Rothbard as Historian

0:00The subject of Rothbard as a historian is a gigantic one, so I'm going to offer some thoughts of my own that are different from the ones that you'll find in David Gordon's book, The Essential Rothbard so as not to cover the same material multiple times. Well, I, as a historian, am of the opinion that even if Murray Rothbard had not done any work in economics and he could rest only on the work he did in history, I think he could still be satisfied that he had led a productive life and had a distinguished career and made important contributions to his field. So it's quite astonishing to realize this. And when you look through the titles of his that are historical works, it's rather impressive and there's no need to catalog them all in a brief talk, But I recall when I was first at the Mises University in 1993, out on the west coast, I remember the initial talk was by Murray, and he said, just in an overview of American history,

1:05he paused to point out when he was talking about the Panic of 1819, that he was the world's foremost expert on the Panic of 1819. I remember thinking, wow, this guy is gutsy. And then he said, you know, The Panic of 1819, published by Columbia University Press, that he had worked on for his PhD. That's an excellent book, and it was extremely well received. It got excellent reviews in the top journals. I was either an undergraduate or graduate, I don't remember the year, I was reading a book on Jacksonian America for some of my studies. It's called Liberty and Power. I think it was written by Harry Watson.

1:52And doing my traditional geekly duty, I was reading through the bibliographical essay at the end. And sure enough, when he gets to the early 19th century, Watson says, and Watson is just a predictable mainstream, I can script everything that's going to come out of his mouth kind of guy, and yet he gets to the early 19th century and he says Murray Rothbard's book The Panic of 1819 is unlikely to be superseded and I remember cheering to myself, yeah, good for you Murray, you know, it's just great, you know, here we are in the mainstream and they're all saying, yeah, you know, there's no, see, what I tend to find is that the mainstream of the history profession they know so little economics that you can sneak in a book like The Panic of 1819 in which at its core is actually a very radical book and is very important from our point of view. They're not educated enough to know that. They just think it's a really well-researched

2:49book and so they don't know anything about the panning of 1819, so it's great. So that's wonderful. Whereas his book on the Great Depression, I think people were sort of more on to him by then. They know the free market caused the Great Depression, don't tell me otherwise. But America's Great Depression is, again, an extraordinary contribution to the study of history. I mean, you read it, and it shows how theory and history are supposed to work together. It's an excellent example of that. His multi-volume work, Conceived in Liberty, which Floyd Lilly knows intimately because she's been recording it in this heroic labor of hers. She's been recording it so that people can listen to it in their cars if they're planning Then beyond that we've got of course his history of economic thought, which is a history. We have important articles of his on the origins of the New Deal, on the Progressive Era, on World War I. We've got the great collection of essays that he edited and contributed to with the new leftist turned neoconservative Ronald Radosh, who's now repudiating all his good work and playing up all his rotten ideas.

4:02So, I'm sure he hates the book A New History of Leviathan, so that's his highest endorsement, little does he know. And, you know, when you read David Gordon's treatment of Rothbard as historian, I think he gives a lot of important, makes a lot of important observations about Murray's willingness to consider, to look into people's motives, not just to assume that if somebody works for the government, he has the public good in mind and that all his efforts are directed selflessly toward increasing human well-being and so on. You know, Murray is a little more astute than that. And at one point he said that in a sense, you know, you always have to think about who benefits in various situations.

4:48When you consider legislation that is some kind of agricultural legislation, does it make the agriculture department more powerful? Does it give those people more money? Does it give certain favored sectors of agriculture more influence? Could it be that those people want the legislation? He would ask questions like this. He always wants to look at who's benefiting from this and then investigate, did they have anything to do with bringing it about? Which is why he once said that in a sense, sometimes the study of history is really the confirmation of your own initial paranoia through a deeper factual analysis, which I always liked. Now, in Conceived in Liberty, which is his multi-volume history of the colonial period of American history, he begins with a kind of an overview in which he lays out his own philosophy of history, the perspective that he brings to this study.

5:46That's very important. Most historians don't have the honesty to do that, or they pretend that they have no prejudices, or this or that. But what Rothbard is saying is that he's going to approach history from a particular perspective. And he's not giving you distorted history because he's doing this, but he's giving his history a structure. History technically consists of every single event that has ever occurred. So unless you are going to give it some kind of theoretical structure, it's going to be just a sterile catalogue of discrete occurrences. That doesn't help anybody. So he begins by saying,

6:50The secondary condition for the flowering of all the other goods that mankind cherishes. Moral virtue, civilization, the arts and sciences, economic prosperity. Out of liberty then stem the glories of civilized life. But liberty has always been threatened by the encroachments of power, power which seeks to suppress, control, cripple, tax and exploit the fruits of liberty and production. Power, then, the enemy of liberty, is consequently the enemy of all the other goods and fruits of civilization that mankind holds dear. And power is almost always centered in and focused on that central repository of power and violence, the state. With Albert J. Nock, the 20th century American political philosopher, I see history as centrally a race and conflict between social power, the productive consequence of voluntary interactions among men, and state power.

7:43In those eras of history when liberty, social power, has managed to race ahead of state power and control, the country and even mankind have flourished. In those eras when state power has managed to catch up with or surpass social power, mankind suffers and declines. Well, Rothbard goes on to comment on the debate among historians at that time as to whether the theme that is most evident in American history is a theme of consensus or conflict. Murray says that, of course, it's conflict, but not social or class conflict that's at the root of American history, but rather this conflict between power and liberty. The Social and Ideological Conflicts have been ancillary to the central one, which concerns who will control the state and what power will the state exercise over the citizenry.

8:53And one common example that he was fond of citing was the alleged conflict of interest between farmers and merchants. Supposedly they have completely disparate interests, and Rothbard's view was that in the market, of course, they have harmonious interests. They each buy and sell the products of the other. This is an example of economic harmonies, as the famous title of Frederic Bastiat put it. So it is only through and by state action that so-called class conflicts can ever arise. So yes, there are exploiters and exploited, but the parties whom these terms describe are rather different than in the standard narrative. Now, in the early 20th century in the United States, that's when the study of history became professionalized and you'd get degrees in it.

9:44And if you were just an amateur historian, you weren't credentialed, you didn't have some fancy degree from a university, you began to be looked down upon, you weren't really scientific, you weren't really scholarly, you needed this kind of professional training. And when this professionalization of history in effect took over the profession, one of the key features of the history profession and one of the qualities of the good historian that the profession began to boast of was an impartiality, you know, was you don't favor one side or the other, you rather look at things dispassionately and you simply record the events as they occurred and you don't make your own prejudices. and so some people took this to the extreme of arguing that even bringing of any kind of theoretical apparatus to the study of history was not allowed because what non-arbitrary way was there of choosing a theoretical apparatus that was arbitrary to anyone it was just a value judgment on your part so anything that you would embrace theoretically and then bring to the study of history was in effect automatically building a bias into your work

10:58And so, for example, one scholar criticized this practice whereby we begin the examination of historical facts with any theory of interpretation. And he went on to say that the simple but arduous task of the historian is to collect facts, view them objectively, and arrange them as the facts themselves demanded. And this historian, Edward Cheney, said that facts, when justly arranged, interpret themselves. Well, Rothbard never believed that, that facts interpret themselves. How are you going to account for the Great Depression? By just staring, as he says in the beginning of that book, that gazing at sheaves of statistics is not going to yield you any knowledge whatsoever, unless you have some antecedent theory that can help you make sense of the data of history.

11:54And of course Rothbard is following in the path of Mises here, who is very clear about this inhuman action and his epistemological works and theory and history. He's very clear about the relationship between history and theory. Mises, Rothbard's great teacher, says, History cannot be imagined without theory. The naive belief that, unprejudiced by any theory, one can derive history directly from the sources is quite untenable. No explanations reveal themselves directly from the facts. And so we can understand the economic facts of the past only with the help of some sound theoretical apparatus. And in the preface to theory and history, Mises' work, Rothbard pointed out that Mises was fond of giving, as an example of what he's talking about, the comings and goings of people at New York's Grand Central Station.

12:52And that if you were to observe this, not through the lens of theory, but just observing this crazy quilt of people coming and going hither and thither all day long, it would look to you as if there was no order to this whatsoever. This was just a chaotic, random series of events one after the other. But as soon as you understand that these are people who have motivations and that, in fact, what's really happening here is most people are simply arriving at work and then going back home at the end of the day, suddenly this crazy quilt of seemingly unconnected events is coherent and makes some sense. And that, in effect, is a kind of a microcosm of what we're talking about I think Hans Hoppe explains this well as well, when he says the benefits to be gained from the study of political economy and philosophy by the historian include the knowledge he gains of pure a priori social theory, which enables him to avoid otherwise unavoidable errors in the interpretation of sequences of complex historical data and present a theoretically corrected and reconstructed set of knowledge.

14:01and a decidedly critical or revisionist account of history. One or two Austrian scholars conferences ago, I actually gave a paper called, What Austrian Economics Can Teach Historians. I'd been meaning to do this for a long time, because I thought to myself that I almost have kind of an unfair advantage as a historian who's been exposed to all the good work that you folks have been doing. But I wanted to give a kind of as thorough a catalog of these advantages as I could, so I wrote this paper. And a little bit of what I'm saying to you today is kind of derived from the thoughts I had at that time. Now, for instance, just beginning with the colonial period of American history, if you were to read colonial newspapers like the Pennsylvania Gazette, for example, you'd read a lot of complaints that there's a scarcity of money in the colonies and that the way out of this is we need the government to produce paper money for us.

14:53And this complaint is heard again and again. There's a shortage of money and we need paper money printed and that will help us. And Rothbard doesn't fall for this. He says, well, either these people misdiagnose the problem or rather these are people who in some way or another benefit from the production of paper money. For example, Ben Franklin's printing firm gets the contract to print the money. He might have a little bit of a bias in this matter. It might not be a pure scientific judgment he's making when he says that these things need to be done. Or likewise, trying to study an event like the Great Depression is not possible unless you have some kind of theoretical apparatus to help you.

15:38Now I recall in my own experience as a graduate student at Columbia University, I was auditing an undergraduate course just to sort of refresh my memory on some things and, I think, to be seen by my dissertation advisor, Alan Brinkley, who was teaching the course. And it came time to talk about the Great Depression. So he went to the board and he listed some theories that have been advanced to account for the initial downturn, if not necessarily for the length of the Depression. So he went and he explained, you know, well, underconsumption is a big theory, you know, and that's the one that I subscribe to, he said. So he went and explained that, you know, there are all these goods produced, people just couldn't buy enough of them, and so everything just collapsed, it's sort of a standard thing.

16:26And then he went and listed some other ones. He gave, he did talk about Milton Friedman briefly. And then he picked Jude Wineski, who is a late Jude Wineski, who's a great guy in some ways, a heroic figure in some ways. But Wienyski placed a lot of emphasis on taxes and tariffs as having been a triggering mechanism that really made the Depression particularly severe. But, you know, relatively speaking, I don't think that is the key to the issue. But this way, Brinkley could make it seem as if he has presented a right-wing theory of the Depression and then shown, you know, Well, international trade was a relatively minor aspect of the economy, so tariffs, increased tariffs can't really account for this. So this way he could satisfy his conscience, I suppose, on this.

17:14But needless to say, do I need to tell you there was no mention of the Austrian theory? Well, I will tell you anyway. There was no mention of the Austrian theory. So I thought to myself, dare I become that species of animal I so despise? The guy who sits in the back of the lecture hall, raises his hand and lectures the professor. Dare I go into this? But I thought, you know, I've got two bad options here, you know. I become what I hate or I let this stand. That was just much worse, much worse. So I raised my hand, he calls on me, and I took about two solid minutes, which when you're doing this is an eternity, and I sort of roughly explained the Austrian theory, snuck in the Hayek won the Nobel Prize for this sort of thing, so that it wouldn't seem like I'm just some crazy guy in the back.

18:04It's a crazy guy plus one Nobel Prize winner. Which is usually two crazy guys, of course. So I went through and explained the whole thing very quickly. And of course, poor Alan Brinkley. I even hated to do this to him. As much as he deserved it, I hated to do this to him. And he was very gracious and he noted the importance of Hayek and then moved on. But he admitted to us, he made a very important admission to us, he said that as a non-economist, he said, he was not really trained to be able to decide which of these theories is the correct one. So he chose the one that fits in the best with his own political prejudices, namely that we need a central government to manage the economy.

18:49And, well, that seems to work with this theory that the economy has this tendency to break down, that the market price system doesn't really work all the time, and all these other problems. That fit in with Brinkley's way of thinking, so he latched on to it. Well, that's a problem, and if you don't have economic training, you're liable to just accept whatever seems to float your boat, and that's not going to advance human knowledge. So we have to have a sound theory, and of course the Austrian business cycle theory gives historians a great advantage. They know what to look for. They know immediately, start looking, what was the central bank up to in the previous number of years? You know where to look. That is hugely important for a historian. But then we have the fact that we don't simply have a downturn in 1929, but particularly 1931, The 31 is what Benjamin Anderson called the tragic year. Things get really bad.

19:45But what we also have is a persistent depression. I mean, it just goes on year after year after year. All through the 30s, you've got double-digit unemployment, all these other problems. It just persists. And so you have a second question, not simply what caused it, but why won't it go away? And there are a variety of answers to that question. There's a variety of answers to that. But what's significant is that we know, as Austrians, we sort of know to look, we know that this shouldn't be happening. And when I say that, I have in mind the at least two times, possibly three or more, in Man Economy and State, in which Rothbard refers to the market economy with the word beautiful. I mean, he can't sort of restrain himself from pointing this out.

20:31I mean, he's very, very technical and clinical throughout most of the presentation. You know, he doesn't use the word thug or anything like that, you know, very... But at least a couple of times he describes this wonderful edifice of order as being beautiful. And he does so because he's saying, isn't it wonderful how production is coordinated in this wonderful way and the needs of society are met in this wonderful way. So he's acknowledging and he's pointing out that the market is a kind of self-correcting... I even hate to say it's a thing, of course it's not a thing, it's a collection of people's activities, but in effect it runs itself, it doesn't need some exogenous force, it runs itself, it is a beautiful structure. So when we see that this beautiful structure, somehow there's something stuck in one of the gears, you see long-term unemployment, you see all these problems, but you know you've got this beautiful structure, To understand the logic of how it works based on Rothbard's edifice, then you have to start

21:32looking around as to what is preventing a recovery that we should expect, what's preventing that? And so you start looking around, are wage rates being held artificially high? Are there various measures being taken that are undermining investment or making investors cautious? We have the fact that, well, I point out that in another piece of writing that in the early The President declared that all incomes over $25,000 a year are going to be confiscated. That has an effect on investment, I would say. But the Congress, by the way, later overturned that on the grounds that it might undermine the war effort. We're telling people that we're going to take all... We want them to get rich so then we can exploit them partially for military purposes, but if we take all their money, then they'll stop working.

22:23So, there was that great unquenchable thirst for justice we see on the part of Congress. We also have historians constantly, in my experience, saying things like, people's purchasing power needed to be increased during the 30s, you know, and so, how do we increase purchasing power? I mean, in some certain sense that's correct, but what do they mean by that and how do they do it? They don't mean, let's increase production and make the society wealthier and therefore or Make Goods Easier for People to Acquire No, by purchasing power, we mean we have to force everybody's wages up through various measures. But, as some observers have noted, you don't have any purchasing power at all when you're unemployed, and that's what these wage measures typically did.

23:11Well, yeah, I suppose it might have increased my purchasing power in some sense if I don't look at any other sector of the economy. If I just look at my own pocketbook, that might have increased my individual purchasing Power, but unfortunately I have no job, so I don't even have that benefit. So these are things that one would know if he had some kind of understanding of the market. Now beyond even this, I'm particularly interested in Rothbard's article from 1956, Toward a Reconstruction of Utility and Welfare Economics. As I say, I'm a non-economist who's very much interested in the subject, but I remember I remember reading that article and thinking, man, here this guy is, you know, barely 30 years old and making, you know, making just a fantastic contribution from what I can see.

24:00I mean, extremely persuasive and important. But in that article, you know, where you see Rothbard's welfare economics worked out, you know, you realize that this article has extremely radical implications. What he's doing is, of course, building on the Austrian understanding of exchange, that exchange is mutually beneficial or otherwise it wouldn't take place. And there's the fact that the thing that I sell, I value less than the thing I acquire, and the other person has a reverse valuation. He draws a lot of important implications from this, which, of course, would be that any kind of coerced transaction, Transaction, Taxation is a radical statement. We cannot say that anything that government does, the vast bulk of which is financed by taxation, improves human welfare. There is no unambiguous way to make that statement.

25:23So, this is an important point because it actually can help us understand history, believe it or not. Because a lot of times historians rely on economic aggregates like, statistical aggregates like gross domestic product. To say the country was doing really well in this year because look at its gross domestic product figures. But this can be extremely misleading. And for one thing, we have to understand that a substantial portion of that figure involves government. And we cannot assume that those figures involve unambiguous increases in people's welfare when a lot of this is carried out through coercion. So when we see, for example, that people are alleging that World War II was a time of great prosperity in America, what are they basing that?

26:13Sometimes they're basing this on anecdotal evidence that everybody had a job and so this must have been a great thing. Well, everybody had a job because 11 million people were drafted into the military and some of them died. Well, yeah, I suppose unemployment was reduced, but I don't think that's the best way. As Bob Higgs says, you don't need any kind of macroeconomic model to understand what happened to unemployment in that situation. But specifically, I think Rothbard's concept of private product remaining is very valuable here. He says that in America's Great Depression, he says that what we ought to do to get a better, if we insist on using some kind of aggregate, in order to get a better understanding of the health of the people economically, we ought to use PPR, private product remaining.

27:06And so he deducts product or income originating in government and government enterprise from gross national product. And this figure is the gross private product from which Rothbard then deducts the resources that government activity drains from the private sector. So the larger of either government expenditures or receipts to get the private product remaining in private hands. And so, it seems to me that if economists or historians want to understand the American standard of living today or over time, they're better served by calculating this PPR than they are by following the Department of Commerce and its figures. So, historians who don't have insights like this have fallen into this trap of arguing that World War II was a time of great prosperity in American history.

27:54Well, here's a response, a very Austrian type of response, by Robert Higgs, very much a Consider that between 1940 and 1944, real GDP increased at an average annual rate of 13%, a growth spurred wholly out of line with any experienced before or since.

28:41Moreover, that extraordinary growth took place notwithstanding the movement of some 16 million men, Equivalent to 28.6% of the total labor force of 1940 into the armed forces at some time during the war and the replacement of those prime workers mainly by teenagers, women with little or no previous experience in the labor market and elderly men. Is it plausible that an economy subject to such severe and abruptly imposed human resource constraints could generate a growth spurt far greater than any other in its entire history? Further, is it plausible that when the great majority of the servicemen returned to the civilian labor force, some nine million of them, in the year following VJ Day, While millions of their relatively unproductive wartime replacements left the labor force, the economy's real output would fall by 22% from 1945 to 1947.

29:41Well, of course, the answer is that the statistics on which all this stuff relies are utterly meaningless. If they're giving us results like this, there's got to be something wrong with them, because this doesn't make any sense. And Higgs' diagnosis of all this is to say that there cannot be any kind of, to the extent that you want to do national product accounting, if you're not going to do it with market prices, then right away you're simply adding up a series of nonsense numbers. And given how much of the US economy was either directly controlled or the ripples of control, again, reached more and more sectors of the economy, When you consider that, then really the prices that are being generated have nothing to do, have no foundation in consumer choice.

30:28They're just arbitrary nonsense numbers that have been slapped onto various products. So then you add up these arbitrary nonsense numbers, you get a gigantic nonsense number and say, look at how great the economy is. That's basically Higgs's critique. When we recall particularly Rothbard's point that voluntary transactions are the only ones we can be sure improve consumers' well-being, we can conclude that the greater the government's coercive power over the economy, the less meaningful in terms of consumer welfare any of these output statistics become. So you wind up getting arbitrary figures, and the sum of these is a great big arbitrary figure, and yet these are the figures that historians have used to make these judgments about the state of the economy.

31:14Well, these figures also obscure the performance of the US economy after World War II, because if you rely on these very figures, you would have to conclude that 1946 was one of the most catastrophic years in American history. You've got dramatically falling output, all the statistics seem to be down, it's just terrible. Private output, though, which is the key, because usually you just look at all this big aggregate and it looks terrible, but private output increased by 30% in the one year in 1946. So if you actually look at the private sector, that is a fantastic, we've never had a year like 1946. And in 1946, people were not depressed. There was no depression. The economy was not in the doldrums. Just read the papers, look at people at the time. Things were great. People were happy. The war was over. Everything was doing well. People were working.

32:08The problem is that, okay, a lot of the so-called defense establishment expenditure has gone down, but that's a good thing for the economy. for the economy. As I say, the private economy is producing at absolutely record levels, and you would know that if you used Rothbard's figure, but you would not know that if you used the official figures that basically every historian relies on. So you can avoid embarrassing mistakes like this if you are schooled in this tradition. So this, in a nutshell then, is a kind of an overview of some of Rothbard's contributions that even when he's not making a contribution directly to history, like when he's talking about welfare economics, inadvertently he is, because he's giving us a tool that can help us to understand history better, so as to elucidate our own principles all the more effectively, so as to show people that what you superficially think is going on in the economy at this time is not what is going on at all, and so Rothbard is constantly, he can't help himself but be interdisciplinary, even when he's not even trying, the guy can't help but make multidisciplinary contributions.

33:16If only this were a problem that I had, you know, I would love to have this problem, but if you continue to look through his work in history though, you'll notice that he is a fantastic storyteller, he uncovers all kinds of fascinating connections between, it turns out this was this guy's father-in-law, and this guy got this connection for this guy, and these people are lobbying for this legislation because they own all the land out there, and they know that values are going to increase. There's no way I can sum all that up in a paper. The best way that you can learn about Rothbard as historian is to read his works of history or so. Okay, thanks.