Was Rothbard a Mainstream Economist?

0:00I'm going to address a question, the very raising of which marks me as heretical, and I'm going to argue further that in a real sense, a non-trivial sense, Rothbard was indeed a mainstream economist. I came up with this sort of insight, or actually it was an epiphany in re-reading Man Economy and State in order to write the introduction for it, and it struck me that Rothbard was was deeply engaged and used the mainstream economic literature of the 1950s and that in fact, in a real sense, he was a mainstream economist, not only that, he was attempting with Man Economy and State, I'll argue, to reformulate or renew a mainstream economics Economics that had existed up until the late 1930s that was more or less sinking in the face of the positivist and mathematical hijacking of economics that began in the late 40s and really came to predominate in the 1970s.

1:13And there's some interesting indications of this in Man Economy and State which I'll get to. Rothbard wrote Man Economy and State, put pen to paper in 1952, January 1st actually, working on New Year's Day, and then on May 5th, 1959, seven years later, more than seven years later, he wrote to his mentor, Ludwig von Mises, a finito. It is done. He had completed it. Now, what I found in going through his papers, private correspondence, was that in the very writing of the book, he transformed, or the aim in writing the book was transformed for a number of reasons, okay? Initially, he wanted to write a book that was suitable for lay readers and for college instruction, that would, what he brings to, and this is his words, bring to the surface This is a step-by-step nature of the edifice, which Mises had constructed, but more or less had taken for granted that his readers would understand, because Human Action was really aimed at an audience that was already very familiar with the economics up to the 1930s.

2:26And Mises had labeled this economics, modern subjectivist economics, Mises never called it Austrian economics, because these interesting attitudes that both Mises and Rothbard shared towards the historical Austrian School. So it really did assume a great deal of familiarity with economic theory. But Rothbard quickly realized that the original plan was flawed, that the traditional textbook format was too disorganized in its arrangement and its treatment of various topics to accommodate the development of economic theory in a systematic way. So he immediately began to think in terms of a treatise, a fully integrated treatise. Secondly, as he read Mises, he found there were a lot of gaps in Mises' economic, what he called Mises' economic organon, his economic structure, that he had to fill in his own words himself.

3:26Thus, he writes in his papers, the book turned out to quote, Third, as he was writing the book, during those seven years, Rothbard, and by the way, by that point, mathematical economics was in the wind, and positivism was in the wind, but it had not yet dominated economics, so as he was writing the book, he was reading very widely, not only from earlier works of the Orphanage, by the Austrian masters, but from the economic works of American and British economists that had written after World War I, Frank Feder, Philip Wickstede, Edwin Cannon, many of these other works that don't really show up explicitly in human action.

4:21So Rothbard concluded that many of the essential points must be deduced originally, because there were gaps in Mises, or from other works. So he became familiar with this much broader Anglo-American tradition, which had incorporated and extended and advanced the earlier Austrian insights. So in this sense, he was now engaged with the mainstream. Now let me diverge for a moment from the main point, and I'll come right back to it, and talk about Mises. When Mises read Rothbard's book, he really recognized the profound originality and significance of Rothbard's contribution. And in his review of Man Economy and State, Mises wrote that Rothbard, quote, joins the rank of eminent economist by publishing a voluminous work, a systematic treatise on economics.

5:15In every chapter of his treatise Rothbard adopts the best teaching of his predecessors and adds to them highly important observations. Then Mises went on to say Rothbard's work is an ethical contribution to the general science of human action, praxeology, and its most important up to now best elaborated part. He says, henceforth all essential studies in these branches of knowledge will have to take full account of the theories and criticisms expounded by Dr. Rothbard. Now, Mises was known for his very exacting scholarly standards and his parsimonious praise of other economists, so this is indeed high praise for Mises to say this. So he evidently viewed Rothbard's work as opening a new epoch in economic theory.

6:06Now, what was Mises' attitude towards the Austrian School? As early as 1932, Mises had argued that all the essential ideas of the Austrian School of Economics had been absorbed into the mainstream of what he called modern subjective economics. Even as late as 1969, in his last work, Mises wrote, all the essential ideas of the Austrian School were by and large accepted as an integral part of economic theory, and one no longer distinguished between an Austrian School and other economics. The Appalachian Austrian School became the name given to an important chapter of the history of economic thought. It was no longer the name of the specific sect, with doctrines different from those held by other economists. So Mises saw the Austrian School as an anachronism, in the sense that if it was applied to him, he would say, no, no, no, I'm not an Austrian economist, in the sense that he understood it, I'm a modern subjectivist economist.

7:01Rothbard followed Mises, who was his mentor, and what I found was very interesting, in the text of Man Economy and State, Rothbard uses the terms Austrian or Austrian School at least ten times, and he encloses them in brackets, as if he was referring to a movement that had purely historical relevance to the contemporary reader. He never used it to describe himself in this book. The few times he uses these terms without quotation marks, they clearly refer to economic doctrines or controversies. The single time that Rothbard mentions Austrian in the preface to the first edition, he does so in the phrase, the Austrian economist, placing the word in quotation marks and using it in a sentence featuring verbs in the past tense.

7:50He was talking about the Austrian economist. Now, that's not to say that Rothbard did not see Menger, Boehm-Bawerk and the other early Austrians as being sort of the foundation of the economic system that he was working in. He certainly did see that. But he said that his book was an attempt to fill the gap of 40 years of great treatises. And the treatises he is referring to are not specifically Austrian treatises. Frank Fetter, Philip Wickstede, Frank Towson The only reason why he refers to the Austrian School so many times in Man Economy and State is because in his judgment they best perceived this method, meaning the praxeological method, and used it most fully and cogently.

8:38They were the classic employers and showed the praxeological method. So Rothbard sort of replaced Mises' phrase, modern subjective economics, with the praxeological method, which is a method of using what we'll see is called imaginary constructs, certain imaginary or intellectual experiments, mental experiments, that allows you to isolate the causes and effects of various economic phenomena. And he uses it all through his book, throughout his book. And Mises talks about this praxeological method, which I'll briefly characterize in Mises' terms. He says, the praxeological method studies acting under unrealized and unrealizable conditions only from two points of view.

9:26It deals with states of affairs which, although not real in the present and past world, could possibly become real at some future date, and it examines unreal and unrealizable conditions If such an inquiry is needed for a satisfactory grasp of what is going on under conditions present in reality, causal realist economics, finding the causal laws of economic change in the real world. Rothbard took Mises' statement very seriously. For seven years, he immersed himself in the use of this praxeological method in elaborating, in a systematic way, the theorems of economic science.

10:16And this method was used, it was not explicitly, and not in a very fine manner, but it was used by even classical economists. The best of the classical economists use this method. And most of the better neoclassical economists use this method through the 1930s. So Rothbard sees himself in this mainstream that includes neoclassical, non-Austrian neoclassical economists. By the early 1950s, this method and the praxeological method and verbal logic had been eclipsed by positivism and mathematical models. Not completely eclipsed, but they were beginning to fall by the wayside. There was a Paul Samuelson who claimed that it wasn't really important that economic theorems be true.

11:10He says, Samuelson says, whether such a theorem was false or of trivial importance or even of indeterminate validity was not very important. It had to be in principle testable. It was better if it was realistic though. Milton Friedman went beyond him and said, no, no, In fact, the realism of assumptions, worrying about that, gets in the way of doing real economic theory. So let me skip ahead, I only have five minutes. This comes from my introduction. So you can find this in the introduction to the new edition of Man Economy and State. So what Rothbard was seeking to do during the 1950s was to recover and reconstruct the edifice of sound economic theory. and he, as a result, what he did was he not only read from the past, but he looked, there are citations, if you look at Man Economy and State, there are citations to over 150 books, journal articles, conference proceedings, government documents, dissertations, policy and research institute monographs, published between the appearance of Human Action in 1949 and the appearance of Man Economy and State in 1962. So he was fully engaged with the mainstream literature, okay, and he took many important doctrines out of it, I'll mention one,

12:24and one book, The Quality of Competition by Lawrence Abbott, which really influenced Rothbard's view of competition as a rivalrous process. And Abbott was a mainstream economist. Let me end by saying, when did Rothbard, in his later years, always referred to himself as an Austrian economist, when did that happen? That happened in the 1970s. By the 1970s, economics had become pervaded with positivism. It had become simply a branch of applied mathematics. And fortunately, people were reading Rothbard's treatise during the 60s, as well as Mises' Human Action.

13:09And as we well know, there was an Austrian revival in 1974. There was no term to describe this group of economists that were reacting against, Radically Reacting Against the Positivism in Mathematical Economics And so the term Austrian was at hand. It had a lot of cache to it. Hayek had won the Nobel Prize. It was also attached to the names of great historical economists, von Bawerk, Menger, who were part of the Marginal Revolution. So at that point Rothbard and the others in this causal realist tradition embraced the term. And I might end by saying that the term, it's questionable whether the term is still doing a service. That is, whether or not in the future we should really read ourselves of this term.

14:00I think, I want to end by saying that I think Austrian economics is the once and future mainstream. So I don't think we should read ourselves out in the mainstream. I don't think we should refer to ourselves as a heterodox school of thought like the left-wingers do. I don't think we should align ourselves with those people or refer to ourselves in that way. I don't think that's good self-identification. I think we are mainstream economics and I think if you read Man Economy and State with an eye to what I've said, you'll see that in the real sense we are. And so is Murray.