Man, Economy and State
(The Scholar’s Edition, 2004)
by Murray N. Rothbard
Right away, Chapter 1 is titled “Defense Services on the Free Market,” in which I thought – goody gumdrops – Dr. Rothbard would again disprove gun control notions. But, rather, he discussed how police protection and courts have to be provided by private companies rather than a government if we are truly going to have a free society.
It is hard to swallow, even for a libertarian, but let’s face it, one cannot, at least I cannot, refute him.
The thing is, the main function of government is to protect the property rights of individuals (which include “human” rights), but, in order to function, government must take from these same individuals in order to pay its employees to do the protecting. It is hard to protect rights by infringing on them. It makes no sense. You cannot have your cake and eat it too, so one has to choose: Does one believe in rights or does one believe in government?
Government is not necessary for the definition of rights. All one needs is reason; Rothbard and others, such as Mises and Hoppe, have shown that rights are a priori. Without them, life cannot go on. This was elaborated on in Man, Economy and State in the Crusoe illustrations.
And Rothbard goes on to point out that people who are under different governments with very different laws in some cases can get along fine. Then, why is government necessary at all to make people get along in peace? (1)
So, back to a free market defense system, what would we have? That the individual has the right to self-defense is a given. Otherwise, what else can be done? We cannot know any details of how any free-market defense would work, any more than we could have known how the television industry would work fifty years before television (2). But we do know some generalities. Dr. Rothbard thinks that chances are security companies would sell subscriptions or memberships and charge regular premiums in much the same manner that insurance companies do. In fact, insurance companies might take on this work (3). In an unfettered free market, with free entry, there would be genuine competition, eliminating a lot of the present problems with insurance companies.
Of course, there is the real possibility that any given protection or security company might become rogue, or start to behave like a criminal gang. This would be difficult in a free market because rival companies would step up to the plate and put a stop to it. Why? The paying customers of the rogue company and also the honest companies say so, that’s why. Customers can always take their money elsewhere.
In contrast, government agencies can do as they please. If you own a gun store and have a brush with the BATFE, you know this very well. Also, if you run a medical marijuana dispensary, you know how much control consumers have over the DEA. You cannot stop your payments to these agencies; the IRS will see to that. Under government, the breaking of heads and the taking of property is legal or else laws against it are ignored. In the free market it is illegal and the law is justly enforced.
We move on from that brief chapter to Chapter 2, “Fundamentals of Interventionism.”
The most fundamental fact here is that to satisfy one’s wants, one must either work to produce what he wants by making it himself or exchanging for it, or he must take it from somebody by force. It is either/or (4). One who uses the latter means can be called an intervener. This person intervenes into the order of the free market. There are three basic kinds of intervention, all hegemonic, and I will cite my own examples of each in hopes that you can relate.
First, there is autistic intervention (5) whereby the intervener dictates to an individual as to how the individual conducts his life or uses her property. An example of this would be mandatory seat belt and motorcycle helmet use. Such autistic intervention as exemplified by these laws has become more draconian by the year, and proves beyond a shadow of a doubt that the government is interested only in becoming more powerful as the God-given rights of individuals are usurped.
The system is such these days that those who advocate such laws that “protect” the individual from his own “foolishness” will often say the health care system will have to pay a great deal more money to restore someone to health who was injured in an accident only because he was not wearing a seat belt, and had he been wearing one, such injuries would not have occurred. What this actually shows is that the government should not be involved with health care in the first place, but that individuals should be required to be responsible for their own health and safety. This gets us into the affordability of health care which again shows the system is a quagmire of economic and collectivist fallacies, for one thing the level of taxation is the first most important reason health care is unaffordable. Dr. Rothbard treats these fallacies in many places in his works, so right now all I can do is say what I say more than anything else (except maybe that individuals need to have guns) and that is people need to know their economics.
The second kind of intervention is binary intervention (6). In this instance, the intervener forces the individual to turn some property over to the intervener. Taxes are the example coming to mind right away. You work hard all year in hopes of being paid enough to make all the time and effort put into your job worthwhile. From the time you leave home until the time you return you are working for that paycheck. When you receive that check, have a look at the stub and see what has been withheld for income tax. It is outrageous. Regardless of what you think of wars and other government endeavors ... you might even favor them (please tell me why) ... you must admit that you and your employer have zero to say about these deductions.
Governments take and take and take. There are so many ways they do it, including inflation as Rothbard explains. If inflation is 5 percent per year, then the dollar you have today will be worth 95 cents a year from now. So, the government has taken away from you a nickel for every dollar you have. This is a 5 percent tax. What can you do? Zero! If you are going to be smart and save, they will tax your smartness this way.
The last type of interventionism is triangular (7). In this case, a deal between two individuals is interfered with. Say a family is having dinner at home and shares a bottle of wine. The youngest child, a 20-year-old adult, partakes of the wine. By no stretch of the imagination is this going to disrupt civil order in any way. But in the eyes of the government, the serving of alcohol, even by the parents, to a neonate of a mere 20 years of age is enough to bring the sky crashing down on a ruined civilization. Of course that is not literal, but the battering ram and ten police cars outside are very literal if the wrong people get wind of the fact that this child is all of three days before the magical age of 21.
Now, it is pretty easy to flout ridiculous laws of that sort in the privacy of your home. Sometimes. This private home had better be isolated if this family would like to pass a joint along with the wine.
But some equally intrusive and unjust interventions usually cannot be avoided. Try to get a job without a Social Security number, or if you are the wrong age and cannot live at home. You probably do not want to work at what few jobs are available to you.
The bad things that happen to you that are no fault of your own are often the result of some intervention, meaning some infringement on your rights, and as often as not this intervention is by government. All three kinds of interventions are bad as they force people to do something other than what they would otherwise do, meaning utility is lost. The consequences of all kinds of interventions go much further than one thinks they will (8). The book deals with these consequences. Dr. Rothbard points out that there is actually no way to effect any real change under the circumstances, as the Libertarians repeatedly said in this last election, which was allegedly about change. I firmly believe that no true change will occur under the Obama administration as intervention will continue. The details might change a little bit, but the system is still involuntary, therefore interventionist.
We have already belabored the method interventionists use to keep people obedient. That is propaganda.
As a result, people have the idea that government agencies can prevent harm to consumers. We saw in Man, Economy and State that they cannot. The left insists that consumers are ignorant of the information they need to make smart choices and that bureaucrats who are distant can make smart choices for them. That is insane; you are right there doing your full-time job of being responsible for you. The politician or bureaucrat does not even know that you are alive, and makes decisions in a one-size-fits-all manner. These decisions are based on wrong data, and have far-reaching consequences (9) that most likely cannot be traced back to government decisions (10).
A good and timely example is touched upon on page 1071. We are having great economic problems right now, just before Christmas, 2008, as thousands are losing their jobs. The lack of consumer spending in holding prices down (which is a good thing in and of itself) and jobs are hard to come by when normally seasonal part-time jobs open up. The establishment is blaming the whole mess on greed, while actually all the problems can be traced back to artificially low interest rates and an increase in the money supply. The propaganda machine will not allow the Ron Pauls of the world to explain what is really happening.
All the incentives are wrong, Dr. Rothbard explains (11), for bureaucrats and politicians to serve the public. Why should they? After all, their pay comes from compulsory taxation rather than voluntarily paying customers. The politician who has to run for re-election will use the propaganda machine against a challenger who is equally unfit and has less name recognition, and possibly third-party candidates who may be fit but get no media coverage at all. The incumbent can also count on cronies whom he favored while in office. Since one voter has very, very little influence over an election, there is very little incentive to look into the records of candidates.
By contrast, in the marketplace the consumer is sovereign.
In the next chapter, “Triangular Intervention,” we begin to examine the far-reaching adverse effects of government intervention. These cases are when the intervener compels two people to exchange in a manner that is different from the way they would have exchanged if left free.
There are two general kinds of triangular intervention: Price control and product control. Price control dictates the terms of an exchange and we have seen this dealt with so many times it is unnecessary to hash it over here. Even the establishment had to give up on this intervention after it saw the inevitable results of freedom-enemy President Nixon’s price-freeze decree (12).
But, Dr. Rothbard goes into more detail on price controls by discussing exchange rates (I have personally experienced that roller coaster since I spend a great deal of time in Canada, so the first thing I do when I get there is to check the exchange rate, even before I check the price of gasoline), bi-metallic standards (when government decrees the ratio of two money metals such as gold and silver), and usury laws (where interest rates are tampered with). These are all under price control.
Product control is then treated by discussing prohibition (again, this has been touched on in other Rothbard works which I have reported on) and rationing (a form of partial prohibition, an example of which would be the limit on how many guns a person may buy within a given period of time), government priorities (some people have better access to a product than others), and maximum-hour laws (when a law forbids one to work more than X hours a week, as women’s earning capacity used to be limited, holding them back).
The grants of compulsory monopoly are also a form of product control. This was discussed in Chapter 10 of Man, Economy and State. Compulsory monopolies are obviously injurious to the consuming public, so in order to keep them, government uses its foremost tool: propaganda. Many laws that enforce monopolies or partial monopolies are not even associated with this by the gullible public, and are only opposed by libertarians on individual rights grounds. Most of the time, the government is claiming to be “protecting” someone. Examples are (13) licensure, child labor laws (with a very high age of majority), minimum wage laws, anti-pushcart laws, Sunday blue laws, and more, which do nothing except to grant special privilege to some businesses and limit consumer choices. These rules create partial monopolies. These and other examples are then elaborated on (14). The bottom line is that consumers always lose out on goods and services they might have enjoyed at lower prices, businesses lose out on production opportunities, workers lose out on preferred jobs they might have done well, and government bureaucrats win as they gain on money and power. This is what Dr. Rothbard is focusing on here, although my main objection to them is the infringement on the rights of individuals.
But it is the politicians and bureaucrats who make the rules, so it should surprise nobody that they are made to benefit them, the politicians and bureaucrats, and the rest of us are just unwilling cash cows.
Out of these examples, Dr. Rothbard mentioned immigration restrictions. Of course in a free market the flow of people from one country to another would be as unrestricted as the flow of goods and services. Dr. Rothbard advocates open borders. Wages tend to equalize the world over, given a free or only somewhat hampered market.
But, what he ignores (at least in this section of the book) is the welfare system, public “education,” and all the various ways people can feed at the public trough at your expense and mine. I cannot agree with open borders unless and until we clean up this welfare system, or at least find a way to prevent foreigners from partaking in our welfare.
I frequent Canada. In Canada I am a foreigner. I am there on a visa and have to live by the terms of that visa. The terms are easy except I cannot work for pay. So, I don’t. If I help someone out, I do not accept any money or in-kind remuneration. When the visa is up, I have already left. How would it be if I were to seek free medical care? That would be wrong. I either purchase a health insurance policy or I pay out of pocket. By the same token, foreigners who are here in the U.S. should not have their expenses paid by the government here. They need to buy insurance or pay out of pocket, and they need to refrain from working if they do not have a green card or whatever it is that permits them to work.
Many changes must be made before I think we can have open borders. Once these changes are made, open ‘em wide! Basically, Dr. Rothbard is right; his theories are sound.
Dr. Rothbard discusses anti-trust laws (15) which are supposed to be pro-competition, anti-monopoly laws. These laws have been on the books longer than most people have been alive, so they are regarded as a fact of life, and not questioned. They are not analyzed by anyone, not even establishment economists. For if they were, they would have to be re-thought. If there is any criticism of these laws it is that they are too weak.
But, as we saw in Man, Economy and State, the only true monopolies are those that have obtained monopoly status from special privilege granted by the state. Therefore, anti-trust law does not prevent monopolies. What it does is to allow the government to harass business by trotting out anti-trust charges whenever it pleases (16). If government really wanted to stop monopolies, it would simply stop monopoly privilege.
Government itself is a monopoly. One thing this particular monopoly called government does, something nobody has the natural right to do, is to forcibly prevent one from selling labor or some other product without special permission. Without the special permission, the selling is illegal. This special permission to engage in a particular line of work or to conduct a business is called a “license.” The false idea behind this is that there is no right to conduct business, but that it is a “privilege” granted by the state. In order to conduct a business, one must be granted a license, for which one must pay a fee, sometimes a large fee.
We have learned that to buy, sell or trade (i.e., carry on business) is a natural right.
Dr. Rothbard discusses the trend toward monopoly inherent in the bribing of public officials. A bribe occurs when someone wants permission from a public official to do something that is illegal. The person pays the public official to look the other way (17).
What is really the difference between selling a license and taking a bribe? Economically, and in Dr. Rothbard’s opinion, none! None at all! Licensure is simply bribery with a cleaned-up name. I have always opposed business licensure and occupational licensure mainly because it infringes upon the right to start a business (nobody has to patronize the business) or to bargain with prospective employers or employees. Compulsory union membership, I may add, is not different. It all keeps prospects out of a field, tending towards a monopoly favoring those already in the field. The solution to both problems (the blow to individual rights and the monopoly trend) is, of course, to repeal the laws that outlaw the activities.
And, we have to remember that government itself is a monopoly! Just try to compete with it! As we have seen in this chapter, government is at the bottom of all monopoly and its attendant problems.
All of this has been triangular intervention, whereby the government prohibits, requires, or regulates an agreement between two other parties, causing a trend toward monopoly.
So, how does government acquire the funds to finance this intervention? We already know from Man, Economy and State that inflation fills establishment (including government) coffers. We also know about taxation, the direct compulsory collection of the people’s hard-earned money.
Now, let me ask you this: Is the difference between inflation and counterfeiting, and the difference between taxation and robbery any more than the difference between licensure and bribery? Is it really? (18) Are government officials better than the rest of us or must they live by the same standards? We need to get real about this! It is going to hit the fan in this country and the sooner we get real and stay real, the less we will suffer.
Now, Dr. Rothbard asks us who is hurt by and who benefits from taxation and expenditures. Obviously, the people who pay the taxes are hurt the most. As I have said at least once before, look at your paycheck stub and see how much has been taken out for taxes. This is money you worked hard for but were not even allowed to look at. Next, look at a sales receipt and notice the sales tax that the business had to absorb and still get you to buy the product (19).
Who benefits? Government bureaucrats. They are the people who tell you what to do. They are the police, building inspectors, judges, and school officials; they have a heck of a lot of power. They are the “deciders.” This goes for politicians, of course, but at least politicians face re-election. Bureaucrats get tenure. You are paying them to mess up your life, even to take your property.
This is liable to cause the problem of public support. Therefore, there needs to be more than just government employees on the government payroll. There are those who adhere to the government’s cause, whom Dr. Rothbard calls “adherents” (20). I would say that these are a large part of the “establishment.” The armaments industry is an example, companies that manufacture war materials. I think today one could cite Halliburton and Blackwater as examples. This would include suppliers to these companies. This is one way wealth drifts toward establishment interests.
It also shows how taxes and government expenditures distort the market, and it thus proves that a “fair” tax or “neutral” tax is neither fair nor neutral. Government spends this money in the marketplace, but not in the same way the consumer would. Consumers would spend it on food, clothing, shelter, education, entertainment, medical care, self-defense, and other things people need. The government takes money from these areas of the economy and spends it on war materials, prison cells, chasing down pot-smokers and seat-belt-non-users, and other things that people do not need. Of course, some of the money goes to border security (such as it is), roads, bureaucrat salaries, some medical care, and some things people do need. But, how efficiently? Regardless of how you think about these issues, you must understand that the spending is changed from what it would have been had earners been allowed to keep what they earned. So, the economy is distorted, and it is mainly the little guy with no connections who loses out as resources are taken away from what he wants (21).
This distortion of the economy, I fear, is about to get even worse. This is because of the distortion caused by government taxation and spending level (regardless of kind) proportional to the private sector (22). We have just about finished (it is nearly Christmas 2008) the disastrous Bush administration, the earmarks of which were enough spending to make drunken sailors appear sober and frugal, so a great deal of the distortion we see now is from this cause. But while we can celebrate Bush’s retirement, we have to face the Obama administration which promises to be even worse. They are describing new policies to be like unto FDR to combat the present recession. This is scary for numerous reasons, and for an elaboration on that, please see my 2004 - 2005 winter essay, The Three Worst American Enemies of Freedom (23) for my thoughts on FDR’s sorry record, paying close attention to works cited in the footnotes, which are worthy of reading by anyone who is interested in the subject.
Dr. Rothbard, in his discussion of taxes, talks about income vs. sales taxes (24). Many libertarians, including myself until I took courses in Austrian economics, would like to see a repeal of the income tax and an enactment of a national sales tax to replace it. The rationale is that this would end the dread Internal Revenue Service with its mounds of personal information requirements and it would tax consumption rather than earnings.
While this would be a step forward, Dr. Rothbard shows that it is all wrong.
Most people believe that it is the customer who is paying the sales tax; that the seller is “passing on” this expense to the customer. They tell you that the item you are buying is X dollars and Y cents, “plus tax.” This leads you to believe that you are paying the tax. Actually the price of the item includes all you pay (plus time and expense).
Let’s say that I won’t pay more than $9.00 for a T-shirt as per my example in last year’s essay. That is $9.00, plus time and expense of getting to and from the store. I bundle my errands, so this might be negligible. Of course I know what the sales tax will be and that is considered. If this tax brings the T-shirt over the amount I will pay, I will not buy. I will buy at $8.50, tax or no tax. I will not buy at $9.50, tax or no tax. If the store does not absorb the tax, it loses business.
I remember an example from a few years ago when I was in British Columbia. The government announced an additional sales tax of three cents a liter on gasoline to go into effect on a given day. The demand for gasoline is inelastic (until prices rise to a certain level), so I thought prices would be up by three cents the morning of the tax. Sure enough, they were. I thought that maybe we were not entirely right about this, at least when demand for the product is inelastic, but if we were right, prices would drop back again by competition, forcing producers to absorb the tax. Not many days later, the prices were down again, vindicating the Austrian economists. This could have been the straw that broke the camel’s back in the case of some fuel stations, closing the station and throwing its employees out of work.
Sales taxes, explains Dr. Rothbard, do not get passed forward as a product is sold from one producer to another on its way to completion and the end consumer. Rather, the taxes get passed back to the original producers on their income. They harm everyone by distorting the economy.
Technically, I think the added gasoline tax I just mentioned is an excise tax rather than a sales tax. But, it boils down to the same thing. Whatever you think of the oil industry, for better or for worse, they are the ones who are paying the tax, and they are specially penalized to the same extent that other products are not taxed the same way (25). The supply of the product in question is lowered as some producers are driven out of that line of production. This will cause an upward trend in the price of the product as demand will not change. The tax, like all taxes, causes distortions in the economy, and these distortions favor government and government-subsidized firms at the expense of the independent private sector.
Consequences of a direct tax on income are more straightforward. It may be that this tax, which reduces the remuneration for your productivity, and hence your standard of living, can either discourage your productivity, or else the greater marginal value of what few dollars you have left can force you to work harder to make up for it (26). Either way, it is a loss. The same work means less income. More work means less leisure, and leisure is also an economic good.
Time preferences are adversely affected by the income tax (27). Less income means a greater percentage of the reduced income must be budgeted toward present necessities, such as food, clothing, and shelter that must be consumed before another paycheck is received. Therefore, a smaller percentage can go into savings and investment. A higher time preference, meaning a greater emphasis on now rather than the future, is forced onto individuals who really are wise enough to put something aside for future needs. Investment into badly needed capital is curtailed.
Those who retort that government expenditures are “investments” are kidding themselves or are being sucked in by propaganda such as education spending’s being an “investment in tomorrow’s leaders,” or highway work’s being an “investment” in the road. It is true that investment may occur (28). A rebuilt bridge today may prevent a catastrophe next year, or at least save on next year’s higher cost of the work, and under other circumstances education expenditures now would pay off in a more productive populace in future decades, were it not for the fact that government schools do not teach students to read or think, at least not very well.
The point really is that money spent by government is spent on things that the marketplace does not necessarily want as much as it wants the things the money would have been spent on had taxpayers been allowed to keep that money. There would have been real investment, directed by the marketplace.
The chapter continues the discussion of various kinds of taxes, one by one for about 100 pages, but the conclusion is always the same: The economy is distorted away from the approach the consuming public prefers, and economic signals to entrepreneurs and businesspeople are skewed so they are less able to profit by fulfilling the needs of consumers.
The “progressive” tax, whereby higher-income people pay a higher percentage of their income in taxes (29), is discussed at length. My gut reaction is that this is fairer than a flat tax, but my gut reaction is based on my emotional response to poverty. It is also based on the very long and numerous days I put into a career that paid only a moderate salary. Obviously we would all like to help the poor, and I make it a point to give to food banks and charitable activities of the church. But, my gut reaction to the progressive income tax is one hundred percent wrong, since Dr. Rothbard shows beyond doubt that what is wrong with this is the level of taxation in all brackets, and not the progressive nature of the tax (30). What is needed is an across-the-board tax reduction, even if this means a tax that is more steeply progressive. This would punish high-earners less and this would distort the economy less while forcing government to shrink.
Later in the chapter, Dr. Rothbard discusses the “just” tax. We covered the just price already last winter. This is whatever price people are willing to pay for a good. However, since in a truly free market, there is no tax, so the “just tax” is a contradiction in terms.
Adam Smith tried to describe a “just tax” (31). It should be inexpensive to collect and relatively convenient to taxpayers. But, since when do bureaucrats want to keep costs down? Their jobs are on the line, so make-work is inevitable. Also, an expensive and inconvenient tax is more likely to be flouted, so it is actually more just than a cheap, easy one (32).
In discussing the distribution of the tax burden (33) Dr. Rothbard reiterates something we all should understand (whether we agree or not), and that is that taxation is basically like slavery. Therefore an equal distribution of the tax burden is no better than equal enslavement, and that to escape taxation is no more immoral than it is to escape slavery. Some will cry that it isn’t fair that some can escape the tax while others cannot, so the means of escape must be cut off. The real solution to this inequity is to discontinue the tax altogether.
This does not even mention the problem of defining “income” (33). Would it include an increase in the market value of your house? The market value of plants grown in your garden? The wages you would have had to pay a housekeeper had you not done your own housework? If these market values were counted as income, in the absence of actual sales of these products, how are these values to be determined? And what about “capital gains?” Is this income? If it is, a correction for the purchasing power of money must be made (34).
In fact, if you want to make any attempt to be “fair,” the purchasing power of money must be considered in determining the tax.
So, Dr. Rothbard has shown that taxes are both immoral and impractical, and even if there were such a thing as a “just” tax, there is no way to calculate it justly. Nor is there any way to accurately calculate “ability to pay” (35).
Nor is there any way to calculate the sacrifice an individual makes to pay a tax. As individuals differ, the perceived sacrifice differs. If you are a libertarian and oppose just about everything the government does, a “small” tax is probably a big sacrifice, but to someone in the establishment, a “big” tax may be a small sacrifice. Therefore it is impossible to calculate a tax on the basis of sacrifice (36).
Then, beginning on P. 1245, Dr. Rothbard begins a section called “Voluntary Contributions to Government.” I had to laugh out loud. Say what? Anyone who thinks our “voluntary” income tax is voluntary in any way, shape, or form is out in la-la land. Hero Irwin Schiff had been preaching that there is no law saying one had to pay an income tax because the federal government could not produce one, and he has now gone to prison for that. He was right, but he is in prison. Others believe that because we use un-backed-up paper as money, we have no real money, so we owe no taxes. They are right too, but some of them are also doing time.
It is compulsory, it is harmful, and it is wrong. ’Nough said about taxation.
Rothbard then turns to the binary intervention of government expenditures. He points out right away that the intervention of credit expansion (a very important topic at this time) was discussed in Man, Economy and State (37).
Government expenditures have multiplied like rabbits, especially during the allegedly conservative but actually far-left Bush administration. Some of these expenditures are “transfer” payments such as subsidies, welfare, and Social Security payments, but many of the most recently prolific ones are what Dr. Rothbard calls “resource-using.” The wars are an example of that, as are the enforcing of numerous laws that have also multiplied like rabbits. The housing of millions of prisoners, many of whom are non-violent drug or gun offenders, is also an example as, in a free country, they would not be law-breakers at all. Actually, there is a lot of overlap between transfer and resource-using expenditures, but there is still a distinction (38).
Transfer payments such as subsidies encourage factors of production to remain in areas where they are used less efficiently. Right now, the automakers are a good example. Without going into why the automakers failed (over-expansion of credit and artificially low interest rates are at the bottom of the entire economic mess and that includes automaker failure), the Bush administration’s bailout of these companies is wrong because if these companies are failing, perhaps they should fail. While I feel for the workers being laid off during the holidays, a free market would open up new jobs for them, and this money, kept by the taxpayers, would be spent or invested in areas that the consuming public really wants. To keep these dinosaurs on life support now will only delay their demise and all the hardship that goes with it.
Another aspect of resource-using expenditures besides those above is the pricing (39). There is no way to determine the pricing of government activities. Those who consume government “goods” such as roads or schooling do not pay market prices. There is no way to tell if consumers are getting their money’s worth, as the paying and the consuming are severed. The government cannot find out how much to spend on what, so politicians and bureaucrats arbitrarily decide. Even if a government “enterprise” is run “like a business,” it is false because the government can always obtain more funds through taxation (40). Also, managers are not investing their own personal funds. If you can remember, the Post Office was “privatized,” re-named the Postal Service and run “like a business” in order to “make a profit.” Many people fell for this, and believed that the post office was then actually a private company. All who were paying close attention and had even rudimentary understanding of economics knew that there had been no real change. When losses occurred, tax money was injected. This gave the Postal Service an unfair advantage over UPS and other package delivery firms.
This is enough to drive anyone “postal.”
As we have pointed out before, the inability of government “enterprise” to determine prices is the most important practical reason socialism does not work. Socialism, whether it be actual undisguised socialism where government owns the means of production, or fascism where the means of production are nominally privately owned but actually directed by government (we are headed that way at breakneck speed as the Bush administration ends and the Obama administration begins) (41) never has worked and never will work because it cannot work. Prices, i.e., how much to pay, how much to charge, and how much of what to produce is impossible to calculate in a socialist (or fascist) “economy.” Dr. Rothbard, and Dr. Mises before him, and others, have proven that beyond a shadow of a doubt, and the results of socialist attempts around the world have vindicated them.
I personally consider socialism (including fascism) as in the same category with other superstitions. Socialism is false just as is the idea that a black cat crossing your path will bring you bad luck.
Socialism, Dr. Rothbard says, is the “polar opposite of the purely free market.”
I had to pause. “Polar opposite.” That is saying that socialism and freedom are as far apart as the two poles. I have to wonder. These left-wing types who preach socialism also want more freedom, so they say. They bemoan the insane war on drugs but want to step up the war on guns. They scream bloody murder when the police beat down someone’s front door but oppose the private ownership of land. They want to help the poor but criticize businesses like Walmart that sell for very low prices and also give first-time workers a chance to get started in the workplace. We all start at the bottom. To cut the bottom rungs off the ladder of success by jacking wages above market is not going to help. They want to help the poor but refuse to study their economics to find out why gouging the rich is going to hurt the poor.
The left, and the Bush-ite neoconservatives who prattle about the free market and are really part of the left, are trying to get to one pole by heading straight for the other one.
But, what about staying at or near the “equator”? What we have had here, and what they have in most countries, is a “mixed economy,” or a partially socialist and partially free economy. We have been moving toward the socialist “pole” for decades, at least 150 years, but we are not there yet.
While the plethora of rules and regulations and the extent of taxation are at the top of the list of culprits, the expansion of government lending is up there too (43). Dr. Rothbard makes this a very important point, as he says that, regardless of the legal status of the lender, the lender is also part owner (44).
Think about it. Did you make a sizeable loan to anyone? Or did you borrow a sizeable sum from anyone? Does that not change your relationship? If someone owes you thousands, don’t you feel you have a claim on them? Of course you feel that way, because you do have a claim on them. Even if you believe and follow the Bible and will forgive the loan, this is still the case.
This is another reason free market people like Ron Paul are so dead set against the bailout of banks and automobile companies. Of course, the banks have been in the government’s stable forever, and the big automakers have not exactly been averse to a centralized economy. But this bailout is horrific for numerous reasons and Dr. Rothbard is pointing this out. Government will now be part owner of these companies, which is a giant step to socialism.
And, we must not forget a lesson learned from Rothbard and others: “Public” or “government” ownership really means ownership by those officials who are the deciders (45). Additionally, there is no incentive for these officials to use the property efficiently, as when they leave office they cannot take it with them. Rather, they are inclined to abuse it for their own self-aggrandizement while in office.
The next chapter, “Antimarket Ethics: A Praxeological Critique,” explores some of the most popular criticisms of the free market.
One of them is individuals do not know what is best for them, so they need Big Brother to protect them from their own foolishness “for their own good” (46).
I suppose this is all right for children under ten or twelve, but they have their parents to guide them, and the rest of us are big boys and girls now, so who are these government officials to wreak all of this harm on us “for our own good?” Are they better than we are?
The free market assumes that all individuals act in their own perceived self-interest and that individuals are far more able to determine their own interests than anyone else. And, if one is not sure exactly what to do to further his own interests, one may hire a consultant (47). For example, to stay out of trouble with the IRS people, who, if they are paying attention, know that I am fiercely opposed to their very existence, I go to a tax preparer. I also pay the preparer extra to run interference for me. Chances are you have a doctor, a dentist, and maybe even a financial planner. You can discontinue these services any time. At the end of the day, you call the final shots. Or, at least you should. We are not a free society any more. You can do these things within the limits prescribed by Big Brother. In some areas of life, there is no freedom at all. Try to remodel your house. Even if the house is all paid for, just try it without Big Brother’s licenses and permits (for a fee, naturally). You will run into an avalanche of “have to’s” and “can’ts.” You will soon find out that one’s home is not one’s castle at all.
To remodel your home, you should be able to choose your own experts (or do it yourself and learn the hard way as you go). And, in fact, you can, but these experts have to grovel to Big Brother’s “experts” for expensive licenses. Who is to say that Big Brother’s experts who license contractors, doctors, and just about all other professionals, know what they are doing or care what they are doing when they are tax-paid bureaucrats and probably tenured? Their positions are political, and perpetuating the system and their positions is their priority (48).
One of the main reasons some people advocate strong government is that people are evil (49). They are right that everyone is evil, but everyone is good, too. Everyone is a mixture of good and evil. No one is perfect. That is why Jesus died on the cross. Nobody can become perfect. Therefore, some say, we need a strong government to keep people in line. This is an error. First off, who determines what is good and what is evil? We have the Bible and we have our ability to reason. We may have some a priori knowledge that it is wrong to kill, steal, etc., and can agree that these acts should be prohibited. Some actions infringe on the rights of others and these are the actions that should be prohibited. But there are some actions that do not, or might not, infringe on the rights of others. They might be sinful, but should not be illegal. Smoking a joint, keeping a loaded gun in one’s purse, sleeping with someone who is not your spouse harm no-one except possibly the participants and violate no rights. My own view is that the first is sinful only because it is unhealthful, the second is not sinful at all, and the third is sinful because it may have far-reaching effects on the participants and also the new life it might bring, a child without two full-time parents. I think the last of the three is the worst, especially since it is one thing that the Bible expressly prohibits, but it is the only one that is legal.
I could try to foist these beliefs on others, but to do so I would have to believe that I am somehow better. But I am not. And, neither are any of those who are charged by our powerful government to enforce the rules.
There is one thing you may notice about those who advocate strong, all-inclusive government. They imagine themselves (or at least someone who thinks like them) as the one to determine what is allowed and what is not. In reality, not only will they not be in charge, but whoever is will foist rules on them that will be entirely different from the rules they want. It is then that they will realize that government officials are not better.
All the power that the neoconservatives worked so hard to give George W. Bush will now be in the hands of Barack Obama. They are already sorry. We warned them about this, but of course they would not listen.
The fact that we are all imperfect is one of the few things we all have in common. Dr. Rothbard treats the concept of “equality” by showing that there is no such thing except for equality of natural rights (50). We are not equal, rather we are all different. Different talents and different levels of ambition will reap different incomes. It is impossible that we even start out equally since being born in different places means different opportunities. And, there is no way to change that. Remember the Parable of the Talents (51). What the parable tells us is that we all have different resources and abilities, and the important thing is what we do with what we have.
In an effort to complete this segment and move on to some of Dr. Rothbard’s works on monetary policy which are so critical to understanding the situation at hand, I skipped over part of this chapter, but beginning on P. 1321 there is a section called “The Charge of ‘Selfish Materialism.’” The free market discourages altruism and distracts from “higher” goals is what we hear all the time. We do not even have a free market for gosh sakes but the establishment keeps talking about how “unfettered laissez-faire capitalism has caused the current recession” (52). This is such nonsense that I would hardly know where to begin if it were even necessary to hash over yet again how unfree our almost-socialist market actually is. If it is a free market at all it is only in comparison to the degree of socialism the establishment apparently wants.
As for “selfishness,” as a Christian I am put in an untenable position by the prattlings of the left/neoconservative, Bushite, Obamaite establishment. The Bible says help the poor, go the extra mile, turn the other cheek, love thy neighbor as thyself, and so on. And I certainly believe in that and live accordingly to the best of my ability.
This does not mean that one should not put oneself first. Rather, you have to put yourself first. If you do not take care of yourself, how do you expect to care for someone else? Your minister had to study, perhaps paying large sums to go to school for years before being able to do his or her job. The doctor needs to rest before surgery. I was operated on early in the morning. I wanted to make sure that the doctors had taken care of themselves before cutting me up.
Jesus often prayed for a long time in preparation for a major job.
You have to put yourself first! Any other idea is nuts! So, don’t listen to this B.S. about not being selfish.
A person’s monetary income serves his chosen ends which may be altruistic or “selfish.” Whatever the person does is what he believes is in his rational self-interest. A successful person might be able to afford a yacht for himself or to build an orphanage. He will choose according to his rational self-interest (53). The establishment person, thinking inside the box, will laugh and say, Guess which I will choose! Chances are he will be right.
Why would that be in many cases? Do you have any idea how difficult our so-called “free market” has made it to build an orphanage? No? Well, go down to your city hall and see where one can start all of the bureaucratic procedures to get the licenses, permits, zoning variances, etc., and don’t forget to ask about the fees and time frames! This is assuming you even can find out! I think you will agree with me that buying the yacht is far simpler, not to mention quicker. [Editor’s note: Look up the story of when Mother Teresa tried to open a shelter in New York City. Even her saintly patience was so tried, she gave up.]
In a truly free market, all it takes is to buy the land, hire the builders and architects, and go ahead and do it! Of course, one is responsible. But, even in our regulatory micromanagement, if anything goes wrong, the philanthropist or entrepreneur is still held responsible, even though it is government that makes it such an obstacle course that many additional things can go wrong.
In any case, the pursuit of monetary income cannot be rationally criticized. Altruism requires this as much as egoism does. Monetary rewards are good measures of how well one is serving consumers. As I said last winter, Bono’s income far exceeds mine, and rightfully so. If you want to be truly unselfish, then earn as much as you can by serving customers. Of course, the left-wing (and neoconservative) altruists will tell you that you are selfish. They will always do that, until you adapt your lifestyle to their dictates.
Many of these same establishment types that bleat “selfish!” at people who are well-to-do because they are ambitious (and that is no matter how charitable they are), will also say that a competitive free market takes us “back to the jungle” (54). I really do not think I need to say it again, as Murray Rothbard has made it so very clear as I have pointed out so many times, but the free market is not just competitive, it is also cooperative. Think back to Crusoe alone on the island and how difficult it was, and how much easier he and the other man made it for each other, and how much easier yet it was as more people arrived. Law of the jungle? Quite the contrary. Actually it is more government involvement that takes us back to the jungle.
Dr. Rothbard moves on to a section called “Power over Nature and Power over Man.” This is particularly interesting as in the beginning of Genesis we are told that man has dominion over the earth and what this means is that we human beings are responsible for the earth and all the plants and animals on it. It’s ours. God gave it to us (55). Of course we have learned that the best way to take care of the earth and ourselves is for individuals to privately own whatever they find, make, or exchange for. Dr. Rothbard has spent a lot of time and pages explaining this.
But some individuals believe they can own, or at least control, people. Of course, they cannot. What came to mind, even before reading the section, was those who presume that government should enforce morality as they see it, and that wars should be fought to uproot regimes they see as detrimental to their goals.
There is this group or these groups of people whom some call “dominionists” who believe that the admonition in Genesis also means dominion over people. I did want to include something about this in my essay, How the Bush Administration is Destroying our Country and Damaging the Christian Church (56), but never had time to research it. Most likely, the Bush administration was supported by these, and chances are there were many in the administration itself. It would be worth looking into.
I firmly believe in what Genesis says, not only because I believe in the Bible’s being the Word of God, but because it simply makes sense! Man must “conquer” or use nature in order to stay alive (57), and cooperation rather than coercion makes it possible to give and get help in doing that. This is compelling evidence that the Genesis passage refers to dominating the earth, plants, and animals, but not human beings.
Dr. Rothbard touches on the leftist-invented dichotomy of human rights and property rights (58). The left often talks about the need “to place human rights over property rights.” This makes no sense at all, as property rights are human rights. The individual owns himself, as he is his own property. Were this not true, he would be a slave to some other person (where would that person’s right to him come from?) or to society as a whole in which case he would have to ask everyone’s permission to do anything.
We have seen that this is incompatible with life.
Some individuals believe that the property rights to be abolished would be the right to land and big ticket items. This, they believe, would make it possible to respect human rights over property rights. The left, for example, is all for freedom of the press (or at least claims to be). In fact, some even agree with us libertarians that there should be no censorship at all, not even of (indefinable) hard-core pornography. However, the state, they believe, should own all the land and the means of production including printing presses. If the state owns all the presses (or, nowadays, a monopoly on Internet service provision), what makes you think it will allow just anything to be published? How do you think priorities will be set for publication?
Even if printing presses are allowed to be privately owned, what makes you think there will be land allocated on which to put the press? Or even put your feet if someone in power does not like you?
The answer seems to be: “Trust us.”
Human rights are property rights, and that includes the right to own land. It also includes the right to protect your property, and that means the right to self-defense, including the right to own a gun.
As the book is winding down, Dr. Rothbard critiques an important study that was published a few years before he wrote the book (59). Not having read the Henry M. Oliver study I cannot really judge, but Dr. Rothbard thought it was a pathetic attempt to explode laissez-faire. He goes through some or all of Oliver’s objections to the free market, which appear to me as pathetic. It would not be worth mentioning at all were it not for the fact that some of these objections are still being heard and that the book was very well received by the establishment. It would be worthwhile to read the Oliver book with the Rothbard critique close at hand.
Dr. Rothbard ends the book with an overview of all the principles that were explained in the book, the difference between a free market society and a socialistic one, with emphasis on the fact that every economy is somewhere in the continuum between them.
1) Rothbard, Murray, Power and Market, Auburn: Ludwig von Mises Institute, 2004, P. 1051.
(2) Ibid. P. 1051.
(3) Ibid. P.1052.
(4) Ibid. P. 1057.
(5) Ibid. P. 1058.
(6) Ibid. P. 1058 - 1059.
(7) Ibid. P. 1058 - 1059.
(8) Ibid. P. 1069.
(9) Ibid. P.1070.
(10) Ibid. P. 1071.
(11) Ibid. P. 1070 - 1074.
(12) Ibid. P. 1076 - 1077.
(13) Ibid. P. 1093.
(14) Ibid. P. 1094 - 1144.
(15) Ibid. P. 1117 - 1121.
(16) Ibid. P. 1117.
(17) Ibid. P. 1141 - 1142.
(18) Ibid. P. 1050.
(19) Ibid. P. 1151 - 1152.
(20) Ibid. P. 1152.
(21) Ibid. P. 1154.
(22) Ibid. P. 1155.
(23) http://alicelillieandher.blogspot.com/2005_05_01_archive.html Scroll down to Franklin Roosevelt to see a litany of blow after blow he dealt to the economy, preventing recovery and destroying freedom. Please do check out the works cited in the footnotes.
(24) Rothbard P. 1156 - 1162.
(25) Ibid. P. 1162.
(26) Ibid. P. 1165.
(27) Ibid. P. 1166.
(28) Ibid. P. 1168.
(29) Ibid. P. 1191 - 1196.
(30) Ibid. P. 1194 - 1195.
(31) Ibid. P. 1216.
(32) Ibid. P. 1217.
(32) Ibid. P. 1218.
(33) Ibid. P. 1222.
(34) Ibid. P. 1223.
(35) Ibid. P. 1227.
(36) Ibid. P. 1234 - 1235.
(37) Rothbard, Murray, Man, Economy and State, P. 989 - 1024 (Same volume as Power and Market)
(38) Power and Market, P. 1254.
(39) Ibid. P. 1261.
(40) Ibid. P. 1262.
(41) Ibid. P. 1273.
(42) Ibid. P. 1273.
(43) Ibid. P. 1274.
(44) Ibid. P. 1274.
(45) Ibid. P. 1277.
(46) Ibid. P. 1300.
(47) Ibid. P. 1301.
(48) Ibid. P. 1301 - 1302.
(49) Ibid. P. 1303 - 1308.
(50) Ibid. P. 1308 - 1312.
(51) Matthew 25:14-30.
(52) http://www.lewrockwell.com/woods/woods106.html, Woods, Thomas E., Jr., “We Need Our Heads Examined, Says Harvard.” This is of interest in this regard. In early March, 2009, Harvard sponsored a conference called “The Free Market Mindset” that included top establishment thinkers (?) who just did not see the “elephant in the living room.” Dr. Woods raises the obvious questions they never touched on.
(53) Power and Market P. 1322.
(54) Ibid. P. 1324 - 1326.
(55) Genesis 1:26.
(56) http://www.alicelillieandher.blogspot.com/ Click on 2007 in Blog Archive.
(57) Power and Market P. 1330 - 1331.
(58) Ibid. P. 1337.
(59) Oliver, Henry M., Jr., A Critique of Socioeconomic Goals, University Press, Bloomington, 1954. There is a link at http://books.google.com/books?id=VS5gIb1S8ewC&pg=PA294&lpg=PA294&dq=%22Henry+M.+Oliver%22&source=bl&ots=aic9bk6EDC&sig=Mze6Uyo7LDW6WUDmVD8Va7r4Wxg&hl=en&ei=U5DqSeveDtDgtgeStfmMBg&sa=X&oi=book_result&ct=result&resnum=5