Part II: A Misesian Textbook, 1949–1953

Murray Rothbard’s economic perspective changed significantly in 1949 when he met Ludwig von Mises and read his magnum opus, Human Action. With the financial support of the Volker Fund, Rothbard accepted Mises’s offer to write a textbook rendition of his treatise. Early on, Rothbard evinced a thorough understanding of Mises’s monetary transmission mechanism and praxeological method. This allowed him to further develop the theories of value and price formation the emerging neoclassical synthesis had neglected. In particular, Rothbard used the means-ends relationship to deduce the law of ordinal marginal utility rankings and contrasted it with modern theories of utility. He then showed how this law logically resulted in demand schedules that always sloped downward, which in turn led to a theory of pricing that explained the process of equilibration to the market clearing price. Finally, he extended his analysis to price formation in a monetary economy. In addition to exhibiting his own intellectual progress, Rothbard’s developments significantly advanced economic science because Mises assumed these logical deductions but never actually derived them.