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Rothbard’s Theory of International Relations and the State

Posted by M. C. on December 22, 2024

for the oligarchic rule of the State is its parasitic nature—the fact that it lives coercively off the production of the citizenry. To be successful to its practitioners, the fruits of parasitic exploitation must be confined to a relative minority, otherwise a meaningless plunder of all by all would result in no gains for anyone.

The root myth that enables the State to wax fat off war is the canard that war is a defense by the State of its subjects. The facts, of course, are precisely the reverse. For if war is the health of the State, it is also its greatest danger. A State can only “die” by defeat in war or by revolution. In war, therefore, the State frantically mobilizes the people to fight for it against another State, under the pretext that it is fighting for them.

https://mises.org/mises-wire/rothbards-theory-international-relations-and-state

Mises Wire •Ryan McMaken

Murray Rothbard is well known as an opponent of warfare perpetrated by states. This includes acts of war by states against other states, as well as acts of war by states against non-state organizations and individuals. Consequently, Rothbard historical scholarship and his political commentary is characterized by consistent opposition to aggressive warfare and imperialism as practiced by states in general, and by the United States government in particular. 

Thus, Rothbard’s normative analysis of foreign policy and international relations is quite clear in his many prescriptive statements calling for fewer wars, smaller wars, and more limited warfare in general. In this, Rothbard follows a long tradition of libertarian or radical “classical liberal” theorists. 

But did Rothbard provide us with a positive or descriptive analysis of international relations? That is, did Rothbard have a value-free theory of international relations describing the structure of the international system? The answer is yes if we extrapolate from his analysis of the nature of the state and how states interact with each other. 

The Fundamental Characteristics of Rothbard’s International System 

Rothbard’s description of international relations is characterized by four key tenets of states and their foreign policy: 

  1. The international system is anarchic. 
  2. States are controlled by an oligarchic ruling elite insulated from non-state actors, and a state’s foreign policy is primarily determined by the state’s elites who seek to preserve the system. 
  3. Above all else, states seek to preserve themselves, and they seek to expand their own power, relative to other states, when possible. 
  4. War can be a tool of domestic policy. In some cases, states tend toward war because wars offer an opportunity for states to expand the state’s power over the domestic population. 

The Anarchic System

In his essay “War, Peace, and the State,” Rothbard writes: 

In the modern world, each land area is ruled over by a State organization, but there are a number of States scattered over the earth, each with a monopoly of violence over its own territory. No super-State exists with a monopoly of violence over the entire world; and so a state of “anarchy” exists between the several States. 

This observation is hardly unique to Rothbard, and has been employed by international relations scholars from several different schools for many decades. Scholars differ on what they believe to be the implications and outcomes of the anarchic system, however. For Rothbard, the international system is characterized by violence partly because it is dominated by states—which are institutions founded on coercion. Rothbard recognizes, of course, that not all states are equally aggressive all the time. Some states are revisionist states and others are defensive, status quo states. This varies with the state of the international system at various times.  Moreover, state violence is often traced back to previous acts of state violence, as in the case of the post-World War I revisionist states which were reacting to the harsh provisions imposed by the victorious allies. Because states are focused on their own interests and preservation, states will only engage in international cooperation when it is of benefit to the state itself. What is of benefit to the ordinary people of each state—i.e., peace, freedom, and free trade—is rarely of primary importance to those who decide foreign policy.  

States Are Ruled by a Small Minority 

Central to Rothbard’s view of the state is the fact that “’we’ are not the government; the government is not ‘us.’ The government does not in any accurate sense ‘represent’ the majority of the people.”  This view has its origins in classical-liberal exploitation theory, and it is certainly reflected in Rothbard’s view of international relations. For examine, in For a New Liberty, Rothbard writes:

the normal and continuing condition of the State is oligarchic rule: rule by a coercive elite which has managed to gain control of the State machinery. There are two basic reasons for this: one is the inequality and division of labor inherent in the nature of man, which gives rise to an “Iron Law of Oligarchy” in all of man’s activities; and second is the parasitic nature of the State enterprise itself. 

Overall, Rothbard accepted the main tenets of elitism as he also shows when he writes: 

for the oligarchic rule of the State is its parasitic nature—the fact that it lives coercively off the production of the citizenry. To be successful to its practitioners, the fruits of parasitic exploitation must be confined to a relative minority, otherwise a meaningless plunder of all by all would result in no gains for anyone.

For Rothbard, this holds true whether or not a regime is allegedly a democracy, and the presence of democratic institutions does not fundamentally change a state’s behavior in the international sphere. Rothbard notes that, in evaluating state behavior in war: 

The theoretical reason why focusing on democracy or dictatorship misses the point is that States—all States—rule their population and decide whether or not to make war. And all States, whether formally a democracy or dictatorship or some other brand of rule, are run by a ruling elite. Whether or not these elites, in any particular case, will make war upon another State is a function of a complex interweaving web of causes, including temperament of the rulers, the strength of their enemies, the inducements for war, public opinion. While public opinion has to be gauged in either case, the only real difference between a democracy and a dictatorship on making war is that in the former more propaganda must be beamed at one’s subjects to engineer their approval. Intensive propaganda is necessary in any case—as we can see by the zealous opinion-moulding behavior of all modern warring States. 

States Seek Self-Preservation

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Taking Notes Out of Rothbard’s Taiwan Playbook

Posted by M. C. on May 19, 2023

Those who today reasonably say that the defense of an island eighty miles off the coast of mainland China and five thousand miles from Hawaii (let alone the mainland United States) cannot possibly be a core national interest can take comfort in following the footsteps of such brave and principled forebearers as Rothbard.

https://libertarianinstitute.org/articles/taking-notes-out-of-rothbards-taiwan-playbook/

by Joseph Solis-Mullen

Writing pseudonymously in a series of articles for Faith and Freedom in the 1950s, Murray Rothbard took on the question of whether or not the United States should defend Formosa (Taiwan) from attack by mainland China. While his conclusions will surprise no one familiar with his work (that war is the health of the state, that individuals concerned with the fate of Taiwan should do as they will privately, but that their lives and property are not for the government to command), a review of the articles’ contents are worthwhile, nonetheless. For apart from such typically memorably Rothbardian lines as “only those who want to socialize America really look forward to the third and perhaps last World War,” we find many of the same ludicrous rationales for war with China used today excoriated with great wit by Rothbard.

For example, Rothbard begins the first of these, “Along Pennsylvania Avenue,” by rhetorically posing the question of how it happened that a smattering of islands eighty miles off the coast of mainland China became “necessary to our defense,” and as an answer he replies:

…[the government] were forced to portray the Reds as “island hopping” their way to the United States. […For] if the Reds take Formosa, they will be one island nearer to the United States. It is an age-old story: a peaceful Pacific “moat” is needed for our defense. In order to protect his moat, we must secure friendly countries or bases all around it. To protect Japan and the Philippines, we must defend Formosa, to protect Formosa we must defend the Pescadores. To protect the Pescadores, we must defend Quemoy, an island three miles off the Chinese mainland. To protect Quemoy we must equip Chiang’s troops for an invasion of the mainland. Where does this process end? Logically, never (18).

Readers unfamiliar with the history of the region may be interested in some additional context regarding Rothbard’s mention of equipping Chiang Kai-shek, the dictator of Taiwan and exiled leader of China’s failed Republic, for an invasion of the mainland. Despite having been driven from the off by force of arms, and only secured in their island fortress by virtue of the United States Navy repeatedly intervening to prevent a cross-strait invasion by the PLA, it was the official policy of Taipei to retake the mainland by force. Though such plains never got far off the ground—and were mostly abandoned by the 1970s—it was not until the constitutional revisions of the 1990s that Taiwan officially gave up such a policy of armed reconquest in favor of focusing strictly on its own defense.

Writing in the 1950s, near the height of the first Taiwan Strait Crisis and when talk of an invasion of the mainland by Taipei was still openly planned and called for by Chiang, Rothbard heroically pushed back against those who equated isolation with appeasement. In a scene all too familiar, he complained that Congress’ answer to heightened tensions over Formosa was to write what “amounted to a blank check for war in China whenever the President shall deem it necessary,” noting sadly that only two congressmen had opposed the resolution on the grounds that the United States should not actively seek to “engage their boys in a war on foreign soil,” the rest merely arguing over the scope or scale of the commitment to be made.

Rothbard was predictably red-baited for his efforts, even attacked by a fellow “libertarian” in Faith and Freedom. He defended himself in a series of further articles, “Fight for Formosa?” Parts I & II, and reflecting on the experience some years later in The Betrayal of the American Righthe had this to say:

I could never—and still cannot—detect one iota of devotion to ‘freedom’ in the worldview of those whose zeal for crusading abroad makes them blind to the real enemy: the invasion of our liberty by the State…to give up our freedom in order to “preserve” it is only succumbing to the Orwellian dialectic that “freedom is slavery.”

Indeed.

Those who today reasonably say that the defense of an island eighty miles off the coast of mainland China and five thousand miles from Hawaii (let alone the mainland United States) cannot possibly be a core national interest can take comfort in following the footsteps of such brave and principled forebearers as Rothbard.

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Murray Rothbard versus the Progressives

Posted by M. C. on November 3, 2022

If you want to do yourself a favor read some Rothbard.

Not only is social democracy still with us in its many variations, but it has managed to define “our entire respectable political spectrum, from advanced victimology and feminism on the left over to neoconservatism on the right.”4 Make no mistake about it, Rothbard warned, “on all crucial issues, social democrats however they label themselves, stand against liberty and tradition and in favor of statism and Big Government.” Furthermore, social democracy is far more insidious than other forms of statism because it claims “to combine socialism with the appealing virtues of ‘democracy’ and freedom of inquiry.”

https://mises.org/wire/murray-rothbard-versus-progressives-1

Joseph T. Salerno

There has been a radical change in the social and political landscape in this country, and any person who desires the victory of liberty and the defeat of Leviathan must adjust his strategy accordingly. New times require a rethinking of old and possibly obsolete strategies. —Murray N. Rothbard1

Murray Rothbard wrote the above words in 1994, shortly before his untimely passing. They sum up the main theme of a series of brilliant articles that he published in the 1990s calling for a radical readjustment of libertarian strategy to the new political and social realities that had emerged in the aftermath of the collapse of communism in Eastern Europe and the Soviet Union. In these articles, Rothbard identified both the abstract social philosophy and the concrete political movement that then had emerged as the greatest menace to liberty and society. He also proposed a radical reformulation of the political spectrum and a revised political vocabulary to express the new strategy called for in the altered ideological and political context. 

Before proceeding further, I want to point out that Rothbard’s articles, despite their deep insight and radical implications for libertarian strategy, have been largely overlooked by friend and foe alike for a couple of reasons. First, when he wrote the articles, Rothbard was hard at work on his monumental two-volume treatise on economic thought. Understandably, he wrote the articles quickly as one-off responses to particular events, ideas, and political developments during a period of rapid change, from 1991 to 1994. Rothbard’s new views on strategy were therefore presented as fragments in different articles containing inevitable repetition and overlapping. This obscured the fact that taken together these articles presented a systematic and comprehensive strategy for radical social and political change. Second, the articles appeared in the Rothbard-Rockwell Report a journal of social, political, and cultural commentary. Unfortunately, Triple R’s scintillating polemics and its coverage of an incredibly broad range of topics sometimes diverted the reader from the deep theorizing that informed many of its articles. I confess that I did not appreciate the significance of Rothbard’s articles, and their unity and breadth of vision, until very recently. 

Social Democracy: Identifying the Enemy

After the collapse of communism, and with Nazism and fascism “long dead and buried,”2 Rothbard argued that social democracy was the only remaining statist program, and its advocates were hell bent on making the most of their ideological monopoly. In the “new post-communist world,” Rothbard wrote:

The Enemy of liberty and tradition is now revealed full-blown: social democracy. For social democracy in all of its guises is not only still with us … but now that Stalin and his heirs are out of the way, social democrats are trying to reach for total power.3

Not only is social democracy still with us in its many variations, but it has managed to define “our entire respectable political spectrum, from advanced victimology and feminism on the left over to neoconservatism on the right.”4 Make no mistake about it, Rothbard warned, “on all crucial issues, social democrats however they label themselves, stand against liberty and tradition and in favor of statism and Big Government.” Furthermore, social democracy is far more insidious than other forms of statism because it claims “to combine socialism with the appealing virtues of ‘democracy’ and freedom of inquiry.”5 As shrewd observers of the political scene for a century and a half, social democrats—or left liberals in the American political lexicon—are indeed seriously committed to democracy. As Rothbard explained:

The maintenance of some democratic choice, however illusory, is vital for all varieties of social democrats. They have long realized that a one-party dictatorship can and probably will become cordially hated … and will eventually be overthrown, possibly along with its entire power structure.6

Picking up on the insight of the contemporary political theorist Paul Gottfried, Rothbard noted that the social democrats’ devotion to democracy also serves as a pretext for an attack on those who assert the “absolute” inviolability of the right to free speech and a free press. This assault on free speech, Rothbard presciently pointed out in 1991, 

constitutes an agenda for eventually using the power of the State to restrict or prohibit speech or expression that [neocons and social democrats] hold to be “undemocratic.” This category could and would be indefinitely expanded to include: real or alleged communists, leftists, fascists, neo-Nazis, secessionists, “hate thought” criminals, and eventually … paleo-conservatives and paleo and left-libertarians.7

Progressivism: The Social Philosophy of Social Democracy

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Rothbard on Today’s Progressive War Jingoism | Mises Wire

Posted by M. C. on June 18, 2022

Today, as always, the real antiwar movement finds its traction far outside the Beltway and the commentariat. Average people, less affluent and war weary after our two decades in the Middle East, dare to worry more about gas prices and rent than Ukraine. Trump listened to those people. Will Joe Biden? Or will he succumb to the modern-day Walter Lippmanns? 

https://mises.org/wire/rothbard-todays-progressive-war-jingoism

Jeff Deist

Readers of Murray Rothbard’s articles and speeches on war collectivism will immediately recognize the progressive pietist fervor surrounding today’s progressive war jingoism: everywhere is Ukraine! The atavistic need to analogize today’s situation to 1938, with Vladimir Putin as Adolf Hitler and war skeptics as Neville Chamberlain at Munich, is proof of this. The lessons of 1914, where a series of tragic blunders turned a regional conflict into a conflagration across Europe, are far more apposite.

The obvious interest for the US is containment of the war as a terrible but internecine (and ongoing) fight between Russians and Ukrainians. Absent what ought to be defunct obligations to nearby NATO (North Atlantic Treaty Organization) countries, absolutely no US role should be remotely contemplated.

The war chorus, however, is not to be underestimated. It sings loudest from the neoconservative Left.

Outlets like The Bulwark, The Atlantic, the Washington Post, Fox News, and MSNBC are all natural habitats for the war promoters seeking to sit on Joe Biden’s shoulder and yell in his ear. Will the president, reeling from bad poll numbers and bad economic news at home, succumb to the voices urging escalation and promising the glory to a strong commander in chief?

To date, Biden’s public statements have been reasonably reassuring. He earlier insisted no US troops would be sent into the country and has repeated this since. A proposed three-way deal—sending American F-16 fighters to the Poles, freeing up their Soviet MiGs for Ukrainian pilots—appears to have been scuttled over fears of escalation. The establishment of a no-fly zone in Ukraine, which would compel NATO (including US) pilots to intercept and destroy Russian fighters and bombers, is off the table for now.

But Biden’s disastrous trip to address NATO in Brussels last week resulted in several gaffes that raise questions as to his real thinking. Is regime change the real but unstated US policy for Russia? Did he misspeak when telling members of the Eighty-Second Airborne what they might “see” in Ukraine? Getting rid of Putin is no easy task, and an old-fashioned land war in Eastern Europe with a nuclear foe is an unbelievably daunting notion. Does he face the same kinds of active insubordination from war hawks in his own cabinet, Pentagon, Joint Chiefs, and CIA that plagued JFK and Donald Trump? Is he falling prey to the Victoria Nuland wing of the State Department?

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The Broken Window Fallacy Reapplied

Posted by M. C. on June 14, 2022

Both Bastiat and Hazlitt saw that the government is the great window breaker, that destroyer of wealth that drives the economy backwards. The engine of creativity, recovery, and expansion is the private sector, completely unencumbered by state intervention. Ron Paul’s newest book is called Pillars of Prosperity: Free Markets, Sound Money, and Private Property. The title nicely sums up the message of the economics of freedom.

https://mises.org/library/broken-window-fallacy-reapplied

Llewellyn H. Rockwell Jr.

The claim of the Austrian School that has scandalized members of other schools for 150 years is the following. The propositions of economics are universal. The principles apply in all times and all places, because they derive from the structure of reality and human action.

What brought about economic growth, inflation, or the business cycle in China in 300 BC are the same institutions that drive phenomena in the United States in AD 2008. The circumstances of time and place change, but the underlying economic reality is identical.

That claim has made other economists—to say nothing of sociologists, historians, and politicians—scatter like pigeons. The Historical School poured scorn on this idea, and Carl Menger, the founder of the Austrian School, fought them tooth and nail. The Chicago School of positivists found the claim preposterous, and Mises and Hayek and Rothbard battled them. The Keynesians have long been outraged, and the postwar Austrian generation reasserted the truth. The socialists, who posit that rearranging property titles will transform all of reality, say that the claim is absurd, capitalistic nonsense.

But there it stands. No matter where or when, the essential prerequisite for economic growth is capital accumulation in a framework of freedom and sound money. The consequence of price control is shortage and surplus. The effect of money expansion is inflation and the business cycle. The effect of every form of intervention is to make society less prosperous than it would otherwise be.

The list of universals is endless, which is why every age needs good economists to explain and articulate the truth.

Well, I would like to add that there are universal fallacies too.

Frédéric Bastiat pointed to one: the belief that the destruction of wealth fuels its creation. He explains this by means of an allegory that has come to be known as the story of the broken window. Most famously it was retold as the opening of Henry Hazlitt’s Economics in One Lesson, which is probably the bestselling economics book of all time.

A kid throws a rock at a window and breaks it, and everyone standing around regrets the unfortunate state of affairs. But then up walks a man who purports to be wise and all knowing. He points out that this is not a bad thing after all. The man fixing the window will get money for doing so. This will then be spent on a new suit, and the tailor too will get money. The tailor will spend money on other items, and the circle of rising prosperity will expand without end.

What’s wrong with this scenario? As Bastiat put it, “It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way which this accident has prevented.”

You can see the absurdity of the position of the wise commentator when you take it to absurd extremes. If the broken window really produces wealth, why not break all windows up and down the whole city block? Indeed, why not break doors and walls? Why not tear down all houses so that they can be rebuilt? Why not bomb whole cities so construction firms can get busy rebuilding?

It is not a good thing to destroy wealth. Bastiat puts it this way: “Society loses the value of things which are uselessly destroyed.”

It sounds like an unexceptional claim. But herein rests the core case against everything the government does. Perhaps, then, we can see why the allegory is not better known. If we took it seriously, we would dismantle the whole apparatus of American economic intervention.

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Rothbard vs. the Religion of Progressivism

Posted by M. C. on June 11, 2022

Despite these superficial deviations, progressives are Marxist to the core because they fervently believe in the Enlightenment myth of inevitable progress toward an ideal society. Therefore, as Rothbard points out, progressivism is “‘religion’ in the deepest sense, held on faith: the view that the inevitable goal of history is a perfect world, an egalitarian socialist world, a Kingdom of God on Earth.”

https://mises.org/wire/rothbard-vs-religion-progressivism

Joseph T. Salerno

Our main text for the Rothbard Graduate Seminar this week is Murray Rothbard’s Power and Market: Government and the Economy, which contains a systematic treatment of one area of economic theory, interventionism. This represents a departure from past seminars in an important respect. Earlier seminars focused on texts by Mises or Rothbard that addressed a much broader scope of their thought. Previous seminar texts such as Man, Economy, and State and Human Action cover the entirety of economic theory. Human Action, in addition, features a full treatment of methodology as well as discussions of epistemology, political philosophy, and economic history. Other texts used at earlier Rothbard Graduate Seminars such as The Ethics of Liberty and Economic Controversies are also broad in scope, containing, respectively, Rothbard’s systematic presentation of his political philosophy and a broad spectrum of his essays on theoretical and applied economics.

This week’s RGS deliberately focuses on the much narrower topic of interventionism, because it is the economic program of progressivism, the prevailing ideology of the twenty-first century. Progressivism attained this position after a leftist “long march” through Western educational, cultural, religious, economic, and political institutions, which began shortly after World War II, gained momentum during the 1960s, and rapidly accelerated in the 1980s. In a prescient memo written shortly after the war, Ludwig von Mises pointed out that the essence of the progressive policy agenda is interventionism. Mises called the teachings of progressives, “a garbled mixture of divers particles of heterogeneous doctrines incompatible with one another.” He included Marxism, British Fabianism, and the Prussian historical school in this doctrinal witch’s brew. Whatever the differences among them, however, all progressives were passionately united on two points. First, they believed that “contradictions and evils are . . . inherent in capitalism.” And second, they argued that the only way to root out the inequities and irrationalities of capitalism and transform it into a more humane and rational system was by imposing the program of interventionism laid out by Marx and Engels in The Communist Manifesto. As Mises pointed out, “the Communist Manifesto is for [progressives] both manual and holy writ, the only reliable source of information about mankind’s future as well as the ultimate code of political conduct.”

To be clear, the gradualist, interventionist path to socialism laid out in The Communist Manifesto was explicitly rejected in the later writings of Marx as “petty-bourgeois nonsense.” The later Marx advocated permitting the conditions of revolution to ripen until the continuing immiseration of the workers, worsening economic crises, and concentration of capital in fewer and fewer hands caused the proletariat to rise up and destroy the capitalist system in one mighty blow. Although embracing Marx’s ultimate goal, progressives thus differ from full-blooded Marxists in choosing the nonviolent, gradualist route toward socialism via interventionism, the mixed economy, democratic socialism, or whatever you wish to call it. Some progressives view interventionism as a method of subverting capitalism and achieving full socialist central planning. Others—probably the majority today—see interventionism as the means for taming and humanizing capitalism and seek to foist it on the productive class of workers and entrepreneurs as “a permanent system of society’s economic organization.” But the difference between these two variants is beside the point. Regardless of the precise long-run goal of their proponents, interventionist policies have the same effects. They distort market prices, misallocate resources, stifle and misdirect entrepreneurship, destabilize the economy, and redistribute income from the producers to the parasitic ruling elites and their constituencies and cronies.

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Murray Rothbard versus the Public Choice School | Mises Wire

Posted by M. C. on November 30, 2021

What I take to be the most important disagreement between Rothbard and public choice is this: Rothbard doesn’t take a value neutral attitude toward the state: he hates it. He sees the state as predatory. As he puts it in Anatomy of the State, “The State provides a legal, orderly, systematic channel for the predation of private property

https://mises.org/wire/murray-rothbard-versus-public-choice-school

David Gordon

Murray Rothbard was at one time good friends with Gordon Tullock, one of the founders of the public choice analysis of government, and he also corresponded on friendly terms with James Buchanan, another of the founders. Both Rothbard and the public choice movement look with suspicion on claims by agents of the government to be acting for the common good, and both support the free market, though Rothbard does so to a much greater degree. Despite these points of agreement, Rothbard has some fundamental criticisms of public choice, and I’d like to look at one of these in this week’s column.

What I take to be the most important disagreement between Rothbard and public choice is this: Rothbard doesn’t take a value neutral attitude toward the state: he hates it. He sees the state as predatory. As he puts it in Anatomy of the State, “The State provides a legal, orderly, systematic channel for the predation of private property; it renders certain, secure, and relatively ‘peaceful’ the lifeline of the parasitic caste in society.” By contrast, he views people outside the state, aside from criminals, as engaged in peaceful exchange. There is, then, a dichotomy between people in the state and nonstate actors.

The public choice school denies that this dichotomy exists. The key point of their analysis of government is that people in government act to promote their private interests, in the same way as private actors. That is to say, government officials aren’t more “public spirited” than private businessmen, but neither are they worse in their motives. The basic distinction, emphasized by Rothbard, that the state’s activities are coercive, in contrast to the peaceful exchanges in the free market, is glossed over.

More than this, the distinction is denied to exist, especially in the work of Buchanan. He considers the state to be a voluntary institution. You might ask, How can he possibly think this? Does he imagine that if you refuse to pay your taxes, government agents will just let you alone?

Buchanan is well aware that the government can forcibly extract resources from you while private actors cannot, but he thinks this distinction doesn’t matter because you have agreed to allow the state do this. Of course you will deny that you have made such as an agreement, but Buchanan has an argument that, despite what you might think, you have indeed.

Suppose, contrary to Rothbard, that you believe there are certain “public goods” that people will not voluntarily produce on the free market because they are nonrivalrous and nonexcludable, but you and others think it would be desirable to produce these goods. You could then make an agreement with these people to allow an agency to take money from you to pay for the public goods, so long as it does so from everyone else who signed the agreement as well. In this way, the alleged problems posed by the nonrivalrousness and nonexcludability of the public good would be overcome.

A simpler example may make voluntary acceptance of coercion clearer. Suppose people in an anarcho-capitalist society want to join a private protection agency that enforces a law code. The agency will have a list of the actions it will take in response to violations of this code. If you agree to join the agency, you have agreed that these actions can be taken against you, if you violate the law code. It is in exactly this way that Buchanan thinks that even though the state extracts resources from you, it is noncoercive: you agreed to be taxed and to be subject to the penalties for nonpayment.

The main objection to this is obvious and well brought out by Rothbard. People haven’t made an agreement of the sort Buchanan assumes. As Rothbard points out in a memo for the Volker Fund, available now in Economic Controversies, in The Calculus of Consent, Buchanan gets around this by weakening the conditions for the agreement. If the tax agents could say to you, “You, along with everyone else, agreed to be taxed and now we have come to collect,” they might have a case against you; but if it is just the case that a substantial number of people have agreed, but you haven’t, the matter is quite otherwise. As Rothbard says,

In short, despite a lot of talk about unanimity being called for, the upshot of the discussion is that (a) unanimity is weakened by numerous qualifications and circumlocutions—and that (b) much of the existing structure of government is endorsed as being “really” unanimity! This, of course, is worse than simply adhering to majority rule, and comes perilously close to the “we owe it to ourselves,” “we are the government” position of the Left. The worst example of this, including the definite tendency to rationalize the existing situation as reflecting unanimity, is the concept of “income insurance” to justify actions of government that “redistribute” income. Now it is obvious that when government takes from A and deliberately gives to B, this can hardly be called a gesture of unanimity, or people voluntarily banding together to purchase a service from government. But Buchanan and Tullock try to say this, by asserting that the wealthy really favor being taxed more than the poor, because they are taking out “income insurance,” knowing that when they will be poor, the government, like an insurance company, will help them. And, in another place, they say that people really want to be coerced so long as they are all coerced, so that, everybody is really not being coerced. Not only do I consider all this nonsense, but it is dangerous nonsense as well, because it provides new support for the idea that anything that the State does, no matter how blatantly coercive, is “really” backed by everyone.

There is a further problem with the argument. Even if we confine ourselves to the less than fully unanimous agreement discussed in The Calculus of Consent, and consider only people who would have entered into it, it doesn’t follow that the state may coerce them to pay taxes. Even if they would have found it rational to enter the agreement, they in fact haven’t. No such agreement exists, and only explicit agreements bind. Lysander Spooner long ago made this point. Buchanan ignores it, but Rothbard affirms it. Author:

Contact David Gordon

David Gordon is Senior Fellow at the Mises Institute and editor of the Mises Review.

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This Is a Sign that Price Inflation Will Soon Get Worse | Mises Wire

Posted by M. C. on September 4, 2021

Slowly, but surely, the public began to realize: “We have been waiting for a return to the good old days and a fall of prices back to 1914. But prices have been steadily increasing. So it looks as if there will be no return to the good old days. Prices will not fall; in fact, they will probably keep going up.” As this psychology takes hold, the public’s thinking in Phase I changes into that of Phase II: “Prices will keep going up, instead of going down. Therefore, I know in my heart that prices will be higher next year.” The public’s deflationary expectations have been superseded by inflationary ones.

https://mises.org/wire/sign-price-inflation-will-soon-get-worse

Connor Mortell

Recently here on Mises Wire, Sammy Cartagena wrote a brilliant article demonstrating that Two Percent Inflation Is a Lot Worse Than You Think. In it, he demonstrates that the manageable 2 percent inflation year over year we all have gotten used to is a whole lot less manageable than we tend to think. But in it, he also cited explaining that “over 23 percent of all dollars in existence were created in 2020 alone.” From that he explains that while future inflation is important, he is focused on past inflation for the sake of his article, which is where these two articles diverge because this will be questioning future inflation. Anyone paying attention has seen that there has obviously been inflation this past year whether through price increases or more subtle ways to sneak inflation into the economy. However, when we look at the massive spending bills and the aforementioned fact that over 23% of dollars have just recently been ushered into existence, it leaves many asking why has there not been proportionally drastic inflation?

The major piece that is holding back even more inflation than we’ve already seen is a public expectation of a return to normal. The economy is exceedingly complicated and there are countless causal factors effecting this so I cannot say this is the only reason, but we can turn to The Mystery of Banking where we see Murray Rothbard go as far as claiming that “Public expectation of future price levels” is far and away the most important determinant of the demand for money. Rothbard goes on to cite his intellectual predecessor – Ludwig von Mises – to explain just how strongly expectations played a role in the German hyperinflation in 1923:

The German hyperinflation had begun during World War I, when the Germans, like most of the warring nations, inflated their money supply to pay for the war effort and found themselves forced to go off the gold standard and to make their paper currency irredeemable. The money supply in warring countries would double or triple. But in what Mises saw to be Phase I of a typical inflation, prices did not rise nearly proportionately to the money supply. If M in a country triples, why would prices go up by much less? Because of the psychology of the average of the average German, who thought to himself as follows: “I know that prices are much higher now than they were in the good old days before 1914. But that’s because of wartime, and because all goods are scarce due to diversion of resources to the war effort. When the war is over, things will get back to normal, and prices will fall back to 1914 levels.” In other words, the German public originally had strong deflationary expectations. Much of the new money was therefore added to cash balances and the Germans’ demand for money rose. In short, while M increased a great deal, the demand for money also rose and thereby offset some of the inflationary impact on prices.

As Rothbard explains, prices not rising in proportion to a radical increase in the money supply is not only understandable, it is actually to be expected. Sure, this current situation is not a wartime economy, however, as far as Rothbard’s explanation of the psychology of the average person goes, it is not all too different from the expectations during the war. Today the psychology of the average American leads to him thinking to himself “I know that prices are much higher now than they were in the good old days before 2020. But that’s because of the pandemic, and because all goods are scarce due to the unemployment from people who had to stay home during this dangerous time. When the pandemic is over, things will get back to normal, and prices will fall back to 2019 levels.” The problem with this expectation is that it cannot last forever. As Rothbard explains

Slowly, but surely, the public began to realize: “We have been waiting for a return to the good old days and a fall of prices back to 1914. But prices have been steadily increasing. So it looks as if there will be no return to the good old days. Prices will not fall; in fact, they will probably keep going up.” As this psychology takes hold, the public’s thinking in Phase I changes into that of Phase II: “Prices will keep going up, instead of going down. Therefore, I know in my heart that prices will be higher next year.” The public’s deflationary expectations have been superseded by inflationary ones.

Rothbard explains that these new expectations will intensify the inflation rather than holding it back. Rothbard also claims that there is no way of knowing when these expectations will finally shift because so many cultural, technological, geographical, and other factors affect any given population. As a result, we unfortunately can’t say when modern Americans will realize that prices are not headed back to their pre-pandemic levels and start having intensifying expectations. But however long it does take, the last point that we have to remember from Rothbard is his claim that “When expectations tip decisively over from deflationary, or steady, to inflationary, the economy enters a danger zone. The crucial question is how the government and its monetary authorities are going to react to the new situation.” While it is too late to not have created all that new money supply, when the day does come that we enter that danger zone, it is not too late for us to react appropriately and avoid that final phase III of hyperinflation but rather allow for a healthy deflationary bust allowing the economy to recover as it so desperately needs. Author:

Connor Mortell

Connor Mortell graduated from Texas Christian University with a BBA in finance, minoring in Chinese language and culture. After graduation he worked as a legislative aide in the Florida House of Representatives for just shy of two years. Currently he is an MBA student at Florida State University. As well he will be attending Mises University in summer 2021.

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The Secret Ronald Reagan Told Me about Gold and Great Nations | Mises Wire

Posted by M. C. on August 21, 2021

Ronald Reagan once told me that no nation has abandoned gold and remained great. As president, he supported the creation of the Gold Commission. However, he did not stop the establishment from stacking the commission with defenders of the monetary status quo.

https://mises.org/wire/secret-ronald-reagan-told-me-about-gold-and-great-nations

Ron Paul

Today [August 15] marks 50 years since President Richard Nixon closed the “gold window,” ending the ability of foreign governments to exchange United States dollars for gold. Nixon’s action severed the last link between the dollar and gold, giving the U.S. a fiat currency.

America’s experiment with fiat has led to an explosion of consumer, business, and—especially—government debt. It has also caused increasing economic inequality, a boom-bubble-bust business cycle, and a continued erosion of the dollar’s value.

Nixon’s closure of the gold window motivated me to run for office. Having read the works of the leading Austrian economists, such as Ludwig von Mises and Murray Rothbard, I understood the dangers of abandoning gold for a fiat currency and wanted a platform to spread these ideas.

When I first entered public life, support for restoring a gold standard, much less abolishing the Fed, was limited to so-called “gold bugs” and the then tiny libertarian movement. Even many economists who normally supported free markets believed the fiat system could be made to work if the Federal Reserve were forced to follow rules.

These rules were supposed to provide the Fed with clear guidance as to when to increase or decrease the money supply. This may sound good in theory, but a “rules-based monetary system” still allows the Federal Reserve to manipulate interest rates, which are the price of money, causing artificial booms and very real busts.

The stagflation of the Carter era did increase interest in monetary policy. The rise of the “supply-siders,” who supported a limited role for gold, helped increase interest in the issue.

Ronald Reagan once told me that no nation has abandoned gold and remained great. As president, he supported the creation of the Gold Commission. However, he did not stop the establishment from stacking the commission with defenders of the monetary status quo.

The commission’s two pro-gold members, Lewis Lehrman and myself, produced a minority report, written with the aid of Murray Rothbard, making the case for a gold standard. The report was published as The Case for Gold. It can be downloaded at Mises.org.

By the mid-1980s, any interest among the political and financial elites in questioning the Fed’s power had disappeared. This was due to acceptance of the myth that Paul Volcker tamed inflation. In the 1990s, a virtual cult of personality arose around the “Maestro” Alan Greenspan, who once told me that the Fed had learned how to “replicate” the results of a gold-backed currency.

While my warnings that the Fed was leading the American economy over the cliff were dismissed in Washington, they found a receptive audience outside the Beltway. The response to my 2008 presidential campaign led to a birth of a new liberty movement that put monetary policy front and center.

The 2008 meltdown, big bank bailouts, and the Fed’s subsequent failure to reignite the economy despite unprecedented money creation fueled the growth of the new movement. My Campaign for Liberty organization mobilized the new liberty movement to make Audit the Fed a major issue in Congress.

Fifty years after Nixon closed the gold window, prices are heading toward 1970s-era increases. Yet the Fed cannot increase interest rates as long as the politicians keep creating billions of new debts.

It is clear that America is heading toward another Federal Reserve–created economic crisis. The good news is the impending crisis gives us an opportunity to spread our message, grow our movement, and finally force Congress to audit and end the Fed.

Originally published by the New York Sun. Author:

Ron PaulDr. Ron Paul is a former member of Congress and Distinguished Counselor to the Mises Institute.

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Wisdom from Rothbard | Mises Institute

Posted by M. C. on August 17, 2021

https://mises.org/power-market/wisdom-rothbard

David Gordon

The collapse of the American-backed state in Afghanistan brings home the wisdom of Murray Rothbard’s essay “The Death of a State,” written in July 1975. The lessons that Rothbard drew from the fall of South Vietnam apply equally to the present crisis. Among these were the importance of guerilla warfare, the dependence of all states on majority support, and the blow to US imperialism with its false doctrine that “the United States has the moral duty, and the permanent power, to install, prop up, and rule governments and peoples throughout the world. We are being forced into a policy of ‘neo-isolationism,’ unfortunately not through the adoption of moral principle, but through the concrete realization that imperialism is no longer realistically viable.” We should follow Rothbard’s advice and end all American overseas military commitments.

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