stories of various 19th American trusts. It was very interesting and instructive to read the books assigned because when you paid attention to the facts presented (instead of the ideological motivation) it turned out that none, absolutely NONE, of the many trusts that were formed worked to the advantage of the conspirators. The operations of capitalism destroyed them all economically and usually bankrupted those who formed them unless they were in cahoots with the government.
One interesting aspect of the history of trusts is that successful, wealthy businessmen kept trying to form them with the obvious expectation that they would profit greatly by doing so even though that never happened. That goes to show that most rich businessmen are hopeless economic illiterates (like Donald Trump, George Soros, Eric Sprott, etc.) despite however much money they have accumulated.
The Truth About the “Robber Barons” by Thomas J. DiLorenzo
Monopoly is rare and temporary in a free market.
The popular Standard Oil story is a myth.
Read, 100 Years of Myths about Standard Oil by Gary Galles
Anti-trust laws can actually create barriers to entry and benefit large firms.
See, Should Government Regulate Monopolies? by Lynne Kiesling
Game Theory 101: on monopoly.
Cartels are rare in a free market.
The Myth of the Free Market Cartel | by Murray N. Rothbard
Cartels by Andrew R. Dick
Khan Academy video: Why Parties to Cartels Cheat.
When you throw all Trusts into a basket you confuse the issue. There are Statutory Trusts and Private-Trusts. Individuals make Family Estates Trusts to avoid probate. Others make Trusts for the protection of an estate and certain beneficiaries.
