The Political Importance of Murray Rothbard (by Ron Paul)

It would be difficult to exaggerate Professor Murray N. Rothbard's influence on the movement for freedom and free markets. He is the living giant of Austrian economics, and he has led the now-formidable movement ever since the death of his great teacher, Ludwig von Mises, in 1971. We are all indebted to him for the living link he has provided to Mises, upon whose work he has built and expanded.

But many are less aware of Rothbard's political influence. Some would say that while he is undoubtedly an excellent economist, his political efforts have been less than successful.

I would deny this. Rothbard is the founder of the modern libertarian movement, and of the Libertarian Party which is its political incarnation, and he thus has built the necessary foundation for liberty by inspiring the most important third-party movement ever. And in my own political work, I have been profoundly influenced by the lucid and brilliant works of Rothbard.

In his first correspondence with me after I was elected to office, Rothbard expressed surprise and delight to find a real Congressman who wrote that "taxation is theft," and approvingly quoted his article, "Gold vs. Fluctuating Exchange Rates." I, of course, was thrilled to hear from someone whose works I had studied and admired for so many years.

The aura that has traditionally surrounded American politics in this century has turned to suspicion during the past decade. The scandals of Watergate (and, let us hope, Iran-Contragate as well) convinced the public, for a time, that it is naive to trust any mainstream politician. Rothbard was delighted with the whole event, saying in 1979 that, "it is Watergate that gives us the greatest single hope for the short-run victory of liberty in America. For Watergate, as politicians have been warning us ever since, destroyed the public's 'faith in government'—and it was high time, too."

Rothbard rejoices, saying, "government itself has been largely desanctified in America. No one trusts politicians or government anymore; all government is viewed with abiding hostility, thus returning us to that State of healthy distrust of government that marked the American public and the American revolutionaries of the eighteenth century." For the sake of liberty, let us hope this hostility isn't just a passing phase.

Most understand  that what a politician says during his campaign is rarely compatible with his performance. Still, this broad—and healthy—cynicism does not translate into clear public understanding of the lies of the average politician. 

It is incredible how a politician can maintain an image while the facts clearly point in the opposite direction. Many still see President Reagan as a budget-cutter while he has proposed the largest budgets and deficits in our history.

While it is perhaps understandable  that the public remains naive about the realities of politics, given the Establishment-media conspiracy to hide the  t ruth, but the tendency of scholars to gloss over facts and misrepresent realities is absolutely inexcusable. Academics tend to cling to old interpretations, or worse, old Statist ideals which blur their view of reality. And when prevailing historical orthodoxy is challenged, those who have an interest in maintaining myths attempt to silence their opponents.

Just one example from his works is the case of Murray Rothbard's revisionist analysis of Herbert Hoover's pre-Depression years. When Rothbard set out to tell the story of Hoover, consider what he was up against. Republicans, who for the most part opposed Roosevelt's New Deal, blame the enormous growth of government that occurred duringthose years on the Democrats. Conversely, the Democrats, who are proud of the New Deal, take credit for it. Thus Republicans are taught that "Hoover's only problem was  that he did not have a Republican Congress," and Democrats are taught that government should solve any crisis  that "socially Darwinian free markets inevitably cause," just as Roosevelt did. And intellectuals are notoriously stubborn about accepting new historical interpretations, especially if the revision favors free markets over government planning.

It is a tough job to change historical interpretations—no matter how false—which have been solidified for generations in the minds of State-protecting partisans. Nevertheless Rothbard announced in 1963: "Herbert Clark Hoover must be considered the founder of the New Deal in America." And in fact "Franklin D. Roosevelt, in large part, merely elaborated the policies laid down by his predecessor."

Rothbard's analysis is stunning and exhaustive. He set out to prove his proposition and did so without question. Hoover was an interventionist. He was philosophically committed to using the coercive machinery of government to bring about full employment, insure the survival and influence of labor unions, manipulate the price level for farmers' benefit, maintain wage levels and deport immigrants, prevent bankruptcies, and above all to inflate the money supply. Hoover did this in spite of the"bitter-end liquidationists" who thought the Depression represented a necessary correction in the malinvestment of the previous decade.

And indeed, against all odds, Rothbard has made inroads to changing the way history treats Hoover. The eminent British historian Paul Johnson, who became the darling of the conservative movement with his massive study on the history of Christianity and his history of the world during the twentieth century, Modern Times, was directly influenced by Rothbard's reconstruction of Hoover. In Modern Times, Johnson calls Hoover's fiscal and monetary policies "vulgar Keynesianism," a point upon which Rothbard had previously elaborated.

Idols for Destruction, a scholarly work by Herbert Schlossberg now causing much talk in conservative and evangelical circles, enthusiastically echoes Rothbard's historical revision of Hoover. "Herbert Hoover, amazingly referred to even by historians as a partisan of laissez-faire, energetically supported  . . . a powerful central State  that would coordinate the efforts of business."

The New Deal was not new after all. It has hatched in the decade prior to Roosevelt's ascension to power. Rothbard's analysis, directly and indirectly, has led many to be more objective when evaluating partisan politics, both now and in the past.

Years before I ever thought of running for Congress, I came across Rothbard's America's Great Depression. Before reading it, my thinking was clouded by the temptation to divide these issues and ideas in partisan terms. Rothbard fixed that.

America's Great Depression was a key book in my conversion to pure free-market, libertarian thinking. The confidence I gained with ammunition supplied by Rothbard encouraged my entry into politics, since I needed the reassurance that my intuitive allegiance to liberty was shared by great thinkers. Rothbard taught me to always keep the distinction between peaceful market activity and State coercion in my mind. It served as a constant guide once I was in office.

I wanted to see the brilliant writings of theoreticians such as Rothbard translated into practical political action. To my surprise there was a strong constituency for these views, and I was elected to four terms. Even a person familiar with only a small part of the vast work Rothbard has produced during his career knows his attitude towards politics. Like Mises, he labels the State as the "social apparatus of violentoppression."

How do we minimize the role of the State? To bring about radical and permanent change in any society, our primary focus must be on the conversion of minds through eduction. This is a task to which Rothbard has dedicated his life. That's why he was such a willing participant on so many occasions in the educational functions I held for interns, staffers, and Members of Congress. After speaking at a seminar I held, he expressed delight at the large turn-out, saying it "shows the extent to which our ideas have permeated politics and public opinion, far more  than I had hoped or believed."

But because Rothbard sees education as the primary vehicle for change,  that does not mean, of course,  that he is opposed to getting directly involved in political action towards a libertarian society. As he had said, "since the State will not gracefully convert itself out of power, other means  than education, means of pressure, will have to be used."

That's why I asked his help when I was appointed to the U.S. Gold Commission, and Rothbard produced brilliant material on American monetary history in the nineteenth century, especially as related to gold and the evils of central banking. These are issues that Rothbard has refused to compromise on, despite enormous pressure from inside and outside the movement. To this day, he remains the most persuasive monetary theorist and consistent critic of inflation and fiat paper money. When gold is once again restored to a central place in our monetary system, we will owe a gigantic debt to the work of Rothbard.

In fact, Rothbard's work with the Gold Commission helped us get on the road to a gold coin standard, because out of the Gold Commission came support for my legislation to mint the American Eagle Gold Coin. And his encouragement and support helped me make up my mind to  run for the Presidency of the United States on the LibertarianParty ticket.

In a multitude of ways, Rothbard's work has given not only me but all of us the ammunition we need to fight for the American dream of liberty and prosperity for all mankind.

Chapter 22: http://mises.org/books/maneconomyliberty.pdf

Anatomy of the State, by Murray Rothbard

Anatomy of the State, by Murray Rothbard.

Read by Graham Wright.

Ten Books That Influenced Me

These are the books that had the greatest impact on my worldview. All of them are from the last few years, which emcompass my intellectual journey from political apathy and economic naiveté, to being a radical libertarian anarchist and Austrian economist.

I list the books in the order that I (first) read them, with the year in which I first read them in brackets. This post is not to be taken as a blanket endorsement of these books. They are the ones that influenced me most, not those I consider the greatest works, nor those that I would recommend to others necessarily.

1. The Road To Serfdom, F.A. Hayek (2007) – This book introduced me to a new way of thinking about politics. It introduced me to basing political views on principles rather than on whims. I identified myself as an individualist, and became opposed to all forms of collectivism. I understood that governments, even if they start off extremely limited, will always tend to grow, especially if the public has a collectivist mindset.

2. The Revolution: A Manifesto, Ron Paul (2008) – Ron Paul cured my apathy about politics. I found him online in November 2007, and became a massive fan very quickly. He took principled positions, he obviously knew what he was talking about economically, and had held those stances his whole career without wavering or compromising. I began questioning my own views about the role of government. I stopped believing in the left-right paradigm, and started to understand a far better paradigm: libertarianism versus statism.

3. Economics in One Lesson, Henry Hazlitt (2008) – The title is so appealing that I made this the first book on economics I read. I found it through the Ludwig von Mises Institute, which Ron Paul had directed me towards. Immediately, the fallacies of mainstream economics, and the wealth-destroying nature of socialism and all kinds of interventionism, became apparent to me. Hazlitt’s lesson is so remarkably powerful, that I immediately felt confident enough to reveal my political preferences publicly and argue for free markets in practically every area of society. The economic arguments in favor of a state are untenable, and quite obviously so.

4. For A New Liberty, Murray Rothbard (2008) – It took me about 9 months to go from a Ron Paul-inspired limited constitutional government position, to a full libertarian anarchist position. More than any other author, Murray Rothbard deserves most of the credit for that. This book was so clear, and made the case so powerfully, that I instantly saw the superiority of the anarchist position. It was also the first time I had encountered an explanation of how security and law can be provided without a government.

5. Anarchy and the Law, Edward Stringham et al (2008) – This compilation of essays and book excerpts sealed my anarchism. I read alternative justifications for and visions of anarchy: from David Friedman, Linda and Morris Tannehill, Randy Barnett, Roderick Long, Roy Childs, Hans Hermann Hoppe, John Hasnas. These all helped shape my worldview and especially sharpened up my thinking about how security and law can be provided without a state.

6. The Enterprise of Law, Bruce Benson (2009) – This book gave me my first encounter of public-choice economics. Benson took a whole different approach to Rothbard and Friedman, with a great deal of historical, empirical research into customary law, as well as a detailed analysis of the state law-making process and how it compares to law produced by private courts.

7. Democracy: The God That Failed, Hans-Hermann Hoppe (2009) – Just when I thought my political views were fully-formed, Hoppe hit me with his idea that monarchy is superior to democracy (though anarchy is still best of all, of course). I had taken it as given that if we must have a state, let it at least be democratic, and I had always seen the recent historical transition from monarchies to democracies as a positive thing. This book changed my view completely, and gave me a whole lot more reasons to oppose modern states. If we must have a state, let it at least be a monarchy, I now say.

8. Boundaries of Order, Butler Shaffer (2010) – This book played a vital role in my forming my position, contra Rothbard, as a subjectivist ethicist. In particular, it provided me with the terminology that reveals the flaws in his natural rights justification for libertarianism. It allowed me to move past Rothbard and develop a sophisticated subjectivist justification for libertarianism, free from terminological baggage and smuggled norms.

9. The Selfish Gene, Richard Dawkins (2010) – I thought I understood evolution pretty well, until I read this book. I had not realised the importance of asking at what level evolution takes place. It is at the level of the gene, and this has enormous implications for how we view evolution. I was struck by the beauty and structure to be found in nature and evolution, as Dawkins masterfully described. I was fascinated by the idea that morality can be explained in evolutionary terms; this idea fit perfectly with my subjective ethics worldview.

10. How The Mind Works, Steven Pinker (2010) – This book is full of remarkable ideas, about how our minds evolved to deal with reality. It brings to life the story of how and why we developed language, self-awareness and morality. I have not yet fully absorbed all that this book has to offer, and will probably need to read it a few more times before I feel I have a good grasp on it. But I already feel that it has had a profound affect on my thinking.

Looking over my list, the thing that jumps out at me is that there is no Ludwig von Mises. He will have to be contented that his views influenced me through others: particularly Rothbard, Hoppe, Hazlitt and Paul. Human Action, Theory and History and Socialism come closest to being on this list. His shorter works, The Anti-Capitalistic Mentality, Profit and Loss, and Economic Calculation in the Socialist Commonwealth all deserve a mention as well.

Murray Rothbard is probably my single greatest influence, and if I had the space, would have had more than one entry in this top ten. I learned economics from Man, Economy and State, and The Ethics of Liberty was highly influential as well. Rothbard’s crowning glory, however, has to be his epic A History of Economic Thought, which shows off his masterly scholarly skills, and wonderful writing style, to the maximum.

Some more short works that influenced me include The Politics of Disobedience (Etienne de la Boetie), The Production of Security (Gustave de Molinari), No Treason (Lysander Spooner), Against Intellectual Property (Stephan Kinsella) and The Depoliticization of Law (John Hasnas).

A Critique of Murray Rothbard's Idea of a "Basic Legal Code"

Here is a passage from The Ethics of Liberty:

[L]aw and the State are both conceptually and historically separable, and law would develop in an anarchistic market society without any form of State. Specifically, the concrete form of anarchist legal institutions—judges, arbitrators, procedural methods for resolving disputes, etc.—would indeed grow by a market invisible-hand process, while the basic Law Code (requiring that no one invade any one else’s person and property) would have to be agreed upon by all the judicial agencies, just as all the competing judges once agreed to apply and extend the basic principles of the customary or common law. But the latter, again, would imply no unified legal system or dominant protective agency. Any agencies that transgressed the basic libertarian code would be open outlaws and aggressors, and Nozick himself concedes that, lacking legitimacy, such outlaw agencies would probably not do very well in an anarchist society.

Here is the problem as I see it, with this idea of a "basic law code"...

Firstly: how detailed it this basic law code? Consider the two extremes:

• Broadly defined. "No one may invade anyone else's person and property". No more detail than that. ("Invade" and "property" are not given definitions... that is for the courts to interpret)
• Narrowly defined. The basic law code is identical to the libertarian law code, as developed by Rothbard, Kinsella, Block, etc... down to the details... like the basic law code is specific about IP, abortion, capital punishment, etc. (There is very little scope for interpretation of the basic legal code... the courts task is limited to applying the law code)

I've never been able to get a clear answer from Rothbardians about how detailed the basic law code is supposed to be. In the following analysis, I will show how the whole concept of the "basic law code" vanishes when you really think about it.

Rothbard says that the basic law code will be agreed upon by all reasonable courts. I take him to mean everybody except serial killers, rapists etc, i.e. 99% of the population. With such widespread agreement required, it seems hopelessly unrealistic to suppose that the basic law code is narrowly defined, down to the last detail. Even among libertarians, there is a disagreement over IP, abortion, punishments, etc. There is no way the entire population of reasonable people is going to agree on every little detail of libertarian theory.  The entire field of economic analysis of law - how laws get produced and what kinds of laws get produced - is skipped over by making this supposition.

To Rothbard, there were two types of court: reasonable courts, which have signed up to the basic law code, and outlaw courts, which have not. Rothbard does not provide any analysis - any mechanism - of how reasonable courts and outlaw courts will resolve disputes between them. This may not be much of an issue if we assume 99% of courts are reasonable, but see above.

So maybe the basic law code is broadly defined, leaving a lot of scope for interpretation, so that widespread agreement is possible. But then how will disputes about things which might fall into the area of interpretation - say IP disputes - get resolved? There needs to be a mechanism to explain this... how disputes between courts which have both agreed to the basic (broadly defined) law code will be resolved, when their interpretation of that law code differs. Rothbard has not provided us with a mechanism for this.

David Friedman, in chapter 29 of The Machinery of Freedom, has described a mechanism for how courts which provide different laws (perhaps very different laws) will resolve their disputes: the bargaining process.

One can imagine an idealized bargaining process, for this or any other dispute, as follows: Two agencies are negotiating whether to recognize a pro- or anti-capital-punishment court. The pro agency calculates that getting a pro-capital-punishment court will be worth $20,000 a year to its customers; that is the additional amount it can get for its services if they include a guarantee of capital punishment in case of disputes with the other agency. The anti-capital-punishment agency calculates a corresponding figure of $40,000. It offers the pro agency $30,000 a year in exchange for accepting an anti-capital-punishment court. The pro agency accepts. Now the anti-capital-punishment agency can raise its rates enough to bring in an extra $35,000. Its customers are happy, since the guarantee of no capital punishment is worth more than that. The agency is happy; it is getting an extra $5,000 a year profit. The pro agency cuts its rates by an amount that costs it $25,000 a year. This lets it keep its customers and even get more, since the savings is more than enough to make up to them for not getting the court of their choice. It, too, is making a $5,000 a year profit on the transaction. As in any good trade, everyone gains.

The same mechanism applies to all courts, so there is no need to call some courts "outlaw courts." Hence the idea of a basic law code dissolves. Each court is just producing laws, which may or may not be close to plumbline libertarian laws.

Why do bankers love their central banks?

Bankers love having a central bank because it enables them to lend more money than they have, so they collect more (a lot more) profits from interest payments than they would otherwise. This is known as fractional reserve banking.  There are natural limits to fractional-reserve banking imposed by markets, and the central bank makes it possible for commercial banks to bypass these limits. The central bank is the institution through which the commercial banks are cartelized and protected from competition.

Bankers support the money monopoly, the "lender of last resort" function, deposit insurance, the high rate of inflation, and all kinds of regulations (FSA, EU, IMF, etc), because it strengthens their cartel. The ideal scheme for the bankers would be a global central bank, with a global monopoly of (ideally paper) money, and international bailouts and regulations. The history of banking is the story of how the bankers, and the politicians who are happy to go along (they can finance deficits and inflate away their debts), have removed one-by-one all the market-imposed limits on fractional reserve lending. See Murray Rothbard's 'The Case Against The Fed'.

Check out the Ludwig Von Mises Institute video 'Money, Banking and the Federal Reserve'. It avoids the serious economic fallacies that undermine the otherwise-decent videos 'The Money Masters' and 'Money As Debt', and lead them to offer false and terrible solutions, like Lincoln-style Greenbanks. It highly praises the gold standard, because having gold backing the notes is a major market-imposed limit to fractional reserve banking. But the ultimate goal is a market-based money. Re-imposing a gold-standard dollar, controlled by congress, would be a second-best or interim measure; it would still be a money monopoly, but the boom-bust cycle and inflation would be significantly reduced, and it may ease a transition to market-based money.

Ron Paul, well-known for his support of the gold standard, shows that his ultimate goal is market-based money, when he says:

"Money will be honest, the unit precisely defined, and its integrity guaranteed by government or by voluntary contracts. Counterfeiting privileges of the Fed will be abolished and relegated to notorious underground figures. Honest money will allow credit to be freely created in the market and not by the privileged banking cartel, yet controlled by the integrity of the market and the convertibility of the dollar. The economic benefits of low long-term fixed interest rates will be welcomed by all, since credit can then fuel true long-term economic growth." [emphasis added]