The American auto industry is at the moment notoriously paranoid about its public relations. Although it pays for nearly 10 percent of all national advertising, the industry feels that it is treated unfairly by journalists, academics, and consumer advocates. The new chairman of General Motors, Richard C. Gerstenberg, has described the “developing crisis in communications” between the public and the business community, notably the automotive community. GM’s retiring chairman, James M. Roche, often addressed himself to the same problem. In a valedictory interview with the Wall Street Journal he urged that Americans stop attacking the auto corporations and pay more attention to the positive aspects of their lives. A few months before, he had pronounced that “American business, from the perspective of the world, is plainly in trouble.” “When free enterprise needs support,” he complained, “it finds itself the target of much irresponsible criticism that causes disunity in our society.”

Surrounded by this common contemporary suspicion, the auto corporations’ PR departments must be astonished to find two entirely responsible studies of the automobile business, published recently by the Harvard and MIT presses. Studies so responsible that they seem left over from the high tides of the Eisenhower years, from 1955, in fact, when US manufacturers sold more, larger cars than they did in 1970 and when Americans enjoyed the peace with prosperity that President Nixon is now trying to re-create: “In the past forty years we have had only two years with real prosperity, without war and without inflation,” the two fat years being, according to a White House gloss, 1955 and 1956.

The two authors are at least as positive-spirited as Roche and Gerstenberg. Lawrence White aspires to a dignified neutrality about the social merits of the American automobile. He writes that “a discussion of automobiles and the automobile industry can, in some circles, turn into a highly passionate argument with heated opinions traded on all sides.” He himself has never been an auto enthusiast. He possesses (and trades) no “strongly held opinions about the superiority—or inferiority—of the products that Detroit produces.” John Rae goes even further than White in rejecting vulgar modern fears about the economic role of the automobile. He too dislikes manifestations of passion and heat: “Unfortunately, urban transportation has…become an emotionally charged issue [and] generate[s] heated reactions from individuals and groups.” But where enthusiasm is unavoidable, he is an eager partisan of existing automotive arrangements. “Transportation,” he writes, “is social progress,” and “there is no substitute in sight for the highway and the motorized vehicle.”

Both authors ignore such popular criticisms of auto transportation as have become familiar since 1956. The purpose of White’s calmness is to make possible a “scholarly” economic description of the auto industry. The American auto business, he writes, is a “classic case of a tight oligopoly” (an oligopoly being, in the competitive theory of industrial organization, a market of few competing sellers). When he is forced to deal with noneconomic facts, he tries to provide cash or price values, or, at the very least, a scientific method. Even the back-slapping of the auto showroom is described with the help of what White calls “hard evidence,” the researches of a Chicago business economist named Allen F. Jung: “Jung first experimented with different approaches to the dealer, which involved timid-unknowledgeable, medium-knowledgeable, and forthright-knowledgeable approaches….”

White also applies his investigative methods to the “external costs” imposed on society by the automobile industry—i.e., costs such as air pollution which are external to the economic bargain between the consumer and the auto corporation. These costs are risky material for an economist averse to value judgments. White concedes that citizens have “feelings” about air pollution (and about congestion and the destruction of neighborhoods). But he finds himself in a methodological “quandary”: “an exact dollar amount cannot be placed on these feelings.” Unfortunately, the only careful study of the costs of air pollution has failed to find “any significant relationships between pollution levels and per capita cleaning and laundry bills,” or office and home cleaning expenditure, or deaths from lung disease, or worker absenteeism.

Similar trepidations inhibit White in his discussion of the external costs associated with auto safety. He writes that in 1967 there were 13.7 million auto accidents in the US, involving 24.3 million drivers and $10.7 billion worth of economic loss (“including the discounted future wages of those who died”). But, again, the costs and benefits of safety measures have not yet been studied statistically, and “it is arguable whether death can even be compensated for.” White may have been relieved to note the recent announcement by the Department of Transportation that it intended an upward revaluation of the economic cost to be imputed to death.

For White, this sustained value-neutrality has an ulterior purpose. His book is presented by the Harvard Press as a handbook for “economists, historians, business administrators, consumer groups and public policy-makers,” and in the Introduction he pronounces, that an economic understanding of the industry is “vital if the industry’s efforts are to be harnessed to public policy goals.” The book ends with “recommendations for public policy.” Concluding from his investigations of automotive oligopoly that the industry behaves in an imperfectly competitive way, White urges that the government take antitrust action to dissolve the auto corporations into smaller, more combative enterprises.


White’s book presents an academic version of the well-known argument that antitrust vigilance and a return to the robustness of late nineteenth-century free competition would save American consumers. Belief in antitrust regimens was characteristic of the middle 1950s: most antitrust activity against GM took place under Eisenhower, notably the suit divorcing GM and Dupont, which was decided by the Supreme Court in 1957.

Recently, the argument has been revived. According to the nervous automotive press, GM is taking the antitrust revival sufficiently seriously to start decentralizing and scrambling its automotive operations, in order to sabotage any future attempt at dissolution. Such strategically placed critics as Senator Philip Hart of Michigan and the Senate Antitrust subcommittee have entered the debate, in support of the “ordinary laws of economics” and the free enterprise system. Ralph Nader has said that the antitrust “comeback” will make evident the “contempt which many large corporations have for competitive capitalism.” White’s economic explanations are clearly meant to be traded in this boom market.

One of the disadvantages of the modern antitrust argument is that it tries to provide a (competitive) economic justification for an economic solution to political problems. This disadvantage is particularly grave when the argument is applied to the auto industry, which because of its “importance” (as noted even by White) has exceptional power to perpetrate political and social evil. White’s variation of the antitrust argument is less radical or humane than the versions implied by most congressional critics of the auto industry. But his explanations are relevant to a general evaluation of the argument: as a live economist, practicing competitive theory, he should not be ignored by the partisans of automotive free enterprise.

If the objective of antitrust policy is not only to preserve the ideals of free competition but also to prevent social harm (such as, in the case of the auto industry, waste of national resources, destruction of the natural and social environment, death, pollution, and decay), then antitrust advocates should show whether the social harms to be prevented are caused by economic concentration; what benefits could be expected to follow from increased competition; and whether the expected benefits are good, bad, or trivial from a political and social point of view. White and his less academic co-believers hardly attempt such demonstrations.

White, for example, only considers the auto industry since 1945, but even within that period he does not show how the behavior of the auto corporations degenerated as competition decreased. He neglects the extent to which the evil aspects of automotive development—including congestion, frequent death, the destruction of cities, and the wasteful emphasis on styling and model changes—were established in the 1920s, when between twenty and sixty American companies competed to produce passenger cars.

The expected effects of antitrust dissolution are discussed only briefly by White. How, one is left wondering, would the eight or so future auto firms in fact behave, under the new and desirable “loose oligopoly”? Does oligopolistic theory describe business life well enough to make any such prediction possible? White writes that if there were “more centers of initiative” in the auto industry (in other words, more auto corporations), various benefits would follow: “meaningful price competition,” “faster technological progress,” “faster response to changes in consumer taste.”

Price competition, even when meaningful, is a modest benefit compared to the costs of automotive development. White does not explain why an increase in the anarchy of competition should lead to accelerated technological progress. He admits that a ban on technical cooperation between the existing auto corporations would have “no spectacular results”: the Japanese auto industry—Detroit’s main competitor, even in such comparatively advanced areas as electrically-operated urban transportation and the development of rotating piston engines—is becoming rapidly more concentrated. “Faster response to changes in consumer taste” is another meager benefit. It is not made clear why such sharp-shooting responsiveness should be a proper objective for public policy. Would the three new firms of a dismembered GM provide model changes three times a year?

The interpretation of consumer desire is the weakest part of White’s argument. An explanation of the demand for automobiles is critical, not only for White’s descriptive economics but also for his policy recommendations. (The “public policy” recommendations of most aspiring trust-busters are directed at legislators and government officials, who are assumed to be preoccupied with the preservation of consumer welfare.)


According to competitive economic theory, social and institutional matters such as consumer taste should be treated as data external to the analytical model. White provides no economic arguments to explain consumer demand for automobiles. Direct statistical evidence is not available about the psychological preferences in question (such evidence would presumably involve mass introspection under laboratory conditions, with a random sample of Americans describing their most intimate feelings about fast and large cars, square and curving, safe and risky—about cars versus buses, subways, and remote-controlled taxis). White therefore assumes that the existing auto market corresponds pretty well to these implied desires: “This author believes that market allocation, stressing (for example) model changes, probably reflects accurately consumer preferences.”

White discovers no serious evidence to support this belief. The only part of his book where he abandons the language of scientific objectivity, where his prose becomes passionate, even heated, is a passage in which he attempts to justify his assumptions about real consumer emotion:

A car perhaps represents one of the last bastions of privacy in modern America, where a man is away from his family and his boss and colleagues. He can sing, shout, scratch his ears, turn the radio on loud, and make threatening gestures and shout obscenities at other motorists, all without fear of social rebuke…. He has control over his immediate environment to a degree probably not equalled elsewhere in his daily routine.

This vista of liberation is not entirely successful in obscuring the disadvantages of White’s argument. Owning and driving a car satisfies psychological desires—but people have an infinite number of conscious and unconscious desires, some of which are a lot more likely to be satisfied than others. White does not, for example, rely on antitrust adjustments to satisfy the psychological desire not to be killed in an auto accident. His proposed public policy on auto safety requires government planning and intervention: to provide and to compel corporations to provide information about auto accidents. He seems troubled by the intuition that the need to stay alive is somehow more “real” even than the need for privacy, and that consumer attitudes to auto safety are somehow affected by the promotional policy of the auto corporations. He suggests that insurance companies should be “urged” (by government and legislators) to offer economic incentives for driving safe cars, in case “drivers’ preference functions are such that they are indifferent to safety features per se….”

White underestimates not only a process as intensively studied (since 1956) as the inflection of demand by advertising and psychological persuasion. He also neglects the entire pattern of social and economic support on which automotive power depends: a low level of auto taxation (even before Nixon’s recent bonanza with the auto excise tax); a gasoline tax which is dedicated to the building of more roads; federal and state subsidy for the highway construction program and for an auto-dominated organization of urban and suburban development; abandonment of public transportation; acceptance of communal responsibility for the costs, in pollution and destruction, of automotive growth.

These fiscal and social incentives make it rational as well as hedonistic to want a private automobile. White evokes the car as a bastion of privacy but the car serves as such a bastion only because national resources have for the last sixty years been mobilized to support automotive development. If in 1910 some Ford-like entrepreneur had developed an advanced technology for mass-producing cheap second houses, every American family might by now own two or three extra houses: convenient shacks (easily accessible on foot or by public transportation) to which the father of the family might retreat as to the supreme bastion of social privacy. Other scenarios can be constructed for other durable consumer goods. If one fifth of the nation’s resources had been committed since 1910 to the automation of housework, women would now have increased control over their immediate environments: automotive liberation has usually been bestowed not on women but on the family, taking trips for vacations and week-ends, or on men, driving to work, scratching and shouting.

The ways in which the auto corporations sustain their economic power have not been neglected by the industry itself, or by its apologists. John B. Rae, for example, describes the structural basis of automotive development with revealing frankness. Rae, while quite as eager as White to claim academic objectivity, writes about the automobile with much simpler partiality: his book (in four parts, “The Road Yesterday,” “The Road Today,” “The Road and the City,” “The Road Ahead”) is a hymn to the automotive superstructure which White ignores.

The book’s dedication page reveals that Rae’s studies were made possible by a “research grant from the Automobile Manufacturer’s Association Inc.” His acknowledgments provide a guided tour of auto-industrial power: the Transportation Research Department of the AMA, officers of Chrysler, Ford, GM, and American Motors, the Automobile Club of Southern California, the Federal Highway Administration, the Ford Archives, the National Highway Users Conference Inc., the Rand Corporation. (The MIT Press, perhaps embarrassed by this galaxy of subvention, contributes a modest blurb: “There is a strong tendency at present to look at the adverse features of highway transportation, and this book attempts to put forth a more balanced view of its possible benefits….”)

Rae describes the history of highway construction from Babylon to Reston, Virginia: “Since the Roman Empire built its 50,000 miles of main highway, there has been no road system in the world to compare with the 41,000 miles of US Interstate.” The “culmination of American highway policy” was the Federal Aid Highway Act of 1956, establishing federal funding for interstate highways. The interstate system has so far cost about $50 billion, nearly twice as much as originally estimated, a cost overrun attributed by Rae in part to the fact that the transportation of long-range ballistic missiles requires extra high bridges and extra wide tunnels.

In the US, efficient road building developed with the gasoline tax. Rae dismisses diversion of highway revenues (for purposes other than that of building new highways) as involving “unsound principles of taxation,” and he refers readers to an essay by his friend at the Auto Club of Southern California, called “Raids on the Gas Tax.” By now, he writes, more than half of all states have passed “anti-diversion” legislation.

The social arrangements that support the development of the automobile are, according to Rae, almost all good. He claims the accessibility of Yellowstone Park as an automotive benefit (bus and rail services into Yellowstone being apparently inconceivable). Suburban planning is also progressive: the suburban “millions” are “looking for a sense of community which the great city does not provide.” Rae even struggles with the sociology of the relationship between car ownership and the religious habits of Americans: “The automobile made it possible for people to travel greater distances to the church of their choice…. [There are] a number of drive-in churches….”

One of the main discoveries of contemporary (“irresponsible”) criticism of the auto industry is that automotive power—including the power to determine consumer demand—is based on favoritism that political and economic institutions have shown the auto industry. It is precisely the structural and institutional arrangements neglected by competitive economic theory which explain the power of the auto industry, and the ways in which that power can be attacked.

An assault on the political base of automotive domination is a much more radical undertaking than the competitive adjustments proposed by antitrust activists. Such an assault could attack all the social waste involved in the production of automobiles. Increasing competition would never, for example, alter the conditions of work within the auto corporations: neither White nor Rae, of course, considers the situation of auto workers to be relevant to the economic structure of the auto industry.

Even the least ambitious attempt at a public policy to regulate the auto industry requires an understanding of the industry’s power. The strength of the present criticism of GM and the other auto corporations is recognized by the corporations’ executives (if not by writers like Rae, through enthusiasm, or like White, through remorseless impartiality). Arguments for antitrust policy depend more on faith in free competition than on scientific explanation or prediction: preoccupation with such arguments can only distract the strength of the auto industry’s enemies.

This Issue

February 24, 1972