Friday, June 22, 2018

Forget the Deniers, the True Place of Murray Rothbard in the Austrian School Tradition

Murray Rothbard, Henry Hazlitt, Ludwig von Mises
By Joseph T. Salerno

Recently a young Austrian scholar made a very interesting observation in an informal discussion on Facebook: 
I have experienced that when you quote Mises instead of Rothbard (and they say basically the same in most circumstances) other Austrians are usually more receptive and willing to engage you in a discussion. Have you guys experienced the same thing?
Indeed we have and the reason has become increasingly obvious. In the past ten years or so, there has been a concerted effort in some quarters of the Austrian economics movement to
deny Rothbard his just due as a prodigiously productive scholar and as Mises’s pre-eminent follower whose work inspired the modern revival of Austrian economics.1 The story according to the Rothbard deniers goes something as follows. “Yes, yes,” they grudgingly admit, Rothbard wrote some foundational works on Austrian economic theory and history, including: Man, Economy and StateAmerica’s Great DepressionThe Panic of 1819, and Power and Market. But that was way back in the 1960s. By the 1970s he had “disengaged” from economics and the mainstream economics profession and began to focus on libertarian political philosophy and social theory. Apparently, for the Rothbard deniers, there is no greater intellectual failure then to refuse to engage mathematical and positivist economists in endless and fruitless “conversation” and to instead concentrate on advancing the Misesian praxeological paradigm. By the 1980s, this tale continues, Rothbard abandoned serious academic pursuits altogether and became a political activist and propagandist for libertarian ideas. By intermingling politics and economic theory, the deniers allege, Rothbard shunted Austrian economics onto the wrong track and abandoned the tradition of Menger, Böhm-Bawerk, Mises and Hayek.
Well, let us put the two central claims of the deniers’ narrative to the test. To assess the claim that Rothbard abandoned scholarly pursuits after 1980 I list his major articles, monographs, treatises, and volumes of essays published since 1980:
  • “The Myth of Neutral Taxation” (1981)
  • “Law, Property Rights, and Air Pollution” (1982)
  • “The Federal Reserve as Cartelization Device” (1984)
  • The Case for the Genuine Gold Dollar” (1985)
  • “The End of Socialism and the Calculation Debate Revisited” (1991)
  • The Ethics of Liberty (1982)
  • The Mystery of Banking (1983)
  • Ludwig von Mises: Scholar, Creator, Hero (1988)
  • The Case against the Fed (1994)
  • Making Economic Sense (1995)
  • An Austrian Perspective on the History of Economic Thought (two volumes, 1995)
In fact, Rothbard’s scholarly works have continued to pour forth to this very day, over twenty-two years after his untimely death. His latest book, The Progressive Era, a 500-page tome expertly edited by Professor Patrick Newman, was just published this month by the Mises Institute.2 This work bids fair to be the definitive study of the political and economic origins and consequences of that tragic epoch in American history. But let us not forget the flood of other posthumous books by Rothbard, which include The Logic of Action (two volumes, 1997); The Irrepressible Rothbard: The Rothbard-Rockwell Essays of Murray N. Rothbard (2000); A History of Money and Banking in the United States (2002); Betrayal of the American Right (2007) Strictly Confidential: The Private Volker Fund Memos of Murray N. Rothbard (2010); and Science, Technology, and Government (2015). Stay tuned because there are more works to come from the treasure trove of unpublished manuscripts in the Rothbard archives at the Mises Institute.3
This brief survey of Rothbard’s academic writings demolishes the foolish allegation of the deniers that Rothbard dropped out of the scholarly “conversation” altogether after 1980 in order to churn out nonacademic propaganda pamphlets as a political activist. In fact Rothbard’s steady stream of contributions from 1962 to 1995 and beyond in economic theory, the history of economic thought, political economy, and economic history, I believe, marks him as the greatest economist of the past 50 years. What of the deniers’ assertion that the content of Rothbard’s writings disqualify him as a true heir to the Misesian tradition? This reveals a stunning lack of familiarity with the history of the Austrian economics. Indeed it would be news to Mises himself as well as to his closest disciples and fellow travelers, such as Henry Hazlitt and Friedrich A. Hayek. 
Mises reviewed Rothbard’s magnum opus on economic theory, Man, Economyand State and enthusiastically endorsed it. He lauded Rothbard’s work as an “epochal contribution to the general science of human action.” He then went on to declare: “Henceforth, all essential studies in these branches of knowledge will have to take full account of the theories and criticisms expounded by Dr. Rothbard.”4 Anyone who is at all familiar with Mises’s writings can attest to the fact that Mises was rarely lavish in his praise of the works of other authors. Indeed Mises once remarked: “There never lived at the same time more than a score of men whose work contributed anything essential to economics.5 Yet Mises extravagantly lauded Rothbard’s treatise despite the fact that parts of the book were intended to correct, improve upon, and fill the gaps in the system of economic theory that Mises had presented in his own treatise, Human Action. Given this context, Mises’s review of Rothbard’s treatise sounds for the all the world like an older scholar at the end of his career passing the torch to someone he considered his closest protégé.
This interpretation is reinforced when we examine Mises’s reaction to the most notable instance in which Rothbard explicitly rejected one of Mises’s doctrines. I am, of course, referring to the theory of monopoly price. Mises had conceded that the formation of a monopoly price above the competitive price was theoretically conceivable in an unhampered market, although highly unlikely to occur in practice. Rothbard argued, to the contrary, that the distinction between a monopoly and a competitive price was conceptually meaningless in a free market economy. Now Mises was once asked his opinion of Rothbard’s disagreement with his theory of monopoly price by Joaquin Reig, the Spanish translator of Human Action. This occurred at the Mont Pelerin Society meeting in 1965. Mrs. Mises, who witnessed the exchange, said that her husband had replied: “Whatever Rothbard has written in this work is of the greatest importance.”6 However, the Spanish economist Jesús Huerta de Soto has reported that when Reig himself used to recount this incident he would quote Mises’s response as: “I agree with every word Professor Rothbard has written on the subject.”7 Whichever account of the incident is more accurate, the point is that Mises clearly viewed Rothbard as an economist who substantially advanced his own work in the field of economic theory. 
Henry Hazlitt was a follower and close associate of Mises, and an eminent Austrian economist in his own right. In his review of Man, Economy, and State, Hazlitt affirms Rothbard’s description of the method he used in creating his structure of economic theory.8 Hazlitt writes, it 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. . . .” Hazlitt concurs with the several contributions that Rothbard himself identifies as having made to the Misesian system, including his novel theory of monopoly. But Hazlitt questions whether Rothbard “has done full justice to his [i.e., Rothbard’s] own contribution.” Hazlitt then goes on to list seven or eight other “major points” in which Rothbard “contributes lucidity and light,” including and especially presenting “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.” 
Perhaps the weightiest endorsement of Rothbard as Mises’s true heir comes from Friedrich Hayek, who enjoyed an intellectually intimate but subtly conflicted relationship with Mises. Hayek was also a distinguished historian of economic thought and especially understood the intricate relationship between the two parallel but distinct branches that constituted the Austrian school of economics. Although both traditions were ultimately rooted in the writings of the founder of the Austrian school, Carl Menger, they stemmed from two different and, on several key issues, conflicting theoretical systems developed by Menger’s two leading followers, Eugen von Bohm-Bawerk and Friedrich von Wieser.9 Hayek agreed with most of Mises’s analytical and policy conclusions and vigorously defended and promoted them. However, Hayek explained, he had theoretical differences with Mises because he was brought up in the Wieserian tradition while Mises was an adherent of the rival Bohm-Bawerkian tradition:
Although I do owe [Mises] a decisive stimulus at a crucial point of my intellectual development, and continuous inspiration through a decade, I perhaps most profited from his teaching because I was not initially his student at the university, an innocent young man who took his word for gospel, but came to him as a trained economist, trained in a parallel branch of Austrian economics from which he gradually, but never completely won me over. Though I learned that he was usually right in his conclusions, I was not always satisfied by his arguments, and retained to the end a certain critical attitude which sometimes forced me to build different constructions, which however, to my great pleasure, usually led to the same conclusions.10
As late as 1977, Hayek admitted, somewhat ruefully, that the tradition that Mises represented had eclipsed the tradition he was raised in. He then noted, “Today’s active Austrian school, almost exclusively in the United States, is really the followers of Mises, based on the tradition of Böhm-Bawerk. . . .”11 And there is strong evidence that Hayek considered Rothbard a leading follower of Mises. Thus, for example, in the second volume of his magnum opus on political economy, Law, Legislation, and Liberty, Hayek cited the parallel arguments of Mises and Rothbard denying the existence in a market economy of a process of distribution separate from the processes of production and exchange.12 And in the third volume of the same work, Hayek cited Rothbard’s book Power and Market at the beginning of his chapter on government intervention in the market, noting that it was one of several books (including books by Dominick Armentano and “especially” Israel Kirzner) “which have substantially developed the conceptions here sketched.”13
Perhaps the clearest statement of Hayek’s view of Rothbard as the leading Misesian economist of the time can be found in Hayek’s Foreword to Rothbard’s booklet, Individualism and the Philosophy of the Social Scienceswhich was published in 1979 and contains two of Rothbard’s essays on the methodology of the social sciences, especially economics. Hayek treated Rothbard as his intellectual peer in the project to interpret and extend Mises’s praxeological approach to economics and the social sciences. According to Hayek,
Among the thinkers who have made outstanding contributions to the peculiar problems raised by the science of human action, Ludwig von Mises has probably been the most acute and the most original thinker of modern times. Professor Murray N. Rothbard has been profoundly influenced by his work in this field. Both of us has been trying to develop it further, and if this has sometimes led us to modify Mises’s conclusions, perhaps even in different directions. I am sure this is what Mises would have expected and even desired. . . . That the present state of this tradition, established by the large, systematic treatises that Mises completed from the third to the seventh decade of this century, should be made accessible to readers of the ninth in a condensed form by one of his best authorized disciples is certainly to be much welcomed.14
Hayek’s characterization of Rothbard as someone who “has been profoundly influenced” by Mises’s methodological position and as one of Mises’s “best authorized disciples,” along with the admiration for Rothbard’s work expressed by Hazlitt and Mises himself surely is sufficient reason to reject the bizarre and vacuous claims made by the Rothbard deniers. Murray Rothbard was a true heir to the Misesian tradition whose voluminous and profound research and scholarship greatly advanced Austrian economics and continue to inspire new generations of young economists today.
  • 1.For Rothbard’s central role in the rebirth of Austrian economics, see Joseph T. Salerno, “The Rebirth of Austrian Economics—in Light of Austrian Economics, “The Quarterly Journal of Austrian Economics,“ Vol. 5, No. 4 (Winter 2002): 111–28.
  • 2.Murray N. Rothbard, The Progressive Era, ed. Patrick Newman, Mises Institute, Auburn, AL, 2017.
  • 3.For an overview of Rothbard’s thought, which includes a 53-page bibliography of his works through 2005, see David Gordon, The Essential Rothbard, Mises Institute, Auburn, AL, 2007. . Also see the annotated bibliography of Rothbard’s writings through 1985, compiled by Carl Watner with annotations and a bibliographical essay by David Gordon, Murray N. Rothbard: A Scholar in Defense of Freedom, Mises Institute, Auburn, AL, 1986.
  • 4.Ludwig von Mises, “Man, Economy and State: A New Treatise on Economics,” in idem, Economic Freedom and Interventionism: An Anthology of Articles and Essays, ed. Bettina Bien Greaves, The Foundation for Economic Education, Inc. , Irvington-on-Hudson, NY, pp. 156-57.
  • 5.Ludwig von Mises, Human Action: A Treatise on Economics, Scholar’s Edition, Mises Institute, Auburn AL, 1998, p. 869.
  • 6.Margit von Mises, My Years with Ludwig von Mises, Arlington House Publishers, New Rochelle, NY, 1976, p. 160.
  • 7.The Spanish Roots of the Austrian School: An Interview with Jesús Huerta de Soto.” Austrian Economics Newsletter, vol. 17, no.2 (Summer 1997), p. 1.
  • 8.Hazlitt on Rothbard’s Man, Economy, and StateMises Wire (January 2, 2007) .
  • 9.For a thorough de-homogenization of these two traditions, see Joseph T. Salerno, “Friedrich von Wieser and Friedrich A. Hayek: The General Equilibrium Tradition in Austrian Economics,” Journal des Economistes et des Etudes Humaines, 2002, vol. 12, no. 2, 1-24; Salerno, “The Place of Mises’s Human Action In the Development of Modern Economic Thought,” The Quarterly Journal of Austrian Economics vol. 2, no. 1 (Spring1999).
  • 10.F. A. Hayek, “Coping with Ignorance.” In Friedrich A. Hayek, Knowledge, Evolution and Society, The Adam Smith Institute, London, p. 18..
  • 11.The Collected Works of F. A. Hayek, Vol. 4: The Fortunes of Liberalism: Essays on Austrian Economics and the Ideal of Freedom, eEd. Peter G. Klein, University of Chicago Press, Chicago, p. 157.
  • 12.F. A. Hayek, Law Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. 2: The Mirage of Social Justice, University of Chicago Press, Chicago, 1976, p. 157, n. 12.
  • 13.Hazlitt on Rothbard’s Man, Economy, and StateMises Wire (January 2, 2007) .
  • 14.F. A. Hayek, Foreword in Murray N. Rothbard, Individualism and the Philosophy of the Social Sciences, Cato Institue, San Francisco, 1979, pp. ix-x.
Joseph Salerno is academic vice president of the Mises Institute, professor of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.

The above originally appeared at

1 comment: