A Reviewer’s Notebook – 1962/12

Essays IX: TO Whom It May Concern

There are fifty-two articles in this year’s anthology of Freeman and Notes From FEE articles, Essays on Liberty: Volume IX (Foundation for Economic Educa­tion, 448 pp. $3.00 cloth, $2.00 paper). To review such a collec­tion is always a problem in the disposition of the available space: the poor critic inevitably feels as though he were being asked to compress fifty-two healthy and pertinent responses into one. A manifest impossibility! However, one way to make a stab at accom­plishing the impossible might be to construct from the articles the man whom the staff of FEE and The Freeman hopes to convince and then see how the articles as a whole apply to his predicament.

A Time for Decision

The man whom The Freeman hopes to change is uneasy about retaining a mind so open that the winds blow into it and out again from all directions. He is a little tired of being bought by the cen­tral government with his own money, though his conscience hasn’t quite nerved him up to the point of doing something about it. He prides himself on being a small-d democrat, but he doesn’t really believe that rights should be given or withheld on the say-so of 51 per cent of the voting pub­lic. He doesn’t like to be called an extremist, but can he always stay in the middle of the road and still respect himself as a man of prin­ciple? He probably thinks the old central area of his city is pretty dilapidated, but he is of two minds when he sees his mayor carrying a tin cup to Washington and beg­ging for “urban renewal” funds that are ponied up in part by peo­ple who live three thousand miles away from the region that is slated for reconstruction.

Businessmen Wanted

If the man whom The Freeman hopes to reach is a businessman, he is probably getting the benefit of some subsidy or other. But pri­vately this businessman must often wonder about the virtue of being “protected” by something that is calculated in the long run to create a bothersome surplus of the very stuff he is offering for sale.

This same businessman may have a guilty conscience because, in the seventies of the nineteenth century, a few bold enterprisers attracted to themselves the name of “robber barons.” Having a guilty conscience because Jim Fisk and Daniel Drew once rifled the Erie Railroad treasury, the business­man may feel timid about coming out and saying that modern union officials are often guilty of prac­tices that would have caused the pious Drew (who founded a theo­logical seminary) to blanch.

Again, the business man may feel that his alleged possession of “market power” means that he must hire public relations men to create for him a good “image” as one who would never use power unethically. Yet, under a system where “market power” is entirely at the mercy of “consumer power,” and hence must deliver in order to hold its franchise, the business­man may resent spending money on synthetic “image-making” as a sheer economic waste.

The Cost of Silence

The man whom The Freeman hopes to convert may like to “get along” with his fellows. But this desire for sociability is not always compatible with the responsible man’s urge to stand up and be counted. The would-be responsible man may be ready for the gospel according to Ludwig von Mises, who has always been willing to risk his neck for what he believes. Sociable people have kept quiet about the inroads of inflation on their standards of living for the past thirty years. They have also watched passively while the cost of government has risen from an average of $56 per person in 1900 to an average of $615 per person in 1960. They may have groused to themselves about this high cost of government from time to time, but they haven’t wished to appear hard-hearted about the “need” for government-dispensed charity.

The Welfare Burden

The person whom The Freeman hopes to reach may have been tempted in the past to undertake the “do-gooder” role. But with dead-beatism being exalted as a way of life (see the response of the professional do-gooders to the attempt of Newburgh, New York, to set up standards for city re­lief), this person must be grow­ing skeptical of pushing “service to others” to the point of under­mining self-reliance. He may be ready to reflect upon the fact that the “general welfare” clause of the U. S. Constitution has been perverted to permit all sorts of tax-supported “do-goodism” that Jefferson, Madison, Franklin, Hamilton, and the other Founding Fathers would have deemed ar­rantly unconstitutional. The erst­while do-gooder may now be ready to entertain the proposition that tax-supported welfarism is an in­vasion of the rights of an individ­ual to employ the fruits of his labor as he deems best—which, it should be noted, may include the private charity which some indi­vidualists frown upon.

Purposeless Citizens

The man whom The Freeman hopes to reach has probably been worrying about the purposeless­ness of many of his fellow citizens. But the spectacle of people think­ing more and more in terms of compulsory national purpose must seem to him to have its totalitar­ian implications. The national pur­pose, when translated into such things as price control, patently becomes “people control.” In emer­gent countries, such as those of mid-twentieth century Africa, ex­altation of the national purpose works to undermine the concep­tion of the individual as a crea­ture of God. Instead, he becomes a creature of the emergent state—and a pushover for communist infiltration.

Taxation Affects the Market

The man whom The Freeman hopes to persuade is probably won­dering why modern technological efficiency hasn’t resulted in widen­ing markets more than it has. And, in pondering the problem, he is no doubt ready to accept the proposition that taxes on business must be charged into the price of goods and services if they are to be paid at all. The less the tax, the lower the price and the wider the market—and the less the chance that capital will “want out.”

As for the failure of foreign aid to improve the efficiency and economic capacity of “underde­veloped” nations, the potential Freeman convert should be more than ready to realize that it makes a difference whether the rulers of new nations import tractors or solid gold Cadillacs. Even John Kenneth Galbraith and Chester Bowles have arrived at the point of questioning the ability of for­eign aid to take hold in countries that haven’t developed traditional saving and investment habits of their own.

Think on These Things

The foregoing portrait of the potential Freeman convert has been built up by abstraction from articles in this year’s Essays on Liberty. It may seem odd that a majority of Americans don’t al­ready agree with the gist of the fifty-two articles. In the days of Madison and Jefferson practically every thinking citizen would have quickly grasped the distinctions set up in Clarence B. Carson’s “Of Rights—Natural and Arbitrary.” The electorate of the early nine­teenth century which refused to vote for Albert Gallatin’s pro­posals for a federally supported canal and highway system would have thoroughly understood John C. Sparks’s “The Highway Dilem­ma” and Leonard Read’s “Into Space and Beyond Criticism.” But, as W. E. Sprague tells us in his trenchant “Danger: `Mindtraps’ Ahead,” the socialist recruiter has rushed to benefit from the curious f act that America, with the most comprehensive education system in the world, has been strangely unable to inculcate respect for the principles of elementary logic. We don’t think as clearly now as we did 150 years ago.

More than ever we fall for the appeal to majorities, the appeal to the “heart,” the appeal to un­analyzed statistics, the appeal to “authority.” We are still impressed with analogies that are not true parallels, with the to quoque (or “You’re another!”) habit of name-calling, and with the “post hoc, ergo propter hoc” fallacy.

It’s unrealistic to suppose that this year’s Essays on Liberty will reach multitudes. But ideas aren’t spread by sloganizing for the masses ; they are spread by per­meation—and by example. Hi there, Freeman-contributor Stan­ley Yankus under your Australian banana tree! In living like a free man, in undertaking the “hard­est job” of improving yourself and your understanding of freedom, you are showing us all what to do.

Man, Economy, And State: A Treatise on Economic Princi­ples, by Murray N. Rothbard. Princeton: D. Van Nostrand, Two volumes. 987 pp. $20.00.

Reviewed by Henry Hazlitt

One of the unhappy casualties of World War I was the old-fashioned treatise on economic “principles.” This was a work not too technical to be read by the intelligent lay­man, on the one hand, nor, on the other, like current textbooks, a choppy and oversimplified com­pilation of currently fashionable doctrine. One of the last of the species was Frank W. Taussig’s Principles of Economics, first pub­lished in 1911. The spirit of that book was revealed in a passage from the preface:

“I have tried in this book to state the principles of economics in such form that they 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 vain pretense of simplifying all things.”

A Forty-Year Gap To Fill

It is the announced purpose of Dr. Rothbard’s Man, Economy, and State (two volumes running to a total of 1,000 pages) to write in this spirit and “to fill part of the enormous gap of forty years’ time.” And he has succeeded. He has given us a work in the tradi­tion of Taussig, Wicksteed, Fet­ter, Knight, and Mises, a compre­hensive study of principles, which treats economics as a coherent edifice, not a fragmented study of “utility,” “monopoly,” “interna­tional trade,” “labor,” “agricul­ture,” “public finance,” and “linear programming.” Such a unified edi­fice, as Rothbard explains, can be built only by treating economics as a deductive science using verbal logic. For “if economics proceeds by deductive logic grounded on a few simple and evident axioms, then the corpus of economics can be presented as an interrelated whole to the intelligent layman with no loss of ultimate rigor.”

This was the method of the “Austrian” economists. It is the method of Ludwig von Mises. In fact, Rothbard, a former student of Mises, frankly takes off from Human Action: “From now on, little constructive work can be done in economics unless it starts from Human Action.,,, In one sense, the present work attempts to isolate the economic, fill in the interstices, and spell out the de­tailed implications, as I see them, of the Misesian structure.”

Outstanding Contributions

What contributions has Roth-bard made to the structure? He indicates some of them in his own preface. His book begins by deduc­ing the entire corpus of economics from a few simple “axioms” : “the Fundamental Axiom of action—that men employ means to achieve ends” ; that “there is a variety of human and natural resources,” and that “leisure is a consumers’ good.” Rothbard is not afraid to be old-fashioned enough to begin with “Crusoe economics” before he takes up interpersonal rela­tions, and barter before he takes up indirect exchange through money.

One of the features of his con­sumption-and-production theory is “the resurrection of Professor Frank A. Fetter’s brilliant and completely neglected theory of rent—i.e., the concept of rent as the hire price of a unit service. Capi­talization then becomes the process of determining the present values of the expected future rents of a good. The Fetter-Mises pure time-preference theory of interest is synthesized with the Fetter rent theory [and] with the Austrian theory of the structure of produc­tion.,,, One ‘radical’ feature of our analysis of production is a complete break with the currently fashionable ‘short-run’ theory of the firm, substituting for this a general theory of marginal value productivity and capitalization. It is a ‘general equilibrium’ analysis in the dynamic Austrian, and not in the static, currently popular Walrasian sense.”

Rothbard also expounds “a com­pletely new theory of monopoly—that monopoly can be meaningfully defined only as a grant of privilege by the state, and that a monopoly price can be attained only from such a grant. In short, there can be no monopoly price on a free market.”

The Role of Time

So far I have adhered to Roth-bard’s own summary. But I am not sure he has done full justice to his own contribution. For example, I do not recall any book (with the possible exception of the works of Mises, Fetter, and Böhm-Bawerk) that gives so full a recognition to the inherent and omnipresent (but neglected) role of time, not merely in the explanation of interest, but in all economic activity. Rothbard constantly emphasizes time as an indispensable factor in all produc­tion, and as a necessary but “scarce” means to all our ends.

On a score of other major points, also, he contributes lucid­ity and light: his excellent de­scription of the enormous benefits of a money economy over one of the direct exchange; his explana­tion of why a separate theory of “international” trade is unneces­sary and why the “balance of pay­ments problem” for a nation is no different from that for an individ­ual; his rigorous exposition of a pure time-preference theory of in­terest; his mordant exposure of labor union fallacies ; his beauti­ful explanation of why the free market, far from being “anarchic” or “planless,” is the only organiza­tion under which true economic balance and order are possible.

What does Rothbard’s book give us that Mises’ does not? The ques­tion can best be answered by a comparison. One mathematician does not necessarily differ from another when he explores other fields or other specific problems. The chief difference between Mises and Rothbard is that the latter, treating at much less length some of the basic problems that Mises has explored more thoroughly, de­votes a much larger part of his work to the refutation of opposing doctrines : some as found in the older works, such as those of Hen­ry George, Veblen, Marshall, Fish­er, Schumpeter, and Knight ; but more particularly those found in the literature of the last twenty-five years—in the Keynesians, in the “mathematical economists,” in W. W. Rostow, in Galbraith.

It is in the controversial part of his work that Rothbard is most stimulating. With the statistical and mathematical economists he is unsparing. He points out the ar­bitrary and unscientific nature of all index numbers, as well as the emptiness or deceptiveness of theequations in which the mathemati­cal economists deal : “In human action there are no quantitative constants. As a necessary corol­lary, all praxeological-economic laws are qualitative, not quantita­tive.” His exposure of the chief Keynesian doctrines is thorough, and his criticism of Galbraith is devastating.

Some Debatable Points

In discussing a book of such im­portance, with so much in it to praise, and with an instructive challenge on nearly every page to some “orthodox” or “unorthodox” doctrine, it seems ungrateful to call attention to flaws. Yet in a structure of thought of which the foundations are so carefully laid, and in the midst of an otherwise brilliant and penetrating discus­sion, Rothbard will suddenly an­nounce some extraordinary conclu­sion based on a fragment of ab­stract doctrinaire logic. Examples are his sharp contrast between copyrights and patents, and his implication that the former might well be granted in perpetuity and the latter not at all ; his conclusion that repudiation of government debt is no great evil; that it even has a “social utility,” and the add­ed advantage of making future government borrowing more diffi­cult; his opinion that libel and slander ought not to be illegalized, and that even blackmail “would not be illegal in the free society. For blackmail is the receipt of money in exchange for the service of not publicizing certain informa­tion about the other person. No violence or threat of violence to person or property is involved.”

It is hard to explain these aber­rations. They are in such sharp contrast to the rest of the book that they seem almost as if stuck in by another hand. But they are practically all in the legal and political, rather than in the eco­nomic, field. The nearest I can come to a rational explanation of them is to assume that when Roth-bard wanders out of the strictly economic realm, in which his schol­arship is so rich and his reasoning so rigorous, he is misled by his epistemological doctrine of “ex­treme apriorism” into trying to substitute his own instant juris­prudence for the common law prin­ciples built up through genera­tions of human experience.

I mention these lapses because I am certain that opponents of the book, and victims of his devastat­ing refutations, trying to discredit so much that is brilliant and orig­inal and profound, will cite them with relish and with the implica­tion that the rest of the book can be ignored. But it cannot be ig­nored. It is in fact the most im­portant general treatise on eco­nomic principles since Ludwig von Mises’ Human Action in 1949.

From National Review (150 East 35th Street, New York 16), September 25, 1962.

 

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The first truth to be discovered about human action is that it can be undertaken only by individual “actors.” Only indi­viduals have ends, and can act to attain them. There are no such things as ends of or actions by “groups,” “collectives,” or “states,” which do not take place as actions by various specific individuals. “Societies” or “groups” have no independent ex­istence aside from the actions of their individual members. Thus, to say that “governments” act is merely a metaphor; actually, certain individuals are in a certain relationship with other in­dividuals and act in a way that they and the other individuals recognize as “governmental.”

Murray N. Rothbard, Man, Economy, and State