¹ Chandler, Alfred D. Jr., Strategy and Structure (Cambridge, Mass., 1962Google Scholar) and Cochran, Thomas, “Business Organization and the Development of an Industrial Discipline” in Williamson, Harold F., ed., Growth of the American Economy, 2nd ed. (Englewood Cliffs, N.J., 1951), 294Google Scholar.

² Stigler, George J., “Monopoly and Oligopoly by Merger,” American Economic Review (May, 1950), 23–24Google Scholar; Dewey, Donald, Monopoly in Economics and Law (Chicago, 1959)Google Scholar; Markham, Jesse, “Survey of Evidence and Findings on Mergers,” in Business Concentration and Public Policy (Princeton, 1955), 141–182Google Scholar; and Bain, Joe S., “Industrial Concentration and Government Anti-Trust Policy,” in Williamson, , Growth of the American Economy, 708–729Google Scholar.

³ Gardiner Means' testimony in Economic Concentration, Hearings Before the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary, U.S. Senate, 89th Congress, 1st Session, pt. 2, March-April (Washington, 1965), 9–10Google Scholar. Also see Berle, Adolf A., The Twentieth Century Capitalist Revolution (New York, 1954), 11Google Scholar.

⁴ North, Douglass C., Growth and Welfare in the American Past (Englewood Cliffs, N.J., 1965), 160Google Scholar.

⁵ See, for example, Diane L. Lindstrom, “Demand, Markets and Eastern Economic Development: Philadelphia, 1815–1840,” and Herbst, Lawrence A., “Interregional Commodity Trade from the West to the South, and American Economic Development in the Antebellum Period,” dissertation summaries presented at the Thirty-Fifth Annual Meeting of the Economic History Association, Philadelphia, 1974Google Scholar. Also see Niemi, Albert, State and Regional Patterns in American Manufacturing (Westport, Conn., 1974)Google Scholar.

⁶ Among contemporary industries classified as regional by the Census Bureau are malt liquor, dresses, inorganic chemicals, wooden furniture, house furnishings, fertilizers, fabricated structural steel, fabricated metal products and aluminum castings, as well as meat slaughtering and processing, sawmills and planning mills, printing, and gray iron foundries. Fluid milk, bread, industrial gasses, concrete, and brick are among those classified as local manufacturing industries. U.S. Bureau of the Census, Concentration Ratios in Manufacturing Industry, 1963, Pt. II, prepared by the Bureau of the Census for the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary, United States Senate, 90th Congress, 1st Session, 1967, Tables 25–26.

⁷ Schwartzman, David and Bodoff, Joan, “Concentration in Regional and Local Industries,” Southern Economic Journal, XXXVII (January, 1971), 343–348CrossRefGoogle Scholar.

⁸ For example, Frank J. Kottke, “Estimation of the Weighted Average Market Share for the Leading Four Firms in Markets Important to the Largest Companies in Each Industry Category, Where Any of These Markets Were Regional, 1954, 1958, 1963,” in Hearings on Economic Concentration, Pt. 8, pp. 5384–5392; Weiss, Leonard, “Average Concentration Ratios and Industrial Performance,” Journal of Industrial Economics, XI (July, 1963), 237–254CrossRefGoogle Scholar; Schwartzman, David, “The Effect of Monopoly on Price,” Journal of Political Economy, LXVIII (August, 1959), 352–362CrossRefGoogle Scholar, and Blair, John, Economic Concentration (New York, 1972), 9–11Google Scholar.

⁹ A more unorthodox, but for some purposes perhaps more useful, measure of concentration would involve calculating the largest firm's output as a percentage of total state consumption, rather than production, of a specific good. To investigate the sensitivity of our ratios to such a change, we calculated consumption-based ratios for five industries in 1860. For cotton and woolen goods, the ratios were generally lowered by shifting to the consumption definition, while for liquor and meat packing they tended to rise. Flour milling cocentration did not show a general pattern increasing in some cases and decreasing in others. What seemed apparent was that in some cases in which state consumption exceeded production by a large amount, imports went primaritly to urban areas, leaving rural producers free of outside competition and able therefore to maintain their monopolistic potential. Given the greater relative importance of the rural population, the resultant system of local monopolies in the countryside could still have been significant, even though urban markets were comparatively more competitive. We have postponed the research at county levels necessary to investigate this question in preference to developing the more conventional production-based concentration data contained in this paper. An even more refined mesure would account for the effect not only of imports from Europe and the North, but of plantation and home manufacture as well.

¹⁰ This question will be examined as part of a comprehensive study of antebellum industrial organization in the entire United States. Preliminary rank correlation analysis indicates number of firms to be poorly correlated with single-firm concentration, especially among such agriculturally-based industries as sawmilling and flour milling. The number of firms in an industry was significantly correlated negatively with concentration in the “newer” machinery industry and in iron manufacture. Where one—sided significance tests were used, based on the assumption of expected negative correlation, leather tanning was added to the former two and meat packing to the latter.

¹¹ Elsewhere we have estimated profit rates in southern manufacturing using a representative sample of firms. For the estimates, a full discussion of the techniques, and an analysis of the implication of the findings, see our papers, “Profitability in Antebellum Southern Manufacturing: Estimates for 1860,” Explorations in Economic History (forthcoming) and “Profitability and Industrialization in the Antebellum Southern Economy,” paper presented at the Annual Meeting of the Southern Historical Association, November, 1974 (mimeo.).

¹² The low-concentration group in 1850 consisted of boots and shoes, carriages and wagons, men's clothing, flour milling, leather, lumber, and tobacco; in 1860, of boots and shoes, flour milling, furniture, leather, lumber, and tobacco. The high concentration group in 1850 included chemicals, iron castings, liquor, machinery, and woolens; in 1860, chemicals, men's clothing, cotton ginning, cotton gins, iron castings, meat packing, rice milling, and woolens.

¹³ The calculations were as follows. For 1850:

¹⁴ This finding, assuming that the two groups are independent, may be explainable in a different way. The mean rate of return earned by the group of industries with low concentration is significantly more variable than the mean rate earned by the one consisting of highly concentrated ones. If this indicates a greater element of risk in industries characterized by low levels of concentration, such as flour or saw milling, the higher average profit rate could be reflecting a risk premium rather than monopoly power. The variance of the low-concentration group in each case analyzed is given by the numerator in the F-ratios:

¹⁵ Bain, Schwartzman, Weiss, and Rhoades and Cleaver, for example, all find a significant relationship between these variables, although not always a continuous one. Bain's analysis was similar to our test number 2, involving a comparison of a group of concentrated industries with a group of nonconcentrated ones, as was Schwartzman's. The others use various regression forms. Rhoades and Cleaver find the relationship to be strong only in industries in which 4-firm concentration exceeds 50 per cent. In his study, however, Victor Fuchs concludes that rates of return on assets were not very closely correlated with concentration ratios in any direct way, a conclusion that remains at variance with those of most such studies. Bain, Joe S., “Relation of Profit Rate to Industry Concentration: American Manufacturing, 1936–1940,” Quarterly Journal of Economics, LXV (August, 1951), 293–324CrossRefGoogle Scholar; David Schwartzman, “Effect of Monopoly on Price;” W. Weiss, “Average Concentration Ratios and Industrial Performance;” Rhoades, Stephen A. and Cleaver, Joe M., “The Nature of the Concentration — Price/Cost Margin Relationship for 352 Manufacturing Industries: 1967,” Southern Economic Journal, Vol. 40 (July, 1973), 90–112CrossRefGoogle Scholar; and Fuchs, Victor, “Integration, Concentration and Profits in Manufacturing Industries,” Quarterly Journal of Economics, LXXV (May, 1961), 278–291CrossRefGoogle Scholar. For a survey of other studies of this issue, see Weiss, Leonard, “Quantitative Studies of Industrial Organization,” in Intrilligator, Michael D., ed., Frontiers of Quantitative Economics (Amsterdam, 1971Google Scholar) and Sherman, Roger, “On the Question of Deconcentration,” Industrial Organization Review, Vol. 1 (1973), 87–100Google Scholar.

¹⁶ That the concentration-profit relationship was strongest for the industries manufacturing agricultural implements, machinery, iron work, and related capital goods (the production of which tended to be more remote from the ultimate consumer than such goods as flour or corn meal) lends support to the view that proximity to buyers or potential entrants may have induced sellers to abstain from using their market power.

¹⁷ See, for example, Commaner, William S. and Wilson, Thomas A., “Advertising, Market Structure and Performance,” Review of Economics and Statistics, Vol. 49 (November, 1967), 423–140CrossRefGoogle Scholar, and Ornstein, Stanley I., “Concentration and Profits,” Journal of Business, Vol. 45 (October, 1972), 585–619Google Scholar.

¹⁸ Studies of contemporary industries have uncovered a significant positive relationship between absolute firm size and profit. See, for example, Demsetz, Harold, “Industry Structure, Market Rivalry and Public Policy,” Journal of Law and Economics, XVI (April, 1973), 1–9CrossRefGoogle Scholar and Hall, Marshall and Weiss, Leonard, “Firm Size and Profitability,” Review of Economics and Statistics, Vol. 48, (August, 1967), 319–331CrossRefGoogle Scholar. To provide a preliminary analysis of this proposition for our nineteenth-century data, we ran tests of the hypothesis that the rate of profit of the largest firms was not significantly different from that earned by all firms in that industry. For 1850, 42 per cent did earn profits significantly higher than the industry average while only 11 per cent had profits significantly below. In 1860, 44 per cent earned rates above the average of the industry but only 14 per cent had rates below. On the basis of this preliminary investigation, size (and those influences related to size, such as age of firm or economies of scale) did exert an influence on profit rates.

¹⁹ There is an additional possibility that derives purely from our method for calculating the profit rates. No implicit cost for an owner's foregone salary was included in the calculations. Such an adjustment would lower the profit rate proportionately more for small firms than for large ones, thus its exclusion may overstate profits in smaller firms and understate it relatively in the larger firms that tend to have higher concentration rates. It is virtually impossible to determine from the census data which firms warrant inclusion of this implicit cost, and there are other counter influences, about which selectivity of application among specific firms is equally difficult. On these grounds no adjustment was made.