Murray Rothbard’s Magnum Defense of Free Markets

Posted by T on September 09, 2016
Economics, Ethics / 1 Comment

I met Rothbard at a von Mises conference in Las Vegas in the early 90’s. During the opening reception, he enthusiastically went around introducing himself to all the attendees — something I have never witnessed from keynote speakers at Christian conferences. He was ebullient, joyful, humorous; it was a pleasure to meet him. This wonderful guy wrote his tome Man, Economy and State (1962, info listed at end) to expound economic theory from the “action principle” of Austrian libertarianism. It is the gold standard for libertarian theory. Although weighing in at almost a thousand pages, most of the foundational ideas are broached in the first 160 pages, plus the last chapter, so it is not as daunting to get a good overview as it seems at first.

In reviewing his book, I pass by a number of quibbles. For example, he invokes the happiness principle: that in pursuance of which all human choices are made (p. 15). Though this notion has a long pedigree in the history of philosophy, it is an empty, purely formal concept, having no explanatory power, for it changes shape just as each individual is diposed to choose, and thus cannot be an explanation of the motive of choice itself.  Its strength is its weakness. Rothbard also asserts as key, the idea of the uncertainty of the future. “If a man knew future events completely, he would never act, since no act of his could change the situation” (p. 5). This seems patently false, for this known future includes his acts as part of its falling out; and those acts (read: choices) are no less real for being known in advance. For example, I could resolve to purchase a particular car at 10 AM tomorrow. That future is certain (so I believe). Yet it does not alter the sense I have of being free, both in making the resolution now, and in carrying it out tomorrow. Both of these ideas could be tightened up logically, I believe, and this is left as an exercise for the reader. But even tightened up, they cannot be foundational, as I will show.

In Chapter 2, “Direct Exchange,” (pp. 67ff.) slavery is rejected because it entails the threat of violence. At this point we can see that libertarianism has the same Achilles’ heel that all ethical systems based on pure reason suffer from, namely: how will the strong man be convinced (for example) not to enslave if he can get away with it? He mentions some pragmatic considerations that might lead the strongman not to enslave others — the threat of a slave revolt, or perpetual warfare. But such considerations have no weight with the man who thinks he could overcome them. It is interesting that Rothbard goes so far as to argue that even slavery voluntarily entered into would be wrong.

The argument that the slave might be an enthusiastic supporter of the system because of the food, etc., provided by his master ignores the fact that, in that case, violence and the threat of violence by the master would not be necessary (p. 69).

But later, Rothbard seems to allow violence in situations where immunity from it has been demerited; for example, he quotes Auberon Herbert favorably who writes

The sovereignty of the individual must remain intact, except where the individual coerced has aggressed upon the sovereignty of another unaggressive individual. (p. 159, italics added by me)

So, if the slave’s voluntary entering into this state entailed giving property rights in his labor to the master, then the latent threat of violence to enforce the ongoing relationship would seem to be naught but an instance of asserting defrauded rights.

Rothbard suddenly ends this section (p. 80) with the stipulation that while the subsequent analysis will simply assume the free-market (and slave-free) situation, he promises to return to the subject later. The final chapter does indeed take up the topic again, but now restricted to state coercion, not household slavery. So it should be noted that the status of household slavery as such remains an unredeemed debate debt.

A second major topic of interest is that of the origin of land property. Rothbard asserts that nature has no owner until a human arrives and mixes his labor with it for the first time (p. 147); immediately upon that happening, the “first user” has title to that land in perpetuity — even if he (or his “assigns”) subsequently allows the land to fall into disuse.

Suppose that he clears new land and therefore obtains title to it, but then finds that it is no longer useful in production and allows it to remain idle. In a free society, would he lose title? No, for once his labor is mixed with the natural resource, it remains his owned land. (pp. 147f.)

He would even apply this notion to fishing rights in bodies of water! (p. 150) However, he concedes that Columbus can’t just step foot on the New World and claim the entire continent for himself.

Columbus or Crusoe would have to use the land, to “cultivate” it in some way, before he could be asserted to own it. This “cultivation” does not have to involve tilling the soil, although that is one possible form of cultivation. If the natural resource is land, he may clear it for a house or a pasture, or care for some plots of timber, etc. If there is more land than can be used by a limited labor supply, then the unused land must simply remain unowned until a first user arrives on the scene. (p. 147)

The final chapter redeems his promise to take up the topic of violence again. I have already noted that he fails to pay up his lingering debt on the subject of private slavery. But leave that aside for now. A great merit of this chapter is the interesting thesis that the free market creates a situation where the happiness of every single person can but increase. This is because of the radical turn to subjectivity as the only measure of value. Absent coercion, everyone’s choice at each moment is for that which, subjectively defined, it is the best of all possible choices. If this is a form of utilitarianism, it has distinct qualities that should be held up clearly by way of contrast with Bentham and Mills and other historical expounders of utilitarianism:
1. There is no aggregate calculus — no finding the maximum of the happiness curve of the whole society (even in principle)
2. It proposes, not an increase in happiness of a mere majority, nor of an average, nor a weighted average, but literally of everyone. It is a norm where unanimity is insisted upon and achieved!
3. Consequently, any calculus that weighs the loss of (even just) one against the gain of (even all) others is ruled out from the outset.

I don’t know if ethicists have given this form of utilitarianism a name, or if they have even discovered it. I will call it distributed utilitarianism. The argument is not, that the free market maximizes some kind of aggregate sum of happiness, but that it alone grants increasing happiness without exception. People need to pause and acknowledge the genius of this proposal. It is, I think, quite unique in the history of humanistic ethics.

Having paused and acknowledged, however, we must now also add that utilitarianism still can only live on the borrowed capital derived from an ethic with a different foundation. This can be seen both foundationally and as to coherence. Foundationally, utilitarianism cannot provide an answer to the objector’s question, “why should I care about distributed utility in deciding what I should do, if I can gain even more utility violating it?” This is a generalization of the strongman’s question mentioned above.

But if this seems like too facile an objection, there is also a problem of inner coherence. The marginal increases of everyone’s happiness in making free exchanges is only sensible given the ethically legitimate status quo of property-right in the prior situation. The angry worker’s claim to increased happiness by seizing ownership of the factory is supposed to be refuted in distributed utilitarianism by the owner’s decrease in happiness at its loss. But this begs the question. What if the workers answer, “in a deeper sense, the factory actually belongs to us; it is not a loss to you any more than some factory on the other side of the world burning down is a loss to you. Your problem is psychological, not real.” In other words, the settlement of property must first be understood as righteous prior to the invocation of distributed utilitarianism. It in fact needs the prior de jure understanding of property, and needs to secure that the current distribution thereof is appropriate in terms of that de jure system.

Rothbard grounds the de jure principle of ownership in first use, as summarized above. My basic criticism of this view has three levels. First, it is arbitrary: that is, there is no reason to accept this as a de jure origin of land title (and by the way I can think of few examples from history where title was established in this way). But second, intuitively it seems to lead to patent injustices. It assumes a simple binary decision on use of the resource: it is either used or not used. But if one man claims 5 acres in the new world, and cultivates it thoroughly and efficiently, while another grabs 500 acres, scattering seeds helter skelter to “put in into cultivation,” is it fair that the second one ends up with 100 times the land? Rothbard suggests (p. 151) that subsequent economic trades would equalize such imbalances. Yes: but to the economic disadvantage of the responsible first-user of the five acres. Third, the very term title is smuggled in without definition or explanation. But this concept already presupposes a juridical settlement, with (for example) judges, county clerks, and so forth. Where do these come from on Rothbard’s view? In reality, how does it even make sense to assert your right to a plot of land, prior to the existence of an entire social order in terms of which that has meaning? Say you go down to Antarctica, and stake out your “square mile” where you “harvest” ice for a while. Then you go back home. Fifty years later, one of your descendants goes back to build his hut there, only to find someone else is squatting. Is it not laughable to suppose that he has “title” in perpetuity, because his ancestor fifty years ago harvested some ice?

I submit that the foundational holes in Rothbard’s libertarianism, revealed poignantly in the exposition of slavery and property rights, are consequent to the fact that his theory lacks a one-many correlation of the individual property-holders (the many) to the surrounding, upholding membership community (the one). Neither pole of this correlation can exist without the other. He needs to sneak an entire system of deeds, surveyors, boundary markers and magistrates in through the back door for his proposal to make the slightest bit of sense. He tries to defer this issue by claiming, without plausibility,“whether the enforcement is undertaken by each person or by some sort of agency, we assume here that such a condition — the existence of an unhampered market — is maintained in some way” (p. 152). There are little hints here and there that he wants to establish the order by voluntary social contract (e.g. point 3, p. 159, of the Herbert quote), but that theory has been exploded too many times to bear repetition in this already too-long review.

What these problems reveal is that methodological individualism is an impossible foundation. But once a foundation other than methodological individualism is introduced, grounding the one-many correlation, then neither the happiness principle nor the freedom-motif can any longer serve as absolutes.

Now Rothbard might protest here that I have set the bar too high: that the entire history of philosophy can be read from the perspective of a vain effort to find the one-and-many synthesis. Why should he be held to such a high standard? As if sensing his absent foundation, twenty years later Rothbard articulated Natural Law as the normative substrate for his theory. It would be too much of a digression to go into this theory in any depth right here, but here is a basic challenge: let all Natural Law theorists agree on and publish their “Ten Commandments.” It hasn’t been done, and cannot be done. Natural Law is either but a metonymy for law deduced by nude reason — in which case it is subject to the same defects I am highlighting here — or it thinks to deduce its laws empirically from Nature — in which case it has two problems: the naturalistic fallacy, and the fact the Nature herself presents opposites under any rubric of importance. Occasionally, a male mounts another male in the animal kingdom, for example.

In contrast, we do have an answer. The holy Trinity is eternally one-and-many, so that the creaturely structures can have ontological grounding as creaturely representations of the eternal. But, the cornerstone of a foundation being discovered at last, men do not then have the freedom to go off and build whatever system they want to. No, it must be consistent with the revelation of the triune God: including law and covenant. Ironically, the law of God provides (in just the nick of time!) a transcendent securing of property rights, seemingly to the succor of libertarianism, but at a cost: a system of covenantally interlocking authority structures. Slavery is not an absolute evil, according to the Bible. Thus, the freedom principle cannot be foundational. Likewise, happiness is not an absolute good — not for any single creature, and thus, a fortiori, not for the distributed totality.

Murray N. Rothbard. Man, Economy and State: A Treatise on Economic Principles (Los Angeles: Nash, 1970 [1962])

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