2. The Early Years—Becoming a Libertarian

THE EARLY YEARS—BECOMING A LIBERTARIAN

Murray Rothbard was born March 2, 1926, the son of David and Rae Rothbard. He was a brilliant student even as a young child; and his academic record at Columbia University, where he majored in mathematics and economics, was stellar.

At Columbia, the philosopher Ernest Nagel impressed Rothbard a great deal. Nagel was always ready to engage students in discussion: Rothbard said that he always appeared eager to learn whether a student could contribute to a problem that was puzzling him. Nagel stressed careful analysis of arguments; and in a class that Rothbard attended on the philosophy of the social sciences, Nagel criticized the institutionalist school for its opposition to economic theory. Nagel maintained that economists should not confine themselves to amassing data. A good theory explains the facts: it does not just reproduce them.

If so, the main objection of the institutionalists to economic laws failed. They claimed that theoretical statements were inevitably only approximately true, since they can never reproduce with full accuracy the details of the real world.

Institutionalists conceive of economic theory as only relative to particular historical situations; therefore universal economic theoretical laws are illegitimate. According to the institutionalists, each theorist discourses on the most pressing problems of his day.... So they conclude that economic theorists are selective. But any scientific inquiry is selective!¹

Nagel admitted the premise but denied the conclusion. An explanation does not aim to reproduce the world, just to account for it. If the economist says, e.g., that under certain conditions, if the price of a good falls, the quantity demanded will increase, his explanation cannot be faulted for failure to list every detail about each particular market.

A theory must: (1) explain, (2) afford means for prediction.... To criticize a theory (as do the institutionalists) on the ground that the fundamental assumptions are not supported by statistical evidence is very weak—it takes centuries to accumulate evidence.²

Rothbard absorbed Nagel’s point about explanation and never deviated from it; but he soon came to reject Nagel’s views on prediction.

In accepting theory, he differed with the teaching of most of the faculty of the Columbia economics department. Many of the most important professors accepted the institutionalist creed. Heavily influenced by Wesley Clair Mitchell, the key figure in the National Bureau of Economic Research, Arthur Burns and John Maurice Clark looked at economic theory skeptically.³ Burns was himself an excellent theorist, but his skills were mainly directed to the criticism of the work of others.⁴ Burns had known Rothbard since he was a child, and David Rothbard asked Burns to “look out” for his son. No close academic relationship ever developed between the two during Rothbard’s stay at Columbia, however.

Fortunately one of his teachers, George Stigler, was not averse to theory; and in his lectures Rothbard encountered arguments critical of price and rent control that much impressed him. Stigler, together with Milton Friedman, had written a pamphlet critical of price control, published by the Foundation for Economic Education.⁵ Rothbard wrote to this group and soon visited their headquarters. Here he met FEE’s founder, Leonard Read, as well as F.A. (“Baldy”) Harper, an economist and social philosopher who not only supported the free market, but also doubted the need for a government at all. Even more significantly he met Ludwig von Mises. Mises’s rigorous defense of free market economics had a profound effect on Rothbard’s thinking; and when Mises’s masterwork, Human Action,⁶ appeared in 1949, he devoured the book. He joined Mises’s seminar at New York University, becoming one of its main participants. For the seminar, he wrote a number of papers that he later in part incorporated into his published work: these included a report on the neo-Kantian economist Harro Bernardelli’s criticism of utility theory and an analysis of the quantity theory of money.

Meanwhile, Rothbard had graduated from Columbia—he was elected a member of Phi Beta Kappa—with a major in economics and mathematics and had begun graduate work in economics.⁷

In graduate school, Rothbard’s mentor was the eminent economic historian Joseph Dorfman, the author of the multivolume The Economic Mind in American Civilization,⁸ a work of vast erudition. Rothbard said of him:

Prof. Dorfman is absolutely without peer as a pure scholar in the history of American economic thought and opinion. He makes most historians seem like journalists.... Dorfman was the first one to annihilate Arthur Schlesinger, Jr.’s Age of Jackson. Schlesinger had presented Jackson as a proto-FDR, leading the forces of the masses against monopoly capitalism; actually, Dorfman showed that the Jacksonians were libertarian types: favoring free trade, laissez-faire, states’ rights, and hard money, and were pro-commerce.⁹

Rothbard shared Dorfman’s passion for historical learning, and his Ph.D. thesis on The Panic of 1819¹⁰ remains to this day a standard work. Rothbard received his doctorate in 1956; he could not finish earlier owing to disagreements between Dorfman and Burns about how the thesis should proceed.

As he deepened his understanding of laissez-faire economics, he confronted a dilemma. If sound arguments showed that the market could supply goods and services better than the State could, why should one make an exception for defense and justice? Why here do we face a unique situation in which provision by a coercive monopoly outperforms the market? The arguments for market provision of goods and services applied across the board. If so, should not even protection and defense be offered on the market rather than supplied by a coercive monopoly? Rothbard realized that he would either have to reject laissez-faire or embrace individualist anarchism. The decision, arrived at in the winter of 1949, was not difficult. Once the issue was raised, Rothbard realized that, however surprising it might seem, the free market need not be abandoned even here.

In arriving at his iconoclastic response, Rothbard was much influenced by several nineteenth-century individualist anarchists. He called Lysander Spooner’s No Treason¹¹ “the greatest case for anarchist political philosophy ever written,” listing it under “Books That Formed Me.”¹² He termed Benjamin Tucker a “brilliant political philosopher” despite his “abysmal ignorance of economics.”¹³ The detailed attempt by the Belgian economist Gustave de Molinari to spell out how a system of private protection would work impressed him:

In short, he reasoned: [if] free competition [can] supply consumers with the most efficient service, and monopoly was always bad in all other goods and services, why should this not apply to the service of defense. He maintained that single entrepreneurs would be able to supply protection in the rural districts, while large insurance type companies could supply the urban consumers.¹⁴

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¹Lecture notes from Ernest Nagel’s class, taken by Rothbard in the summer of 1948; Rothbard Papers. The Murray N. Rothbard Papers are held at the Ludwig von Mises Institute in Auburn, Alabama, and include Rothbard’s letters, correspondence (1940–1995), memos and unpublished essays (1945–1994), and drafts of published works, as well as Old Right and libertarian movement papers.

²Notes from Nagel lectures; Rothbard Papers.

³Nagel criticized Mitchell in his lectures; Rothbard Papers.

⁴In Man, Economy, and State, Rothbard credits Burns for an important criticism of the theory of monopolistic competition, presented in his classroom lectures. In 2004, as Rothbard had originally intended, Man, Economy, and State was published together with Power and Market. All quotations and page references here are from this edition, Man, Economy, and State with Power and Market, Scholar’s Edition (1962; Auburn, Ala.: Ludwig von Mises Institute, 2004), p. 732.

⁵George Stigler and Milton Friedman, Roofs or Ceilings?: The Current Housing Problem (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1946).

⁶Ludwig von Mises, Human Action: A Treatise on Economics, Scholar’s Edition (1949; Auburn, Ala.: Ludwig von Mises Institute, 1998).

⁷Critics of Austrian economics who allege that the school’s reluctance to use mathematics stems from the inability of Austrians to cope with the subject should note that Rothbard was an excellent mathematician. He especially liked set theory.

⁸Joseph Dorfman, The Economic Mind in American Civilization, 5 vols. (New York: Viking Press, 1946).

⁹Letter to Ivan Bierly, November 14, 1959; Rothbard Papers.

¹⁰The Panic of 1819 (New York: Columbia University Press, 1962).

¹¹Lysander Spooner, No Treason (Larkspur, Colo.: Pine Tree Press, 1965).

¹²Memo to Tom Fleming, January 24, 1994; Rothbard Papers.

¹³Unpublished essay, “A Reply by Benjamin Tucker II,” undated, c. 1954; Rothbard Papers.

¹⁴“On Gustave de Molinari,” unpublished, no date; Rothbard Papers.