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Man, Economy, and State / Power and Market: Government and Economy
Murray N. Rothbard's great treatise Man, Economy, and State and its complementary text Power and Market provides a sweeping presentation of Austrian economic theory, a reconstruction of many aspects of that theory, a rigorous criticism of alternative schools, and an inspiring look at a science of liberty that concerns nearly everything and should concern everyone. The Mises Institute's new edition of Man Economy, and State , united for the first time with its formerly sundered companion volume Power and Market , is a landmark in the history of the Institute. It takes this book out of the category of underground classic and raises it up to its proper status as one of the great economic treatises of all time, a book that is essential for anyone seeking a robust economic education. The revealing new introduction by Joseph Stromberg uses material from the Rothbard Archives, including his personal notes during the research and writing phases, to reconstruct the intellectual setting in which the book was written, and its initial and widening impact. For years, the Mises Institute has kept it in print and sold thousands of copies in a nice paperback version. Now in our twentieth year, we decided to take a big step and put out an edition worthy of this great treatise. It is the Scholar's Edition of Man, Economy, and State —-an edition that will immediately become definitive and used throughout the world. The footnotes (which are so brilliant and informative!) are at the bottom of every page. The index is huge and comprehensive. The binding is impeccable and its beauty unmatched. Students have used this book for decades as the intellectual foil for what they have been required to learning from conventional economics classes. In many ways, it has built the Austrian school in the generation that followed Mises. It was Rothbard who polished the Austrian contribution to theory and wove it together with a full-scale philosophy of political ethics that inspired the generation of the Austrian revival, and continues to fuel its growth and development today. From Rothbard, we learn that economics is the science that deals with the rise and fall of civilization, the advancement and retrenchment of human development, the feeding and healing of the multitudes, and the question of whether human affairs are dominated by cooperation or violence. Economics in Rothbard's wonderful book emerges as the beautiful logic of that underlies human action in a world of scarcity, the lens on how exchange makes it possible for people to cooperate toward their mutual betterment. We see how money facilitates this, and allows for calculation over time that permits capital to expand and investment to take place. We see how entrepreneurship, based on real judgments and risk taking, is the driving force of the market. What's striking is how this remarkable book has lived in the shadows for so long. It began as a guide to Human Action , and it swelled into a treatise in its own right. Rothbard worked many years on the book, even as he was completing his PhD at Columbia University. He realized better than anyone else that Mises's economic theories were so important that they needed restatement and interpretation. But he also knew that Misesian theory needed elaboration, expansion, and application in a variety of areas. The result was much a rigorous but accessible defense of the whole theory of the market economy, from its very foundations. But the publisher decided to cut the last part of the book, a part that appeared years later as Power and Market . This is the section that applies the theory presented in the first 1,000 pages to matters of government intervention. Issue by issue, the book refutes the case for taxation, the welfare state, regulation, economic planning, and all forms of socialism, large and small. It remains an incredibly fruitful assembly of vigorous argumentation an
1544 pages, Hardcover
First published January 1, 1962
About the author
Murray N. Rothbard
219 books948 followersMurray Newton Rothbard was an influential American historian, natural law theorist and economist of the Austrian School who helped define modern libertarianism. Rothbard took the Austrian School's emphasis on spontaneous order and condemnation of central planning to an individualist anarchist conclusion, which he termed "anarcho-capitalism".
In the 1970s, he assisted Charles Koch and Ed Crane to found the Cato Institute as libertarian think tank.
In the 1970s, he assisted Charles Koch and Ed Crane to found the Cato Institute as libertarian think tank.
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December 3, 2011
A masterpiece on economics presented in a logical, well-organized format that establishes basic foundational principals, then builds to define more progressively complex ideas. While much of the work follows the principles of Mises and Human Action: A Treatise on Economics, this work is far more readable and better organized. If you have read Human Action, you must read Man, Economy & State to complete the picture. If you have not read Human Action, you may want to read Rothbard’s work first, then go to Human Action as a deeper dive.
Rothbard presents a comprehensive guide to economics and praxeology. He provides strong arguments against many of the more popular economic theories exposing their fallacies in easy to understand language. Unlike your typical economics text book, you won’t find a lot of detailed mathematical formulas here and the ones you do find are often illustrations of fallacious thinking by other economists.
While I highly recommend this book for anyone who want a better understanding of money, banking, economics and political thought, I can’t agree with everything presented in the book. I think there are a few areas where Rothbard slips off his usually sound foundations:
1. “Selling Costs” (Chapter 10.5-C): Rothbard challenges Professor Chamberlin’s ideas on the value of distinguishing selling costs from production costs. He makes the case that the “distinction is completely spurious” and goes on to cite Human Action p319, yet this page from Human Action including nothing relevant to the discussion of selling costs. He goes on say the cost of sales are unnecessary from a point of economic analysis and should simply be considered part of the cost of production. He misses the point and value of such separate analysis in this regard. While I am not directly familiar with Chamberlin’s teaching on this subject, I do have some personal business experience in this area.
There are many cases in business where a decision is needed whether to scrap excess production or to sell it. Rothbard seems to assume that some sale no matter how deep the discount will always be taken because some revenue from the sale will always be better than no revenue at all and such decisions need to be made without regard to sunk costs. However, an economic analysis is necessary to make such a decision. Simply stated, a comparison needs to be made between the potential net revenue of moving excess inventory through the sales channel or simply scrapping that inventory. Cost of sales can include the cost of transportation to the sales location, the costs of promotions, advertising, commissions and financing of the sales as well as the customer support costs directly associated with after-sale support. These costs are incurred only if the excess inventory is moved through the sales channel. If the sum of these costs exceeds the potential gross revenue from the discounted sale, the net proceeds will be negative (a cost). With such a financial analysis, the owner of this inventory can easily see that the cost of scrapping the inventory is lower than the cost of selling it – this decision better maximizes overall profit for the entrepreneur.
If the selling costs are simply lumped into the production costs, such an analysis is always impossible to make. In this case the entrepreneur will mistakenly choose to sell the excess inventory, judging only on potential revenue from the sale. But measured from this decision point, the cost of sales are future expenditures while cost of production are in the past. To be consistent with Rothbard’s own reasoning for making such decision based only looking forward, he must be able measure these costs of sales. He is inconsistent and illogical in this regard.
2. “Patents & Trademarks” (Chapter 10.7): In this section, Rothbard takes a decided turn from his consistent logic of economic evaluation based on human action and seems to circumvent his own implied ethic by starting his entire argument based on the way courts decide infringement in the cases of copyrights and patents. He uses the distinctions between these two cases as the basis and foundation for disparate treatment with regard to copyrights and patents. He is now employing the fallacy of arguing from history or from authority to support his position. He makes the case that patents are illegitimate and should not be considered a genuine property right, while he argues that copyrights should be. His basis is this arbitrary distinction made in the government prosecution of infringement cases and on the implied contract established by the notification of a copyrighted work.
Instead, he should begin with a review of the history and basis for copyrights and patents and an analysis of the principals of property ownership of ideas. The historical review would clearly review that both patents and copyrights began with a government grant of monopoly to the holder through the force of the state as a form of mercantilism. This perspective leads to questions of why it may be necessary to use government force and whether such “intellectual property” is actually property at all. These questions have been answered in works by libertarian writers since Rothbard including N. N. Stephan Kinsella, Daniel Krawisz and Jacob Huebert among others.
(It was a long book, so it deserved a long review.)
Rothbard presents a comprehensive guide to economics and praxeology. He provides strong arguments against many of the more popular economic theories exposing their fallacies in easy to understand language. Unlike your typical economics text book, you won’t find a lot of detailed mathematical formulas here and the ones you do find are often illustrations of fallacious thinking by other economists.
While I highly recommend this book for anyone who want a better understanding of money, banking, economics and political thought, I can’t agree with everything presented in the book. I think there are a few areas where Rothbard slips off his usually sound foundations:
1. “Selling Costs” (Chapter 10.5-C): Rothbard challenges Professor Chamberlin’s ideas on the value of distinguishing selling costs from production costs. He makes the case that the “distinction is completely spurious” and goes on to cite Human Action p319, yet this page from Human Action including nothing relevant to the discussion of selling costs. He goes on say the cost of sales are unnecessary from a point of economic analysis and should simply be considered part of the cost of production. He misses the point and value of such separate analysis in this regard. While I am not directly familiar with Chamberlin’s teaching on this subject, I do have some personal business experience in this area.
There are many cases in business where a decision is needed whether to scrap excess production or to sell it. Rothbard seems to assume that some sale no matter how deep the discount will always be taken because some revenue from the sale will always be better than no revenue at all and such decisions need to be made without regard to sunk costs. However, an economic analysis is necessary to make such a decision. Simply stated, a comparison needs to be made between the potential net revenue of moving excess inventory through the sales channel or simply scrapping that inventory. Cost of sales can include the cost of transportation to the sales location, the costs of promotions, advertising, commissions and financing of the sales as well as the customer support costs directly associated with after-sale support. These costs are incurred only if the excess inventory is moved through the sales channel. If the sum of these costs exceeds the potential gross revenue from the discounted sale, the net proceeds will be negative (a cost). With such a financial analysis, the owner of this inventory can easily see that the cost of scrapping the inventory is lower than the cost of selling it – this decision better maximizes overall profit for the entrepreneur.
If the selling costs are simply lumped into the production costs, such an analysis is always impossible to make. In this case the entrepreneur will mistakenly choose to sell the excess inventory, judging only on potential revenue from the sale. But measured from this decision point, the cost of sales are future expenditures while cost of production are in the past. To be consistent with Rothbard’s own reasoning for making such decision based only looking forward, he must be able measure these costs of sales. He is inconsistent and illogical in this regard.
2. “Patents & Trademarks” (Chapter 10.7): In this section, Rothbard takes a decided turn from his consistent logic of economic evaluation based on human action and seems to circumvent his own implied ethic by starting his entire argument based on the way courts decide infringement in the cases of copyrights and patents. He uses the distinctions between these two cases as the basis and foundation for disparate treatment with regard to copyrights and patents. He is now employing the fallacy of arguing from history or from authority to support his position. He makes the case that patents are illegitimate and should not be considered a genuine property right, while he argues that copyrights should be. His basis is this arbitrary distinction made in the government prosecution of infringement cases and on the implied contract established by the notification of a copyrighted work.
Instead, he should begin with a review of the history and basis for copyrights and patents and an analysis of the principals of property ownership of ideas. The historical review would clearly review that both patents and copyrights began with a government grant of monopoly to the holder through the force of the state as a form of mercantilism. This perspective leads to questions of why it may be necessary to use government force and whether such “intellectual property” is actually property at all. These questions have been answered in works by libertarian writers since Rothbard including N. N. Stephan Kinsella, Daniel Krawisz and Jacob Huebert among others.
(It was a long book, so it deserved a long review.)
December 5, 2009
This book essentially contains the entire discipline of economics, the way it would be taught in a sane and rational world. In Man, Economy, and State, Rothbard builds an impenetrable case for the market economy, from the most basic axiom of purposeful human action to its furthest implications in all types of human interaction. In the appended Power and Market, he demonstrates the destructive nature of political power, and delivers a crushing blow to statism in all its forms.
Rothbard's style is straightforward, imaginative, and clear; a refreshing change from the dryly academic style in which the science of economics is generally presented. In writing this treatise the author assumes nothing of the reader, except that he or she is intellegent and eager to learn.
This book is essential for anyone who is interested in the pursuit of truth, particularly within the study of economics; but most of all to those who want to know the nature of freedom, and who oppose the engines of political tyranny that have for so long dominated academia.
Rothbard's style is straightforward, imaginative, and clear; a refreshing change from the dryly academic style in which the science of economics is generally presented. In writing this treatise the author assumes nothing of the reader, except that he or she is intellegent and eager to learn.
This book is essential for anyone who is interested in the pursuit of truth, particularly within the study of economics; but most of all to those who want to know the nature of freedom, and who oppose the engines of political tyranny that have for so long dominated academia.
October 5, 2015
A must read. One of few works in the 20th century covering economic theory with such an ambitious scope and scale, and doing so with admirable clarity and relative brevity. Much of the work will be non-controversial for those with a minimum understanding of economics. Rothbard describes himself as a disciple of Austrian economist Ludwig von Mises, and as such, he expands, explores, and improves on many Austrian economic ideas.
Rothbard largely divides his work into his main portion, economics in a pretend (historically speaking) completely free and unhampered market, and in much of that he explores the theoretical-only model of the evenly rotating economy (ERE) where there are no unknowns and all people receive, after the fact, what they expect beforehand.
Curiously, Rothbard takes up the idea of property ownership in his mythical completely free society. At first blush, it seems reasonable enough, but it does not stand close scrutiny. He states the first "user" of any heretofore unoccupied territory becomes its owner and may claim all produce therefrom. For claiming empty lands, this does seem reasonable. However, what constitutes "first use?" If I fence in five acres of empty land, even though I never set foot on any of it, do I own all five acres, or merely the perimeter supporting my fence and fence posts? What if it's 1,000 or 1,000,000 acres fenced in? Is walking over ground enough to claim it, or must I do more work to it? How much, what kind? If I run my plough through the earth, may I claim only the trough, or also the area to which the earth moved? How much else may I claim? Six inches to either side? Six feet? What happens when my trough runs next to my neighbor's, where exactly do we draw the line? What about subterranean mineral rights? He makes this principle more absurd by extending it to water and air. So if I buzz inches above my neighbor's roof with a remote control airplane, I now own the air above his home, and can buzz my loud drone over his home, film and photograph him and his family in their backyard all I wish. I would not tolerate this from a neighbor and I doubt you would either. So now that I've buzzed my neighbor's rooftop, how much airspace exactly do I own? Only the exact paths my aircraft took? Or some space around and in between? How much above and below? How is this to be documented and recorded for future dispute resolution? (Land is one thing, water and air become a little trickier for cadastral surveys.)
The advantage of Rothbard's method is that is does solve many, if not most, of the current "market externality" disputes. If every bit of land, water, and air has a private owner, then anyone damaging or poisoning it with pollution, for instance, can be sued for damages, therefore the polluter can be made to bear the costs and consequences of his pollution. However, it completely neglects the problem of how this would devastate, and likely altogether prohibit, anything resembling long-distance trade by land, sea, or air. If every stretch of land, river, coastline, open ocean, and airspace were owned by literally billions of separate owners in various-sized parcels, anyone wishing to construct a road, railroad, or use such infrastructure, or simply pass over the river, lake, ocean, through the air, etc., will have to negotiate separately with potentially thousands of owners for even a relatively short route. Rothbard passes over this with a imperious wave of his hand in a footnote! "Inevitably, someone will point to the plight of the railroad or highway company that must pay 'extortionate rates' to the man who 'merely' owns the property along the way..." (footnote 72, p 1140) Never mind the actual rent or sale price of such patches and parcels, the cost of having to separately contract with thousands (or more) of separate owners, added to the risk of holdouts (those who will not sell/rent at any price), it is difficult to see any trade or travel over any but the shortest distances being possible. In the past there was private infrastructure (toll roads, bridges, river gates, etc.), but these were not built on Rothbard's parcelized principle of first use ownership. The first Assyrian "empire" was less an empire than an unprecedented trading network. The great empires had not yet arisen and the Near East was divided into countless small kingdoms, city states, etc., with each charging its own tolls, customs, etc., and often localities within each polity also had their own local fees and regulations. Long-distance trade was difficult for all and any products brought from afar were exceptionally expensive. The Assyrians established trading colonies called Karums, which were used to negotiate discounts in tolls, exceptions to regulations/prohibitions, and such, so as to facilitate long-distance trade with some success. Yet Rothbard's method would subdivide all of the world into many more bits and pieces than the Assyrians had to deal with.
Rothbard's master, von Mises, seems to have taken a much more pragmatic approach. Mises recognized that there was no truly unowned land property. As he noted, "All ownership derives from occupation and violence...That all rights derive from violence, all ownership from appropriation or robbery, we may freely admit to those who oppose ownership on considerations of natural law. But this offers not the slightest proof that the abolition of ownership is necessary, advisable or morally justified...This the doctrine of natural law has called the war of all against all. The war ends when the actual relation is recognized as one worthy to be maintained. Out of violence emerges law." (Socialism: An Economic and Sociological Analysis, location 689-697) Rothbard's agenda in creating this unnecessary as well as unworkable "first use" system seem to be to disinherit the governments of the world of claimed "unused" land, and also to open up all "unowned" water and air resources to private owners. While having the benefit of eliminating land/water/air-related market externalities, it would be at the cost of destroying most of the world's trade, and thus, as Rothbard himself relates in his critique of other trade-reducing measures, tending to reduce humankind toward starvation and barbarism. Since the ownership question on planet Earth has already been (effectively) resolved, it seems better to take Mises' approach of recognizing and accepting current enforced claims at face value in an effort to steer clear of the war of all against all.
On the question of land, Rothbard seems to insist land has intrinsic value, without being able to define or defend it; he ignores Frédéric Bastiat's repeated demonstrations that land only has value insofar as labor is applied to it. In fact, Rothbard reduces toward this argument himself in places, without openly accepting it. Bastiat is only mentioned twice in Rothbard's text, a sign that maybe he could broaden his base from more than just Austrians.
One of the perennial questions of liberty is, to whom does it apply? Rothbard refers to Ernst Barker and gives one of the clearest and most succinct solutions to the problem of children in a free society (see Rothbard's footnote 12, p 93), a question Ayn Rand unfortunately failed to address in her otherwise brilliant Atlas Shrugged.
Unfortunately, Rothbard neglects to address the question of mental incapacity. What is defined as incapacity or incompetence to reason, and who gets to decide? Must we wait till a violently insane person freely buys a gun, freely walks into a school, and freely guns down 20 children and their teachers prior to killing or restraining the person? Or can anyone determine a person's inability to reason sufficient to restrict his/her liberty to some extent, or even completely? In light of today's epidemic of mass shooting (among other examples), it would be beneficial to explore or debate free market ideas on this topic.
Rothbard is sadly a gold-bug. He insists that anything used as currency must, once upon a time, have had its own barter value, or be imposed by force by a State or similar hegemon. He appears to duck the "intrinsic value" problem of other gold bugs, by regressing to its historical fact of once having had intrinsic value, but not depending on that in the present tense. After all, gold only has intrinsic value because of the faith and confidence of people's belief in its intrinsic value. Should people, en masse, decide tomorrow that they no longer wish to adorn themselves and their valuables in gold, gold's industrial uses are not sufficient to maintain its current price or anything near to it, and it would therefore become worth a small fraction of its value. More to the point, imagine the practical difficulties in using actual gold in exchange, yet another point Rothbard dismisses with an imperious wave of the hand. Adam Smith devotes considerable space to the difficulties in maintaining gold currency in the face of inevitable wear and tear, not to mention deliberate clipping. Should every consumer be expected to keep an exact scale upon his/her person to measure all currency provided, to ensure the total weight is correct? Imagine supermarket checkout lines! And how easy is it to forge currency, adulterating its purity, replacing its core, etc. Paper currency today contains many difficult-to-counterfeit safety features. While RFIDs or similar technology could be implanted in all real gold currency, so they could be installed in counterfeits. And is every consumer expected to keep a RFID reader in his/her pocket for every exchange? Imagine people fishing around in their pockets for every last fraction of an ounce of gold powder to make the right amount... It would seem depositing gold in gold warehouses and exchanging paper vouchers would be the only sensible solution, though imagine the truckloads of gold going to and fro as these vouchers were redeemed! Not to mention the temptation toward robbery! This could become an expensive drain on commerce.
More to the point, the advent of Bitcoin and similar modern private currencies blows every bit of Rothbard's gold/paper money theories clean out of the water. Bitcoin never had an intrinsic value that can be regressed to, nor is it hegemonically imposed. In fact, it is used in the face of monopoly laws against its existence and is most popular with the very Libertarians who Rothbard assumes will only accept currency that can regress to intrinsic value. The fact of the matter is that currency can be anything widely accepted in the marketplace, and in a free society, anything that is voluntarily and widely accepted. One finds Milton Friedman's analysis of money in the real world much more useful.
On a related note, Rothbard attempts to torpedo fractional banking through deception: "It should be clear that this practice is outright fraud. Someone else's property is taken by the warehouse and used for its own money-making purposes. It is not borrowed, since no interest is paid for the use of the money." (p 802) In fact, where it is practiced, people are paid a fraction of the interest earned on the loans made with their deposits; nor is it fraud, the banks declaring to their customers that their deposits will in fact be loaned back out. Fraud requires misrepresentation at a loss, a point Rothbard is quite clear about elsewhere.
Rothbard correctly and brilliantly tackles the "problem" of income inequality, redistribution of wealth, etc.: "In the free market process, therefore, there is no separation between production and 'distribution.' There is no heap somewhere on which 'products' are arbitrarily thrown and from which someone does or can arbitrarily 'distribute' them among various people. On the contrary, individuals produce goods and sell them to consumers for money, which they in turn spend on consumption or on investment in order to increase future consumption. There is no separate "distribution"; there is only production and its corollary, exchange." (p 477)
While Rothbard's criticism of closed-shop unions is thorough and convincing, his criticism of open-shop unions rely on generalizations drawn from empirical data, not theory: "Empirically, on the other hand, almost all cases of effective unionism are imposed through coercion exercised by unions." (p 897) Rothbard (and the reader) would be better referred to Henry Hazlitt's more thoughtful and nuanced treatment of open-shop unions in Economics in one lesson.
Rothbard's theory of price is often regarded as the center-piece of the work. Indeed, it is clear and penetrating. However, Rothbard makes one point unnecessarily muddy. In the beginning of the work, Rothbard shows that the price that clears the market is decided by the preferences of both consumer and producer. Yet later he keeps insisting that price is finally and unilaterally set by the consumer, as if I could insist Aston Martin sell me one of their new cars for a dollar, and then it would be up to them to downgrade the prices paid back to higher-order capital goods producers and other factors (labor, land) to meet my demand. In fact, the current cost structure of any seller will, most likely, factor into that seller's preferences and what price he/she is willing to sell or not sell. This leaves the matter where Rothbard first defined it, as a meeting of buyers and sellers, not consumers "dictating" as he later characterizes it.
Rothbard claims that "No tax can be shifted forward." (p 1156) He gives all kinds of reasoning and shows that sales or excise taxes tend to shift production to untaxed lines of production and/or, in general, shift demand downward and thereby in any event reduce the prices charged not only by the final seller but all contributing factors, impacting specific factors most. Undoubtedly some of this occurs (consumers have only so much disposable income), however, empirically, his theory can be easily disproved. A glance at http://www.ibtimes.com/price-cigarett... shows how cigarette pack prices correlate very strongly with taxes on cigarettes, showing that cigarettes are not the same price (or even close!) in New York as in Kentucky. Rothbard could try to evade this through a "psychic benefit" argument, that a person is willing to pay more for cigarettes in Manhattan than Louisville, because of Manhattan's other benefits over and above Louisville's, but then how does he explain the price of cigarettes in New Jersey?!
In the second included work, Power and Market, Rothbard reprises (or even verbatim restates) many sections of his preceding work. He does intermix some new material, and towards the end gives very thoughtful treatment of taxation and coercion specifically. In fact, he goes so far as to demand the abolition of all government and its replacement by privately contracted services, to include private defense services. David Friedman gave a much better discussion of private "justice" and defense in his The Machinery of Freedom: Guide to a Radical Capitalism. Still, even Friedman was unable to overcome the most urgent objections to such a system of competing private "justice." If I contract a firm to provide me police and court services, and which therefore has its own law, it will clearly favor me over a person paying a competing firm. Therefore, regardless of the merits of any dispute, if I bring a person to my court who does not subscribe to it, my court must decide in my favor, or other customers would flee from it. If we take our case to both our courts, we can expect either A) a draw, or B) they might settle it amongst themselves in favor of which of us pays more, with the "losing" court being paid some of my (or his) extra subscription in compensation. Conceivably, in the case of draws, they can be sent to a separate appeals court that the defense firms hire, but again, the more well-funded customer ought to expect a favorable decision (as he could in a dispute within one company's jurisdiction). And the poor, unable to afford any defense contract at all, can expect to be raped, robbed, murdered, etc., with impunity. While Rothbard recognizes there is some risk that one or more armed agencies might just become violent, aggressive, de facto governments, he again dismisses it with more of a shrug than an argument.
His treatment of patents it overall very good, but in reducing them to only copyright protection, while permitting "independent discovery," he obviously overlooks how easy it would be to fraudulently claim independent discovery and thereby go direct to mass production without any R&D costs, and how hard it would be to disprove such. While current patent laws are abominable and need significant reform, it is hard to see how someone who labors with his mind could secure his property as well as someone who works with his hands. In Rothbard's case, copyright is sufficient anyway as he is a writer, not an inventor of incredibly expensive new drugs, for instance.
Rothbard rightly attacks the idea of a neutral tax (I accept from his arguments it would be impossible in practice), but he throws the baby out with the bath water in not bothering to at least avoid deliberately non-neutral taxes (likely because he opposes all government and taxation anyway). He dismisses a great deal of other goals because they are "conceptually impossible of fulfillment." (p 1297) One can easily conceive of a unicorn, but not a 10,000-sided figure; the first, nonetheless, is not real, while the latter is. Rothbard's non-governmental utopia has never been realized in history (especially when one considers informal governments still capable of coercion), while some form of coercion has always been with us. I cannot accept throwing out justice and defense without more solid convincing. Bastiat's The Law gives a more workable solution; while taxation itself may seem a violation, it perhaps really is a burden necessarily borne in light of reality.
Even with its flaws, Rothbard's fundamental arguments on economics hold; his arguments against government need considerably more support and refinement. Read it!
Rothbard largely divides his work into his main portion, economics in a pretend (historically speaking) completely free and unhampered market, and in much of that he explores the theoretical-only model of the evenly rotating economy (ERE) where there are no unknowns and all people receive, after the fact, what they expect beforehand.
Curiously, Rothbard takes up the idea of property ownership in his mythical completely free society. At first blush, it seems reasonable enough, but it does not stand close scrutiny. He states the first "user" of any heretofore unoccupied territory becomes its owner and may claim all produce therefrom. For claiming empty lands, this does seem reasonable. However, what constitutes "first use?" If I fence in five acres of empty land, even though I never set foot on any of it, do I own all five acres, or merely the perimeter supporting my fence and fence posts? What if it's 1,000 or 1,000,000 acres fenced in? Is walking over ground enough to claim it, or must I do more work to it? How much, what kind? If I run my plough through the earth, may I claim only the trough, or also the area to which the earth moved? How much else may I claim? Six inches to either side? Six feet? What happens when my trough runs next to my neighbor's, where exactly do we draw the line? What about subterranean mineral rights? He makes this principle more absurd by extending it to water and air. So if I buzz inches above my neighbor's roof with a remote control airplane, I now own the air above his home, and can buzz my loud drone over his home, film and photograph him and his family in their backyard all I wish. I would not tolerate this from a neighbor and I doubt you would either. So now that I've buzzed my neighbor's rooftop, how much airspace exactly do I own? Only the exact paths my aircraft took? Or some space around and in between? How much above and below? How is this to be documented and recorded for future dispute resolution? (Land is one thing, water and air become a little trickier for cadastral surveys.)
The advantage of Rothbard's method is that is does solve many, if not most, of the current "market externality" disputes. If every bit of land, water, and air has a private owner, then anyone damaging or poisoning it with pollution, for instance, can be sued for damages, therefore the polluter can be made to bear the costs and consequences of his pollution. However, it completely neglects the problem of how this would devastate, and likely altogether prohibit, anything resembling long-distance trade by land, sea, or air. If every stretch of land, river, coastline, open ocean, and airspace were owned by literally billions of separate owners in various-sized parcels, anyone wishing to construct a road, railroad, or use such infrastructure, or simply pass over the river, lake, ocean, through the air, etc., will have to negotiate separately with potentially thousands of owners for even a relatively short route. Rothbard passes over this with a imperious wave of his hand in a footnote! "Inevitably, someone will point to the plight of the railroad or highway company that must pay 'extortionate rates' to the man who 'merely' owns the property along the way..." (footnote 72, p 1140) Never mind the actual rent or sale price of such patches and parcels, the cost of having to separately contract with thousands (or more) of separate owners, added to the risk of holdouts (those who will not sell/rent at any price), it is difficult to see any trade or travel over any but the shortest distances being possible. In the past there was private infrastructure (toll roads, bridges, river gates, etc.), but these were not built on Rothbard's parcelized principle of first use ownership. The first Assyrian "empire" was less an empire than an unprecedented trading network. The great empires had not yet arisen and the Near East was divided into countless small kingdoms, city states, etc., with each charging its own tolls, customs, etc., and often localities within each polity also had their own local fees and regulations. Long-distance trade was difficult for all and any products brought from afar were exceptionally expensive. The Assyrians established trading colonies called Karums, which were used to negotiate discounts in tolls, exceptions to regulations/prohibitions, and such, so as to facilitate long-distance trade with some success. Yet Rothbard's method would subdivide all of the world into many more bits and pieces than the Assyrians had to deal with.
Rothbard's master, von Mises, seems to have taken a much more pragmatic approach. Mises recognized that there was no truly unowned land property. As he noted, "All ownership derives from occupation and violence...That all rights derive from violence, all ownership from appropriation or robbery, we may freely admit to those who oppose ownership on considerations of natural law. But this offers not the slightest proof that the abolition of ownership is necessary, advisable or morally justified...This the doctrine of natural law has called the war of all against all. The war ends when the actual relation is recognized as one worthy to be maintained. Out of violence emerges law." (Socialism: An Economic and Sociological Analysis, location 689-697) Rothbard's agenda in creating this unnecessary as well as unworkable "first use" system seem to be to disinherit the governments of the world of claimed "unused" land, and also to open up all "unowned" water and air resources to private owners. While having the benefit of eliminating land/water/air-related market externalities, it would be at the cost of destroying most of the world's trade, and thus, as Rothbard himself relates in his critique of other trade-reducing measures, tending to reduce humankind toward starvation and barbarism. Since the ownership question on planet Earth has already been (effectively) resolved, it seems better to take Mises' approach of recognizing and accepting current enforced claims at face value in an effort to steer clear of the war of all against all.
On the question of land, Rothbard seems to insist land has intrinsic value, without being able to define or defend it; he ignores Frédéric Bastiat's repeated demonstrations that land only has value insofar as labor is applied to it. In fact, Rothbard reduces toward this argument himself in places, without openly accepting it. Bastiat is only mentioned twice in Rothbard's text, a sign that maybe he could broaden his base from more than just Austrians.
One of the perennial questions of liberty is, to whom does it apply? Rothbard refers to Ernst Barker and gives one of the clearest and most succinct solutions to the problem of children in a free society (see Rothbard's footnote 12, p 93), a question Ayn Rand unfortunately failed to address in her otherwise brilliant Atlas Shrugged.
Unfortunately, Rothbard neglects to address the question of mental incapacity. What is defined as incapacity or incompetence to reason, and who gets to decide? Must we wait till a violently insane person freely buys a gun, freely walks into a school, and freely guns down 20 children and their teachers prior to killing or restraining the person? Or can anyone determine a person's inability to reason sufficient to restrict his/her liberty to some extent, or even completely? In light of today's epidemic of mass shooting (among other examples), it would be beneficial to explore or debate free market ideas on this topic.
Rothbard is sadly a gold-bug. He insists that anything used as currency must, once upon a time, have had its own barter value, or be imposed by force by a State or similar hegemon. He appears to duck the "intrinsic value" problem of other gold bugs, by regressing to its historical fact of once having had intrinsic value, but not depending on that in the present tense. After all, gold only has intrinsic value because of the faith and confidence of people's belief in its intrinsic value. Should people, en masse, decide tomorrow that they no longer wish to adorn themselves and their valuables in gold, gold's industrial uses are not sufficient to maintain its current price or anything near to it, and it would therefore become worth a small fraction of its value. More to the point, imagine the practical difficulties in using actual gold in exchange, yet another point Rothbard dismisses with an imperious wave of the hand. Adam Smith devotes considerable space to the difficulties in maintaining gold currency in the face of inevitable wear and tear, not to mention deliberate clipping. Should every consumer be expected to keep an exact scale upon his/her person to measure all currency provided, to ensure the total weight is correct? Imagine supermarket checkout lines! And how easy is it to forge currency, adulterating its purity, replacing its core, etc. Paper currency today contains many difficult-to-counterfeit safety features. While RFIDs or similar technology could be implanted in all real gold currency, so they could be installed in counterfeits. And is every consumer expected to keep a RFID reader in his/her pocket for every exchange? Imagine people fishing around in their pockets for every last fraction of an ounce of gold powder to make the right amount... It would seem depositing gold in gold warehouses and exchanging paper vouchers would be the only sensible solution, though imagine the truckloads of gold going to and fro as these vouchers were redeemed! Not to mention the temptation toward robbery! This could become an expensive drain on commerce.
More to the point, the advent of Bitcoin and similar modern private currencies blows every bit of Rothbard's gold/paper money theories clean out of the water. Bitcoin never had an intrinsic value that can be regressed to, nor is it hegemonically imposed. In fact, it is used in the face of monopoly laws against its existence and is most popular with the very Libertarians who Rothbard assumes will only accept currency that can regress to intrinsic value. The fact of the matter is that currency can be anything widely accepted in the marketplace, and in a free society, anything that is voluntarily and widely accepted. One finds Milton Friedman's analysis of money in the real world much more useful.
On a related note, Rothbard attempts to torpedo fractional banking through deception: "It should be clear that this practice is outright fraud. Someone else's property is taken by the warehouse and used for its own money-making purposes. It is not borrowed, since no interest is paid for the use of the money." (p 802) In fact, where it is practiced, people are paid a fraction of the interest earned on the loans made with their deposits; nor is it fraud, the banks declaring to their customers that their deposits will in fact be loaned back out. Fraud requires misrepresentation at a loss, a point Rothbard is quite clear about elsewhere.
Rothbard correctly and brilliantly tackles the "problem" of income inequality, redistribution of wealth, etc.: "In the free market process, therefore, there is no separation between production and 'distribution.' There is no heap somewhere on which 'products' are arbitrarily thrown and from which someone does or can arbitrarily 'distribute' them among various people. On the contrary, individuals produce goods and sell them to consumers for money, which they in turn spend on consumption or on investment in order to increase future consumption. There is no separate "distribution"; there is only production and its corollary, exchange." (p 477)
While Rothbard's criticism of closed-shop unions is thorough and convincing, his criticism of open-shop unions rely on generalizations drawn from empirical data, not theory: "Empirically, on the other hand, almost all cases of effective unionism are imposed through coercion exercised by unions." (p 897) Rothbard (and the reader) would be better referred to Henry Hazlitt's more thoughtful and nuanced treatment of open-shop unions in Economics in one lesson.
Rothbard's theory of price is often regarded as the center-piece of the work. Indeed, it is clear and penetrating. However, Rothbard makes one point unnecessarily muddy. In the beginning of the work, Rothbard shows that the price that clears the market is decided by the preferences of both consumer and producer. Yet later he keeps insisting that price is finally and unilaterally set by the consumer, as if I could insist Aston Martin sell me one of their new cars for a dollar, and then it would be up to them to downgrade the prices paid back to higher-order capital goods producers and other factors (labor, land) to meet my demand. In fact, the current cost structure of any seller will, most likely, factor into that seller's preferences and what price he/she is willing to sell or not sell. This leaves the matter where Rothbard first defined it, as a meeting of buyers and sellers, not consumers "dictating" as he later characterizes it.
Rothbard claims that "No tax can be shifted forward." (p 1156) He gives all kinds of reasoning and shows that sales or excise taxes tend to shift production to untaxed lines of production and/or, in general, shift demand downward and thereby in any event reduce the prices charged not only by the final seller but all contributing factors, impacting specific factors most. Undoubtedly some of this occurs (consumers have only so much disposable income), however, empirically, his theory can be easily disproved. A glance at http://www.ibtimes.com/price-cigarett... shows how cigarette pack prices correlate very strongly with taxes on cigarettes, showing that cigarettes are not the same price (or even close!) in New York as in Kentucky. Rothbard could try to evade this through a "psychic benefit" argument, that a person is willing to pay more for cigarettes in Manhattan than Louisville, because of Manhattan's other benefits over and above Louisville's, but then how does he explain the price of cigarettes in New Jersey?!
In the second included work, Power and Market, Rothbard reprises (or even verbatim restates) many sections of his preceding work. He does intermix some new material, and towards the end gives very thoughtful treatment of taxation and coercion specifically. In fact, he goes so far as to demand the abolition of all government and its replacement by privately contracted services, to include private defense services. David Friedman gave a much better discussion of private "justice" and defense in his The Machinery of Freedom: Guide to a Radical Capitalism. Still, even Friedman was unable to overcome the most urgent objections to such a system of competing private "justice." If I contract a firm to provide me police and court services, and which therefore has its own law, it will clearly favor me over a person paying a competing firm. Therefore, regardless of the merits of any dispute, if I bring a person to my court who does not subscribe to it, my court must decide in my favor, or other customers would flee from it. If we take our case to both our courts, we can expect either A) a draw, or B) they might settle it amongst themselves in favor of which of us pays more, with the "losing" court being paid some of my (or his) extra subscription in compensation. Conceivably, in the case of draws, they can be sent to a separate appeals court that the defense firms hire, but again, the more well-funded customer ought to expect a favorable decision (as he could in a dispute within one company's jurisdiction). And the poor, unable to afford any defense contract at all, can expect to be raped, robbed, murdered, etc., with impunity. While Rothbard recognizes there is some risk that one or more armed agencies might just become violent, aggressive, de facto governments, he again dismisses it with more of a shrug than an argument.
His treatment of patents it overall very good, but in reducing them to only copyright protection, while permitting "independent discovery," he obviously overlooks how easy it would be to fraudulently claim independent discovery and thereby go direct to mass production without any R&D costs, and how hard it would be to disprove such. While current patent laws are abominable and need significant reform, it is hard to see how someone who labors with his mind could secure his property as well as someone who works with his hands. In Rothbard's case, copyright is sufficient anyway as he is a writer, not an inventor of incredibly expensive new drugs, for instance.
Rothbard rightly attacks the idea of a neutral tax (I accept from his arguments it would be impossible in practice), but he throws the baby out with the bath water in not bothering to at least avoid deliberately non-neutral taxes (likely because he opposes all government and taxation anyway). He dismisses a great deal of other goals because they are "conceptually impossible of fulfillment." (p 1297) One can easily conceive of a unicorn, but not a 10,000-sided figure; the first, nonetheless, is not real, while the latter is. Rothbard's non-governmental utopia has never been realized in history (especially when one considers informal governments still capable of coercion), while some form of coercion has always been with us. I cannot accept throwing out justice and defense without more solid convincing. Bastiat's The Law gives a more workable solution; while taxation itself may seem a violation, it perhaps really is a burden necessarily borne in light of reality.
Even with its flaws, Rothbard's fundamental arguments on economics hold; his arguments against government need considerably more support and refinement. Read it!
December 4, 2015
Murray Rothbard is fantastic!
It is because of Murray Rothbard's passionate writing that I became a Libertarian. It is because of Rothbard's arguments that I became an anarchist. It is because of Rothbard's philosophy that I stayed one through out the years. Do not read this book unless you are prepared for the possibility of losing your faith in the State and becoming to an Anarchist.
It is because of Murray Rothbard's passionate writing that I became a Libertarian. It is because of Rothbard's arguments that I became an anarchist. It is because of Rothbard's philosophy that I stayed one through out the years. Do not read this book unless you are prepared for the possibility of losing your faith in the State and becoming to an Anarchist.
June 5, 2015
The bottom line: A complete and well-developed discourse on Austrian economics.
Murray N. Rothbard’s Man Economy and State is a sweeping presentation of Austrian economic theory. In fact, one could call this the “Bible” of Austrian economics given the books breadth, complexity, and no-stone-left-unturned philosophy.
Rothbard essentially deduces the theory behind ... http://www.chesadaphal.com/man-econom...
Murray N. Rothbard’s Man Economy and State is a sweeping presentation of Austrian economic theory. In fact, one could call this the “Bible” of Austrian economics given the books breadth, complexity, and no-stone-left-unturned philosophy.
Rothbard essentially deduces the theory behind ... http://www.chesadaphal.com/man-econom...
November 12, 2012
Starts somewhat slow. He really hammers on simple points and seems somewhat emotional about what should be a scientific topic.
He also seems to spend a lot of time taking opposing viewpoints to their extreme in order to refute them as, therefore, nonsensical.
Currently reading
August 27, 2012After 100 pages, we are still in what is usually called the introduction. Golly if this guy isn't thorough.
September 2, 2012
If you're only going to read one economics book in your lifetime, this is the one.
August 2, 2014
Interesting Quotes:
"Every individual...is constantly engaged in planning. This planning may range from an impressive investment in a new steel plant to a small boy's decision to spend two cents on candy, but it is planning nevertheless. It is erroneous, therefore, to assert that a free market society is 'unplanned'; on the contrary, each individual plans for himself."
-Murray Rothbard, Man, Economy, and State
"[W]hile knowledge is a limit, capital is a narrower limit...[W]hile capital cannot engage in production beyond the limits of existing available knowledge, knowledge can and does exist without the capital necessary to put it to use...The relative unimportance of technology in production as compared to the supply of saved capital becomes evident...simply by looking at the 'backward' or 'underdeveloped' countries. What is lacking in these countries is not knowledge of Western technological methods...[but rather] the supply of saved capital needed to put the advanced methods into effect. The African peasant will gain little from looking at pictures of American tractors; what he lacks is the saved capital needed to purchase them."
-Murray Rothbard, Man, Economy, and State
"Most current critics of patents direct their fire not at the patents themselves, but at alleged 'monopolistic abuses' in their use. They fail to realize that the patent itself is the monopoly and that, when someone is granted a monopoly privilege, it should occasion neither surprise nor indignation when he makes full use of it."
-Murray Rothbard, Power and Market
"[E]ven if we adopt an altruistic ethic, we must applaud maximization of monetary income...For market earnings are a social index of one's services to others, at least in the sense that any services are exchangeable. The greater a man's income, the greater has been his service to others. Indeed, it should be far easier for the altruist to applaud the maximization of a man's MONETARY income that that of his PSYCHIC income when this is in conflict with the former goal. Thus, the consistent altruist must condemn the refusal of a man to work at a job paying high wages and his preference for a lower-paying job somewhere else. This man, whatever his reason, is defying the signaled wishes of the consumers, his fellows in society...
"If, then, a coal miner shifts to a more pleasant, but lower-paying job as a grocery clerk, the consistent altruist must castigate him for depriving his fellowman of needed benefits. For the consistent altruist must face the fact that MONETARY income on the market reflects services to others, whereas psychic income is a purely personal, or 'selfish,' gain...
"Rather than scorn the pursuit of monetary gain, the consistent altruist should praise the pursuit of money on the market and condemn any conflicting nonmonetary goals a producer may have--whether it be dislike for certain work, enthusiasm for work that pays less, or a desire for leisure. Altrusists who criticize monetary aims on the market, therefore, are wrong ON THEIR OWN TERMS."
(Caps are italics)
-Murray Rothbard, Power and Market
[Note for timeline: I finished reading Man Economy and State in early April, read several other books for a month or so, and then came back to read Power and Market. I didn't read this massive book in just a few days.]
"Every individual...is constantly engaged in planning. This planning may range from an impressive investment in a new steel plant to a small boy's decision to spend two cents on candy, but it is planning nevertheless. It is erroneous, therefore, to assert that a free market society is 'unplanned'; on the contrary, each individual plans for himself."
-Murray Rothbard, Man, Economy, and State
"[W]hile knowledge is a limit, capital is a narrower limit...[W]hile capital cannot engage in production beyond the limits of existing available knowledge, knowledge can and does exist without the capital necessary to put it to use...The relative unimportance of technology in production as compared to the supply of saved capital becomes evident...simply by looking at the 'backward' or 'underdeveloped' countries. What is lacking in these countries is not knowledge of Western technological methods...[but rather] the supply of saved capital needed to put the advanced methods into effect. The African peasant will gain little from looking at pictures of American tractors; what he lacks is the saved capital needed to purchase them."
-Murray Rothbard, Man, Economy, and State
"Most current critics of patents direct their fire not at the patents themselves, but at alleged 'monopolistic abuses' in their use. They fail to realize that the patent itself is the monopoly and that, when someone is granted a monopoly privilege, it should occasion neither surprise nor indignation when he makes full use of it."
-Murray Rothbard, Power and Market
"[E]ven if we adopt an altruistic ethic, we must applaud maximization of monetary income...For market earnings are a social index of one's services to others, at least in the sense that any services are exchangeable. The greater a man's income, the greater has been his service to others. Indeed, it should be far easier for the altruist to applaud the maximization of a man's MONETARY income that that of his PSYCHIC income when this is in conflict with the former goal. Thus, the consistent altruist must condemn the refusal of a man to work at a job paying high wages and his preference for a lower-paying job somewhere else. This man, whatever his reason, is defying the signaled wishes of the consumers, his fellows in society...
"If, then, a coal miner shifts to a more pleasant, but lower-paying job as a grocery clerk, the consistent altruist must castigate him for depriving his fellowman of needed benefits. For the consistent altruist must face the fact that MONETARY income on the market reflects services to others, whereas psychic income is a purely personal, or 'selfish,' gain...
"Rather than scorn the pursuit of monetary gain, the consistent altruist should praise the pursuit of money on the market and condemn any conflicting nonmonetary goals a producer may have--whether it be dislike for certain work, enthusiasm for work that pays less, or a desire for leisure. Altrusists who criticize monetary aims on the market, therefore, are wrong ON THEIR OWN TERMS."
(Caps are italics)
-Murray Rothbard, Power and Market
[Note for timeline: I finished reading Man Economy and State in early April, read several other books for a month or so, and then came back to read Power and Market. I didn't read this massive book in just a few days.]
April 14, 2016
Fairly good treatise on economic theory; disagree with its Misesian monetary theory, opting for Menger's.
November 7, 2018
My personal favorite Austrian treatise.
December 28, 2022
Gives a really solid foundation on how to think about economics.
Has some really eye-opening and interesting ideas like how costs are actually "passed" from businesses to consumers (it doesn't work as you would expect). And how costs are actually determined by price instead of the other way around.
Despite the lengthy size, however, I don't think it's the first and last stop on economics. I'm hoping some of it's ideas will be fleshed out a bit more in other books I end up reading.
Has some really eye-opening and interesting ideas like how costs are actually "passed" from businesses to consumers (it doesn't work as you would expect). And how costs are actually determined by price instead of the other way around.
Despite the lengthy size, however, I don't think it's the first and last stop on economics. I'm hoping some of it's ideas will be fleshed out a bit more in other books I end up reading.
Read
October 21, 2022I made it to page 450 or so.
An absolute monstrosity of a tome. I think it's probably great and very logical, but I'll have to revisit this in another life or when I retire. You can't read this for pleasure and reading it for understanding would take me probably a year.
An absolute monstrosity of a tome. I think it's probably great and very logical, but I'll have to revisit this in another life or when I retire. You can't read this for pleasure and reading it for understanding would take me probably a year.
January 27, 2018
Can't beat it.
June 21, 2021
A masterpiece on economic theory, “Man, Economy & State with Power and Market” is Rothbard’s magnum opus on economics and one of the best books you can read on the subject. Though it takes determination to get all the way through, Rothbard assumes the reader knows nothing about economics in the beginning so it’s something that any intelligent person with a desire to learn can pick up. Much of what you would see in macro and micro textbooks can be found within.
It starts with basic fundamental principles from human action and the law of marginal utility to barter and direct/indirect exchange, but gradually builds on itself and culminates with more complex ideas like the production structure within an economy and business cycle theory. His theory on monopoly and competition is completely original and took the free market to new philosophical limits in 1962 in making the case that monopoly is an exclusive grant of government privilege, that no one firm can ever control 100% of the market, and that cartels will inevitably either be broken up by the competitive market or merge into a corporation unless the government is sanctioning it. Rothbard was a much better writer than Mises and Hayek, so “Man, Economy, & State” is especially helpful in understanding Austrian capital and business cycle theory; it’s highly recommended that you read this book before reading Mises’ “Human Action” or Hayek’s essays on the subject.
The second part of the book “Power and Market” starts with a recap and further elaboration on the last chapter of “Man, Economy, & State.” He goes on to talk about government intervention in every aspect of the economy; from wage and price controls, antitrust and conservation laws, to regulations, to borders, etc. The chapters on taxation and his exposition of minimum and maximum price controls are especially informative. It’s worth mentioning that this part of the book was cut out from the original publishing in 1962 because it was deemed too radical at the time; indeed, Rothbard makes the case for a purely free market without a trace of government interference. Thus, “Power and Market” completes the picture in setting the stage for Anarcho-Capitalism.
No economist was right about everything, and Rothbard is no exception to that. There are a couple of flaws in his chapter about money that stand out which are important to keep in mind while reading:
1. Rothbard and Mises’ monetary theory is flawed in their assertion that demand-side deflation isn’t harmful. While they are right that bank credit diverts resources away from short term production and that investments in the wrong stages of production are what artificially push up demand in the first place, wages and prices take time to adjust; therefore “any amount of money” is not necessarily the optimum amount at any given point in time.
2. Rothbard is misguided that full reserve banking is preferable to free banking. He argues that the only way to prevent disequilibrium in the economy is to abolish fractional reserve banking, so that the interest rate will always set the right proportions between saving and spending. But, such a system would produce a reverse business cycle with an overextension of savings against not enough consumption, so monetary disequilibrium would still occur. It would also require draconian oversight from government bank police to enforce. However, he does concede that free banking would be much preferable to central banking, so this isn’t too much of a problem with the book.
To sum up, “Man, Economy, & State with Power and Market” is a phenomenal book and one of the best investments you can make in economic literature. If you make it all the way through you’ll learn about 90-95% of what is important in economics; regardless of whether or not you end up placing all of your faith in Rothbard and drinking the Ancap kool aid 🥤
It starts with basic fundamental principles from human action and the law of marginal utility to barter and direct/indirect exchange, but gradually builds on itself and culminates with more complex ideas like the production structure within an economy and business cycle theory. His theory on monopoly and competition is completely original and took the free market to new philosophical limits in 1962 in making the case that monopoly is an exclusive grant of government privilege, that no one firm can ever control 100% of the market, and that cartels will inevitably either be broken up by the competitive market or merge into a corporation unless the government is sanctioning it. Rothbard was a much better writer than Mises and Hayek, so “Man, Economy, & State” is especially helpful in understanding Austrian capital and business cycle theory; it’s highly recommended that you read this book before reading Mises’ “Human Action” or Hayek’s essays on the subject.
The second part of the book “Power and Market” starts with a recap and further elaboration on the last chapter of “Man, Economy, & State.” He goes on to talk about government intervention in every aspect of the economy; from wage and price controls, antitrust and conservation laws, to regulations, to borders, etc. The chapters on taxation and his exposition of minimum and maximum price controls are especially informative. It’s worth mentioning that this part of the book was cut out from the original publishing in 1962 because it was deemed too radical at the time; indeed, Rothbard makes the case for a purely free market without a trace of government interference. Thus, “Power and Market” completes the picture in setting the stage for Anarcho-Capitalism.
No economist was right about everything, and Rothbard is no exception to that. There are a couple of flaws in his chapter about money that stand out which are important to keep in mind while reading:
1. Rothbard and Mises’ monetary theory is flawed in their assertion that demand-side deflation isn’t harmful. While they are right that bank credit diverts resources away from short term production and that investments in the wrong stages of production are what artificially push up demand in the first place, wages and prices take time to adjust; therefore “any amount of money” is not necessarily the optimum amount at any given point in time.
2. Rothbard is misguided that full reserve banking is preferable to free banking. He argues that the only way to prevent disequilibrium in the economy is to abolish fractional reserve banking, so that the interest rate will always set the right proportions between saving and spending. But, such a system would produce a reverse business cycle with an overextension of savings against not enough consumption, so monetary disequilibrium would still occur. It would also require draconian oversight from government bank police to enforce. However, he does concede that free banking would be much preferable to central banking, so this isn’t too much of a problem with the book.
To sum up, “Man, Economy, & State with Power and Market” is a phenomenal book and one of the best investments you can make in economic literature. If you make it all the way through you’ll learn about 90-95% of what is important in economics; regardless of whether or not you end up placing all of your faith in Rothbard and drinking the Ancap kool aid 🥤
August 3, 2015
«Such are the laws that praxeology presents to the human race. They are a binary set of consequences: the workings of the market principle and of the hegemonic principle. The former breeds harmony, freedom, prosperity, and order; the latter produces conflict, coercion, poverty, and chaos. Such are the consequences between which mankind must choose. In effect, it must choose between the “society of contract” and the “society of status.” At this point, the praxeologist as such retires from the scene; the citizen—the ethicist—must now choose according to the set of values or ethical principles he holds dear.»
Assim termina uma leitura épica – Rothbard compila a sua análise praxeológica da economia em 1500 páginas. No início da leitura, aparentava ser uma cópia do Human Action de Mises, mas após as primeiras centenas de páginas a leitura adentra os avanços que Rothbard permitiu ao tema. Este tratado é economicamente superior ao de Mises – que terá sempre o incontornável mérito de ter sido o primeiro a estabelecer os fundamentos que serviram de base a este livro. É também mais detalhado e profundo.
Rothbard atinge momentos de puro brilhantismo durante o livro, em destaque:
1. Capítulo de monopólios - apresenta um avanço significativo no conceito bem como na análise económica de “preços monopolísticos” (avanço em relação à posição de Mises). Qualquer pessoa que interesse pelo tema económico dos monopólios não pode deixar de ler a perspectiva (que passarei a subscrever) de Rothbard no capítulo 10.
2. Voluntarismo (ao longo de todo o livro) – apresentação do livre-mercado como acção humana de liberdade; e do estado como elemento coercivo e agressor mesmo que em ambiente democrático.
Alguns momentos que achei incompletos ou por explorar:
1. Em relação aos direitos de propriedade original sobre terrenos - com o objectivo de criar uma metáfora de propriedade, Rothbard compara os direitos de propriedade de uma terra sem dono (posteriormente misturada com o trabalho do proprietário) com a propriedade privada de um animal, dando o exemplo de uma vaca (que também seria propriedade de alguém devido à utilização da mesma em trabalho). É francamente insuficiente para justificar a origem da propriedade de terra. Sobre este tema quero-me aprofundar com o livro “The Economics and Ethics of Private Property: Studies in Political Economy and Philosophy” de Hans-Hermann Hoppe.
2. A crítica ao sistema bancário de moeda fiduciária é toda ela válida, mas Rothbard diz que qualquer sistema de moeda fiduciária será fraudulento para com os clientes/utilizadores desse sistema bancário. Parece-me redutor: poder-se-ia dar o caso de todos os clientes de determinado banco ou dentro de determinada zona económica de trocas aceitarem moeda fiduciária como forma de troca. A moeda fiduciária, quando imposta por um banco central com monopólio monetário protegido pelo governo, é uma fraude mas no caso de todos os agentes serem utilizadores voluntários não o será. Dou o exemplo do Bitcoins que é uma criação voluntária do mercado e é moeda fiduciária.
3. Incompleto na abordagem ao tema da Propriedade Intelectual, que parece evitar...
Recomendo para os que já são proficientes na leitura liberal/libertária. Para os que agora começaram será ainda pesado e intangível. Em conclusão é um livro brilhante!
Assim termina uma leitura épica – Rothbard compila a sua análise praxeológica da economia em 1500 páginas. No início da leitura, aparentava ser uma cópia do Human Action de Mises, mas após as primeiras centenas de páginas a leitura adentra os avanços que Rothbard permitiu ao tema. Este tratado é economicamente superior ao de Mises – que terá sempre o incontornável mérito de ter sido o primeiro a estabelecer os fundamentos que serviram de base a este livro. É também mais detalhado e profundo.
Rothbard atinge momentos de puro brilhantismo durante o livro, em destaque:
1. Capítulo de monopólios - apresenta um avanço significativo no conceito bem como na análise económica de “preços monopolísticos” (avanço em relação à posição de Mises). Qualquer pessoa que interesse pelo tema económico dos monopólios não pode deixar de ler a perspectiva (que passarei a subscrever) de Rothbard no capítulo 10.
2. Voluntarismo (ao longo de todo o livro) – apresentação do livre-mercado como acção humana de liberdade; e do estado como elemento coercivo e agressor mesmo que em ambiente democrático.
Alguns momentos que achei incompletos ou por explorar:
1. Em relação aos direitos de propriedade original sobre terrenos - com o objectivo de criar uma metáfora de propriedade, Rothbard compara os direitos de propriedade de uma terra sem dono (posteriormente misturada com o trabalho do proprietário) com a propriedade privada de um animal, dando o exemplo de uma vaca (que também seria propriedade de alguém devido à utilização da mesma em trabalho). É francamente insuficiente para justificar a origem da propriedade de terra. Sobre este tema quero-me aprofundar com o livro “The Economics and Ethics of Private Property: Studies in Political Economy and Philosophy” de Hans-Hermann Hoppe.
2. A crítica ao sistema bancário de moeda fiduciária é toda ela válida, mas Rothbard diz que qualquer sistema de moeda fiduciária será fraudulento para com os clientes/utilizadores desse sistema bancário. Parece-me redutor: poder-se-ia dar o caso de todos os clientes de determinado banco ou dentro de determinada zona económica de trocas aceitarem moeda fiduciária como forma de troca. A moeda fiduciária, quando imposta por um banco central com monopólio monetário protegido pelo governo, é uma fraude mas no caso de todos os agentes serem utilizadores voluntários não o será. Dou o exemplo do Bitcoins que é uma criação voluntária do mercado e é moeda fiduciária.
3. Incompleto na abordagem ao tema da Propriedade Intelectual, que parece evitar...
Recomendo para os que já são proficientes na leitura liberal/libertária. Para os que agora começaram será ainda pesado e intangível. Em conclusão é um livro brilhante!
January 27, 2018
Rothbard's magnus opus is comprehensive, clearly written, and of high quality. It will likely become a reference I return to again and again in the future.
Austrian economics has been, in my opinion, very unfairly maligned. As I might have stated in my review of Mises' Human Action, I took an entire undergraduate major in economics without ever hearing anything of the 'Austrian school'. I believe one of my professors (who probably had somewhat of an Austrian bent, now that I think on him) once cracked a joke about how the school was an archaic association that sat at the fringe of economics, but that's about it.
The 'Austrian school', whatever that really means, is of course a fringe backwater of modern economic thought. But I can't for the life of me come up with any charitable reasons as to why this might be the case. Instead, I see a group that has largely been rather unduly reviled by mainstream economics -- and I can think of any number of reasons as to why that's the case.
The crux of the divide boils down to the analytical methodology advanced by either 'school'. The Austrians famously make little use of mathematics, whereas modern arguments, largely as a result of Samuelson's work, make copious use of maths. The accusation typically levelled against the Austrians is that their arguments are simply not rigorous, since they fail to proceed along the lines of a standard mathematical argument one finds in just about any technical academic discipline nowadays.
Having read Mises and Rothbard, this criticism is simply absurd. The methodology used is plainly logical and deductive, and the arguments are clear and lucid. One could surely formulate economic axioms and derive conclusions using a formal symbolic language -- and this would indeed be an interesting exercise for a certain type of researcher -- but I fail to see what this sort of obscuritan proceedings could materially add over a development à la Rothbard's as it proceeds in plain English. I suppose it would certainly make it much easier to produce a deluge of academic papers of questionable scope and utility, but that is not exactly a goal worth aiming at.
To take an example: one can read a modern paper on market computation, spend a day deciphering it, and come to the conclusion that it is completely and absolutely decoupled from the real world. That the assumptions as they apply to agents and market processes are artificial, that the analysis is superfluous and misses questions of real interest, and that it could never even be usefully adapted to describe the real world. This is true of every paper of market computation I've read.
Indeed: much of modern economics (or of many other academic disciplines) consists of simply formalizing almost arbitrary mathematical models and then deriving mathematical properties about them. This can in some sense be a wonderful thing; I love mathematics, I love mathematics that exists purely for the sake of mathematics, and I love examinations of mathematical constructs that produce other interesting mathematics (I even really like mathematical economics and market computation). But if one is supposedly studying economics, one can only wander so far from the real world before he should really be considered to be working in some other discipline. Namely: toiling in the dreary mines of 'applied mathematics'.
I believe the 'praxeological' arguments used in Austrian economics are, frankly, far more convincing than what I am used to seeing in much of the modern school. The essence is that one starts from uncontroversial properties about individual and deliberate human action and then derives logical truths from them. It's easy to understand. It's easy to proceed. It's easy to critique. Everything is based on firm micro-foundations. And so by definition, it is impossible to go off course. Contrast this to much of the 20th century economics that turned out to be little more than numerology, as highlighted by Lucas's critique -- by construction an 'Austrian' or praxeological methodology could never go so far astray.
The point isn't that mathematics is almost entirely inapplicable to economics (which is what Rothbard will claim, but which I don't believe is quite true). The point is that blindly doing mathematics demonstrably does not necessarily improve knowledge of economics. This is simply not the case for the praxeological approach. What I think could be a productive research path would be a synthesis of a praxeological approach with a computational analysis as would be found in algorithmic game theory. It would involve formalizing certain axioms of action and characterizing market processes (which are what praxeological arguments inevitably describe) in terms of their computational complexity, but this is all somewhat accessory to the review at hand.
Rothbard's text clearly and usefully describes phenomena that one is interested in learning about when it comes to human interaction in markets. He is more to the point than Mises, and the overall structure of his text more resembles a standard, modern economics reference, which can help for readability. Most of the interesting results from conventional economics are fleshed out by the praxeological Austrian approach, leading one to question how much useful content one is really getting out of the additional 'rigour' in practice. He who would dismiss this school of thought outright does himself a disservice.
One of my main complaints about the Austrian work I've read is the sheer amount of text devoted to defending praxeological arguments or denouncing the methodology of other schools of thought or what have you (I've even fallen into this trap in my own review!). It gets supremely tiresome to read, and I believe all work would be strictly improved by ignoring it entirely. It's a bit like if every modern Bayesian paper or text still spent a ton of time defending its assumptions and critiquing the frequentist approach -- no, the correct approach now is to just ignore the other side and use one's chosen methodology as productively as he is able. If it is indeed can be used productively, the results should speak for themselves. I wonder what a 'modern' Austrian textbook, freed from these shackles, might look like.
Austrian economics has been, in my opinion, very unfairly maligned. As I might have stated in my review of Mises' Human Action, I took an entire undergraduate major in economics without ever hearing anything of the 'Austrian school'. I believe one of my professors (who probably had somewhat of an Austrian bent, now that I think on him) once cracked a joke about how the school was an archaic association that sat at the fringe of economics, but that's about it.
The 'Austrian school', whatever that really means, is of course a fringe backwater of modern economic thought. But I can't for the life of me come up with any charitable reasons as to why this might be the case. Instead, I see a group that has largely been rather unduly reviled by mainstream economics -- and I can think of any number of reasons as to why that's the case.
The crux of the divide boils down to the analytical methodology advanced by either 'school'. The Austrians famously make little use of mathematics, whereas modern arguments, largely as a result of Samuelson's work, make copious use of maths. The accusation typically levelled against the Austrians is that their arguments are simply not rigorous, since they fail to proceed along the lines of a standard mathematical argument one finds in just about any technical academic discipline nowadays.
Having read Mises and Rothbard, this criticism is simply absurd. The methodology used is plainly logical and deductive, and the arguments are clear and lucid. One could surely formulate economic axioms and derive conclusions using a formal symbolic language -- and this would indeed be an interesting exercise for a certain type of researcher -- but I fail to see what this sort of obscuritan proceedings could materially add over a development à la Rothbard's as it proceeds in plain English. I suppose it would certainly make it much easier to produce a deluge of academic papers of questionable scope and utility, but that is not exactly a goal worth aiming at.
To take an example: one can read a modern paper on market computation, spend a day deciphering it, and come to the conclusion that it is completely and absolutely decoupled from the real world. That the assumptions as they apply to agents and market processes are artificial, that the analysis is superfluous and misses questions of real interest, and that it could never even be usefully adapted to describe the real world. This is true of every paper of market computation I've read.
Indeed: much of modern economics (or of many other academic disciplines) consists of simply formalizing almost arbitrary mathematical models and then deriving mathematical properties about them. This can in some sense be a wonderful thing; I love mathematics, I love mathematics that exists purely for the sake of mathematics, and I love examinations of mathematical constructs that produce other interesting mathematics (I even really like mathematical economics and market computation). But if one is supposedly studying economics, one can only wander so far from the real world before he should really be considered to be working in some other discipline. Namely: toiling in the dreary mines of 'applied mathematics'.
I believe the 'praxeological' arguments used in Austrian economics are, frankly, far more convincing than what I am used to seeing in much of the modern school. The essence is that one starts from uncontroversial properties about individual and deliberate human action and then derives logical truths from them. It's easy to understand. It's easy to proceed. It's easy to critique. Everything is based on firm micro-foundations. And so by definition, it is impossible to go off course. Contrast this to much of the 20th century economics that turned out to be little more than numerology, as highlighted by Lucas's critique -- by construction an 'Austrian' or praxeological methodology could never go so far astray.
The point isn't that mathematics is almost entirely inapplicable to economics (which is what Rothbard will claim, but which I don't believe is quite true). The point is that blindly doing mathematics demonstrably does not necessarily improve knowledge of economics. This is simply not the case for the praxeological approach. What I think could be a productive research path would be a synthesis of a praxeological approach with a computational analysis as would be found in algorithmic game theory. It would involve formalizing certain axioms of action and characterizing market processes (which are what praxeological arguments inevitably describe) in terms of their computational complexity, but this is all somewhat accessory to the review at hand.
Rothbard's text clearly and usefully describes phenomena that one is interested in learning about when it comes to human interaction in markets. He is more to the point than Mises, and the overall structure of his text more resembles a standard, modern economics reference, which can help for readability. Most of the interesting results from conventional economics are fleshed out by the praxeological Austrian approach, leading one to question how much useful content one is really getting out of the additional 'rigour' in practice. He who would dismiss this school of thought outright does himself a disservice.
One of my main complaints about the Austrian work I've read is the sheer amount of text devoted to defending praxeological arguments or denouncing the methodology of other schools of thought or what have you (I've even fallen into this trap in my own review!). It gets supremely tiresome to read, and I believe all work would be strictly improved by ignoring it entirely. It's a bit like if every modern Bayesian paper or text still spent a ton of time defending its assumptions and critiquing the frequentist approach -- no, the correct approach now is to just ignore the other side and use one's chosen methodology as productively as he is able. If it is indeed can be used productively, the results should speak for themselves. I wonder what a 'modern' Austrian textbook, freed from these shackles, might look like.
February 28, 2024
First 50% slow and dull. 2nd 50% was quite great
Favorite quotes:
Chapter 11: "He who possesses capital is that much further advanced in time on the road to the desired consumer's good. Crusoe without the axe is 250hrs away from his desired house. Crusoe with the axe is only 200hrs away. If the house was there to begin with, he would achieve his desire immediately. The role of capital is to advance men in time toward producing the consumer's good."
Chapter 13: "To sum up the relationships and the distinctions between praxeology and each of the other disciplines, we may describe them as follows: Why man chooses various ends? Psychology. What man's ends should? Philosophy of Ethics & Philosophy of aesthetics. How to use means to arrive at ends? Technology. What man's are, and have been, and how man used means in order to obtain them? History. The formal implications of the fact that men use means to attain various chosen ends? Praxeology"
Chapter 13: "Economics is a subdivision of the Praxeology"
Chapter 27: "All cases of negative externalities turn out to be instances of failure of government's enforcement agency to properly enforce individual property rights. I.e smoke and air pollution is damaging property and health of others, an act of vandalism". Interesting thought, but I don't completely agree here. The negative externalities could have long-term impacts (lung cancer, ocean pollution) that short human lifetimes with our monkey brains aren't good at comprehending and correlating.
Chapter 74: "Profits are an index of economic's maladjustment being combated - under or over valuation of certain factors. If we should condem anyone, it's not the one who made profits, but that one who made losses, for losses are a sign that he had added further to the maladjustment"
Chapter 119: "In a truly free market, there wouldn't need to be a separate theory for international trade. Nations become significant economically only with government intervention and barriers to trade"
Chapter 122: "The subject of government cannot contract out of that government. He can not sell his shares in the post office. The corelary of the right of ownership is the right of disownership - if I can not sell a thing, then it's evident that I do not own it"
Chapter 129: "Left-wingers often advocate freedom in the sense of opposition to autistic intervention (interference with private non-economic activities), but look beningly on triangular intervention (state-mandated exchange between individuals). Right-wingers on the other hand severely opposite triangular intervention, but tend to favor, or remain indiferent to autistic intervention. Both groups are ambivarent on binary intervention (exchange between individuals and the state)"
Chapter 130: "Progressives insist that consumers are too ignorant and incompetent to buy products intelligently, while at the same time, tauting the vertures of democracy, where the same people vote for politicians whom they do not know and for policies that they hardly understand"
Chapter 130: mentioned maximum-hour laws mandating idleness - though I never heard of such laws, interesting
Chapter 133: "condcription is a method by which the government can comanders labor at far less than labor wage rates - the rates which it would have to pay to enduse the enlistment of the volunteer army"
Chapter 134: on anti-trust: "the politicians have secured a law, under which it was impossible for the citizen to know beforehand what constituted a crime"
Chapter 155: "imagine the universal risk if laborers couldn't be paid until the final product reached the consumers. The pain of waiting for future income, the risk of forecasting consumer demand into the future, would be almost intolerabe, especially for those laborers working the most remote processes of production. But the capitalist entrepreneur pays him immediately instead, and himself adopts the burden of waiting and forecasting future demand. The entrepreneur thus risks loss of his capital." A good reason why executives and shareholders deserve a much higher rate of return (alongside the fact that executives are far harder to replace than a common laborer)
General impressions:
Great introduction to the free market and laissez-faire
Laissez-faire seems close to Objectivism
On the other hand, given that laissez-faire economics claims to allow every actor in the economy to maximize their own utility by freely engaging in the action they think is best for them, doesn't this make laissez-faire economics the solution to the "perfect utility function" in utilitarianism? i.e rather than trying to predict utility for everyone (that ay lies communism, unless you have an AGI), let everyone express their own utilities. Or does this fail due to the short-sightedness of most people and the need in utilitarianism to answer questions that are broader than just 1 or 2 people?
Criticism:
The book discusses hypothetical idealistic scenarios. Does not pay enough attention to imperfect society, where many people are unintentionally irrationally, and some even intentionally irrational (i.e like putin invading Ukraine for no benefit to his county or any other country, except maybe china)
The book also puts too much weight on the assumption that consumers know what is best for them. In reality, consumers are often irrational short-sighted dopamine maximization monkeys. Things like long-term effect of lifestyle choices, or the societal disadvantages of misallocation of resources into the car culture.
But perhaps the thing I disagree with the author on the most is his opinion on growth and education. Growth is critical for human progress and raising living standards (as history very clearly shows) - not an optional extra that some people may choose to opt into. Education of the populous is essential for a well-functioning society, or else you get populists and lunatics that elect clowns like trump - state protecting young children with immature brains from decisions they would regret (skipping school) seems like a positive long-run investment into a healthy and conscious population.
Side note:
Book shows it's age with all the "man, men, he, him, his" and etc
The narrator in the audible version of the book has a dull and unpleasant voice
Favorite quotes:
Chapter 11: "He who possesses capital is that much further advanced in time on the road to the desired consumer's good. Crusoe without the axe is 250hrs away from his desired house. Crusoe with the axe is only 200hrs away. If the house was there to begin with, he would achieve his desire immediately. The role of capital is to advance men in time toward producing the consumer's good."
Chapter 13: "To sum up the relationships and the distinctions between praxeology and each of the other disciplines, we may describe them as follows: Why man chooses various ends? Psychology. What man's ends should? Philosophy of Ethics & Philosophy of aesthetics. How to use means to arrive at ends? Technology. What man's are, and have been, and how man used means in order to obtain them? History. The formal implications of the fact that men use means to attain various chosen ends? Praxeology"
Chapter 13: "Economics is a subdivision of the Praxeology"
Chapter 27: "All cases of negative externalities turn out to be instances of failure of government's enforcement agency to properly enforce individual property rights. I.e smoke and air pollution is damaging property and health of others, an act of vandalism". Interesting thought, but I don't completely agree here. The negative externalities could have long-term impacts (lung cancer, ocean pollution) that short human lifetimes with our monkey brains aren't good at comprehending and correlating.
Chapter 74: "Profits are an index of economic's maladjustment being combated - under or over valuation of certain factors. If we should condem anyone, it's not the one who made profits, but that one who made losses, for losses are a sign that he had added further to the maladjustment"
Chapter 119: "In a truly free market, there wouldn't need to be a separate theory for international trade. Nations become significant economically only with government intervention and barriers to trade"
Chapter 122: "The subject of government cannot contract out of that government. He can not sell his shares in the post office. The corelary of the right of ownership is the right of disownership - if I can not sell a thing, then it's evident that I do not own it"
Chapter 129: "Left-wingers often advocate freedom in the sense of opposition to autistic intervention (interference with private non-economic activities), but look beningly on triangular intervention (state-mandated exchange between individuals). Right-wingers on the other hand severely opposite triangular intervention, but tend to favor, or remain indiferent to autistic intervention. Both groups are ambivarent on binary intervention (exchange between individuals and the state)"
Chapter 130: "Progressives insist that consumers are too ignorant and incompetent to buy products intelligently, while at the same time, tauting the vertures of democracy, where the same people vote for politicians whom they do not know and for policies that they hardly understand"
Chapter 130: mentioned maximum-hour laws mandating idleness - though I never heard of such laws, interesting
Chapter 133: "condcription is a method by which the government can comanders labor at far less than labor wage rates - the rates which it would have to pay to enduse the enlistment of the volunteer army"
Chapter 134: on anti-trust: "the politicians have secured a law, under which it was impossible for the citizen to know beforehand what constituted a crime"
Chapter 155: "imagine the universal risk if laborers couldn't be paid until the final product reached the consumers. The pain of waiting for future income, the risk of forecasting consumer demand into the future, would be almost intolerabe, especially for those laborers working the most remote processes of production. But the capitalist entrepreneur pays him immediately instead, and himself adopts the burden of waiting and forecasting future demand. The entrepreneur thus risks loss of his capital." A good reason why executives and shareholders deserve a much higher rate of return (alongside the fact that executives are far harder to replace than a common laborer)
General impressions:
Great introduction to the free market and laissez-faire
Laissez-faire seems close to Objectivism
On the other hand, given that laissez-faire economics claims to allow every actor in the economy to maximize their own utility by freely engaging in the action they think is best for them, doesn't this make laissez-faire economics the solution to the "perfect utility function" in utilitarianism? i.e rather than trying to predict utility for everyone (that ay lies communism, unless you have an AGI), let everyone express their own utilities. Or does this fail due to the short-sightedness of most people and the need in utilitarianism to answer questions that are broader than just 1 or 2 people?
Criticism:
The book discusses hypothetical idealistic scenarios. Does not pay enough attention to imperfect society, where many people are unintentionally irrationally, and some even intentionally irrational (i.e like putin invading Ukraine for no benefit to his county or any other country, except maybe china)
The book also puts too much weight on the assumption that consumers know what is best for them. In reality, consumers are often irrational short-sighted dopamine maximization monkeys. Things like long-term effect of lifestyle choices, or the societal disadvantages of misallocation of resources into the car culture.
But perhaps the thing I disagree with the author on the most is his opinion on growth and education. Growth is critical for human progress and raising living standards (as history very clearly shows) - not an optional extra that some people may choose to opt into. Education of the populous is essential for a well-functioning society, or else you get populists and lunatics that elect clowns like trump - state protecting young children with immature brains from decisions they would regret (skipping school) seems like a positive long-run investment into a healthy and conscious population.
Side note:
Book shows it's age with all the "man, men, he, him, his" and etc
The narrator in the audible version of the book has a dull and unpleasant voice
August 12, 2013
Like all of Rothbard's work, MES is written in crystal clear English. Indeed, Rothbard had a knack for condensing complex economic theories into a much clearer form which is more digestible to the educated layman.
MES essentially spells out the praxeological theory of Ludwig von Mises in much more concise terms. There are, however, some notable divergences from the pure Misesian approach. Foremost of which would be Rothbard's treatment of monopoly and, although it doesn't deal with economics, his support for anarchy.
In any case, MES is a must read for anyone who wants to fully understand Austrian economics. There are a number of details which might be lost if you were to only read Ludwig von Mises' work. MES does a great job of filling in those gaps and piecing together the whole Austrian puzzle in a seemingly effortless fashion.
MES essentially spells out the praxeological theory of Ludwig von Mises in much more concise terms. There are, however, some notable divergences from the pure Misesian approach. Foremost of which would be Rothbard's treatment of monopoly and, although it doesn't deal with economics, his support for anarchy.
In any case, MES is a must read for anyone who wants to fully understand Austrian economics. There are a number of details which might be lost if you were to only read Ludwig von Mises' work. MES does a great job of filling in those gaps and piecing together the whole Austrian puzzle in a seemingly effortless fashion.
October 27, 2015
One of the last great systematic treatises of economic thought published post World War 1. This books crafts a well-thought foundation for economic thought. Building off of human action in an economy of scarce resources, it breaks down how entrepreneurship, real value judgements, and risk taking drives the market. It will be an enjoyable and informative read for anybody who enjoys praxeology, human action, and economics. If you have the chance, do not abnegate yourself the pleasure of reading this book!
November 5, 2016
It's a lengthy book, but is amazingly clear and concise in its message. Rothbard starts from the premise that humans must always act. Even leisure is a conscious decision to not act or act in a manner that is not productive.
From that premise, he eloquently describes the interactions between individuals and how there are only two types of interactions, voluntary and coerced. He thoroughly details the consequences of both.
From that premise, he eloquently describes the interactions between individuals and how there are only two types of interactions, voluntary and coerced. He thoroughly details the consequences of both.
November 8, 2012
Rothbard's treatise is a must for anyone looking to build a library of Austrian economics. I found his treatment of the problem of monopoly to be novel and convincing as well as his discussion of the nature of psychic gain. A very strong work, lengthy, but easy to read as are most of Rothbard's works.
October 17, 2013
Economics Explained!
This is not just a book on economics, for me it's the ultimate reference guide especially for economic issues involving government, efficiency and the free market system in general. It's logical no maths common sense approach to critically thinking through how the world ought to work.
This is not just a book on economics, for me it's the ultimate reference guide especially for economic issues involving government, efficiency and the free market system in general. It's logical no maths common sense approach to critically thinking through how the world ought to work.
March 29, 2012
The Truth Shall Set You Free!
January 16, 2016
Total masterpiece. The complete science of economics as it should be approached and understood.
October 13, 2017
This is a very long book, 1000+ pages. I took a brake to finish two other books I had started. I will get back to it because their is so much there to learn. Will update when I get back to it
May 3, 2021
State bad.
April 15, 2020
It took me about 8 years (on-and-off) to conquer this mammoth magnum opus standing at a tall 1,369 pages. No review here can do this book the justice, or the criticism, it deserves. But neither would it be right to put it down without saying anything.
First: this is a great treatise on economics that every serious student should read. It’s a holistic and a systematic analysis of human action and its implications, naturally written in the tradition of the Austrian school and heavily influenced by Mises. The work is fully anchored on the quintessential Austrian elements of axiomatic deduction, methodological individualism, the importance of time, (hyper)subjectivity and marginal utility, uncertainty and risk, the role of entrepreneurship, market as a discovery and coordination process, etc. Though Rothbard doesn't make that many original contributions (this started, after all, as a project of writing an abridged version of Human Action), his elucidation of economic concepts is great and not only keeps an entire school tradition alive and relevant but carries it forward in great leaps.
Secondly: the work is generally written in an easy-to-understand language, devoid of the mathematical pretentiousness that most books of this nature are fraught with. This is especially true of the first chapters where Rothbard draws from the famous Robinson Crusoe construct to explain individual action, barter and its subsequent implications. The limit to Rothbard’s simplicity, however, shows during the chapters of production and capital theory, where it becomes (maybe only to me) difficult to find and keep the thread.
In a lengthier and more detailed review I could, of course, praise the book further, but it’s equally important to point out what are, in my opinion, its flaws.
First, stylistically, the book could have been much shorter had Rothbard not repeated himself in every chapter. Clearly another read by him or someone else accompanying him would have made the book leaner after removing the redundancies.
But more importantly, I think Rothbard’s biggest drawback—and I say this having read most of his other books and countless articles and essays—is his unconditional, hardcore belief in the ultimate, undoubted perfection of the free market. He has a burning desire to sincerely believe that every action on the free market is tautologically and unquestionably justified and good. I think he has a strong conviction—emerging from his love of principles, axiomatic deduction and objective ethics—that on the free market everything sort of “falls into place” and that it is “fully rounded” and that every other non-market outcome is arbitrary and necessarily injuring to consumer utility. A side effect of this belief is his lack of readiness to take opposite arguments more seriously, instead quickly dismissing them as without merit.
Though myself a great admirer on principled and utilitarian grounds, I think the nature of the free market is such that it produces desirable outcomes only in general, and that, this takes time. This means that not every free market outcome is actually desirable and even if it is, it doesn’t necessarily manifest itself immediately. Why do I think this? Because free markets are made up of people who have limited and/or imperfect knowledge, who respond differently to incentives, and who need time to bring their reactions to fore.
Let me give one example. Free marketeers say that private businesses, when in competition with each other, have a strong incentive to serve customers because their revenues (and hence profits) rely on pleasing them. Businesses that please customers get to earn their money and make profits; businesses that displease customers drive them away and make losses. Very well. But how do you explain that, sometimes, they actually don’t? There are countless examples where businesses don’t please customers. Have they suddenly given up on making money? Or maybe their agents aren’t doing the job (principle-agent problem)? Clearly things are a bit more complicated than most free marketeers would like to think.
I think the answer is that, sometimes, businesses simply can’t respond properly to customer demand for technical reasons, and sometimes, frankly, they don’t care because they don’t expect to suffer extreme consequences from one isolated instance of customer insubordination. As a business owner, I myself have sometimes cared less about pleasing a customer and more about not bothering myself, even at a cost of losing revenue. Whatever my motivations, from a free market perspective this surely means that I produced a suboptimal outcome. This isn’t theoretical classroom economics; it’s real life.
This doesn’t mean free marketeers are wrong to identify the incentives at work; surely most businesses, most of the time, want to make money and have to please customers to do so. But sometimes, on some days, these incentives aren’t strong enough. That’s why I think, even though Rothbard is correct to identify these “axiomatically deducible economic laws that always uphold,” he can’t tell us the actual intensity of the incentives at work. And this matters.
Ironically, my viewing the imperfection of the free market along these lines couldn’t be more Austrian, for Austrians have, in my opinion, had the most realistic approach to studying economic systems in the sense that they have recognized that only individuals act and that the means they employ to attain their subjective ends—while acting on a timeline greater than zero—may be imperfect.
What I’m saying does not mean that government intervention is justified, because even if one identifies a problem it doesn’t mean that it can be fixed, and much less by governments which are plagued with all sorts of institutional, incentive and knowledge problems. I am sure that whatever the imperfection of the free market, governments only make things worse. But this doesn’t mean we can’t call a spade a spade. And I think Rothbard would have added value to his great work had he recognized this.
There are many more examples I can provide but this isn't the right forum. In conclusion, I highly recommend Robert Murphy's Study Guide to Man, Economy, and State to accompany your reading, which I regrettably didn't use until very late into the book.
First: this is a great treatise on economics that every serious student should read. It’s a holistic and a systematic analysis of human action and its implications, naturally written in the tradition of the Austrian school and heavily influenced by Mises. The work is fully anchored on the quintessential Austrian elements of axiomatic deduction, methodological individualism, the importance of time, (hyper)subjectivity and marginal utility, uncertainty and risk, the role of entrepreneurship, market as a discovery and coordination process, etc. Though Rothbard doesn't make that many original contributions (this started, after all, as a project of writing an abridged version of Human Action), his elucidation of economic concepts is great and not only keeps an entire school tradition alive and relevant but carries it forward in great leaps.
Secondly: the work is generally written in an easy-to-understand language, devoid of the mathematical pretentiousness that most books of this nature are fraught with. This is especially true of the first chapters where Rothbard draws from the famous Robinson Crusoe construct to explain individual action, barter and its subsequent implications. The limit to Rothbard’s simplicity, however, shows during the chapters of production and capital theory, where it becomes (maybe only to me) difficult to find and keep the thread.
In a lengthier and more detailed review I could, of course, praise the book further, but it’s equally important to point out what are, in my opinion, its flaws.
First, stylistically, the book could have been much shorter had Rothbard not repeated himself in every chapter. Clearly another read by him or someone else accompanying him would have made the book leaner after removing the redundancies.
But more importantly, I think Rothbard’s biggest drawback—and I say this having read most of his other books and countless articles and essays—is his unconditional, hardcore belief in the ultimate, undoubted perfection of the free market. He has a burning desire to sincerely believe that every action on the free market is tautologically and unquestionably justified and good. I think he has a strong conviction—emerging from his love of principles, axiomatic deduction and objective ethics—that on the free market everything sort of “falls into place” and that it is “fully rounded” and that every other non-market outcome is arbitrary and necessarily injuring to consumer utility. A side effect of this belief is his lack of readiness to take opposite arguments more seriously, instead quickly dismissing them as without merit.
Though myself a great admirer on principled and utilitarian grounds, I think the nature of the free market is such that it produces desirable outcomes only in general, and that, this takes time. This means that not every free market outcome is actually desirable and even if it is, it doesn’t necessarily manifest itself immediately. Why do I think this? Because free markets are made up of people who have limited and/or imperfect knowledge, who respond differently to incentives, and who need time to bring their reactions to fore.
Let me give one example. Free marketeers say that private businesses, when in competition with each other, have a strong incentive to serve customers because their revenues (and hence profits) rely on pleasing them. Businesses that please customers get to earn their money and make profits; businesses that displease customers drive them away and make losses. Very well. But how do you explain that, sometimes, they actually don’t? There are countless examples where businesses don’t please customers. Have they suddenly given up on making money? Or maybe their agents aren’t doing the job (principle-agent problem)? Clearly things are a bit more complicated than most free marketeers would like to think.
I think the answer is that, sometimes, businesses simply can’t respond properly to customer demand for technical reasons, and sometimes, frankly, they don’t care because they don’t expect to suffer extreme consequences from one isolated instance of customer insubordination. As a business owner, I myself have sometimes cared less about pleasing a customer and more about not bothering myself, even at a cost of losing revenue. Whatever my motivations, from a free market perspective this surely means that I produced a suboptimal outcome. This isn’t theoretical classroom economics; it’s real life.
This doesn’t mean free marketeers are wrong to identify the incentives at work; surely most businesses, most of the time, want to make money and have to please customers to do so. But sometimes, on some days, these incentives aren’t strong enough. That’s why I think, even though Rothbard is correct to identify these “axiomatically deducible economic laws that always uphold,” he can’t tell us the actual intensity of the incentives at work. And this matters.
Ironically, my viewing the imperfection of the free market along these lines couldn’t be more Austrian, for Austrians have, in my opinion, had the most realistic approach to studying economic systems in the sense that they have recognized that only individuals act and that the means they employ to attain their subjective ends—while acting on a timeline greater than zero—may be imperfect.
What I’m saying does not mean that government intervention is justified, because even if one identifies a problem it doesn’t mean that it can be fixed, and much less by governments which are plagued with all sorts of institutional, incentive and knowledge problems. I am sure that whatever the imperfection of the free market, governments only make things worse. But this doesn’t mean we can’t call a spade a spade. And I think Rothbard would have added value to his great work had he recognized this.
There are many more examples I can provide but this isn't the right forum. In conclusion, I highly recommend Robert Murphy's Study Guide to Man, Economy, and State to accompany your reading, which I regrettably didn't use until very late into the book.
February 10, 2020
I've read the first part of this tome (i.e. Man, Economy, and State), which focuses on Austrian economic. This approach to economics is much more philosophical and qualitative than the mainstream, and also much easier to read for a layman. It builds up economics ideas from very simple observations, starting from an isolated individual, to systems of barter, to more complex phenomena. For someone at all interested in economic ideas, I highly recommend looking into the Austrian tradition. This book, however, is not the place to start (perhaps instead Callahan's 'Economics for real people') - as it is a, perhaps overly, thorough treatise covering many topics. Although Rothbard writes very accessibly, there is too much repetition for my taste, with details carefully written out for cases where the main idea has already been presented. Also, some sections were of lesser interest to me and I had great use of Robert Murphy's 'Study Guide to Man, Economy, and State' - which both allows one get a usefull repetition after each chapter, a 'professional' eye on the contents thereof, and (in my case at least) the ability to skip certain chapters and make due with the summation provided by Murphy. For people seriously interested in the Austrian tradition I would guess this book, along with Mises 'Human Action', are must-read books.
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