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74 Iowa L. Rev. 1019 (1988-1989)
The Sherman Act and the Classical Theory of Competition

handle is hein.journals/ilr74 and id is 1033 raw text is: The Sherman Act and the Classical Theory of Competition Herbert Hovenkamp* Since 1890, scholars have debated the relationship between the Sherman Act and the common law of trade restraints. Did the framers merely intend to enact the common law, or did they hope to do something more? Was there an identifiable common law, or was it simply an artificial construct?' This Essay examines the relationship between com- mon law, economics, and political theory at the time the Sherman Act was passed. It argues that the great difficulty we have had in understanding the relationship between the Sherman Act and the common law lies in the fact that in 1890 the common law of competition was itself undergoing a revolution-the same revolution that political economy experienced as classicism was supplanted by neoclassicism.2 One of the great myths about American antitrust policy is that courts first began to adopt an economic approach to antitrust problems in the relatively recent past3-perhaps as recently as the late 1970s.4 At most, this revolution in antitrust policy represented a change in economic models.5 Since its inception, antitrust policy has been forged by economic ideology. But even the common law experienced economic revolutions. The notion of some,6 that antitrust can be freed of involvement in economic policymaking if we can only rediscover its common-law roots, is based on a misconception. The misconception is that the common law itself was somehow exempt from economic policymaking. It never was exempt, in any branch, and certainly not in the law of monopolies and restraints on trade. The common law responded dramatically to the death of mercantil- ism and the rise of classicism in the late eighteenth century.7 It responded equally as classicism collapsed a century later. Courts realized this at the time the Sherman Act was passed, as they wrestled with the problem of how much economic analysis was appropriate in judge-made antitrust policy. Judges preferred the relatively traditional *Professor of Law, University of Iowa College of Law. 1. R. BORK, THE ANcrrnwrr PaRADOX: A Poucv AT WAR WrrH ITSELF 20 (1978). 2. See Hovenkamp, The Political Economy of Substantive Due Process, 40 STAN. L. REv. 379, 408-09, 437-38 (1988). 3. For arguments that antitrust policy only recently has become economic, see Gerhart, The Supreme Court and Antitrust Analysis: The (Near) Triumph of the Chicago School, 1982 Sup. CT. REv. 319; and Posner, The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision, 45 U. CHI. L. REv. 1, 5, 12-13 (1977). 4. See Continental T.V. v. GTE Sylvania, 433 U.S. 36, 51 (1977) (adopting rule of reason for vertical nonprice restraints). 5. See Hovenkamp, Antitrust Policy After Chicago, 84 MICH. L. REv. 213, 217-18 (1985). 6. E.g., Arthur, Farewell to the Sea of Doubt: Jettisoning the Constitutional Sherman Act, 74 CALIF. L. REv. 263 (1986). 7. See generally P. ATivAn, THE RIsE AND FALL OF FREEDOM OF CoisrT (1979). 1019

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