Interesting video on Standard Oil

[Rockandrock44]

I was discussing the topic of Standard Oil with someone and the fact that it did not engage in monopolistic practices in the comments of a YouTube video, and soon after he put up this gem:

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In case you don't want to watch it, here's a summary:

He attacks an article by the Mises Institute titled "100 Years of Myths about Standard Oil"
http://mises.org/daily/5274/100-Years-of-Myths-about-Standard-Oil

He states that it is biased in favor of "anti government fear mongering". He states that people who subscribe to "Mises economics" have a foundational bias. He summarizes the article and states that "the author couldn't imagine how an offer willingly accepted by consumers  could be unfair to them absent force or fraud". He references John McGee's peer reviewed articles, calling the claim that he studied the historical facts in depth as an "argument from authority".

He states that the article states that utilizing predatory pricing would harm a company more than consumers, but FSAthe1st claims that a firm could simply lower prices to eliminate all of the competition, and then jack up the price again when there is no more competition. He states that the article claims that predatory pricing is using "substantial monopoly power that is used to increase prices, thereby reducing the outputs sold.", and he states that this definition is wrong.

He states that the article is biased once again, and that it poisoned the well by stating that Ida Tarbell's book History of the Standard Oil Company was written because her father was driven out of business by Standard Oil. He states that predatory pricing means that there are price cuts that destroy the competition and "prices them out of the market", which Standard Oil was more than capable of doing. He states that Standard Oil bought tons of stock and had such a large stock of oil that they started to export to China. He says that anyone who claims that monopolies cannot exist in a free market or that they are due to antitrust legislation is to take note that Standard Oil was huge before legislation was passed.

He claims that Standard Oil used unfair competition practices that included "competition absorption and elimination" and the formation of a trust. By 1906, Standard Oil had a huge market share before the antitrust lawsuit. He states that Wikipedia is a good source for all this. He states that Standard Oil would've been a monopoly without legislation, and this defeats the myth that monopolies can't happen on a free market, and that one shouldn't use libertarian "evangelism".  He states that the article uses fear mongering, poisons the well, and is hypocritical.


Thoughts?

[Virgil0211]

I was discussing the topic of Standard Oil with someone and the fact that it did not engage in monopolistic practices in the comments of a YouTube video, and soon after he put up this gem:

[yt]lAs00RhDzQ0
[/yt]

In case you don't want to watch it, here's a summary:

Ho boy. Here we go again.

He attacks an article by the Mises Institute titled "100 Years of Myths about Standard Oil"
http://mises.org/daily/5274/100-Years-of-Myths-about-Standard-Oil

He states that it is biased in favor of "anti government fear mongering". He states that people who subscribe to "Mises economics" have a foundational bias.

FSAthe1st just doesn't seem to understand that bias is only relevant AFTER one has countered the information within the article. The fact that he opens up with this just indicates his primary reliance on rhetoric over reasoning.

He summarizes the article and states that "the author couldn't imagine how an offer willingly accepted by consumers  could be unfair to them absent force or fraud".

This is an appeal to ridicule. Though not a fallacy in and of itself, one should establish their premises first. FSAthe1st has decided to prioritize derision and mockery over the presentation of his case. This doesn't bode well for the rest of the analysis, and may indicate a predisposed bias against the article's conclusions, but we will leave that for when the arguments in the video have been properly examined.

He references John McGee's peer reviewed articles, calling the claim that he studied the historical facts in depth as an "argument from authority".

By that argument, citing a peer reviewed paper by Dr. Jack Stoszack(sp?) to argue in favor of abiogenesis is an argument from authority. If FSAthe1st is not willing to read the papers and analyze the claims therein, he most certainly doesn't need to bring up this weak assertion. In order to be an argument from authority, the author of the article would say something along the lines of "John McGee's studied the situation, therefore his opinion is correct" without actually citing the data within the analysis itself.

He states that the article states that utilizing predatory pricing would harm a company more than consumers, but FSAthe1st claims that a firm could simply lower prices to eliminate all of the competition, and then jack up the price again when there is no more competition.

Which would then result in what? Did he even read the section of the article that covered this? For good measure, I'll quote it here:

"That is, predatory pricing costs the supposed predator far more than it costs the prey, who can further expand the cost difference by temporarily shutting down. Unless the predator is allowed to buy up a victim driven to bankruptcy, others can buy up those assets cheaply, thus allowing them to again compete with the predator and reenter effective competition. Without the ability to prevent entry once monopoly pricing is attempted, the monopoly payoff disappears. Because it requires monopoly power to finance predation, predation cannot be the source of monopoly power."

He states that the article claims that predatory pricing is using "substantial monopoly power that is used to increase prices, thereby reducing the outputs sold.", and he states that this definition is wrong.

This is simply wrong. Predatory pricing is explained first in a quote by Dominic Armentano, and second in the article itself. Here they are in that order.

"The popular explanation of this case is that Standard Oil monopolized the oil industry, destroyed rivals through the use of predatory price-cutting, raised prices to consumers and was punished by the Supreme Court for these proven transgressions. Nice story but totally false."

"The Standard Oil myth implied that our competitive system could be undermined by predatory pricing, in which large firms would destroy smaller firms and then use their monopoly power to raise prices to consumers. Combined with fears that such predatory tactics could also be used in other industries, it led to several antitrust laws designed to protect consumers against those mythical abuses."

This is the proper use of the term predatory pricing. Looking through the article, I can't find anything that even remotely resembles FSAthe1st's claim from above.

He states that the article is biased once again, and that it poisoned the well by stating that Ida Tarbell's book History of the Standard Oil Company was written because her father was driven out of business by Standard Oil.

1 paragraph out of 15 and 45 words out of 1,240. I can see a great deal of emphasis was placed on this.

Problem: Poisoning the well involves dismissing the argument because of the source, essentially an ad hominem fallacy. The book was being cited as the most famous source for the story, not specifically being rejected because of its background info. It described a bit of background and then moved on to actually debating the point. It is not a fallacy if someone points out potentially damning background information without relying on it for their argument. However, he may have a point that it could've been better utilized after the information had been presented.

In addition, FSAthe1st has yet to present any argument that effectively counters the article, and thus still has no basis for his accusation of bias. Even if he did, it is irrelevant to the validity of the argument. Biased != automatically incorrect. It can only explain WHY a source was incorrect after this has been established.

He states that predatory pricing means that there are price cuts that destroy the competition and "prices them out of the market", which Standard Oil was more than capable of doing. He states that Standard Oil bought tons of stock and had such a large stock of oil that they started to export to China.

And he doesn't even make an attempt to counter the argument in the paper against predatory pricing OR to address the peer reviewed analysis cited within. Yes, Standard Oil had a great deal of capital and was a large company. This doesn't address the problems with the practice of predatory pricing that were described within the first few paragraphs of the article, and which I've already quoted. 

He says that anyone who claims that monopolies cannot exist in a free market or that they are due to antitrust legislation is to take note that Standard Oil was huge before legislation was passed.

Again, he doesn't address anything in the later segments of the article, and he still hasn't established how the size of the company is relevant to contradicting those arguments. If he feels it should be obvious, then that should make it all the easier to explain. Otherwise, he's simply relying on the emotional weight that 'big evil corporations' have with his audience.

He claims that Standard Oil used unfair competition practices that included "competition absorption and elimination" and the formation of a trust.

And his evidence for this is...?

By 1906, Standard Oil had a huge market share before the antitrust lawsuit. He states that Wikipedia is a good source for all this.

Again, how does size matter in this argument? He needs to connect the dots.

Actually, peer reviewed sources, such as those cited within the article, are quite a bit better. It's a shame he didn't take the time to read the peer reviewed sources rather than falling back on wikipedia.

He states that Standard Oil would've been a monopoly without legislation, and this defeats the myth that monopolies can't happen on a free market, and that one shouldn't use libertarian "evangelism".

In order for it to 'defeat the myth', he must first establish that this would have occurred absolutely without legislation. He has yet to do this in any capacity.

Secondly, I'm only aware of a few people who argue that monopolies are an absolute impossibility on the free market. The disagreement is over how difficult it is for them to form, how well they can maintain that status, whether or not it actually grants them the same market power as a government-supported monopoly, etc. In order for monopolies to form in a free market, they would have to be so effective and so competitive that absolutely no other entity could compete with them in that market. They couldn't cheat by using patents or any kind of government support, and would have to maintain this level of competitiveness for as long as it wished to maintain this status. They also could not raise their prices far beyond the advantage granted to them by economies of scale, or else local competition would start springing up. Basically, they would have to behave almost exactly the same as a competitive company, or else risk competition coming back.

If he wants to label his opponents as evangelists, then he probably should avoid making such logically vacuous arguments in an apparent political crusade.

He states that the article uses fear mongering, poisons the well, and is hypocritical.

He really hasn't established fear mongering, though that's a rather amusing accusation from someone who declares that we need government to protect us from evil corporations.

His one claim of 'poisoning the well' doesn't even hold up to minor scrutiny, so it's hard to see why he included that in his summation.

Hypocritical how? Even then, how is that relevant to the argument? Ad hominem tu quoque, a fallacy FSAthe1st seems to have a history of committing in the comments of the bogosity podcasts and on Nightmare060's videos.

Thoughts?

On the video, or whether or not FSAthe1st actually has them anymore? :-P

Actually, would you mind terribly doing this for some of FSAthe1st's other videos? The more details, the better.

[MrBogosity]

What Virgil said, plus:

He states that the article states that utilizing predatory pricing would harm a company more than consumers, but FSAthe1st claims that a firm could simply lower prices to eliminate all of the competition, and then jack up the price again when there is no more competition.

Yes, that worked so well for the Bromkonvention, didn't it? That's the only case in history I can find where a monopoly actually tried that. I pointed that out to one of these anti-market statists, and he accused me of arguing from anecdote. I told him if what he said were true, he should be able to find case after case to the contrary. Where were they? He never responded. They just can't seem to get the idea that the burden of proof is on them.

He says that anyone who claims that monopolies cannot exist in a free market or that they are due to antitrust legislation is to take note that Standard Oil was huge before legislation was passed.

Being big does not make you a monopoly. I don't know where these people get that idea from. If you live in a small town with one small hardware store, and the town council passes a law that his hardware store is the only one there can be, his tiny hardware store is a monopoly--an actual monopoly, by definition, and not by the flexible and ever-changing definition these guys use.

By 1906, Standard Oil had a huge market share before the antitrust lawsuit.

They had a little over 60% of the market.

He states that Standard Oil would've been a monopoly without legislation,

Ah, has access to other quantum-world timelines, does he? Or was he hit by divine revelation?

At the moment, I'm having trouble finding a historical graph of refined oil prices (NOT crude oil; Standard Oil's market was in refined oil), but if you come across one, you'll notice high oil prices before Standard Oil came into dominance, then you'll see them fall down to their lowest and stay there until 1911 when Standard Oil was broken up, at which point the price starts going up again. That tells the whole story, IMO.

Oh, and welcome to the forum!

[Travis Retriever]

Sure, I'll add my 2 cents as well.

I find it a bit pathetic that FSAthe1st argues that we need a violent monopoly in order to protect us from the possibility of voluntary monopolies. (monopoly being used in the literal sense of sole seller of a good or service).
Self detonating argument FTL.

Also, I prefer Lord T Hawkeye's definition of "monopoly" being someone who has coercive privileges from an entity such as the state to be the sole seller of a good/service (e.g. Local telephone/power monopolies in the USA, and the NHS in the UK).  His reason being that if you use the literal definition, then every single time a new product or invention comes along, the first person to sell it has a monopoly (nuuu! :O) during the time it takes for someone to make their own version of it.

Also, welcome to the forum, Rockandrock44.

[Rockandrock44]

Here's my analysis of it:

He attacks an article by the Mises Institute titled "100 Years of Myths about Standard Oil"
http://mises.org/daily/5274/100-Years-of-Myths-about-Standard-Oil

He states that it is biased in favor of "anti government fear mongering". He states that people who subscribe to "Mises economics" have a foundational bias.

First off he incorrectly claims that the article is "fear mongering", which it is doing no such thing. There is a difference between pointing out the negative (unintended) consequences of a given policy and "fear mongering".  He claim that the article is "biased" is weak considering almost any article or Op-Ed is likely to take a certain position and therefore be "biased" according to him.

It's funny as he uses State statistics in other videos as if they cannot be biased or manipulated to serve the ends of the State (not claiming they are, but that is definitely within the realm of possibility).

One can also claim that Statists have a "foundational bias" toward using the State (and therefore violence) to solve complex social problems, so this whole section is a wash at best.

He summarizes the article and states that "the author couldn't imagine how an offer willingly accepted by consumers  could be unfair to them absent force or fraud". He references John McGee's peer reviewed articles, calling the claim that he studied the historical facts in depth as an "argument from authority".

The McGee comment is hilarious. I was the one who actually sent him a citation of the peer reviewed article. It  can be found here if anyone is interested:
http://www-personal.umich.edu/~twod/oil-ns/articles/research-oil/research-oil/john_mcgee_predatory_pricing_standard_oil1958.pdf

Another good article that has many footnotes and citations (while not peer reviewed in and of itself) is here:
http://www.cato.org/pubs/pas/pa-169.html

FSA does not state how an offer is "unfair" if it accepted by consumers absent force or fraud other than ridiculing the idea, so it can be dismissed. On the contrary, Standard Oil's practices benefited the consumer via lower prices and higher output (the opposite one would observe in a monopoly).

He states that the article states that utilizing predatory pricing would harm a company more than consumers, but FSAthe1st claims that a firm could simply lower prices to eliminate all of the competition, and then jack up the price again when there is no more competition.

As stated by others, this completely ignores the various problems with the predatory pricing scheme. FSA conveniently overlooks the fact that a company must suffer large losses in order to sustain lower prices needed to eliminate competition, with no guarantee that they will make up these losses in the future. There is no evidence Standard Oil did this; on the contrary, Standard Oil only lowered prices by lowering their cost of production. In the comments section of another video FSA admitted that there was no evidence that Standard Oil ever practiced predatory pricing, but that it "could happen". Unfortunately, empirical evidence disagrees with him and the theoretical case is dubious at best.

He states that the article claims that predatory pricing is using "substantial monopoly power that is used to increase prices, thereby reducing the outputs sold.", and he states that this definition is wrong.

This is a quote mine, ironically. The article's full sentence is:
"The mechanism of predatory exploitation of consumers requires substantial monopoly power that is used to increase prices, thereby reducing the outputs sold."

This wasn't supposed to be a definition of predatory pricing, but an explanation of how a firm would regain their losses after eliminating competition (the 2nd part of the predatory pricing).

He states that the article is biased once again, and that it poisoned the well by stating that Ida Tarbell's book History of the Standard Oil Company was written because her father was driven out of business by Standard Oil.

Merely pointing out that Ida Tarbell had a motive to speak out against the company is not a logical fallacy.

He states that predatory pricing means that there are price cuts that destroy the competition and "prices them out of the market", which Standard Oil was more than capable of doing. He states that Standard Oil bought tons of stock and had such a large stock of oil that they started to export to China.

FSA ignores the section of the article that debunked the idea that predatory pricing is an effective way of gaining a monopoly or monopoly profits, and the fact that Standard starting losing market share before the legislation was enacted actually refuted his idea that Standard Oil was on the verge of being a monopoly.

He says that anyone who claims that monopolies cannot exist in a free market or that they are due to antitrust legislation is to take note that Standard Oil was huge before legislation was passed.

Market share started to dip before the legislation and following Antitrust suit was passed, so this is patently false. Standard Oil was huge, but not a monopoly. The other issue is the subjectivity of the term "monopoly". If one zooms in close enough, almost anything is a monopoly. Does McDonalds have a monopoy in Big Macs, or does Coke have a monopoly in Coca-Cola?

Better still, it did not act like a monopoly . Instead it consistently lowered prices and increased output, a fact even FSA admits.

He claims that Standard Oil used unfair competition practices that included "competition absorption and elimination" and the formation of a trust.

As long as he did not eliminate competition via force or fraud, it benefited the consumer to do so. The competition was simply not as efficient as Standard Oil was. And yet this is supposed to be a bad thing?

By 1906, Standard Oil had a huge market share before the antitrust lawsuit. He states that Wikipedia is a good source for all this. He states that Standard Oil would've been a monopoly without legislation, and this defeats the myth that monopolies can't happen on a free market, and that one shouldn't use libertarian "evangelism".  He states that the article uses fear mongering, poisons the well, and is hypocritical.

He has no clue whether or not Standard Oil would've been a monopoly, and the evidence says that it was improbable as Standard was losing market share before the Antitrust legislation even began. The article uses no fear mongering, and he does not elaborate on how it is "hypocritical" (he probably just wanted to add another insult for good measure).

Another great article if anyone is interested in this topic in further detail is here:
http://www.thefreemanonline.org/columns/john-d-rockefeller-and-the-oil-industry/

I can do another play-by-play of his other videos (the one on the NHS, etc) if you like. Should I make another thread or just do it here?

[Travis Retriever]

So who wants to link our dear old boy, FSAthe1st, to this thread, or shall I? :3

[Virgil0211]

So who wants to link our dear old boy, FSAthe1st, to this thread, or shall I? :3

Careful. The sumbitch might block you for 'spamming'. Or make some other vacuous comment.

I can do another play-by-play of his other videos (the one on the NHS, etc) if you like. Should I make another thread or just do it here?

It's up to you. Personally, I'd prefer individual threads, but that would be so that I could organize analyses better and such. However, that might be riding the edge of flooding. Maybe better ask Shane what would be the best thing. I'd love to actually post a rebuttal to these things around here. At least then it'd feel like I was doing something about it.

[MrBogosity]

Different subjects should have different threads. Posting threads or posts with content is NEVER flooding; flooding is making post after post of copypasta or nonsense to try and clog up the forum or stop others from replying.

[Lord T Hawkeye]

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A nice vid from Stefan.  How to destroy the robber baron myth without even needing to know a single historical fact.