4. Power and Market: The Final Part of Rothbard’s Treatise

POWER AND MARKET:
THE FINAL PART OF ROTHBARD’S TREATISE

As Rothbard originally planned Man, Economy, and State, it was to include a final part that presented a comprehensive classification and analysis of types of government intervention. Unfortunately, this part of the book appeared in the original edition only in a severely truncated form. Its full publication came only in 1970, under the title Power and Market.³⁶ The complete version of Man, Economy, and State with Power and Market, as Rothbard originally intended it to appear, was finally published in 2004.

In Power and Market, he divides intervention into two types: triangular, in which “the invader compels a pair of people to make an exchange or prohibits them from doing so,”³⁷ and binary, which is a coerced exchange between the invader and his victim (taxation is the principal example of this). With great care, he elaborates a detailed classification of the possible sorts of intervention that fall under each heading, in every case showing the deleterious effects of such interference.

As one illustration of Rothbard in action, consider the following:

All government expenditure for resources is a form of consumption expenditure, in the sense that the money is spent on various items because the government officials so decree.... It is true that the officials do not consume the product directly, but their wish has altered the production pattern to make these goods, and therefore they may be called “consumers” ... all talk of government “investment” is fallacious.³⁸

A simple, even self-evident point, once Rothbard has called it to our attention, but it was hardly very obvious to previous writers.

Power and Market does not contain Rothbard’s ethical system; it is a work of praxeology and is thus value free. Nevertheless, Rothbard maintains that the praxeologist can arrive at conclusions highly relevant to ethics. If a proposed ethical ideal cannot be realized, it must rationally be rejected. To accept this requires no adherence to a particular ethical view: it is a requirement of reason.

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 ... it is equally absurd to take measures to approach that ideal ... this is a praxeological truth derived from the law that a means can obtain its value only by being imputed from the end.³⁹

One such impossible goal is equality of income.

Income can never be equal. Income must be considered, of course, in real and not in money terms; otherwise there would be no true equality.... Since every individual is necessarily situated in a different space, every individual’s real income must differ from good to good and from person to person. There is no way to combine goods of different types, to measure some income “level,” so it is meaningless to try to arrive at some sort of “equal” level.⁴⁰

Equality of opportunity fares no better.

Yet this, too, is as meaningless as the former concept. How can the New Yorker’s opportunity and the Indian’s opportunity to sail around Manhattan, or to swim the Ganges, be “equalized”? Man’s inevitable diversity of location effectively eliminates any possibility of equalizing “opportunity.”⁴¹

The book also subjected to withering criticism the standard canons of justice in taxation. Rothbard’s line of attack differed from that of most of free market economists, who emphasized the evils of progressive taxation. Rothbard had no love for the progressive principle, but he found some of the arguments against it to be flawed:

The ... objection is a political-ethical one—that “the poor rob the rich.” The implication is that the poor man who pays 1 percent of his income is “robbing” the rich man who pays 80 percent. Without judging the merits or demerits of robbery, we may say that this is invalid. Both citizens are being robbed—by the State.... It may be objected that the poor receive a net subsidy out of the tax proceeds ... [but] [t]he fact of progressive taxation does not itself imply that “the poor” en masse will be subsidized.⁴²

To Rothbard, the level of taxation is the key issue: “Actually, the level of taxation is far more important than its progressiveness in determining the distance a society has traveled from the free market.”⁴³ A rich person required to pay a steeply progressive tax would be better off than under a proportional system with higher rates.

A brief but brilliant passage refuted in advance the antimarket arguments based on “luck” that were to prove so influential in the later work of John Rawls and his many successors.

[T]here is no justification for saying that the rich are luckier than the poor. It might very well be that many or most of the rich have been unlucky and are getting less than their true DMVP [discounted marginal value product], while most of the poor have been lucky and are getting more. No one can say what the distribution of luck is; hence, there is no justification here for a “redistribution” policy.⁴⁴

Rothbard’s point does not depend on accepting his view that people deserve to get the value of what they produce. Rather, the issue is that one must first specify a principle of distribution before one can tell whether someone is “lucky.”

Advocates of the free market contend that the private charity would suffice for the poor and disabled, but they must here respond to an objection. Is not charity degrading? Rothbard’s reply remains within the confines of praxeology, since it involves no appeal to ethical judgments. He notes that someone who raises this objection cannot consistently support government aid.

Statists... often argue that charity is demeaning and degrading to the recipient, and that he should therefore be taught that the money is rightly his, to be given to him by the government as his due. But this oft-felt degradation stems, as Isabel Paterson pointed out, from the fact that the recipient of charity is not self-supporting on the market.... However, granting him the moral and legal right to mulct his fellows increases his moral degradation instead of ending it, for the beneficiary is now further removed from the production line than ever.... [W]e simply say that anyone who considers private charity degrading must logically conclude that State charity is far more so.⁴⁵

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³⁶Power and Market: Government and the Economy (Kansas City: Sheed Andrews and McMeel, 1970).

³⁷Man, Economy, and State with Power and Market, p. 1075.

³⁸Ibid., p. 1153.

³⁹Ibid., pp. 1297–98.

⁴⁰Ibid., p. 1310.

⁴¹Ibid.

⁴²Ibid., pp. 1193–94.

⁴³Ibid., p. 1194.

⁴⁴Ibid., p. 1333. The philosopher Susan Hurley later developed the same point in her Justice, Luck, and Knowledge (Cambridge, Mass.: Harvard University Press, 2003). See my review in The Mises Review 9, no. 2 (Summer, 2003).

⁴⁵Ibid., pp. 1320–21.