David Gordon - The Essential Rothbard

THE ESSENTIAL ROTHBARD

THE ESSENTIAL ROTHBARD

DAVID GORDON

Copyright 2007 Ludwig von Mises Institute

All rights reserved. No part of this book may be reproduced in any manner whatsoever without written permission except in the case of reprints in the context of reviews. For information write the Ludwig von Mises Institute, 518 West Magnolia Avenue, Auburn, Alabama 36832 U.S.A.; www.mises.org.

ISBN: 10 digit: 1-933550-10-4
ISBN: 13 digit: 978-1-933550-10-7

CONTENTS

3. Man, Economy, and State:
Rothbards Treatise on Economic Theory

INTRODUCTION

M urray N. Rothbard, a scholar of extraordinary range, made major contributions to economics, history, political philosophy, and legal theory. He developed and extended the Austrian economics of Ludwig von Mises, in whose seminar he was a main participant for many years. He established himself as the principal Austrian theorist in the latter half of the twentieth century and applied Austrian analysis to topics such as the Great Depression of 1929 and the history of American banking.

A person examining the books and articles of Murray Rothbard without prior acquaintance with their author could not help wondering whether five or six prolific scholars shared the name Murray Rothbard. Surely one man could not alone be the author of books in so many different academic fields, as well as hundreds of articles on contemporary politics. Anyone who had met Murray Rothbard, however, would experience no such bafflement at the scope of his immense intellectual productivity. His amazing mental quickness and energy made what would be a puzzle in almost anyone else a matter of course for him.

Rothbard was no ivory-tower scholar, interested only in academic controversies. Quite the contrary, he combined Austrian economics with a fervent commitment to individual liberty. He developed a unique synthesis that combined themes from nineteenth-century American individualists such as Lysander Spooner and Benjamin Tucker with Austrian economics. A new political philosophy was the result, and Rothbard devoted his remarkable intellectual energy, over a period of some 45 years, to developing and promoting his style of libertarianism. In doing so, he became a major American public intellectual.

I shall endeavor in what follows to provide a guide to the main lines of Rothbards thought, through an account of his major books and a number of his articles.

THE EARLY YEARSBECOMING A LIBERTARIAN

M urray Rothbard was born March 2, 1926, the son of David and Rae Rothbard. He was a brilliant student even as a young child; and his academic record at Columbia University, where he majored in mathematics and economics, was stellar.

At Columbia, the philosopher Ernest Nagel impressed Rothbard a great deal. Nagel was always ready to engage students in discussion: Rothbard said that he always appeared eager to learn whether a student could contribute to a problem that was puzzling him. Nagel stressed careful analysis of arguments; and in a class that Rothbard attended on the philosophy of the social sciences, Nagel criticized the institutionalist school for its opposition to economic theory. Nagel maintained that economists should not confine themselves to amassing data. A good theory explains the facts: it does not just reproduce them.

If so, the main objection of the institutionalists to economic laws failed. They claimed that theoretical statements were inevitably only approximately true, since they can never reproduce with full accuracy the details of the real world.

Institutionalists conceive of economic theory as only relative to particular historical situations; therefore universal economic theoretical laws are illegitimate. According to the institutionalists, each theorist discourses on the most pressing problems of his day.... So they conclude that economic theorists are selective. But any scientific inquiry is selective!

Nagel admitted the premise but denied the conclusion. An explanation does not aim to reproduce the world, just to account for it. If the economist says, e.g., that under certain conditions, if the price of a good falls, the quantity demanded will increase, his explanation cannot be faulted for failure to list every detail about each particular market.

A theory must: (1) explain, (2) afford means for prediction.... To criticize a theory (as do the institutionalists) on the ground that the fundamental assumptions are not supported by statistical evidence is very weakit takes centuries to accumulate evidence.

Rothbard absorbed Nagels point about explanation and never deviated from it; but he soon came to reject Nagels views on prediction.

In accepting theory, he differed with the teaching of most of the faculty of the Columbia economics department. Many of the most important professors accepted the institutionalist creed. Heavily influenced by Wesley Clair Mitchell, the key figure in the National Bureau of Economic Research, Arthur Burns and John Maurice Clark looked at economic theory skeptically.son. No close academic relationship ever developed between the two during Rothbards stay at Columbia, however.

Fortunately one of his teachers, George Stigler, was not averse to theory; and in his lectures Rothbard encountered arguments critical of price and rent control that much impressed him. Stigler, together with Milton Friedman, had written a pamphlet critical of price control, published by the Foundation for Economic Education. appeared in 1949, he devoured the book. He joined Misess seminar at New York University, becoming one of its main participants. For the seminar, he wrote a number of papers that he later in part incorporated into his published work: these included a report on the neo-Kantian economist Harro Bernardellis criticism of utility theory and an analysis of the quantity theory of money.

Meanwhile, Rothbard had graduated from Columbiahe was elected a member of Phi Beta Kappawith a major in economics and mathematics and had begun graduate work in economics.

a work of vast erudition. Rothbard said of him:

Prof. Dorfman is absolutely without peer as a pure scholar in the history of American economic thought and opinion. He makes most historians seem like journalists.... Dorfman was the first one to annihilate Arthur Schlesinger, Jr.s Age of Jackson. Schlesinger had presented Jackson as a proto-FDR, leading the forces of the masses against monopoly capitalism; actually, Dorfman showed that the Jacksonians were libertarian types: favoring free trade, laissez-faire, states rights, and hard money, and were pro-commerce.

Rothbard shared Dorfmans passion for historical learning, and his Ph.D. thesis on The Panic of 1819 remains to this day a standard work. Rothbard received his doctorate in 1956; he could not finish earlier owing to disagreements between Dorfman and Burns about how the thesis should proceed.

As he deepened his understanding of laissez-faire economics, he confronted a dilemma. If sound arguments showed that the market could supply goods and services better than the State could, why should one make an exception for defense and justice? Why here do we face a unique situation in which provision by a coercive monopoly outperforms the market? The arguments for market provision of goods and services applied across the board. If so, should not even protection and defense be offered on the market rather than supplied by a coercive monopoly? Rothbard realized that he would either have to reject