The Rothbardian Turn of Mind

Summer 1998

THE LOGIC OF ACTION
Murray N. Rothbard
Edward Elgar, 1997, Vol. I, xviii + 452 pgs.; Vol. II, ix + 416 pgs.

It is both essential and impossible to review these two volumes. Essential, because they include the bulk of the scientific papers written by a great Austrian theorist. But also impossible, because of the incredible variety of topics covered, ranging from the nature of human action to the influence of gnostic thought on Marxism.

As one reads these disparate essays, however, a common quality comes to the fore. Murray Rothbard again and again challenges an assumption that everyone else takes to be obviously true. Once Rothbard poses his question, our view of the relevant topic is at once turned upside down.

Everyone knows that the free market is the most efficient economic system; Milton Friedman et hoc genus omne build their defense of the market largely on this consideration. One might expect that Rothbard, second to none as a champion of the market, would join in lauding its efficiency. Instead, he asks a fundamental question: does the concept of efficiency mean anything?

"Let us take a given individual...in order for him to act efficiently, he would have to possess perfect knowledge of the future. But since no one can ever have perfect knowledge of the future, no one's action can be called 'efficient.' ...[I]f ends change in the course of an action, the concept of efficiency--which can only be defined as the best combination of means in pursuit of given ends--again becomes meaningless" (I, pp. 266-67). And if efficiency can be given no clear characterization for an individual, it fares even worse when the ends of more than one person are considered.

Murray Rothbard viewed the logical positivists with alarm; but as the example just discussed shows, he used with great skill a favorite tactic of theirs. He asks: what is the operational definition of a concept under discussion? If none can be provided, the concept must be eliminated from science.

Another instance of this technique occurs in the essay, "Toward a Reconstruction of Utility and Welfare Economics."  Our author will have no truck with James Buchanan's attempt "to designate the State as a voluntary institution. Buchanan's thesis is based on the curious dialectic that majority rule in a democracy is really unanimity because majorities can and do always shift. The resulting pulling and hauling of the political process, because obviously not irreversible, are therefore supposed to yield a social unanimity. The doctrine...must be set down as a lapse into a type of Hegelian mysticism" (I, p. 252).

Rothbard's procedure is a simple one. He asks: what does the voluntary state amount to? And given Buchanan's characterization of it, Rothbard goes on to ask: is this what we ordinarily mean by "voluntary"? As it obviously is not, this conception of the voluntary state cannot stand. (Another instance of the same technique may be found in the search for an operational definition of monopoly price in Man, Economy, and State.)

As the same essay illustrates, Rothbard took nothing for granted in ethics. Much of conventional welfare economics rests on the detection of positive externalities. Our author, with his characteristic jump to the essence, inquires, why are positive externalities a social problem?

"A and B decide to pay for the building of a dam for their uses; C benefits though he did not pay.... This is the problem of the Free Rider. Yet it is difficult to understand what the hullabaloo is all about. Am I to be specially taxed because I enjoy the sight of my neighbor's garden without paying for it? A's and B's purchase of a good reveals that they are willing to pay for it; if it indirectly benefits C as well, no one is the loser" (I, p. 25).

Let us once more pause to grasp the revolution involved in Rothbard's query. Before him economists assumed without much thought that beneficiaries of positive externalities ought to pay for them. Once Rothbard has raised the question, you cannot help but wonder, why should this controversial premise be assumed without argument?

When Robert Nozick made a similar point in Anarchy, State, and Utopia (1974), philosophers were quick to take notice. But Rothbard was there long before. (Incidentally, the response that it maximizes efficiency for beneficiaries to pay is blocked by the earlier Rothbardian analysis discussed above.)

In the second volume of this monumental collection, where issues of the application of Austrian theory feature prominently, Murray Rothbard continues his pursuit of the revolutionary question. People have usually looked at an issue in a certain way; but why should we do so?

Thus, an influential approach to welfare economics endeavors to minimize transaction costs. In "The Myth of Neutral Taxation," Rothbard is ready with an iconoclastic query: "What is so terrible about transaction costs? On what basis are they considered the ultimate evil, so that their minimization must override all other considerations of choice, freedom, or justice?" (p. 88). If one responds that reducing these costs has some, though not overriding, importance, Rothbard's question compels one to specify exactly how much, and why, they are to count.

Fortunately for our society, support among economists for the free market is widespread. For almost any government activity, you can find an economist to argue that the market will provide the service in a better fashion. Yet who but Rothbard would think to ask, why should the government be allowed to collect information?

He makes a simple and devastating point: absent statistical data, the government could not interfere with the economy. "[S]tatistics are, in a crucial sense, critical to all interventionist and socialistic activities of government.... Statistics are the eyes and ears of the bureaucrat, the politician, the socialistic reformer. Only by statistics can they know, or at least have any idea about, what is going on in the economy.... Cut off those eyes and ears, destroy those crucial guidelines to knowledge, and the whole threat of government intervention is almost completely eliminated" (II, pp. 182-83).

As you might expect, my favorite section of the volumes is "Criticism," in which Rothbard annihilates adversaries in unique fashion. Again, he always grasps the essential.

As an example, deconstructionists claim that texts lack a fixed meaning. The apparent meaning of a text is always accompanied by countervailing patterns. A reader must then "deconstruct" a text rather than take it to have coherent sense. Rothbard raises the key point: why bother? "If we cannot understand the meaning of any texts, why are we bothering with trying to understand or to take seriously the works or doctrines of authors who aggressively proclaim their own incomprehensibility?" (II, p. 277).

Rothbard, in philosophy as elsewhere, insisted on clear definitions: without this, nonsense inevitably ensues. He found a prime instance of philosophical nonsense in what he termed "reabsorption theology." He maintained that this bizarre view lies at the heart of both Hegelianism and Marxism.

I cannot do better than to end with Rothbard's hilarious account of the reabsorption doctrine. "Stage One is the original state of the pre-creation cosmic blob, with man and God in happy and harmonious unity, but each rather undeveloped. Then, the magic dialectic does its work, Stage Two occurs, and God creates man and the universe. But then, finally, when the development of man and God is completed, Stage Two creates its own aufhebung, its transcendence into its opposite or negation: in short, Stage Three, the reunion of God and man in a 'ecstasy of union' and the end of history" (II, p. 340).

After you read about the "cosmic blob" it is difficult to take Hegel and Marx entirely seriously. And this, I suspect, is exactly the effect Rothbard wished to achieve.