INTRODUCTION TO THE SECOND EDITION

Murray Newton Rothbard (1926–1995) was one of the most important thinkers of the twentieth century. I choose the somewhat vague term thinker because Rothbard’s interests were so diverse that they defy conventional classification. Yes, Rothbard was an economic theorist in the “Austrian” tradition of Ludwig von Mises and Friedrich Hayek.

One of the persistent Clintonian themes of the 1992 campaign still endures: if “it’s the economy, stupid,” then why hasn’t President Clinton received the credit among the public for our glorious economic recovery? Hence the Clintonian conclusion that the resounding Democratic defeat in November, 1994, was due to their failure to “get the message out” to the public, the message being the good news of our current economic prosperity.

Our country is beset by a large number of economic myths that distort public thinking on important problems and lead us to accept unsound and dangerous government policies. Here are ten of the most dangerous of these myths and an analysis of what is wrong with them.

Myth 1: Deficits are the cause of inflation; deficits have nothing to do with inflation.

Depending on your temperament, a presidential election year is a time for either depression or amusement. One befuddling aspect of campaign time is the way the Respectable Media redefine our language. Orwell wrote a half-century ago that he who controls the language wields the power, and the media have certainly shown that they have learned this lesson. For example, the Respectable Media have presumed to declare what “the issues” are in any campaign.

If the federal government’s economists have been good for nothing else in recent years, they have made great strides in what might be called “creative economic semantics.” First they’re defined the seemingly simple term “budget cut.” In the old days, a “budget cut” was a reduction of next year’s budget below this year’s. In that old-fashioned sense, Dwight Eisenhower’s first two years in office actually cut the budget substantially, though not dramatically, below the previous year.

The hottest new topic in mathematics, physics, and allied sciences is “chaos theory.” It is radical in its implications, but no one can accuse its practitioners of being anti-mathematical, since its highly complex math, including advanced computer graphics, is on the cutting edge of mathematical theory.

As improbable as this may seem now, I was at one time in college a statistics major. After taking all the undergraduate courses in statistics, I enrolled in a graduate course in mathematical statistics at Columbia with the eminent Harold Hotelling, one of the founders of modern mathematical economics. After listening to several lectures of Hotelling, I experienced an epiphany: the sudden realization that the entire “science” of statistical inference rests on one crucial assumption, and that that assumption is utterly groundless.

Some economists are given to insisting that Austrian economics studies only the unintended consequences of human action, or, in the favorite phrase (from the 18th-century Scottish sociologist Adam Ferguson as filtered down to F.A. Hayek), “the consequences of human action, not human design.”

The Marxists call it “impressionism”: taking social or economic trends of the last few weeks or months and assuming that they will last forever. The problem is not realizing that there are underlying economic laws at work. Impressionism has always been rampant; and never more so than in public discussion of interest rates.