Rothbard A to Z

Introduction

Murray N. Rothbard was the most hardcore free market economist in the history of economic thought. For this reason, he is destined to be remembered as one of the most important economists of the twentieth century. Of course, in his age of anti-free market sentiment, he never approached the influence of John Maynard Keynes, Paul Samuelson, Friedrich Hayek, or Milton Friedman. Still, Rothbard’s unrivaled commitment to the free market economy guarantees him a special place in the history of thought.

To grasp Rothbard’s historical significance, it is necessary to understand his interpretation of human history. Like his mentor Ludwig von Mises, Rothbard viewed human history as an epic race between liberty and tyranny. In other words, he conceived history as a great struggle between nonviolent and violent methods in society. Humankind progresses when liberty and nonviolence triumph. Conversely, humankind declines when the forces of tyranny and violence prevail. For Rothbard, then, the key to the preservation and proliferation of humanity is liberty, the absence of aggressive violence against person and property.

So what is Rothbard’s role in the grand conflict between liberty and tyranny, nonviolence and violence? Following Mises, Rothbard thought ideas are the determining factor in history. Ideas are the proverbial weapons used in the battle for liberty against tyranny. Consequently, the individuals who generate ideas—the intellectuals—ultimately determine the course of human history. In the final analysis, the fate of humanity depends on whether the intellectuals who advance the idea of nonviolence can overcome those intellectuals advocating the idea of violence.

Rothbard was a figure of immense historical significance because he was one of humankind’s greatest intellectual defenders of liberty and nonviolent methods. He developed a formidable intellectual system to combat the idea of violence and advance the idea of nonviolent interaction. More than any other intellectual in human history, he defended the idea of perfect liberty.

Rothbard built his intellectual system on three pillars: economics, ethics, and history. In economics, Rothbard’s devotion to liberty and nonviolence was reflected in his unmatched support of the free market economy. As he stressed, human beings can interact in two ways, and in two ways only: nonviolently or violently. This means economic activity can be organized nonviolently, or economic activity can be organized violently. There is no third way.

The free market economy is the nonviolent method of economic organization. Consider a device Rothbard termed the Angel Gabriel model. Imagine Angel Gabriel looks down on creation and is horrified to see human beings using violence against one another. In an act of benevolence, Gabriel eradicates all violence among human beings. He modifies nature in a way that makes it physically impossible for any human being to use violence against the person or property of another human being. What kind of economic system would prevail in Angel Gabriel’s world of complete nonviolence?

The Angel Gabriel economy would be a pure free market economy. Freedom means the absence of aggressive violence against person and property. A market is a place where people meet to trade goods and services. Thus, a free market is a place where human beings come together to engage in the nonviolent exchange of goods and services. Taken as a whole, the free market economy is a network of nonviolent exchanges of goods and services.

Along with Mises’s Human Action (1949), Rothbard’s Man, Economy, and State (1962) is one of the two greatest books in the history of economics. Rothbard’s outstanding achievement was to explain how economic activity is organized and coordinated in a world without violence. In essence, Man, Economy, and State is an elucidation of the Angel Gabriel economy. With unequaled clarity and precision, Rothbard’s economic masterpiece spells out how the nonviolent method of the free market results in economic order.

Consumption is the one and only purpose of all production. Hence, the economic problem is to ensure that the economic system produces the goods and services that satisfy the most urgent needs of the consumers. This means humanity requires some mechanism to coordinate production with consumer demand. Put differently, humankind needs some communication system that transmits the desires of the consumers to the producers. As Rothbard so brilliantly explains, the price system is the mechanism that regulates production in the totally nonviolent society.

A price is an exchange ratio established in nonviolent trade. For example, imagine an exchange in which twelve beers are traded for two bottles of wine. In this case, the price of one bottle of wine is six beers. In a monetary economy, trade is conducted with money. For example, imagine an exchange in which $36 is traded for twelve beers. In this case, the price of one beer is $3. Since every exchange results in a price, the free market network of nonviolent exchanges leads to the emergence of a price system. The price system is the array of all the individual prices established in all the individual markets that constitute the free market economy.

In a world of complete nonviolence, the price system coordinates production with consumer demand. The consumers’ decisions to buy or not buy determine all the individual prices in the price system. Producers then use these prices to guide their production activities. To the superficial observer, it appears as if producers determine production. But this is incorrect. The price system is a vast communication system that coordinates economic activity by transmitting the consumers’ orders to the producers. By buying and not buying, the consumers ultimately determine what will be produced, how, and in what quantity and quality. The consumers—and everyone is a consumer—regulate production by establishing all the prices.

The Angel Gabriel economy is a profit-and-loss economy. Although often criticized, profits are absolutely essential to a nonviolent social order. Profits and losses are the irresistible mechanisms that impel producers to obey the consumers. Profit is a sign that production is satisfying consumers, while losses indicate that production is not satisfying consumers. To put it differently, losses are a signal that scarce resources are being wasted in the eyes of consumers. Moreover, losses cannot continue forever. A producer that consistently fails to satisfy consumers will suffer consistent losses until it is finally driven out of business. To avoid going out of business, a producer must adjust production to the best possible satisfaction of consumers. In the perfectly nonviolent society, profits and losses are the forces that ensure producers operate in a way that maximizes consumer satisfaction.

Man, Economy, and State is one of the best accounts of the nonviolent approach to economic organization. As Rothbard demonstrates, the nonviolent method of free market capitalism leads to economic order. But what about the violent approach? As Rothbard points out, socialism is the violent method of economic organization. Socialism is a system of economic organization based on government control of production. Whereas free-market participants control production under capitalism, government controls production under socialism. But government is an agency that has a territorial monopoly on the use of violence. Thus, socialism is an economic system based on the systematic use of government coercion.

Socialism seeks to organize the system of production like a big military. Rather than the consumers, the dictator determines what goods will be produced and in what quantity and quality. Next, the dictator determines the best (least wasteful) way to produce those goods. Finally, the dictator orders his troops—the workers—to produce in accordance with his plan. The socialist method of production turns the entire population into an army of conscripted workers. Like a private in the army, every worker is ordered to perform a certain type of work at a dictated time and place. If the worker does not obey the dictator’s orders, government violence is used to force the worker to comply. But liberty is the absence of violence against person and property. Clearly then, the socialist system is totally incompatible with liberty.

As Rothbard emphasizes, the violent method of socialism is not a viable system of economic organization. In any economic system, producers need some way to determine whether consumers are satisfied or dissatisfied. There must be some method to test whether production is wasteful. In the free market, this is the profit test. But economic calculation requires market prices. The violent method of socialism abolishes nonviolent exchange. Consequently, socialism prevents the formation and emergence of prices (exchange ratios). And if there are no prices, it is impossible to calculate profit and loss.

Socialism makes economic calculation impossible. In technical jargon, it is impossible to make net-present-value calculations in a socialist system. Put another way, the socialist planners can never know whether they are making rational or irrational production decisions. Consumption is the only purpose of all production, but the socialist dictators can never know whether production is successfully satisfying consumers. They cannot detect error. They are like a captain lost at sea with no means of navigation. Therefore, production under socialism is arbitrary, chaotic, and wasteful. Rather than organizing economic activity, the violent method of socialism leads to widespread economic disorganization.

Many commentators believe there is a middle way between the nonviolent method of free market capitalism and the violent method of socialism. Interventionists seek to improve the operation of the free market economy with government violence. In Power and Market (1970), however, Rothbard shows that the interventionist system is absurd and counterproductive from the interventionist’s own perspective. All violence, whether inflicted by an individual or by government, only disrupts, distorts, and falsifies the free market price system. All acts of violence create false signals in the price system that must result in the waste of scarce resources. The nonviolent method of the free market maximizes consumer satisfaction and overall living standards. Any violent government interventions meant to improve the free market economy only impair consumer satisfaction and overall living standards.

Echoing Mises, Rothbard stressed that interventionism is not a permanent system of economic organization. Interventionism is an unstable method that must inevitably result in either the establishment of the free market economy or the establishment of socialism. Every act of violent government intervention in the free market creates discoordination. To eliminate that discoordination, government must either stop intervening, or it must pile on another intervention. But if government adds another violent intervention, that will cause even more economic discoordination. Government can remove all its interventions, or it can add even more. If it keeps adding more and more violent interventions, government eventually takes violent control over every aspect of economic activity. In this way, interventionism tends to socialism. Since interventionism is an inherently unstable approach, the ultimate choice is between pure free market capitalism and pure socialism. There is no middle way.

Socialism and interventionism are not economically viable. But as stressed above, these are the violent methods of economic organization. Economic science leads Rothbard to conclude that it is impossible to successfully organize society with violence. Violent economic methods must lead to economic disorganization, not economic organization. But again, nonviolence and violence are the only two methods of arranging production. Hence, economic science leads Rothbard to conclude that nonviolence is the only viable method of organizing society.

Sadly, we do not live in Angel Gabriel’s world of perfect liberty and nonviolence. In the real world, human beings can inflict violence upon one another. But as Rothbard realized, it is possible for human beings to simulate Angel Gabriel’s world of perfect liberty. With the right ethical rules, humankind can approach Angel Gabriel’s perfectly nonviolent society. This brings us to the second pillar on which Rothbard constructed his intellectual system: ethics.

Rothbard spells out his ethical system in For a New Liberty (1973) and The Ethics of Liberty (1982). The Rothbardian ethical system starts with the most important ethical question to face humankind: when is it legitimate for a human being to use violence against the person and property of another human being? Rothbard’s answer to this supreme ethical question is called the non-aggression principle. According to the non-aggression principle, a human being must never use violence against the person and property of another human being, unless defending person and property from aggressive violence. Every human being must be free to do whatever they please, so long as they do not initiate aggressive violence against person and property. The non-aggression principle is the ethical rule that allows humankind to approach the society of perfect liberty.

Imagine a world in which every human being always obeys the non-aggression principle. In such a world, there would be absolutely no violence. The pacifist ideal of a completely nonviolent society would be realized. In the real world, however, human beings are imperfect, and there will always be some who initiate violence against the person and property of nonviolent individuals. For this reason, defensive violence must be allowed to combat those who violate the principle.

Although he did not discover it, Rothbard is certainly a preeminent figure in the history of the non-aggression principle. Rothbard’s outstanding innovation was to realize and articulate the complete ethical and political implications of the principle. Rothbard made the non-aggression principle the central axiom of his ethical system. Given any individual or political action, Rothbard simply asks: does it violate the non-aggression principle? Any act that violates it is unjust. On the other hand, any act that does not violate the principle is just. All acts that violate the principle must be illegal in the society of perfect liberty, while all acts that do not violate the principle must be legal.

For example, consider slavery. Slavery is a system in which a nonviolent human being must labor for another under the threat of aggressive violence. For Rothbard, slavery is unjust because it violates the non-aggression principle. Therefore, slavery must be illegal. Now consider the case of drinking alcohol. Although it may be morally reprehensible and bad for one’s health, drinking alcohol does not involve the use of violence against a nonviolent human being. Therefore, drinking alcohol must be legal. In this manner, Rothbard uses the non-aggression test to determine whether any act is just or unjust and must be legal or illegal.

Although the non-aggression principle itself has never been controversial in the history of thought, its implications can be shocking for the uninitiated. For example, consider the case of taxation. A tax is a payment that government extracts from a human being under the threat of aggressive violence. To Rothbard, taxation is unjust because it violates the non-aggression principle. Any logically consistent thinker who accepts the principle must reject taxation.

Now we come to Rothbard’s theory of government. Although many eminent thinkers advocated the non-aggression principle before Rothbard, it had never been consistently applied to government. Unlike his predecessors, Rothbard refused to give government the moral sanction to violate the principle. To repeat, government is an institution that has a territorial monopoly on the use of violence. Anyone skeptical of monopoly for economic reasons must also be skeptical of government. More importantly, government is the only agency in society that is permitted to finance its existence with aggressive violence against nonviolent human beings, namely taxation. Rothbard pushes non-aggression to its logical conclusion: government is unjust because it is incompatible with the non-aggression principle. Just as it must cease to exist in Angel Gabriel’s society of perfect liberty, government must cease to exist in a society fully committed to the non-aggression principle.

History is the third pillar of the Rothbardian system. Rothbard’s historical output was massive, and he wrote with stunning proficiency on an extremely wide range of historical topics. In addition to his prodigious work on political and economic history, his An Austrian Perspective on the History of Economic Thought (1995) is perhaps the profession’s most important work on the historical development of economic science. Despite its stunning breadth, there was one fundamental underlying theme in all of Rothbard’s historical work: government has been the primary perpetuator of tyranny and violence throughout history. Through the ages, government has been the foremost enemy of liberty. But liberty is the key to a flourishing human race. To Rothbard, then, government has been the chief enemy of humankind and it has represented the ultimate threat to the survival and progress of humanity. If history could prove anything, it is that aggressive government violence can only stunt the development of humankind.

This brings us to the current volume. Like all of Rothbard’s works, the ultimate purpose of this volume is to foster liberty and nonviolent methods in society. To Rothbard’s mind, the fate of humanity depends on ideas. Specifically, the future of humankind depends on whether the ideas of liberty and nonviolence can prevail over the ideas of tyranny and violence. Rothbard provided humankind with a compelling and formidable system of ideas to defend and advance liberty. This volume is a collection of those affirming ideas. As such, its purpose is to proliferate liberty and, with it, humanity.

Edward W. Fuller

Palo Alto, California

November 2018