Letwin was no libertarian, and is mostly overlooked by libertarian scholars. However, his work is well worth remembering. Libertarians should be better acquainted with at least two of his contributions: his book Law and Economic Policy in America, and his introduction to a 1975 edition of The Wealth of Nations. His little book, The Origins of Scientific Economics: English Economic Thought 1660-1776, is another jewel.
Law and Economic Policy in America is a learned work on the origins of the Sherman Act, sharply narrated with all the political economy implications. Letwin examined both the (rather stretched) common-law rationale for competition policy, and the politics of competition policy, in its genetic moment. As the saying goes, if you like laws and sausages, you should never watch either one being made. But perhaps watching how competition policy was (and is) made will be an eye-opener for some. Letwin’s book is still a masterpiece in explaining how anti-monopoly sentiment built up in American public opinion.
Letwin distinguished between the attitude towards contract ‘in restraint of trade’ as emerged through the complex working of common law jurisprudence, and the way in which a widespread scepticism towards ever-larger corporations grabbing the advantages of economies of scale at the detriment of smaller businesses smoothed the way for a very different kind of legislative measure.
He reminded us that:
‘[A]gitation for antimonopoly laws was first led by the Grangers of Patrons of Husbandry. Founded two years after the Civil War and at first intended to serve the social and educational needs of farmers, it soon became involved in economic and political activity. By 1871, its founder reported that “Cooperation” and “Down with monopolies” were proving popular watchwords (…) “Cooperation” meant organization of farmers’ cooperatives, while “Down with monopolies” meant principally regulation of railroads.’
Anti-monopoly meant basically regulation of railroads, together with fixing reasonable maximum rates and otherwise regulating their behaviour.
Hatred of trusts was rather common, Letwin explained, but:
‘[T]he kind of remedy that the public desired was also clear enough: it wanted a law to destroy the power of trust. (…) But the desire was not and, in the nature of public opinion, could not be expressed in much greater detail.’
The conclusions of the book are in themselves rather indicative of Letwin’s sober arguing style. He considers the argument, congenial to many a libertarian, that:
‘[I]f (…) monopoly were not forbidden by law, and a monopolist set prices so as to earn an unusually high rate of profit (…) he would inevitably be inviting competition.
‘One great assumption, however, which this argument treats casually is that competitors will be called in “sooner or later”. It is a critical phrase. (…) Again, to accelerate the breakdown of monopoly is desirable because it destroys undue private power, but to do so by government action may contribute unduly to the power of government.’
‘The quandary of antitrust policy’ makes it, to quote Robert Bork, a policy at war with itself. Reading Letwin may teach us how, no differently than other public policies, antitrust was right from the beginning the product of the interplay of special interests.
Letwin’s ‘Introduction’ to Adam Smith’s The Wealth of Nations is a short masterpiece about the opus magnum of the economic science. Letwin begins by noting that ‘all great books are liable to be misunderstood’ and Smith’s more than other because it presents ‘a conjunction of science and polemic’: it is both a treatise in economic science, and perhaps the most powerful invective ever against mercantilism. Plus, it is ‘so rich in detail and complex in texture’, as Smith was never relinquishing his reader’s attention and produced, with style, a masterpiece of complexity – aptly, as he aimed to vindicate the harmonious working of a spontaneous order.
And still, Letwin wrote:
‘[T]he whole of The Wealth of Nations is a single protracted argument. Smith set out to prove that the best of all economic policies is to leave the economy to work according to its own intrinsic laws or, what is equivalent, to leave each person to respond as he will to his own natural economic incentives.’
‘Very little of the mercantilist mentality’ escaped Smith’s attention, Letwin explained.
‘But like other popular errors, this one too has great powers of survival; and so, although Smith demolished its intellectual foundations, mercantilism still exists. (…) Smith was better able to change men’s beliefs, than to revise their desires. The will of some men to prosper at the cost of others is not broken by reading books on economics.’
Nor may it be by reading Letwin’s excellent introduction to Smith. However, his careful clarifying and his gentle reinforcing of the arguments of the great Scot can certainly be of use to those that are trying to remake those very arguments every day. For one, it is a great lesson in intellectual honesty – a rare and yet indispensable quality, for those defending the free society above anybody else. May he rest in peace.
This article was originally published by the Cato Institute.