Book Review: Classical Economics: An Austrian Perspective on the History of Economic Thought, Volume II
[Book Review: Classical Economics: An Austrian Perspective on the History of Economic Thought, Volume II by Murray N. Rothbard]
Years ago Murray Rothbard set out to write an Austrian answer to Robert Heilbroner's The Worldly Philosophers. Rothbard was much more ambitious than Heilbroner, whose 347 pages only (lightly) covers from Adam Smith to The Modern World. Professor Rothbard kept finding more and more characters that influenced economic thought, resulting in a two-volume history of economic thought from the Austrian perspective. His death in 1995 kept him from finishing the third volume.
Volume II, entitled Classical Economics, picks up the story (which started with the Ancient Greeks in Volume I) with Frenchman J.B. Say. Say's Law is known to all Econ 101 students as supply creates its own demand. But little else is taught about Say. Yet, Say's Treatise on Political Economy was the most popular economics text in the United States through the Civil War, going through 26 printings, after eight printings in French.
Rothbard next examines Jeremy Bentham, James Mill, and David Ricardo. Ricardo is known for the law of comparative advantage, which makes the case for free trade. But, as Rothbard points out, Professor William O. Thweatt has demonstrated that Ricardo didn't originate the law of comparative advantage, didn't understand it, didn't even have much interest in it. It was in fact James Mill who first presented the law while defending free trade against Thomas Malthus's support of the Corn Laws.
The heart of Classical Economics revolves around the monetary and banking theories of the 1800s. With Great Britain suspending required specie payments, allowing the Bank of England to greatly inflate the supply of money, economic thinkers had to consider the effects of a fiat paper money system. The bullionists contended that the increase in paper money caused the price inflation. The opposing anti-bullionists placed the blame for the higher prices on wartime disruptions, supply shortages, and any other cause that let the government and Bank of England off the hook.
The boom and subsequent bust of 1825 in Britain led to the currency versus banking school debate. The currency school advocates insisted that bank notes be backed 100 percent by specie. Unfortunately, they forgot about demand deposits. Thus, as Rothbard writes, the banking system, led by the Bank of England, [shifted] their inflationary and expansionary attentions to deposits alone — a condition that still prevails throughout the world.
Next, Rothbard looks at Marxism with a religious slant: Marx harked back to the apocalyptics, … who foresaw a bloody Armageddon at the Last Days, before the millennium could be established. Violent, worldwide revolution, in Marx's version made by the oppressed proletariat, would be the instrument of the advent of his millennium, communism.
Rothbard uses poems that Marx penned to expose him as mean, hard-core, [and] proto-Stalinist. The mantra of Marxists is that free-market capitalism oppresses the masses for the benefit of the wealthy bourgeoisie. In terms of sheer numbers, no system has oppressed its citizens in the twentieth century like the communist governments of Lenin, Stalin, Mao, and Pol Pot, whose regimes can be considered the logical unfolding, the embodiment, of the nineteenth century vision of their master, Karl Marx.
Rothbard leaves Marx for the French laissez-faire school, led by Frederic Bastiat, and closes with the decline of laissez-faire thought during the late 1880s and into the early 1900s, spurred by a burgeoning number of Ph.D.'s who sang the praises of modern and progressive Big Government.
The book's final paragraph puts a lump in the throat of any Murray Rothbard fan, student, or friend. He writes that, it is now clear that the revolution against the classical school paradigm went far beyond emphasis on the marginal unit of a good or service, especially in the hands of Carl Menger and his followers. But that is the stuff of another volume.
For scholars and students, Rothbard's bibliographical essay is worth the hefty price of the book. Dr. Rothbard was dismayed that the publisher was asking so much for the two volumes (together nearly $200). This writer and other former students wrote Edward Elgar, attempting to convince the publisher that the book would reach a much wider audience, selling more units, if the price were lowered. But now, we just wish we could buy Volume III, no matter the price.