Preface to the Fourth Edition

DIRECTIONS FOR USE: IF YOU hate the state, read this book. If you love the state, read this book! Students, educated laymen, and academics can all profit from Power and Market. In this volume, Murray N. Rothbard uses positive economics to analyze various schemes and proposals to alter or eliminate market outcomes. Where government supporters come up with numerous reasons why government “needs” to do this or that, Rothbard puts constraints on people’s political fantasies. He shows how the state is not a benign entity that can easily fix problems in the world. Rather, the state is an imperfect and inherently coercive apparatus.

Power and Market, now 35 years after its original publication, is still one of the most systematic economic analyses of government intervention around. Rothbard’s principles treatise Man, Economy, and State describes the economics of market exchange; Power and Market describes the economics of government intervention.¹ Rothbard makes it clear that economics is a value free science that provides no ultimate ethical judgments, but he also points out that economics can be used to criticize certain positions: “if an ethical goal can be shown to be self-contradictory and conceptually impossible of fulfillment, then the goal is clearly an absurd one and should be abandoned by all.”² In certain ways, the book could be considered an early example of public choice economics because it uses economics to analyze government, and it certainly takes the romance out of politics. But Rothbard differed from public choice economists such as James M. Buchanan and Gordon Tullock (and, for that matter, all of his contemporaries) in that he consistently viewed the state as a coercive institution, an institution that was not created to make everyone better off.³

The central chapters of Power and Market offer a typology and discussion of different types of state intervention. Binary intervention is when the state interferes directly with a private party (e.g., taxes and government spending), and triangular intervention is when the state interferes with the interaction between two third parties (e.g., price controls or product regulations). Are people better off when the state takes their money against their will? Are people better off when the state spends their money on something that they would not have purchased on their own? Are private parties better off when they are prevented from engaging in exchange that they consider mutually beneficial? Hint: The correct answer is no! Read Chapters 3, 4, and 5 to see Rothbard’s discussion.

Throughout the volume, Rothbard describes how government is not a benign force as many government supporters assume. The government is an institution of coercion that interferes with voluntary relations in the market. Just in case anyone cannot wait to find out how far Rothbard will push the logic, Rothbard begins Chapter 1 with nothing less than a discussion of why government is unnecessary! Power and Market is noteworthy because it “is the first analysis of the economics of government to argue that no provision of goods or services requires the existence of government.”⁴ Before Rothbard, even the most free-market theorists such as Ludwig von Mises, Henry Hazlitt, Ayn Rand, and Friedrich Hayek had simply assumed that services like law enforcement must be provided collectively by the state. Rothbard believes that law enforcement must be analyzed in terms of marginal units and, like other goods, those marginal units can be provided privately. He briefly mentions some historical examples of private law enforcement and then speculates how a purely private system could work. Is he being too Utopian? Rothbard responds:

[T]his concept is far more workable than the truly Utopian idea of a strictly limited government, an idea that has never worked historically. And understandably so, for the State’s built-in monopoly of aggression and inherent absence of free-market checks has enabled it to burst easy any bonds that well-meaning people have tried to place on it.⁵

Rothbard’s libertarian anarchism influenced many subsequent thinkers, who have since written numerous articles and books on why government is unnecessary.⁶

In addition to breaking new ground in its time, the book is extremely relevant to political economy today. For example, Power and Market’s final chapter is a hard-hitting critique of antimarket ethics, which have been retained or are gaining popularity in modern times. Take the view of many modern behavioral economists who argue that society should not rely on free markets because people do not always know what is best for them.⁷ Rothbard agrees that people often make mistakes, but he disagrees about whether that justifies paternalism. If people do not know what’s best for them, how can they be suited to elect leaders who do?⁸ Or take the popular view of many public choice economists who argue in favor of government law enforcement because human nature is imperfect. Rothbard agrees that men are not angels, but that does not justify government for him.⁹ If humans are so bad, how can we expect a coercive government composed of humans to make the situation better?¹⁰ Rothbard takes on these arguments and many more.¹¹

In Power and Market, no aspect of government intervention is spared. Rothbard’s arguments should give pause to anyone who wants to solve problems using political means. To Rothbard, the state is not perfect, desirable, or necessary; it’s quite the opposite! The state, in all of its forms, is injurious to civil society, and if we truly want to improve the world, we must look beyond government. Real solutions lie not in power but in the market.

EDWARD P. STRINGHAM
San Jose State University
May, 2006

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¹Rothbard originally wrote this volume as the final third of the 1,500-page manuscript for Man, Economy, and State. The length of the manuscript and the nonmainstream political conclusions in his analysis of government were too much for some, however, so Man, Economy, and State and Power and Market were published as separate volumes in 1962 and 1970. See Joseph Stromberg, “Introduction to Man, Economy, and State with Power and Market” in Murray N. Rothbard Man, Economy, and State with Power and Market, Scholar’s edition (Auburn, Ala.: Mises Institute, 2004), pp. lxv–lxxi.

²Rothbard, p. 251.

³The public choice economists’ views on government and anarchy are presented in Edward Stringham, ed., Anarchy, State, and Public Choice (Cheltenham, U.K.: Edward Elgar, 2006).

⁴Murray Rothbard, Power and Market (Kansas City: Sheed Andrews and McMeel, 1970), p. vi.

⁵Rothbard, p. 9.

⁶See for example: Randy Barnett, The Structure of Liberty: Justice and the Rule of Law (Oxford: Clarendon Press, 1998); Bruce Benson, The Enterprise of Law: Justice Without the State (San Francisco: Pacific Research Institute for Public Policy, 1990); idem, To Serve and Protect: Privatization and Community in Criminal Justice (New York: New York University Press, 1998); Hans-Hermann Hoppe, Theory of Socialism and Capitalism (Boston: Kluwer, 1989); idem, Democracy—The God That Failed: The Economic and Politics of Monarchy, Democracy, and Natural Order (New Brunswick, N.J.: Transaction Publishers, 2001); idem, ed., The Myth of National Defense: Essays on the Theory and History of Security Production (Auburn, Ala.: Mises Institute, 2003); Anthony de Jasay, Against Politics: On Government, Anarchy, and Order (London: Routledge, 1997); Edward Stringham, ed., Anarchy, State, and Public Choice (Cheltenham, U.K.: Edward Elgar Publishing, 2006); and idem, ed., Anarchy and the Law: The Political Economy of Choice (New Brunswick, N.J.: Transaction Publishers, 2006).

⁷Richard H. Thaler and Cass R. Sunstein, “Libertarian Paternalism,” American Economic Review 93, no. 2 (May 2003): 175–79.

⁸Rothbard, p. 254.

⁹See Martin C. McGuire and Mancur olson, “The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force,” Journal of Economic Literature 34, no. 1 (March 1996): 72–96, and the arguments by the public choice economists in Edward Stringham, ed., Anarchy, State, and Public Choice (Cheltenham, U.K.: Edward Elgar Publishing, 2006).

¹⁰Rothbard, p. 260. See also Benjamin Powell and Christopher Coyne, “Do Pessimistic Assumptions About Human Behavior Justify Government?” Journal of Libertarian Studies 17 (Fall, 2003): 17–38.

¹¹Rothbard’s coverage of many topics prevents him from delving into any one in too much detail. This breadth of topics is part of the appeal of the book, however. From this perspective, Rothard’s work can be seen as a potential springboard for modern libertarian scholarship on many topics. Rothbard wrote, “The discussion throughout the book is largely theoretical. No attempt has been made to enumerate the institutional examples of government intervention in the world today, an attempt that would, of course, require all too many volumes” (Power and Market [1970], p. vii). The good news is that Rothbard’s initial pass provides today’s libertarian scholars an opportunity to illustrate or extend the theoretical ideas in Power and Market. For example, many of my articles on private rule enforcement attempt to do just that: Edward Stringham, “Market Chosen Law,” Journal of Libertarian Studies 14, no. 1 (winter, 1998–1999): 53–77; idem, “The Emergence of the London Stock Exchange as a Self-Policing Club,” Journal of Private Enterprise 17, no. 2 (2002): 1–19; idem, “The Extralegal Development of Securities Trading in Seventeenth Century Amsterdam,” Quarterly Review of Economics and Finance 43, no. 2 (Summer, 2003): 321–44; Bryan Caplan and Edward Stringham, “Networks, Law, and the Paradox of Cooperation,” Review of Austrian Economics 16, no. 4 (December 2003): 309–26; idem, “Overlapping Jurisdictions, Proprietary Communities, and Competition in the Realm of Law,” Journal of Institutional and Theoretical Economics, forthcoming.