Power and Market: Government and the Economy

I’ve just finished reading Power and Market by Murray Rothbard, a masterly analysis of government intervention in the economy. The book forms the last section of Man, Economy and State (“MES”), and was originally intended to be the published in the same volume. However the original publishers unfortunately considered it to be too “radical” and excluded it from MES. Recently, the Ludwig von Mises Institute has republished the whole thing as originally intended – in one book. Page numbers refer to this edition.

If there is one well-established truth in political economy, it is this: That in all cases, for all commodities that serve to provide for the tangible or intangible needs of the consumer, it is in the consumer’s best interest that labor and trade remain free, because the freedom of labor and of trade have as their necessary and permanent result the maximum reduction of price. And this: That the interests of the consumer of any commodity whatsoever should always prevail over the interests of the producer. Now in pursuing these principles, one arrives at this rigorous conclusion: That the production of security should, in the interests of the consumers of this intangible commodity, remain subject to the law of free competition.

Rothbard notes that “we can discover a great myriad of necessary, indispensable goods and services all of which might be considered 'preconditions' of market activity. Is not land room vital, or food for each participant, or clothing, or shelter? ... Must all these goods and services therefore be supplied by the State and the State only?” (p.1050). The error, then, consists in treating “defense” as a holistic concept rather than a good which, like everything else, must have scarce means allocated to it amongst other ends. To borrow an example from Hans-Hermann Hoppe at the recent Mises Seminar – surely I require a greater provision of defense than Arnold Schwarzenegger does – but the State, in its infinite wisdom, ignores such differences.

Rothbard also deals swiftly with various “nightmare scenario’ objections: what if two defense agencies disagree? Then there arises a market for arbitration services. Even in the massively inefficient State-run courts of today, disputes arising between inhabitants of different countries still get resolved despite the state of “anarchy” existing between court systems.

What if a defense agency decides to go rogue and assault its customers, and generally acts like a mafia? There will likely always be bad guys around. But surely instituting and legitimizing a State that fundamentally subsists on mafia-like means (theft, or “taxation”), to “protect” private property rights, isn’t much of a solution. It is, in fact, precisely this inherent contradiction that forms the core of Rothbard’s argument against the classical liberals.

Power and Market then moves into an economic analysis of various government grants of monopoly (licensing, tariffs and so on), following from Rothbard’s thesis in MES that monopoly can only be coherently defined as a grant of government privilege. An analysis of taxation follows, skewering the economists’ fruitless search for a 'just tax' or a 'neutral tax'. Towards the end of the work, another very interesting chapter appears entitled "Antimarket Ethics: a Praxeological Critique". While again stressing that the book isn’t a work on ethics, Rothbard here posits that economics can criticize ethical goals on the basis of “…(1) existential errors made in the formulation of ethical propositions and (2) the possible existential meaninglessness and inner inconsistency of the goals themselves” (p. 1297). This brilliant chapter also demolishes the goal of “equality”. As Rothbard says, “In all discussions it is considered self-evident that equality is a very worthy goal… But if mankind is diverse and individuated, then how can anyone propose equality as an ideal?” (p. 1309, emphasis in original).