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CIAO DATE: 03/02
Critical Review
Winter–Spring 1998 (Vol.12 Nos.1–2)
Murray Rothbard’s Austrian Perspective on the History of Economic Thought
By Warren J. Samuels *
Abstract
Murray Rothbard’s Austrian Perspective on the History of Economic Thought demonstrates his mastery of the literature. But his interpretation of the development of economics reflects, and is therefore severely limited by, his Austrian-libertarian perspective. Indeed, Rothbard appropriates the history of economic thought principally to advance his perspective, as seen in his neglect of social control, his identification of his desired economic system with the natural order of things, and especially in his denigratory treatment of Adam Smith—at bottom for not being an Austrian economist and a true libertarian. A partly informed, partly myopic and sometimes useful interpretation, this is the work of an ideologue.
The late Murray Rothbard is well known for his versions of libertarianism and Austrian economics and for his love of controversy. 1 He is less well known, perhaps, for his considerable erudition in the field of the history of economic thought. His Economic Thought before Adam Smith and Classical Economics (Brookfield, Vt.: Edward Elgar, 1995), constituting volumes I and II of “An Austrian Perspective on the History of Economic Thought,” demonstrate his mastery of both the original and the interpretive literature pertaining to those periods. Had he concentrated on doing history of economic thought, he could possibly have become a leading authority in the field. Because of his private agenda and perspective (at least the latter of which would not have rendered him unique), he certainly would have been a heterodox and controversial historian of thought, but a well-read one, someone to reckon with. But given that the history of economic thought does not write itself and is an essentially interpretive enterprise, and given his own description of these volumes as delivering “An Austrian Perspective,” the question inevitably arises whether Rothbard appropriates the history of economics to advance Austrian economics.
Rothbard’s Libertarianism and His Austrianism
Rothbard attempts to find precursors to the Austrian program in general and the Misesian one in particular in order to establish that long before Adam Smith, Scholastic writers had accepted both competitive market prices and a subjective utility/scarcity theory of value; indeed, the dominant thought in France and Italy in the seventeenth and especially eighteenth centuries was “proto-Austrian” along these lines. The matter of the Scholastic just price, however, is more complicated than this. It is more than likely, for example, that market prices (competitive or otherwise) were invoked in canonical courts and arbitration situations against putatively extortionary prices actually found in the real world. Many Scholastic writers had multifaceted conceptions of what the just price was all about, comprising intrinsic value, social need, and other considerations. The complete story of Scholastic price/value theory changed over time and was perhaps more complicated than Rothbard makes it out to be. Here he lets his Austrian orientation get the better of him. And he fails to emphasize the gravamen of Scholasticism, namely, the superimposition of a theologically grounded system of ethics on the whole of life, including economic activity. Scholasticism was an intellectual derivative of religion as social control. In ignoring this, Rothbard lets his libertarianism direct his interpretive judgment.
As for Smith, he “actually took the sound, and almost fully developed, proto-Austrian subjective value tradition, and tragically shunted economics on to a false path, a dead end from which the Austrians had to rescue economics a century later” (1995a, xi). The language is an echo of William Stanley Jevons’s dismissal of the value theory of David Ricardo; also echoing Jevons on the role of authority, Rothbard refers to “the tyranny of the British classical model, re-established by Mill in 1848” (1995b, 471). Indeed, he commences his chapter on “The celebrated Adam Smith” as follows:
| Adam Smith (1723–90) is a mystery in a puzzle wrapped in an enigma. The mystery is the enormous and unprecedented gap between Smith’s exalted reputation and the reality of his dubious contribution to economic thought. (1995a, 435) |
Rothbard’s main complaint about Smith is his adoption of the labor theory of value. This eventually became transformed, in the hands of others, into a real-cost theory of value; and with Alfred Marshall, costs became the dominant factors in long-run price, with utility (taste, preference) dominant in the short run. Yet Rothbard’s Austrian approach, for all its admirable emphasis on subjectivism and choice, is no conclusive basis on which to condemn Smith’s confused theory of value; the confusions might have been resolved in a non-Austrian direction.
Another complaint targets Smith’s ostensibly legendary laissez faire. Rothbard criticizes Smith for treating laissez faire as only a qualified presumption and for including a long list of exceptions to it in The Wealth of Nations, thereby departing from the ontology of a harmonious natural order—“in which government interference can only cripple and distort”—said to be evident in the Theory of Moral Sentiments (465 and passim). But to suggest that those who exalt Smith’s reputation have ignored any of this is mistaken. Lionel Robbins (1952) emphasized the important economic role government played for Smith and the English classical economists, and he pointed out that they did not believe in an automatic, perfect harmony of interests. Other writers, including this one (Samuels 1966), have emphasized the critical role, for Smith et al., of government in the construction of a market/capitalist economy increasingly dominated by nonlanded property, and perforce of government as an instrument in modifying and perfecting of such an economy. For Smith in particular, the economy had its foundations not only in law and jurisprudence but in the exercise of the moral sentiments that stand behind moral rules. The idea of laissez faire for Smith (who did not use the term) was severely circumscribed, and was directed largely against mercantilism.
In objecting to Smith’s failure to be a consistent noninterventionist, Rothbard’s Austrian libertarianism not only engenders myopia and wishful thinking but involves the selective reification and absolutist legitimation of economic institutions that have not only changed over time but emerged in no small degree because of government action. This is unsurprising, to all but the myopic libertarian, because the institutions that form the economy are legal (and thus always coercive) in character—or, as I would prefer to put it, they emerge and change on the basis of the legal-economic nexus (Samuels 1989). If Smith knew about anything, it was the difficulty involved in working out the moral and legal rules necessary for organized living, the division of labor, and the production of the wealth of nations. All this is finessed and obfuscated by Rothbard’s naive libertarianism.
Rothbard devotes 30 percent of his second volume to Marx, but for all the deficiencies of Marx’s analysis, Rothbard’s critique is unsatisfactory. Take, for example, his treatment of “class.” For Rothbard, “all classes live in harmony through the voluntary exchange of goods and services that mutually benefits them all”; capitalists and workers have no antagonistic class interests (1995b, 380, 382). Rothbard thus trivializes the idea of class, making it disappear—except when it is supported by state power. One wonders how Rothbard would have treated Vilfredo Pareto’s analyses of class. That believer in utility theory had no libertarian illusions about power and politics. Rothbard treats bourgeois society as if its structure were derivative of the natural order of things, rather than being a product of centuries of middle-class capture and use of government power. The fact that past uses of power have been rendered invisible by their codification in property law does not render them parts of a harmonious, natural universe.
Rothbard concludes his treatment of Marx with the argument that “the well-known horrors of twentieth-century communism . . . of Lenin, Stalin, Mao and Pol Pot, can be considered the logical unfolding, the embodiment, of the nineteenth-century vision of their master, Karl Marx” (1995b, 433). Does it make more sense to say this than to blame Jesus or Mohammed for the excesses of those religionists who have pretended to speak in their names, or the excesses of various businessmen to Adam Smith, Ludwig von Mises, or Murray Rothbard?
For all of Rothbard’s erudition, the fact is that his account of the history of economic thought is driven by, and attempts to reinforce, a particular view of the world. That view, in my opinion, is often laudable in its sentiments but simplistic, flawed, and subject to abuse on behalf of the economic oligarchy that lurks behind Rothbard’s images of wondrous harmony and beneficence. Pervading Rothbard’s text is (of course) the assumption of the Truth of his story. For believers in libertarianism and/or Austrian economics (or Rothbard’s versions thereof), the assumption may seem warranted. Rothbard’s single-minded dedication to his particular perspective serves as a useful heuristic tool. The correlative problem is, however, that there is ample reason to view him as an ideologue and, as a result, to discount his work’s many interesting insights into the history of economic thought.
References
Boettke, Peter J. 1994. The Elgar Companion to Austrian Economics. Brookfield, Vt.: Edward Elgar.
Robbins, Lionel. 1952. The Theory of Economic Policy of the English Classical Economists. London: Macmillan.
Rothbard, Murray N. 1995a. Economic Thought before Adam Smith: An Austrian Perspective on the History of Economic Thought. Vol. I. Brookfield, Vt.: Edward Elgar.
Rothbard, Murray N. 1995b. Classical Economics: An Austrian Perspective on the History of Economic Thought. Vol. II. Brookfield, Vt.: Edward Elgar.
Samuels, Warren J. 1996. The Classical Theory of Economic Policy. Cleveland: World.
Samuels, Warren J. 1974. “Anarchism and the Theory of Power.” In Further Explorations in the Theory of Anarchy, ed. Gordon Tullock. Blacksburg, Va.: University Publications.
Samuels, Warren J. 1988. Review of Murray N. Rothbard, ed., The Review of Austrian Economics, Vol. 1. History of Political Economy 20 (Summer): 329–31.
Samuels, Warren J. 1989. “The Legal-Economic Nexus.” George Washington Law Review 57 (August): 1556–78.
Samuels, Warren J. 1996. “My Work as an Historian of Economic Thought.” Journal of the History of Economic Thought.
Vaughn, Karen I. 1994. Austrian Economics in America: The Migration of a Tradition. New York: Cambridge University Press.
Endotes
*: Warren J. Samuels, Professor Emeritus, Department of Economics, Michigan State University, East Lansing, MI 48824, e-mail samuels@pilot.msu.edu, is coauthor of The Economy as a Process of Valuation (Elgar, 1997) and Economic Thought and Discourse in the Twentieth Century (Elgar, 1993). Back.
Note 1: The importance of Rothbard within contemporary Austrian economics is evidenced by the prominent discussions of his work in Boettke 1994 (see p. 625) and Vaughn 1994 (see especially, but not solely, pp. 99–100). Within Austrian economics Rothbard was a follower of Ludwig von Mises (rather than, for example, of Friedrich von Hayek). Back.