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 Introduction to Man, Economy, and State with Power and Market, Part: a  |   b  |    c |
 Table of Contents

     This raised the question:

What, then, can be the role of this work? I propose that it would be along the following lines. We must understand, firstly, what has happened to the study of economics in the last generation. I believe that it is not an exaggeration to state that since the First World War, Mises’s Human Action has been the only general treatise on economics published, outside of the textbooks in the elementary college courses (and these are hardly treatises)! This seems almost incredible, but it is the fact, and was even noted by Mises’s hostile reviewer in the American Economic Review. In considering this, we should note that the development of economic thought may be divided into two phases: pre–World War I and post–World War. The former era was the Golden Age, at least from the 1870’s on. The usual, perhaps the universal type of economics work written from, say, Ricardo to Fetter, was the general treatise. Since the classicists and Austrians were logical-economists, they developed their work covering the general field, and in clear, step-by-step fashion. The Austrians were considerably clearer than the early classicists precisely because of the greater clarity of their thought. These books almost always advanced the science, added new concepts, but at the same were clear and spelled-out enough to serve also as textbooks should college teachers so desire it. They were written primarily to influence the science of economics, but they were clear enough to be understood without prior absorption over years of a mass of technical jargon. Because these works were generally very sound methodologically, they abstained from mathematics, from “verbalized” mathematics, from anti-realistic concepts, from attempts at “empirically verifiable” concepts, etc. Hence, they could present the general science of economics in a clear fashion.

     Rothbard proceeded to give “some examples of the sort of general treatises that were written during the Golden Age.

Here is Taussig, in his Preface to his Principles of Economics, vii, on the role envisioned for his work: “I have tried in this book to state the principles of economics in such form that shall be comprehensible to an educated and intelligent person who has not before made any systematic study of the subject. Though designed in this sense for beginners, the book does not gloss over difficulties or avoid severe reasoning. No one can understand economic phenomena or prepare himself to deal with economic problems who is unwilling to follow trains of reasoning which call for sustained attention. I have done my best to be clear, and to state with care the grounds on which my conclusions rest, as well as the conclusions themselves, but have made no pretense of simplifying all things. . . . I hope this book is not undeserving the attention of specialists [and of course it received a great deal]; but it is meant to be read by others than specialists. Though not written on the usual model of textbooks, and not planned primarily to meet the needs of teachers and students, the book will prove of service, I hope, in institutions which offer substantial courses in economics.”[35]

Wicksteed, in his great general treatise Common Sense of Political Economy, stated in the Preface and Introduction, that: “This book is intended primarily as a popular but systematic exposition of the ‘marginal’ theory of Economics. . . . It is not a history . . . it is (not) concerned with . . . who first made any given application of the ‘marginal’ theory of Economics,  but what are the main applications of that theory inevitably demanded by the facts. . . . I assume no previous acquaintance on the part of the reader with works on Political Economy, and rely on no hypotheses except such as the common experience of life suggests and explains.”[36]

     This approach was now deemed old-fashioned:

Since the World War, economics has taken an entirely different course. Quasi-mathematical and jargon-refinements, unrealistic concepts and faulty theories, have all proliferated to such an extent that every work on economic theory—even the most general such as Keynes or Hicks—has been highly fragmentary. This preciosity, this over-refinement and fragmentation of economics has resulted in the fact that 99 percent of present-day economists do not know economics; they only know erroneous refinements about artificially isolated segments such as “monetary economics,” “labor economics,” “welfare economics,” “cost curves,” etc. The only general presentations to be found have been elementary textbooks, which are such hodgepodges as to be universally unacceptable. For these textbooks writers, feeling it incumbent to present uncritically “received doctrine,” have had to slap together all of the fragmentized and inconsistent refinements, plus institutional material, in hopeless disarray and error. But, since “modern” theory is too unwieldy for a general treatise, the only general principles have been the textbooks, and these textbooks, have rightly (in contrast to the days of Taussig, etc.) not been taken seriously by the economist [sic] profession. Every economics teacher considers himself superior to the general text and can never treat it as something from which he can learn. The other books, embodying the refinements, are used as readings, in advanced undergraduate and graduate courses, along with journal articles. These are treated respectfully by the profession.

     By dropping the plan for a textbook, Rothbard could address such matters:

I conceive of the role of my book, then, to present a general treatise in the Austrian-libertarian tradition—a treatise that will cover clearly, the entire economic field. This is not difficult precisely because the economics will be Austrian type rather than the plethora of fallacious semi-mathematical refinements. In the course of the treatise, I intend to refute the major fallacies of the other economic camps. These refutations will be accurate but not as extensive, for example, as would be needed in a specialized journal article. The previous chapters will need to be somewhat rewritten, but not extensively. In particular, there will be less need for explanatory diagrams. Since the book will not be shackled to the format of the general college text, the result will be that I will be able to include two very important philosopho-economic sections: one on methodology, and one on the relation between praxeology and ethics. The latter is a particularly important problem for libertarians, and one on which I am writing a journal article elaborating the views. It is particularly important for libertarians to know exactly what we can say as economists about government policy, what ethical judgments we can make, etc. It takes on added importance because of my dissatisfaction with the Weber-Mises position which denies the possibility of any scientific ethics.

     Nonetheless, the original point of the textbook would not be lost. It would

carry out in the main the original intention of being on a less advanced and more “spelled-out” level than Human Action, but it will, I believe, command the attention of the profession as a treatise because of its considerable elaborations in those areas not developed by Mises; its differences from Mises in such areas as monopoly, banking ethics, and government (although I do not intend to cite any specific differences with Mises in the book); and its refutations of current economic theory.[37]

     In August 1954, Rothbard reported as follows to Dick Cornuelle:

The second half of the third year of my grant for the Principles book having arrived, I’ve been taking stock of the present status of the work, and prospects for the future. . . . Originally, the book was conceived as simply a text to sort of spell out Human Action, but as my work evolved, I found that there were a lot of gaps in the economic organon that I had to fill in myself. Going step by step in logical progression turned out to involve a good deal of original contribution on my own part, plus some changes in the direction of purity which I felt impelled to make from Mises’s position (such as in monopoly theory and consumers’ sovereignty doctrine). Then, after your stimulating question, I decided to turn the thing into a treatise, albeit a treatise that could be read, with lots of concentration, by the intelligent layman, including also brief but cogent refutations of the major fallacious doctrines.

During the past year or so, I have been immersed in the main body of analysis—Consumption and Production Theory. Mises has very little detail on production theory, and as a consequence it took me many false starts, and lots of what turned out to be wasted effort, before I arrived at what satisfied me as a good Production Theory. (It’s involved emancipation from 90 percent of current textbook material.)

     Rothbard asked for a one-year extension of his grant.               

The status of the book is now as follows: in addition to the three chapters which you have (I guess they’re really Parts rather than chapters), three others are in process, in various stages of completion. Chapter 4 on Consumption is practically finished, and needs just a few pages of addition and revision. It’s 125 pages. The Monopoly-Competition chapter, Chapter 6, I’ve written 98 pages on, and I would guess am about two-thirds through. I am currently working on a huge Chapter 5, Production Theory (actually, [I] want to include Monop-Comp. [Monopolistic Competition], under Production as a general head), which has currently reached 241 pages.

He estimated 120 more pages would be needed.

     He was rewriting the sections on money and banking. Parts I and II should be done by end of 1954. He was thinking about integrating the discussion of socialist calculation into the Monopoly-Competition chapter:

I’ve just been discussing it with George Reisman, and he raised the question of how extensive the number of firms in the economy must be in order to have calculation. This is really an uncharted area for study, and I don’t know how much of it I will be able to cover.  In the course of newly thinking on the subject in our discussion, we came to the conclusion that for every “vertical integration” within a firm, in order for the firm to allocate costs, etc., internally, there would have to be a market for that area external to the firm. Thus, the inability of a Socialist government to calculate is a special case of the inability of any firm to calculate for departments internal to itself, if there is no external market to which to refer.

     He now needed 

to think about a plan for organizing the various parts of the analysis of interventionism: taxation, inflation, controls, monopoly, etc. What I would like to do, though as yet I see no clear path to it, is to present the whole government intervention part in one logical organon, as I have been doing in the free-market section

and by so doing to “tie them [the issues] together in a unifying principle.”

     This overall conception had resulted in a plan to include “the discussion of Business Cycles . . . where it always should have been, under the Government Intervention part!” New material, which he would send shortly, now totaled 350 to 400 pages. He had found that “working on several different chapters before finishing one” was a good method because his train of thought led him “to write some of one chapter, and then to shift to a previous or succeeding chapter—due to the interrelatedness of economics.” He expressed interest in getting a photocopy machine.[38]

     H.W. Luhnow, president of the Volker Fund,[39] wrote Rothbard at the beginning of September 1954 to tell him that the fund’s directors had approved a one-year extension of his research-and-writing grant.[40]

     In early November, Rothbard wrote Dick Cornuelle, describing in the letter how his participation in Ludwig von Mises’s seminar related to his (Rothbard’s) work on Man, Economy, and State:

Mises’s seminar is just about the best I’ve been to this year. The reason is that he’s dealing strictly with the market—with monopoly, profit and loss, etc.—i.e., the strictly catallactic stuff that he hasn’t really dealt with in class before. It’s very helpful for my work, too. I’ve recently delivered a report on Monopolistic Competition and on selling costs, which Mises had me do, and which I’ll incorporate in Chapter 6 of my book. I’m happy the book has turned from a textbook into a treatise, since it gives me a chance to expand on stuff, and to explicitly refute Chamberlin, etc.

My report got a good reception from Mises and others. Mises sort of embarrassed me for a couple of weeks before by saying repeatedly: “and soon we will hear a very interesting, a very good report by that great old reporter, Mr. Rothbard.”

     Further:

Mises told me that he wrote you recommending a series of translations of key articles. It sounds like a fine idea. Mises has for a long time been suggesting that I read Painlevé’s brief article on mathematical economics, which he claims is one of the best critiques of math. eco. ever printed. (Actually, there are no other good ones except by Mises himself.)

Unfortunately, Rothbard added, Painlevé’s essay was only available in the French edition of Jevons.[41]

     In April 1955, Rothbard submitted his half-year Progress Report. He wrote that “Part II” of the book was nearly done, with 165 pages added to Chapter 5, on production, for a total of 425 pages. He had added “a Cost section after the Joint Ownership by Factors section.” Further:

The section on “Uncertainty and the Rate of Interest” has been eliminated and transferred to its proper place in Chapter 7 on Money. Instead, there is a Section j., Forces Affecting Time Preference . . . a brief section dealing with some of the effects on time preference of such events as immortality or the end of the world.

     Rothbard had renamed the subsections of Section 5, Chapter 5: “Natural resources incompatible with ERE [evenly rotating economy]. Must be classified as land not as capital goods, in contrast to Hayek’s classification.” He was dealing with such matters as the Free Rider Problem and whether or not there could ever be One Big Cartel. Added to Chapter II were a few pages on cartels and contract enforcement, and land ownership.”

     He now had in mind “to finish reconstruction of organization of Chapter 5; and to complete Chapter 7,” giving an outline of the subjects to be included. This writing would bring to a close

the Economics of the Free Market, except for a brief epilogue section on the Role of Government in the free market. After this Part III will ensue: Economics of the Hampered Market. It is impossible to say at this point how long the latter part will be. I will try to evolve it step by step on the basis of analysis of the effect of different types of violent or fraudulent interference with the market. Monetary interference, and its concomitant business cycles, international trade and currency interference, grants of monopoly and quasi-monopoly privilege, price controls, taxes will have to be discussed, plus a section on economics and public policy—the conclusions of “welfare economics,” etc.

     In this memo Rothbard mentioned papers he had written for Mises’s seminar as well as his “Reconstruction of Utility and Welfare Economics,”[42] written for the Hans Sennholz Festschrift. He was also so looking at the Croce-Pareto correspondence on methodology in economics. His Ph.D. dissertation had been revised and was being retyped.[43]

     In a letter of July 19, 1955, to Dick Cornuelle, Rothbard comments on his current readings in economic literature. He was also carrying out a reorganization of the manuscript:

Now, as to my book. At long last, the gears are beginning to grind to get the chapters typed up and sent to you. My last alteration was to split that gigantic Chapter 5 on Production into five separate chapters. All five deal with Production, but Chapter 5 is now the Structure of Production, Chapter 6 on the Rate of Interest, Chapter 7 on General Pricing of Factors, Chapter 8 on Entrepreneurship and Change, and Chapter 9 on Particular Incomes. What was formerly Chapter 6 is now Chapter 10 on Monopoly and Competition.

     Further:

To Chapter 10 I have added a brief final section presenting a new theory of Patents and Copyrights, in which I demonstrate that copyrights are essential to the free market, whereas patents are monopoly grants by the State. (I know Mises will accuse me of having a vested interest in favor of authors, but I swear that is not the consideration.)

     In addition: “Chapter 11, on Money, has been completed,” at 146 pages. (An outline was included here.)

In the course of this, for the first time, the Keynesian system gets the full treatment that it deserves,[44] raked from every important angle. In Section 5h I come out with another component in the interest rate, since I believe there is a flaw in the Fisher-Mises “purchasing power” (or as they call it, “price” component). The flaw comes from their dealing in terms of the loan-market rate of interest instead of the “natural” rate, i.e., the interest margins earned by businessmen on the market. The purchasing power component enters insofar as there is a general change of prices, the terms of trade component insofar as selling and factor prices differ in their rates of change. The section on business cycles briefly refutes in advance any non-Misesian theory, which sets the stage for the Misesian doctrine in Part III of the book.

     He had also written Chapter 12—a transitional chapter leading into Part III:

This purely free market, of course, is our purist system, and so for the first time, this system sees the light of print. All done very scientifically, with no views of my own exhorting the reader. But, in the process, I refute the logic of the position of the typical laissez-faire right-winger (and everybody else) that our pure system couldnt exist. Without going into the question whether it should exist, I calmly and coolly prove that it could.

     Further:

Section 2 is on “Marketable Defense,” which outlines the purist system. Part of my proof that our Austro-anarchist system could exist overlaps with part of the Festschrift article where the theory of “collective wants” is criticized.

     Proceeding to Part III, the Economics of Violent Intervention in the Market:

As you know, what I had always been searching for in discussion of the hampered markets is some sort of integrating explanation, which would permit me to do for the hampered-market part what I did for the free-market part, deducing everything step by step from the original axioms of action. Mises showed the way for the free market, but even he did not accomplish this for analysis of intervention. . . . It had always been my hope to find the logical integration for the praxeology of intervention. Now I believe I have found it.

     Rothbard believed his treatment “will be far more right-wing than Mises because of its grounding in ‘welfare economics,’ which theory I have basically set forth in my Festschrift article.” He was dividing his discussion into subtypes: “(1) ‘autistic interventions’; (2) binary interventions; (3) triangular interventions.”[45]

     At the beginning of October 1955, Rothbard reported to the Volker Fund directors: “Great progress . . . as the work rapidly rounds into shape. In this period, Part II—the analytic bulk of the book—has been completed. . . . Furthermore, a large part of Part III . . . has been written.”

     He included the usual table of contents and an outline for the balance of his new Money chapter. Some 1,590 pages or so were done. He was refining the distinction between patents and copyrights. Repeating what he had written to Dick Cornuelle, he summarized Chapter 12:

Section 2 sets forth briefly, for perhaps the first time in many decades, the outlines of a possible marketable defense system, or marketable government, not advocating such a system (since this is a scientific treatise) but pointing out that such a system could exist.

     He had begun Part III, violent invention: “Here I had very little in previous literature to serve as a guide. Even Mises’s discussion of this material is sketchy and fragmented.” Thus, “[t]he task I set myself was one of weaving the whole part, for the first time, into a logical structure, one which would give a comprehensive view of all possibilities of intervention, flowing in a logical process.” His threefold typology of invasive action might accomplish this. After giving some details, he wrote: “Each of these types of intervention has two types of effect, what I call the direct and indirect. Most economists, including Mises, have dealt only with the indirect effects. It is true that the indirect effects require more complex analysis,” but direct ones have been “neglected.” The direct effects were these:

Autistic interventions prevent people from doing what they would like—they therefore lose in utility.  Binary interventions do the same, coercing a sacrifice to the intervener, therefore the subjects lose in utility. Triangular interventions injure one or both of the would-be parties. Governments are erected on the basis of binary intervention (taxes, inflation).

Further: “For taxation, Calhoun’s inspired division of society into taxpayers and tax-consumers is applied. Inflation is shown to be binary intervention because it consists of fraudulent issuance of ‘counterfeit’ warehouse receipts.” 

     As for indirect effects, “[u]nfortunately, none of the Austrian economists applied their theory to the problem of shifting and incidence of taxation, and therefore it has been necessary for me to carve out a new theory of incidence. . . .” This was not yet finished. “The usual theory,” Rothbard continued, “rests on old classical ‘cost of production’ theories of price, which assume that certain taxes on business can be shifted to consumers through raising cost of production and therefore price.” But Austrian analysis “reveals that no tax can be shifted forward, but can only be shifted backward, reducing the incomes of original productive factors: land and labor.” Hence “the tax falls on businesses, eventually on original factor incomes. Of course, the final effects of all taxes is to injure consumers as well. The sales tax, it is concluded, is a tax on income rather than on consumption.” 

     Now came full outlines of Chapters 13, 14, and 16, substantially done. Chapter 15 was partly done. Rothbard included here an outline of the completed section and one for the balance of Chapter 15. In all, he had written 350 pages in this period.

     He outlined his projected Chapters 17 through 20. His Ph.D. dissertation had been revised and submitted.[46]

     In a letter to Dick Cornuelle, which accompanied this Progress Report, Rothbard—ever an optimist—wrote: “I believe that about 300 more pages will be required to finish the book, i.e., to finish Chapter 15 and write Chapters 17 through 20 and Introduction.” He asked for a three-month grant extension.

Now that the end of the book is in sight, my “blood is up,” or whatever the expression is, and I am eager to see the book finished. Working on it has been an enormously enjoyable and rewarding experience, and I am very grateful to you and Herb and the Fund directors for giving me the opportunity to do it. I’ve learned a terrific amount from writing the book, and I hope the readers will profit too. You know, Mises often says that the best thing for a young economist to do is to write a book dissecting some fallacy, but I don’t see how anything could be better than to write a systematic general treatise of this type. Of course, the fact that the field was practically uncharted, with only Human Action as a guide, presented me with a golden opportunity.[47]

     With the treatise gathering momentum, Rothbard began looking for a publisher. Thus, in November, Rothbard wrote to David McDowell of Random House, expressing the hope that they could discuss the problems involved in publishing such a lengthy work. McDowell replied that he would be glad to speak with Rothbard, commenting, “Frank Meyer spoke to me about it at considerable length.”[48]

     In early December, George B. de Huszar sent Rothbard some suggestions. Rothbard should try textbook publishers such as Harper and Row or university presses (e.g., Yale). A third possibility was Van Nostrand,

The only standard publisher that I know which is conservative and could handle a book of the size you have in mind. . . . Here Leonard Read’s interest would be very helpful, since the president of the firm is a close friend of Read.

De Huszar also advised Rothbard “that one of the first things to do would be to obtain reactions from such people as Mises, Hayek, and Knight as to the value of the work. A commitment from one of these people to write a preface would help.”[49]

     About the same time, Rothbard wrote to Harold W. Luhnow, thanking the latter for the extension he had received:

It was impossible for me to shorten the time involved, for two reasons: the enormous scope of the book, which covers every area of economic theory; and the fact that a great deal of the book broke new ground and required a difficult search for answers to the many theoretical problems that arose.[50]

     On December 13, Rothbard reported to Dick Cornuelle, on his progress with potential publishers:

During the last week or so, I’ve spoken to two representatives of book publishers, and have received a nice letter from George de Huszar on the publishing problem. Due to the good offices of Frank Meyer, I’ve spoken to Tom Sloane of Devin-Adair, and had lunch with David McDowell of Random House, who is a swell fellow, quite libertarian, and very helpful. . . . Everyone says that the big problem I face is not so much the ideological one, since publishers will not be deterred by this (in fact, controversy stirs up sales) but by the extreme length of the book.

Rothbard thought that Random House held out some hope.[51]

     Rothbard’s Progress Report of April 1956 stated that “[t]he economic principles work has, in this period, been brought close to conclusion. Of the approximately 1,900 pages (typewritten) the work will contain, all but an estimated 80 pages have been completed.”

     Chapters 15, 17, and half of 18 were done. He had reduced the total from 20 to 19 chapters. He had decided “to include the Economics of Slavery and Socialism in Chapter 17 on Government Expenditures.” Chapter 18 and 19 would be fairly brief. He planned to do a short preface. The detailed outline of chapters completed in this period includes an interesting summary of Chapter 17, section 6:

Special aura of war, where all economic truths are supposed to be suspended. Particularly important for efficiency to preserve market during war. Self-defeating effects of price controls, priorities, excess profits, taxes, etc. War and extension of govt. power over the people. War places the State itself in jeopardy, hence its alarm. “National defense” enables the State to increase its power over the citizens without risking defeat in war.[52]  

     Appendix A to Chapter 17 was to deal with slavery:

Slavery; capitalization of price of slave. Only earner of special gain is slave-hunter, and even he, in long run, earns only interest. So master reaps no exploitative gain from slave, even though the slave is exploited. Socialism is slavery of all under the State. State rulers do benefit from exploitation, because they do not have to pay capitalized price for their slaves. Partial state slavery: forced labor—military conscription, compulsory jury service, withholding tax collection.[53]

     Rothbard was now in the middle of Chapter 18: “Anti-Market Ethics: A Praxeological Critique.”

This represents, along with my section on Canons of Justice in Taxation, an extension of praxeology to a logical discussion of ethical goals. This does not mean that praxeology can set forth its own ethical conclusions; but it does mean that praxeology can demonstrate either (a) the conceptual impossibility of various ethical goals, and therefore their meaninglessness and absurdity for human action; and (b) their inconsistencies and self-contradiction.[54]

He outlined Chapter 18, as completed thus far, along with its planned sections.

     He had written a seven-page addition to Chapter 16 on Public Borrowing: “Fallacy of warnings about imminent ‘governmental bankruptcy.’ Dangers of reducing public debt. Debt repudiation. . . . Printing money less inflationary than selling government bonds, and less distortive effects.” [55]

     In a letter of April 2 to Ludwig von Mises, Rothbard wrote  that he had applied to the Earhart Foundation for a grant to work on a book on the Great Depression. At the end of May, he reported to Dick Cornuelle that he had successfully defended his Ph.D. dissertation.[56] Rothbard not only worked on several chapters of his treatise at once, but he seems always to have had several major projects going at the same time.

     In July 1956, Rothbard wrote to Harold Luhnow, thanking the latter “and the other directors of the Volker Fund for igniting the spark of this work, and for your unflagging support and encouragement over these years.”[57] The book now ran to 1,900 typed pages.

     Now, for nearly three years, the economic treatise dropped out of Rothbard’s correspondence. He continued his work of reading and evaluating books for the Volker Fund in this period, as well as writing and publishing political commentary and scholarly essays. It seems likely enough that he undertook minor revisions of Man, Economy, and State, but nothing in the record suggests that he did any major work on the treatise.

     On May 5, 1959, Rothbard wrote triumphantly to his mentor Ludwig von Mises:

Dear Professor,

E finito! At last, after more than seven years, I have finally finished the General Principles book. I greatly regret that there is no copy of the book that I can send you, but I have made a copy of the Table of Contents (both general and detailed) to send you, which I am enclosing. I hope to make an appointment very shortly, to discuss some matters about the book with you.

I can never adequately thank you for the inspiration, both scientific and personal, that I have received from you, and for your interest in my work. I regret that I have only been able to attend your seminar rarely this year.

My best regards to Mrs. Mises.

Sincerely,

Murray[58]

THE PUBLICATION OF MAN, ECONOMY, AND STATE

     The search for a publisher for Rothbard’s mammoth book was proving a difficult one. He heard from Praeger, for example, that the market for such a book “is far too limited and the manuscript itself is far to lengthy for us to be able to undertake the financial risk involved in its publication.” In early September, Rothbard inquired of Ivan Bierly, liaison officer at the Volker Fund:

In view of the reluctance of commercial publishers, I thought I’d try University of Chicago Press next. Do you think that’s a good idea? I don’t think there’s anything to lose. (I know I could try McDowell, Obolensky but I have the gravest doubts that anything could happen there without a subsidy.)[59]

     Accordingly, Rothbard wrote the University of Chicago Press in October. He described his book as “an old-fashioned Principles work on economics and political economy.” Another “unusual aspect of the book” was “that it is the first treatise in a decade, and one of the first in many decades, to expound economics in the ‘neo-Austrian’ tradition.” His manuscript, “while differing from Human Action on many points, is an attempt to elaborate and expound this general tradition for the American public, relating it also to other economic schools.” As references, Rothbard suggested “Professor Mises and, at the University of Chicago, Professors F.A. Hayek and Milton Friedman.[60]

     The reply, about three weeks later, from the University of Chicago Press was not encouraging: “Your audience falls between two areas . . . it is not a textbook, nor is it a simple systematic study of economics that the layman would attempt.” Financial considerations were also at issue: “To publish a work of this magnitude would involve so large a share of our budget that we feel we simply cannot under take it.”[61]

     The next month, George de Huszar wrote Rothbard with more suggestions: “First, of all, let me ask you again if you have a preface written by Mises or a letter from him specifically stating that he will write such a preface.” After all, Mises was “still a big name.” He recommended that Rothbard try the University of Oklahoma Press, Michigan, Harper and Brothers, or even the  Libertarian Press in South Holland, Ill. He added:

So far as I know it is perfectly proper for the author to suggest “readers.” So in sending the manuscript you may want to suggest persons like Mises, Hazlitt (?), and especially people with high academic positions in economics, who would be friendly to your manuscript.[62]

     In the end, the Volker Fund provided the solution. Ivan R. Bierly informed Rothbard in January 1960 that “The Directors have just approved the inclusion of your book Man, Society[sic], and the State in the Van Nostrand series, provided we can get together on some basis similar to that suggested by Frank Meyer in his comments, which are attached.”  This would mean “some additional work for you.”[63] Thus, Man, Economy, and State would be published as two volumes, with a third, political volume potentially coming out later.

“Part III” (Power and Market) Aborted

     Frank Meyer was an ex-Communist turned “libertarian conservative,” who was working as a consultant to the Volker Fund as well as a contributing editor of National Review. Rothbard had first written to Meyer in January 1954 and met him in person October or November of that year. Rothbard maintained a friendship with Meyer until Meyer’s death in 1972, while disagreeing sharply with Meyer’s cold war–interventionist views on foreign policy.[64]

     Nevertheless, Rothbard could not have been at all happy about Meyer’s memo (“Frank Meyer on Murray Rothbard’s Manuscript”), which effectively torpedoed his pure theory of invasive action—Part III of the manuscript. In his memo, Meyer wrote that Rothbard’s large manuscript would require some cutting. He thought he had

sufficient perspective on the field to say unequivocally that this book is one of the two or three most important discussions of economics to be written in this century. It is in the direct line of Menger, Böhm-Bawerk, and Mises. . . . Systematically, it is an exhaustive treatise on economics, considering all aspects of the subject and simultaneously taking into account and refuting the most powerful contemporary economists (e.g., Schumpeter, the Keynesians) in a serious and detailed manner. Mises’s Human Action . . .  is too apodictic to come deeply to grips with the inner content of his enemies, and at some points too generalized to enter effectively the contemporary scene of battle.

No one had written a general treatise since the time of Taussig and Fetter: Schumpeter and Keynes “have failed to do so. The same, of course, can be said of Hayek.”

     Meyer continued:

Likewise—and to me this is even more important—Murray Rothbard has broken sharply and clearly with that aspect of the economics of a free society which has always seemed to me its weakest point in the twentieth century: its dependence upon a utilitarian philosophy. Firmly grounded upon an epistemology based in natural law, Man, Economy and State has an integrated wholeness that founds the economics of freedom on the same solid basis upon which the central tradition of the West is founded.

This was all to the good, because in so doing,

first, his thesis is freed from much of the inner weakness that has vitiated Mises’s presentation; and second, it opens the road ideologically to overcoming some of the divisions that have kept apart economists of the Misian [sic] persuasion from champions of that other line of thought hostile to contemporary collectivism, conservatives who stress the central themes of the Western tradition.

     But now came the blow: “Chapters 12 through 19 [Part III] should be removed.” They should be “replaced by a single chapter summarizing the economic themes discussed in this group. These chapters are fundamentally political in their scope and written from the point of view of an uncompromising anarchism.” This, Meyer believed, should be a separate book.

     Further, although Rothbard’s schema “demands” a chapter on interventionism, even a long one, along those lines (but without the detailed defense of anarchism), Rothbard needed to “[separate] his dogmatic (if I may say so) political conclusions from his economic teaching.” Additionally, he needed “to excise some of the ‘cracks’” which, as they then read, were “obviously for the sake of shocking” people. “I refer to such remarks as ‘government (and criminal)’ used as a qualifying adjective for non-free-market activities.” Perhaps Rothbard could add a section on Galbraith’s complaints about “affluence.”[65]

     Rothbard did not take Meyer’s criticisms lightly. In a letter of January 17, 1960, to Ivan Bierly, he expressed his gratitude to the Volker Fund directors for the decision “to publish my book in the Van Nostrand series; I certainly appreciate their confidence and support. I would also like to thank you for your aid and encouragement.” He wanted, however, to protest the decision to cut Part III: “For the record, I would like to take vigorous exception to Frank’s references to the last part as ‘dogmatic’ and ‘political’ rather than ‘economic.’” He maintained that he never advocated policy in the treatise. To hold that a “price control leads to shortage and misallocation of resources” is “in no sense a value-judgment or a political stand on my part; it is purely a scientific economic conclusion of an economic analysis.” Someone who “favors shortages or misallocations, or thinks that some other ethical factors outweigh these, could agree with this conclusion and still favor price controls.” Thus “a bureaucrat can be for controls for their own sake, or for a route to socialism, and therefore could still say that price controls are good, even after learning of their economic consequences.” Thus, he wrote,

I am strongly opposed to economists simply leaping from their economic analysis to a political stance, without bringing in a coherent ethical system, a coherent political philosophy. I do not oppose ethics and political philosophy, far from it; it is just that economics by itself is not sufficient for a political conclusion, although it helps immensely by providing data for a political philosophy.

He could, he said, add the critique of Galbraith mentioned by Frank Meyer.[66]

     Rothbard wrote of the “truncation” of his original three-part work in a draft preface to Power and Market (around 1967):

This completed structure, however, was not destined to be published whole. Severe cuts had to be made, largely for reasons of cost and also for ideological considerations that were imposed (but not, I hasten to add, by the publishers). As a result, the analysis of government intervention had to be severely compressed into one final chapter of Man, Economy, and State, and the analysis of government was left blurred at bottom. For one of the basic analyses that had to be dropped dealt with the role of government and of violence on the free market. The free market was defined throughout the treatise as an economy in which no man aggresses against the person and property of his fellowman. Government was briefly treated as an organized engine of various forms of just such aggression. But the vital element left unclear was the role of enforcement in a free-market society. Suppose that one or more people decide to aggress against the property of others: what, then, is the role of enforcement or of organized violence? In short, how can a purely free market handle the task of forcible defense of person and property? Almost all writers on political economy have rather hastily and a priori concluded that a free market cannot provide defense or enforcement services and that therefore government intervention and aggression are required to supply them.

Thus, Power and Market “stands by itself as an analysis of government, it also serves as a supplemental volume to the former treatise.”[67]

     Rothbard also addressed the separation of Man, Economy, and State and Power and Market in a letter to Robert LeFevre in November 1962. He said,

I’ve been meaning to write you for a long time now to thank you for your fine review of my book, Man, Economy, and State. Yours is the best review the book has had—and this includes the Hazlitt review in National Review, which I didn’t care for worth a darn. Hazlitt took the “National Review” line, which is that I am a great “economist” (defined in the very narrowest sense), but that as soon as I stray one iota outside this economic realm, especially into “politics,” I am an eccentric dolt. Hazlitt’s review was the first time I have seen such questions as the government debt ruled out of the realm of “economics.” I would 10,000 times rather be criticized as you did, for not going far enough into liberty, rather than be attacked for being too “extreme.” Actually, you are quite right, and the material which was in my original draft, originally Volume III, would have been purely “anarchist.” In short, I had planned to define fully and accurately what the “free market” is, and for that to show that part of this definition implies total freedom—for protection and judicial services, as well as for all other services. (I would not have needed to come out for this system in the book, the way it was structured—it was good enough to define it.) The publishers, however, “suppressed” this material, along with the presumed economic necessity for cutting the manuscript. The man responsible for this suppression, at least initially, was the reader, Frank S. Meyer.[68]

     This was Rothbard’s view of the matter, as expressed after the fact. Nevertheless, at the time, he had to accept the terms offered him. In a letter to George de Huszar of February 7, 1960, Rothbard resignedly noted that Van Nostrand would be publishing the treatise. He would have to cut the last section, but that was better than cutting the main body of the book internally.[69] As it turned out, the balance of Part III would be published in 1970, under other auspices, as Power and Market: Government and the Economy.

     In a letter to Norman Hood of Van Nostrand Publishing, Arthur Goddard wrote in January 1961 that he was sending the former the manuscript “for the purpose of providing a basis for an estimate of the costs of publication.” Ivan Bierly of the Volker Fund would handle the contracts. Goddard suggested moving Rothbard’s footnotes to the back of each volume. The manuscript stood at 1,470 pages of pica type.[70]


[35]From Taussig, Principles of Economics, p. vii, as quoted in Rothbard to R. Cornuelle, memo: “Textbook or Treatise?” February 1954, 4 pgs.; Rothbard Papers.

[36]Philip H. Wicksteed, The Common Sense of Political Economy, vol. 1, Lionel Robbins, ed. (London: Routledge and Kegan Paul, 1933), pp. xxix and 1, as quoted in Rothbard to R. Cornuelle, memo: “Textbook or Treatise?”; Rothbard Papers. 

[37]Rothbard to R. Cornuelle, memo: “Textbook or Treatise?”; Rothbard Papers.

[38]Rothbard to R. Cornuelle, memo, August 9, 1954, 3 pgs.; Rothbard Papers.  

[39]Herb Cornuelle had left the Volker Fund to work for the Dole Corporation in late 1953.

[40]H.W. Luhnow to Rothbard, September 1, 1954; Rothbard Papers.

[41]Rothbard to R. Cornuelle, November 5, 1954, 2 pgs.; Rothbard Papers.

[42]Murray N. Rothbard, “Toward a Reconstruction of Utility and Welfare Economics,” in Mary Sennholz, ed., On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises (Princeton, N.J.: D. Nostrand, 1956); reprinted in Murray N. Rothbard, The Logic of Action One (Cheltenham, U.K.: Edward Elgar, 1997), pp. 211–54.

[43]Rothbard, Memorandum to Volker Fund: Progress Report, April 1, 1955, 11 pgs.; Rothbard Papers.

[44]In 1947, Rothbard had written a critique of Keynes, “Spotlight on Keynesian Economics,” for Frank Chodorov’s newsletter, analysis, which for various reasons was not published. Twenty pages of this essay are in the Rothbard Papers, along with seven pages from a different draft or essay on Keynesianism.

[45]Rothbard to R. Cornuelle, July 19, 1955, 6 pgs., Rothbard Papers (at least one page is missing).

[46]Rothbard, Memorandum to Volker Fund: Progess Report, October 1, 1955, 16 pgs.; Rothbard Papers.

[47]Rothbard to R. Cornuelle, October 2, 1955, 2 pgs.; Rothbard Papers.

[48]Rothbard to David McDowell, November 17, 1955; McDowell to Rothbard, November 23, 1955; Rothbard Papers.

[49]George B. de Huszar to Rothbard, December 3, 1955, 2 pgs.; Rothbard Papers. De Huszar was an independent scholar, trained at the University of Chicago. He served on the staff of the Reece Committee, which in the early 1950s investigated the politics of big foundations (cf. René A. Wormser, Foundations: Their Power and Influence [New York: Devin-Adair, 1958], pp. 344–45), and edited The Intellectuals: A Controversial Portrait (Glencoe, Ill.: The Free Press, 1960). Rothbard shared de Huszar’s interest in the sociology of the intellectuals.

[50]Rothbard to Luhnow, December 6, 1955; Rothbard Papers.

[51]Rothbard to R. Cornuelle, December 13, 1955, 3 pgs.; Rothbard Papers.

[52]This section has not been found thus far in the partial early drafts of Man, Economy, and State in the Rothbard Papers. While Rothbard did write a great deal about war from the standpoint of history and political theory, it nonetheless seems unfortunate that his pure economic analysis of war seems irretrievably lost, even though it was only intended to be a four- or five-page section (but see Man, Economy, and State [1970 ed.], pp. 806–07).

[53]Like the missing section on war, the section on slavery, as sketched out in this Volker Fund Progress Report of April 1, 1956, is also missing from the Rothbard Papers. Rothbard did return to the topic of slavery in an unpublished essay written around May 1960: “A Note on the Economics of Slavery,” 6 pgs.; Rothbard Papers. Here, too, the capitalization concept is central.

[54]This Chapter 18 became Chapter 6 of Power and Market: Government and the Economy (Menlo Park, Calif.: Institute for Humane Studies, 1970).

[55]Rothbard, Memorandum to Volker Fund: Progress Report, April 1, 1956, 8 pgs.; Rothbard Papers.

[56]Rothbard to Mises, April 2, 1956; Rothbard to R. Cornuelle, May 30, 1956; Rothbard Papers. The Earhart Foundation grant, which Rothbard duly received, made up for the ending of the Volker Fund grant which had supported his writing of the treatise.

[57]Rothbard to Luhnow, July 29, 1956; Rothbard Papers.

[58]Rothbard to Mises, May 5, 1959; Rothbard Papers.

[59]John Haverstick (Praeger) to Rothbard, August 28, 1959; Rothbard to Bierly, September 5, 1959. Rothbard Papers.

[60]Rothbard to Director, University of Chicago Press, October 5, 1959, 2 pgs.; Rothbard Papers.

[61]Roger W. Shugg, University of Chicago Press, to Rothbard, October 27, 1959; Rothbard Papers.

[62]De Huszar to Rothbard, November 27, 1959, 2 pgs.; Rothbard Papers.

[63]Bierly to Rothbard, January 7, 1960; Rothbard Papers.

[64]Rothbard’s assessment of Meyer’s contribution to libertarian and conservative thought is found in Murray N. Rothbard, “Frank S. Meyer: The Fusionist as Libertarian Manqué,” Modern Age 25, no. 4, Fall 1981, pp. 352–63.

[65]Frank Meyer, memo: On Murray Rothbard’s Manuscript, late 1959 or January 1960, 3 pgs.; Rothbard Papers.

[66]Rothbard to Bierly, Volker Fund, January 17, 1960, 2 pgs.; Rothbard Papers. Rothbard had done background research on Galbraith in 1959 for National Review.

[67]Draft preface to Power and Market, ca. 1967; Rothbard Papers.

[68]Rothbard to Robert LeFevre, November 9, 1962; Rothbard Papers (second page missing).

[69]Rothbard to de Huszar, February 7, 1960; Rothbard Papers.

[70]Arthur Goddard to Norman Hood, Van Nostrand, January 13, 1961; Rothbard Papers.

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