See if you can spot anything wrong with the following claim, a version of which seems to appear in a book, magazine, or newspaper every few weeks for as long as I've been reading public commentary on economic matters:

The dominant idea guiding economic policy in the United States and much of the globe has been that the market is unfailingly wise…. But lately, a striking unease with market forces has entered the conversation. The world confronts problems of staggering complexity and consequence, from a shortage of credit following the mortgage meltdown, to the threat of global warming. Regulation … is suddenly being demanded from unexpected places.

Now, a paragraph like this one printed in the New York Times opinion section on December 30, 2007 — an article called "The Free Market: A False Idol After All?" — makes anyone versed in economic history crazy with frustration. Just about every word is misleading in several ways, and yet some version of this scenario appears as the basis of vast amounts of punditry.

For all the talk about the triumph of capitalism, it seems that the free market—the real thing and not someone's imagined conception of it—has very few friends in politics or the world of ideas. Thus do the writings Murray Rothbard, the leading defender of the market economy of his generation, still have the power to shock and clarify the essential ideological and political battles of our time. This essay in particular constitutes on commentary on his powerful piece from 1973: "A Future of Peace and Capitalism."

The traditional enemies on the left are all-too predictable in their insistence that market processes must be bent, shape, and chopped to conform to the demands of social justice, egalitarian ethics, or environmental concerns. On the right, the neoconservatives insist that global capitalism must be financed by credit expansion and escorted by the US global military empire in order to truly serve the interests of world order. Also on the right, the paleoconservatives cast aspersions on the market for its supposed disruptions of community life, its internationalism, and it baneful moral effects.

So far in this book, we have developed a theory of liberty and property rights, and have outlined the legal code that would be necessary to defend those rights. What of government, the State? What is its proper role, if any?

Most people, including most political theorists, believe that once one concedes the importance, or even the vital necessity, of some particular activity of the State – such as the provision of a legal code – that one has ipso facto conceded the necessity of the State itself.

The State indeed performs many important and necessary functions: from provision of law to the supply of police and fire fighters, to building and maintaining the streets, to delivery of the mail. But this in no way demonstrates that only the State can perform such functions, or, indeed, that it performs them even passably well.

Suppose, for example, that there are many competing cantaloupe stores in a particular neighborhood. One of the cantaloupe dealers, Smith, then uses violence to drive all of his competitors out of the neighborhood; he has thereby employed violence to establish a coerced monopoly over the sale of cantaloupes in a given territorial area.

A major problem with discussions of the necessity of government is the fact that all such discussions necessarily take place within a context of centuries of State existence and State rule – rule to which the public has become habituated. The wry coupling of the twin certainties in the popular motto "death and taxes" demonstrates that the public has resigned itself to the existence of the State as an evil but inescapable force of nature to which there is no alternative.

The force of habit as the cement of State rule was seen as early as the sixteenth-century writings of de la Boetie. But, logically, and to cast off the scales of habit, we must not merely compare an existing State with an unknown quantity, but begin at the social zero point, in the logical fiction of the "state of nature," and compare the relative arguments for the establishment of the State with those on behalf of a free society.

Let us assume, for example, that a sizeable number of people suddenly arrive on Earth, and that they must now consider what sort of social arrangements to live under. One person or group of persons argues as follows (i.e., the typical argument for the State): "If each of us is allowed to remain free in all aspects, and particularly if each of us is allowed to retain weapons and the right of self-defense, then we will all war against each other, and society will be wrecked. Therefore, let us turn over all of our guns and all of our ultimate decision-making power and power to define and enforce our rights to the Jones family over there. The Jones family will guard us from our predatory instincts, keep social peace, and enforce justice." Is it conceivable that any one (except perhaps the Jones family itself) would spend one moment considering this clearly absurd scheme?

If the State, then, is a vast engine of institutionalized crime and aggression, the "organization of the political means" to wealth, then this means that the State is a criminal organization, and that therefore its moral status is radically different from any of the just property-owners that we have been discussing in this volume. And this means that the moral status of contracts with the State, promises to it and by it, differs radically as well. It means, for example, that no one is morally required to obey the State (except insofar as the State simply affirms the right of just private property against aggression). For, as a criminal organization with all of its income and assets derived from the crime of taxation, the State cannot possess any just property.

This means that it cannot be unjust or immoral to fail to pay taxes to the State, to appropriate the property of the State (which is in the hands of aggressors), to refuse to obey State orders, or to break contracts with the State (since it cannot be unjust to break contracts with criminals). Morally, from the point of view of proper political philosophy, "stealing" from the State, for example, is removing property from criminal hands, is, in a sense, "homesteading" property, except that instead of homesteading unused land, the person is removing property from the criminal sector of society – a positive good.

Each state has an assumed monopoly of force over a given territorial area, the areas varying in size in accordance with different historical conditions. Foreign policy, or foreign relations, may be defined as the relationship between any particular State, A, and other States, B, C, D, and the inhabitants living under those States. In the ideal moral world, no States would exist, and hence, of course, no foreign policy could exist. Given the existence of States, however, are there, any moral principles that libertarianism can direct as criteria for foreign policy? The answer is broadly the same as in the libertarian moral criteria directed toward the "domestic policy" of States, namely to reduce the degree of coercion exercised by States over individual persons as much as possible.

Before considering inter-State actions, let us return for a moment to the pure libertarian stateless world where individuals and their hired private protection agencies strictly confine their use of violence to the defense of person and property against violence. Suppose that, in this world, Jones finds that he or his property is being aggressed against by Smith. It is legitimate, as we have seen, for Jones to repel this invasion by the use of defensive violence. But, now we must ask: is it within the right of Jones to commit aggressive violence against innocent third parties in the course of his legitimate defense against Smith? Clearly the answer must be "No." For the rule prohibiting violence against the persons or property of innocent men is absolute; it holds regardless of the subjective motives for the aggression.

There are two types of ethical criticisms that can be made of the free-market system. One type is purely existential; that is, it rests on existential premises only. The other type advances conflicting ethical goals and protests that the free market does not attain these goals...

Number 1:           Knowledge of Self-Interest: An Alleged Critical Assumption
Number 2:           The Problem of Immoral Choices
Number 3:           The Morality of Human Nature
Number 4:           The Alleged Need for Equality
Number 5:           The Problem of Security
Number 6:           Alleged Joys of the Society of Status
Number 7:           Charity and Poverty
Number 8:           The Charge of  "Selfish Materialism"
Number 9:           Back to the Jungle?
Number 10:         Power and Coercion

Number 1: Knowledge of Self-Interest: An Alleged Critical Assumption

This criticism of the market is more existential than ethical. It is the popular argument that laissez faire, or the free-market economy, rests its case on the crucial assumption that every individual knows his own self-interest best. Yet, it is charged, this is not true of many individuals. Therefore, the State must intervene, and the case for the free market is vitiated.

The free-market doctrine, however, does not rest on any such assumption. Like the mythical "economic man," the Perfectly Wise Individual is a straw man created by the critics of the theory, not implied by it.

First, it should be evident from our analysis of the free market and government intervention throughout this work that any argument for the free market rests on a far deeper and more complex doctrine. We cannot enter here into the many ethical and philosophical arguments for freedom. Secondly, the laissez-faire or free-market doctrine does not assume that everyone always knows his own interest best; it asserts rather that everyone should have the right to be free to pursue his own interest as he deems best.

Critics may argue that the government should force men to lose some ex ante or present utility in order to gain ex post utility later, by being compelled to pursue their own best interests.