In and Out of Marshall's Shadow

Peter Groenewegen (2012), the late eminent Marshallian scholar, wondered if possibly Joseph Shield Nicholson, Edinburgh Professor of Political Economy, advised Macgregor upon finishing his MA degree at Edinburgh to go to Cambridge to study with Marshall.

Macgregor (ibid.: 314) vividly expressed the following: ‘We were soaked and stewed in the theory of Value'. Nevertheless, he recalled there was no easy route, including reading Economics of Industry, to properly comprehending Principles as ‘you had to master it yourself' (ibid.: 313). In his remarkable memoir of Marshall, Keynes echoed Macgregor's sentiments in that despite its ‘pervading charm' (Keynes 1924 [1972]: 212), Principles required ‘much study and independent thought' (ibid.) by the reader; there were no shortcuts to discovering the knowledge and insights ‘in the concealed crevices' (ibid.) of Marshall's masterpiece.

Macgregor (1942: 313) reminisced that Marshall's lectures were of little aid to understanding Principles as they were intended to stoke interest, not enlighten. Marshall could be quite mischievous and after speaking for a time in what sounded reasonable and measured, with ‘perfect gravity', he would suddenly stop and exclaim: ‘All I have been saying up to now is perfect nonsense[!]'.

Like nearly everyone around Marshall, Macgregor was in awe of his tower­ing intellect. In thinking back to Marshall's last lecture that Macgregor and other ‘colts in the stable' (including Keynes) attended, Macgregor (ibid.: 314) with the utmost gratitude, respect and admiration remarked: ‘Then, as always, his sense of dignity was great; also his impression of authority; he could not help knowing that there was as nearly as possible nobody else in the economic leadership'. Even Keynes (1924 [1972]: 198) in his memorial acknowledged that near the end of the nineteenth century there was no one close to Marshall's stature, reigning as the authoritative figure in economics until the end of his life. Keynes (ibid.: 222), of course, memorably exalted that ‘Marshall was the first great economist pur sang that there ever was' as he dedicated his life to the elevation of economics to a science.

Macgregor (1942) proceeded to dispassionately offer an incisive, balanced, constructive critique of Principles. He did so with an adroit, contextual analy­sis featuring numerous intellectual influences, including both obvious (e.g. Smith, Ricardo, Mill and Jevons) as well as obscure (e.g. Whewell, Moffatt and Jenkin) figures in the history of economic thought. Macgregor's thor­oughness went so far as to gently chastise Marshall for his neglect in not citing some notable influences, including the eminent psychologist Alexander Bain

(whom Jevons had cited).

Macgregor (ibid.) gave equally detailed attention to some of the other key concepts in Principles, including consumer surplus, substitution, decreasing costs and the representative firm. He also supported Marshall's resistance to the idea of pure or perfect competition in preference for ‘free' competition as, no matter how competitive an industry might be as reflected in the movement towards normal price, firms would maintain at least some degree of monopoly power typically in recognition of custom or goodwill. As such, equilibrium occurs where price equals average cost, which does not necessarily mean mar­ginal revenue equals marginal cost. Macgregor agreed with Marshall that the typical business, despite likely possessing an element of monopoly, is condi­tioned by competition in setting its price as it prefers to maintain, rather than myopically take advantage of, customer goodwill. In keeping with Marshall, Macgregor warned that analytical rigour had its limitations; in the case of the profit maximisation rule, for example, ‘it is possible to work this principle too hard' (ibid.: 320). Some relaxation of determinateness may be justified to ensure relevance.^[81]

Macgregor constructively defended Marshall's representative firm for not being simply a necessary abstraction to reconcile increasing returns with long- period equilibrium.

Macgregor acknowledged the broad criticism of Marshall's treatment of industry structure as out of date and naive especially given the instabilities associated with the rise of trusts and cartels. As Macgregor (1942: 322) explained:

Consider the items. The small firm is, by a good margin, inefficient, but it is supported by the external economies which are associated with large-scale production.

Interestingly, Marshall was fully aware that Principles did not effectively address the evolving nature of industry in which the amalgamation of large businesses (viz. joint-stock companies) into ‘vast enterprises' transformed the structure of industries. Beginning with the fifth edition of Principles pub­lished in 1907, Marshall (1920: xiv) candidly acknowledged in the preface that industrial conglomerates such as trusts ‘cannot be fitly discussed in a volume on Foundations: they belong to a volume dealing with some part of the Superstucture'. Such vast and complex enterprises as trusts with intricate interdependencies required a separate, comprehensive analysis that Marshall was working on but which would not appear in print until 1919. This, of course, would be Industry and Trade, what Marshall referred to as a “continu­ation” of Principles as noted in the 1920 eighth edition. In “The Theory of Monopolies”, Chapter XIV, Book V, Marshall (1920: 477) stated: ‘In a later volume a study will be made of the Protean shapes of modern trade combina­tions and monopolies, some of the most important of which, as for example “Trusts”, are of very recent growth'. The substance of this statement was intact from the first edition to the eighth. Only the first four words replaced ‘At a later stage', beginning in the fourth (1898) edition (see Guillebaud 1961: 534).

Marshall (1920: 417, fn. 1) regarded industrial combination such as a trust to be a rather incoherent ‘semi-monopolistic business aggregate [that] is often “over-capitalized”' and complex, thereby highly confounding in relation to Principles where firms are quite normal and hence subject to analysis (particu­larly, dynamic partial equilibrium) where uniformities are logically deduced. To be sure, Principles is about principles. Though Marshall (ibid.: xiv) famously wrote that, ‘the Mecca of the economist lies in economic biology' (where complexity and change rules), Principles is necessarily ‘a volume on Foundations [which] must therefore give a relatively large place to mechanical analogies; and frequent use is made of the term “equilibrium” which requires that ‘predominant attention [is] paid..to [the] normal conditions of life^,, including that of indus­try (italics added).

Marshall (ibid.: 304), although he did not significantly address the novel challenges of ‘giant businesses', including joint-stock companies and trusts in Principles, acknowledged that such attention was nevertheless ‘urgent', par­ticularly in understanding how such sizeable enterprises with far-reaching scope are managed. Further, he expressed amazement at how quickly innova­tions of process and technique as well as management acumen could be intro­duced. This was particularly so in the United States where industrial combinations featuring trusts first emerged.

Shove (1942), in his equally authoritative critical assessment of Principles in observance of Marshall's centenary birth, more than echoed Macgregor in arguing that the book is obsolete notably with regard to modern industry structure. Though Shove applauded Principles for it ‘stands with Smith's Wealth of Nations and Ricardo's Principles as one of the three great watersheds in the development of economic ideas' (ibid.: 313), it failed to effectively address the middle ground between free competition, featuring atomic com­petition and pure monopoly. The trees in the forest analogy seemed less than satisfactory as large enterprises grew even larger in both scale and scope and became even more dominant and undeterred by old age. Shove (ibid.: 320) enumerated many aspects of modern industry informed by industrial combination that Marshall’s theoretical framework was ill-equipped to address, including: the conflict of interests within the firm; the interpenetra­tion of interests between firms through interlocking directorates, sharehold­ings, subsidiary concerns and the like; the domination of an industry by a few large units; and the inter-mixture of public and private control as seen in the various types of semi-public corporation and of regulating boards and other devices.

Too many complexities, too much instability, too many market imperfec­tions and, perhaps, too much indeterminateness. Maybe there was a limit to Marshall’s ‘restless quest after realism’ combined with a diminished ability to apply the mechanical or even biological approaches to economic develop­ment. Moreover, by 1919 when Industry and Trade was finally published, Marshall’s influence had considerably waned with the “years of high theory” approaching. Industry and Trade proved too little, too late or perhaps, more aptly, too much, too late as this ‘continuation’ volume of Principles was 875 pages of small print. Marshall’s health issues associated with old age and the distractions of the Great War delayed Industry and Trade by some six years. Keynes (1924 [1972]: 228) argued that the volume’s three books would have been better published separately. Nevertheless, despite its descriptive and his­torical emphasis, the volume, particularly Book III, served to highlight the evolution of industrial combination. The matter of trusts caused Marshall the ‘greatest trouble’ (Whitaker 1990: 220) in terms of his biological life-cycle analysis as maintained in Principles.

Macgregor’s work on trusts and cartels dating back to his studies under Marshall, fellowship dissertation and the highly regarded Industrial Combination first published in 1906 was never explicitly referenced in the fifth (1907) through eighth (1920) editions of Principles. Nor is there any evidence of correspondence between Marshall and Macgregor after 1908 when Macgregor left Cambridge for Leeds (see Whitaker 1996). Marshall, nevertheless, should not be thought to have slighted Macgregor. In the preface of the fifth through eighth editions, Marshall (1920: xiv) admitted that trusts ‘cannot be fitly discussed in a volume on Foundations’. Starting with the pref­ace to the sixth (1910) edition, Marshall (ibid.: xiii) newly emphasised that Principles was concerned with ‘normal’ behaviour where ‘economic evolution is gradual’ and where progress is ‘never sudden’ and the businessman is a crea­ture of ‘habit, partly conscious, partly unconscious’. The ‘manifestations’ of large businesses featuring trusts, however, were conveniently thought rather ‘spasmodic, infrequent, and difficult of observation’, hence not ‘representa­tive’ and thereby not amenable to complete economic analysis at least by that offered in Principles. Such a ‘special examination’ of trusts and other amalgamations was contained in Industry and Trade, which appeared a year before the eighth edition of Principles.

Marshall’s Industry and Trade was, to be sure, influenced by Macgregor’s Industrial Combination (see Giocoli 2012). Indeed, Macgregor was explic­itly cited in Industry and Trade and positively so. In Book III, “Monopolistic Tendencies...”, Chapter XI, “Aggregation...”, Marshall (1919: 577) began by saluting ‘several excellent accounts’ of ‘giant businesses’ with Industrial Combination being listed first. (Interestingly, in the index, ‘Macgregor, Prof 577n' rather than ‘Macgregor, D.H. 577n', is recorded, suggesting a certain level of respect.) Marshall’s personal annotated copy of Industrial Combination (which is held at Cambridge’s Marshall Library) shows that he conducted a careful read of the volume. The notes are very specific and sup­portive. To the extent that they are critical, the criticism is primarily lev­elled, not against Macgregor, but his sources. For example, in Macgregor’s application of Cournot’s mathematics, Marshall wrote in the margin: ‘C. made a mistake’. Elsewhere, Marshall wrote: ‘I hold Walker to be sub­stantially wrong on this point’. Finally, although, as noted, there is no evi­dence of any written correspondence between them, Macgregor did attend Marshall’s last lecture as Cambridge Professor of Political Economy as well as his funeral.

Macgregor’s writings reflected Marshall’s enduring inspiration and guid­ance. Industrial Combination was likely motivated in part by Marshall’s Presidential Address to the Economic and Statistics Section of the British Association in Leeds in 1890 entitled ‘Some Aspects of Competition’. In this, Marshall focused on the ‘action of competition and.the attitude of econo­mists towards it’ (Marshall 1890 [1925]: 256). In doing so, he made clear his appreciation that combinations, including trusts, were encouraged by the law of increasing returns and artificially so by tariff protection, particularly in America. The nature and scope of competition fundamentally altered in favour of combination, hence the tendency towards monopoly. Yet, industrial reorganisation in the form of trusts could falter and break up if they charged too high a price as both existing and potential rivals, including other trusts, would act as countervailing forces offering products at lower prices or better quality or both.

Trusts, initially at least, are a confederation of typically joint-stock compa­nies fused together by limited contract rather than absorbed by ownership consolidation. Marshall (ibid.: 271) explained: ‘Trusts have very many forms and methods, but their chief motive in every case is to take away from the several firms in the combination all inducements to compete by indirect means with one another’. Should there be a tendency towards permanent consolidation whereby competition is unduly constrained, government might well intervene, though not to the extent of managing companies. More than likely, the tendency towards consolidation was actuated by the centralisation of executive power over time. For Marshall, this was how both American and British economists viewed the growing concern over combination.

Marshall advised much patience and forethought before government chose to intervene. First, he had much faith in both actual and potential competi­tion to discipline growing monopoly power. Second, he understood that there is a fine line between intervention and management, which is easily crossed, particularly by a government agency prone to act. Further, the State control of industries turns private firms into ‘semi-public concerns' that are ipso facto unnatural and risk forfeiting increasing returns and wider economic progress. To quote Marshall (ibid.: 275; italics added): ‘We believe that a private com­pany which stands to gain something by vigorous and efficient management, by promptness in inventing, as well as in adopting and perfecting improve­ments in processes and organisation, will do much more for progress than a public department'. He added that governments should be particularly cir­cumspect before intervening in industry as the law of increasing returns is dynamic and not easily realised in terms of delivering future benefits to con­sumers, not just in terms of lower prices but product improvements. Marshall, however, emphasised that nascent, small entrepreneurial firms were a requisite ‘superior inventive force' that would preserve or, if need be, restore free com­petition and, intrinsically, the freedom of individualism in the long period.^[82]

Marshall (ibid.: 283) had reservations about socialism, particularly in Germany at the time, arguing that socialists ‘think too much of competition as the exploiting of labour by capital, of the poor by the wealthy, and too little of it as the constant experiment by the ablest men for their several tasks, each trying to discover a new way in which to attain some important end'. He also questioned whether or not a socialist perspective, although admirably expressed with a ‘generous heart', would allow for ‘serious contributions to economic science' (ibid.: 284). Specifically, in addressing the determinants of real wages and the causes of their possible suppression, Marshall made the plea for much greater attention to and analysis of industrial combination by economists whereby government officials and indeed the public would be enlightened of its impact on workers, competition and the economy.

Marshall concluded in his 1890 Presidential Address: ‘Thus the growth of combinations and partial monopolies has in many ways increased, and in no way diminished, the practical importance of the careful study of the influ­ences which the normal forces of competition exert on normal value' (Marshall 1890: 288). Such growth was at a much more rapid pace than previous evo­lutionary changes in industry organisation, in turn fostering greater complex­ity. As a result, Marshall emphatically called forth considerable economic investigation and analysis of combinations as the need was no less than ‘urgent' (ibid.: 291).

Industrial Combination was a pioneering work by which ‘it is doubtful if the general problem of industrial combination has ever been better surveyed' (Andrews 1953: 348). Moreover, it was highly influential in the field of indus­trial economics ‘for nearly a quarter of a century after its publication' (Lee 1989: 23). Ronald Coase (1936: 133), who would later become a Nobel Laureate, in reviewing the volume's reprint three decades after its first publica­tion, praised Industrial Combination as ‘the standard work on its subject'. Coase noted that Macgregor provided a detailed account of the complexity and analytical rationale for combinations, recognising the otherwise underap­preciated role of external economies which of course the pure theory of stan­dard economics had neglected. However, Coase expressed some regret, not that Macgregor would resurrect Marshall's representative firm in the form of a ‘representative organisation' as an analytical device or ‘method', but rather that he did so when, following Marshall's death in 1924, the representative firm would come under attack and be abandoned in value theory and indeed the industrial economics literature. Coase would add, albeit with the utmost admiration, that Macgregor's book was not always an easy read as ‘Professor Macgregor is too aware of the nature of questions he poses to give simple answers. Moreover, there is a wealth of meaning in every sentence and one is liable to miss qualifications or only to see their import after many readings' (ibid.: 135). High praise indeed.^[83]

Henry Macrosty (1907) also offered a persuasive, indeed authoritative, endorsement of Industrial Combination in his review. Macrosty's 1907 Trust Movement in British Industries was rated second to Macgregor's volume in significance by Marshall (1919: 577) with respect to industrial ‘aggregations and federations’. Macrosty highly approved of Macgregor’s ‘representative method' of employing a framework rather than a model that allows analysis featuring assiduous detail and consequential insights to the organisation of combinations. Macgregor, for example, recognised that enormous enterprises, with or without being a combination ipso facto embody monopoly power, but may or may not be monopolies. Such distinctions matter in terms of method and results as well as policy. Macrosty (1907: 105-107) applauded Macgregor for having ‘written a very good book’, one that is ‘very interesting’ as well as ‘a thoroughly useful piece of work’. He noted that the book is ‘full of suggestive criticism’ and ‘praised’ it for its examination of the causes of combinations.

Garrett Droppers’ (1907) review of Industrial Combination was, however, less than glowing in comparison to those by Coase and Macrosty. He acknowl­edged Macgregor’s skilful analysis of the evolution of modern industrial organisations and how this filled a gap in the work of Marshall. This aside, Droppers felt that the volume was left wanting in terms of additional, more compelling explanation for the inception and growth of trusts. This he found the ‘least satisfactory portion’ (ibid.: 121) of the book. Though Droppers con­sidered Industrial Combination to be a fair and balanced treatment which ‘is wholly admirable’ (ibid.: 122), he concluded that it suffered from the ‘serious handicap’ of being too theoretical, ‘as if [Macgregor] did not see the wood for the trees’ (ibid.: 122). This criticism is perhaps rather harsh and misplaced as Macgregor’s approach was steeped in Marshall’s organon, featuring a combi­nation of inductive and deductive analysis (rather than theory), blending con­temporary and historical concrete facts with a priori reasoning.^[84] Consider the following passage from Macgregor (1906: 30):

But, so far as productive efficiency alone is concerned, this is not the case for all trades, and special circumstances must decide the possibilities of economies on this basis. Thus combinations of dealers are difficult to maintain, because they take slight risk of fixed capital, and a competitor can start easily, if he can obtain only a good-will which rests largely on personal causes. The Cordage combina­tions had a chequered history because it was “very easy” for a rival to start. A capital of 200,000 dollars is adequate for a representative salt factory. The distill­ing trade is specially liable to periods of overproduction, because the cost of establishing a distillery of reasonable size is slight, a distillery consuming 1500 bushels per day being on a good competitive basis. The Doscher refineries, with a capacity of 3000 barrels per day, claim to run as cheaply as the Trust with its capacity of 45,000; and this is admitted by the Trust. The Wire Nail Pool of 1895—1896 was broken, because “with 10,000 dollars and six weeks' time any one can become a manufacturer of wire nails”. Similar evidence was given for Tin-plate and other industries.

Macgregor’s Industrial Combination was first published in 1906, a time when the aggregation or amalgamation of gigantic businesses was still the exception and the subject of few economic studies. Even though exceptional, combinations made a pronounced adverse impression on the psyche of gov­ernment officials, in particular, as trusts and cartels were possibly perilous by-products of tariffs and other artificial interferences. Such ‘vast enterprises’ led by industrial magnates (e.g. Carnegie and Rockefeller) were perceived to have heralded the decline of capitalism, if not the so-called March into Socialism. Government intervention could after all be the logical and desired response to such powerful capitalist elites. Veblen (1904) frequently referred to industrial powers as ‘parasitical’. Marshall (1920: 495) even warned that ‘monopolistic cartels’, in particular, were ‘treacherous’. Economic welfare could be at risk.

Macgregor (1906: v), at the outset of his magnum opus, regarded industrial combinations as the ‘most pressing question of industrial organisation’. He believed that trusts and other combinations do not necessarily lead to social­ism, a view that contrasted with Macrosty’s 1904 Trusts and the State. Combination is defined by Macgregor as a type of commercial enterprise in which there is unified control across select firms—that is, ‘many parts but one common control’ (ibid.: 2). Combination is an organisational result of a his­torical process. Expansion in both domestic and foreign markets with an eye on global rivals in the late nineteenth century was typically the motivation or objective. Though such combinations would have enormous scale under nat­ural evolving conditions, they should not be feared as ‘treacherous parasites’.

Macgregor employed Marshall’s representative firm to remind the reader that internal scale economies alone should not be the sole criterion of effi­ciency; indeed, external conditions also needed to be considered in determin­ing the limits to growth. In the case of combinations, the efficient firm was dependent on the readjustment ofthe combined firms’ relations. ‘Combination may be the “representative method” of organisation in the twentieth century’ (ibid.: 4). Combinations rather than independent firms alone were the new natural form of competition that had evolved. Hence, combinations should not be thought of as monopolies. The extent to which combinations enjoy growth as they outcompete rivals is paradoxically a measure of vibrant com­petition. Macgregor (ibid.: 6) noted that the situation is akin to one where ‘moral laws are of no effect in Paradise'! He thereby concluded that a new economic analysis was needed for a modern age in which laissez-faire should no longer be thought of as free competition featuring independent, atomic firms acting in accordance with the invisible hand. Competition needed to be understood in various ways as the method of organisation of industry had evolved to where productive efficiency was but one of many factors to con­sider. This was entirely natural, not artificial, in a new century.

Macgregor (ibid.: 16; italics in original) prescribed an analytical frame­work, rather than model, by which to examine ‘what possibilities combina­tion has of becoming the “representative method” of industrial enterprise'. Frameworks are preferable when many variables are importantly involved in a dynamic process wherein the precision of equilibrium has no place. Profit maximisation is no longer the sole objective, if an objective at all. Frameworks permit the economist to methodically and meticulously assess the firm in the context of its other-than-simplistic, evolving competitive environment. Firms, particularly ‘vast enterprises', behave intentionally whilst they navigate a course of action in coping with various competitive forces. Being strategic reflects intent and an ability to proactively secure and sustain what Macgregor (ibid.: 4) coined ‘competitive advantages' over continuous, not discrete, points in time.^[85]

Macgregor's (ibid.: 13) comprehensive framework for analysing industrial combinations is composed of four ‘factors of competing strength', including productive efficiency, element of risk, bargaining strength with buyers and suppliers, and resources, which considers a firm's strategy and tactics with regard to its rivals. Efficiency alone was viewed as entirely insufficient in try­ing to understand modern industry. The economic variables of price and quantity are severely, if not absurdly, limited in appreciating competition. Each of these factors is addressed with considerable care and detail, ever mind­ful and respectful of the prevailing economic doctrine and its limitations. With Marshallian flair, Macgregor's framework is presented with an admix­ture of detailed facts and analysis which provides an informative, if not com­pelling, cognisance of industrial combination.

First, the growth of a combination's productive efficiency is a function of both internal and external economies. External economies are derived from various entities acting in cooperation. Such entities account for the organisa­tion of economic activity and include communication, transportation facili­ties, financial services and information networks. They collectively serve as an industry infrastructure and one with excess capacity wherein combination may naturally emerge. Further, there is what Macgregor coined ‘collective supply' (ibid.: 21) in which independent firms within the same trade operate in close proximity and benefit from shared interests and intimate informal relationships which generate economies of localisation. This is the preliminary stage before combination. Management is pivotal for realising productive effi­ciency particularly given the competition from other producer combinations which is more acute than that from independent producers. Combination is a stern test of management but also one that develops their capabilities given the broader, more elaborate, scope of combination.

Secondly, risk as it pertains to fluctuations and uncertainty must not be overlooked. Of course, capital is at risk. Yet, combinations are also ‘specially provocative' of competition (ibid.: 63). Lateral integration may be a defensive measure to ameliorate risk whilst vertical, especially forward, integration may increase risk as the ‘risks of one industry are heaped upon the special risks of combination in another; the whole structure is liable to be unwieldy and inor­ganic' (ibid.: 65). Risks fall into two categories, namely static and dynamic. The former applies to interrelationships with other producers and customers. The latter is concerned with the uncertainties introduced by product and pro­cess innovation. Combination is a reaction to, as well as a creator of, risk. Hence, appropriate market knowledge, vision, and especially the ability to act decisively are required.

Thirdly, the bargaining strength of buyers and suppliers may matter when­ever at least some element of monopoly exists. It may matter a great deal when combination exists. Macgregor took exception to the prevailing wisdom that the buyer at each stage from the production of raw materials to the purchase of final goods has the upper hand in terms of bargaining power. He (ibid.: 68) observed: ‘This theory is paradoxical; it would give the conclusion that the persons whose bargaining strength is normally greatest are those who do not bargain at all—the final consumers of goods, or the general mass of the peo­ple'. Such misunderstanding of ‘real conditions', for example, does not allow for the recognition of consumers' associations and cooperatives that exist to empower the buying public who would otherwise be at a disadvantage in negotiating purchasing terms, including price. Macgregor further recognised Edgeworth's analysis wherein combinations are responsible for indeterminate­ness as they have the advantage as both buyer and supplier. He countered that this is not consistent with the evidence. Rather, ‘great organisations’ are engaged in robust competition with each other as they leverage decreasing costs in a quest for increased market share. Hence, they will concede bargain­ing power to both their suppliers and buyers by offering concessions. ‘Relative fewness’ (ibid.: 69) is too simplistic in determining bargaining strength. Both context and time matter. Somewhat surprisingly, perhaps, Macgregor’s analy­sis of bargaining included the use of several graphs depicting comparative static analysis with respect to the consideration of increasing and decreas­ing costs.

Fourthly, the factor of resource pertains to what Macgregor labelled ‘costs of competition’ as opposed to ‘costs of production’. Costs of production per­tain to normal or operational activities that do not alter the behaviour or strategic position of rivals. Costs of competition, for example, advertisements directed at a rival, however, are strategic as the objective is to tilt the competi­tive landscape in an enterprise’s favour. Methods of bargaining may advance to resource status if there is a change in normal bargaining power. Such a change is reflected in an alteration of the strategic position of rivals. Integration, both vertical and horizontal, as a strategy that is either defensive or offensive in purpose and which affects the strategic reconfiguration of rivals also falls into the category of resource.

Macgregor (ibid.) then turns to the causes of combination concerning both trusts and cartels. This was a subject that had hitherto received insuf­ficient attention by economists and government policy makers. Rather, their focus had been on preventative and ameliorative measures in address­ing markets under abnormal conditions, for example, over-capitalisation and tariffs.

Macgregor (ibid.) proceeds to offer a comparative analysis of various struc­tures of combination using two methods, historical evolution in the same country and the preferred lateral comparison across countries, namely England, America and Germany. The distinctions between trusts and cartels are clearly delineated and deftly considered in his comparative analysis. Then, Macgregor carefully addressed the matter of ‘labour combination’ as a response to combination. As a competitive response, not only do cartels beget cartels and trusts beget trusts, industrial combinations beget trade unions. Bargaining power is the primary motive for organised labour.

A thorough consideration of the effects of industrial combination on a nation, including public policy, are attended to in the final portion of Macgregor’s volume. Combination has had a transformative impact not only on industries and countries but also on the way in which they should be analysed. Combination often fosters innovation with respect to both product and process. Macgregor’s (ibid.: 195) evidence supports the notion that tradi­tional monopoly analysis should not be so quickly applied as it is ‘rarely appli­cable’. Further, combinations generally evolve not because of productive efficiency but rather as defensive or offensive competitive manoeuvres. Competition is anything but impersonal, atomistic and determinate; rather, it is strategic, even woolly, and indeed natural. Macgregor concluded that gov­ernment should be particularly circumspect in addressing combination. He (ibid.: 232) warned that in America, trusts, not just cartels, may be subject to the Sherman Act of 1890 which forbade ‘monopoly, or the attempt to do so’. Macgregor feared England would blindly follow America’s legislative example, leading him to recommend that, ‘The best advice for the period of transition is to avoid passion, and prejudgment, and the terrorism of mere size; to per­ceive that the extortion of a few strong producers can be remedied otherwise than by drastic interference with economic tendencies’ (ibid.: 241).^{[86] [87]}

Macgregor provided a new introduction for the 1938 reprint of Industrial Combination! By this time, the “Trust Problem” had become benevolently referred to as “Rationalization”. Trusts were to be encouraged rather than deterred as they had proven to be the fittest method of competition; more­over, they were a common feature of the industrial landscape by 1938. In this new introduction, Macgregor observed ‘there is a similarity with the history of the Joint Stock, which at first attracted much attention as it superseded the private firm, and then fell into line as an approved and normal development’ (Macgregor 1938: page unnumbered).

Imperfect competition, notably oligopoly, had indeed superseded perfect competition. Such is the result of the natural evolution of industry, as Macgregor long argued and anticipated. Market forces mattered. Macgregor (1934: 6) stipulated that ‘“Evolutionism” does not mean merely letting things take their course’. Rather, it is ‘purposes and ideas’ dictated by the conditions of technological advancements and the organisation of industry as set forth by entrepreneurs and “captains of industry”.

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