Book Review: Murray Rothbard's Making Economic Sense

by: Ben Kramer-Miller

Summary

A series of newsletter articles and shorter essays designed for the layperson interested in libertarian ideas and free market thought.

The book is highly entertaining and extremely accessible to people of all backgrounds.

Rothbard's bluntness is appreciated in our sanitized, "PC" collective consciousness.

*Note that this book has been made available for free by the Mises Institute. You can find it here.

Those who are looking for an introduction to Rothbard's work and Austrian economics more generally should probably look at What Has Government Done To Our Money (also available at the Mises Institute) and discussed by yours truly here. But those who are interested in an informal, layman's explanation of various economic (and political/social) phenomena as well as a work designed to be - in most places - anything but pedantic should consider reading through Making Economic Sense.

Making Economic Sense is a collection of short essays, most of which are just 3-4 pages each and which were initially published in a monthly newsletter called Free Market. These essays generally deal with smaller topics such as an event, a law, a politician, or an ideology (taken very loosely). Rothbard then provides readers with a libertarian/anarchist/Austrian interpretation which usually boils down to one of the following:

First, economic regulation and intervention has unintended consequences that are negative and often negatively impact the group that the regulation or intervention was trying to help. For instance, Rothbard alludes to the U.S.' boycott of South Africa in order to protest its policy of Apartheid. While this was intended to help the blacks in South Africa, it actually hurt that country's overall economy and, by extension and in particular, the black community. He also points out, for instance, that we have seen a steep rise in poor, single mothers in response to the government's welfare policy, which subsidizes the lifestyle.

Second, mainstream politicians - regardless of their political affiliations - converge towards a similar political stance - neo-Keynesian collectivism. He points out that both Democrats and Republicans (which he collectively refers to as "Republocrats" ) are committed to growing government, maintaining the monetary status quo (i.e. maintaining the fiat currency system in which we have perpetual inflation and deficits), and regulating business heavily, often at the detriment of small business. He notes that we essentially have one party that is separated into factions where one (Democrats) attempts to usurp more power from the states and rights from individuals, while the other (Republicans) pays lip-service against this but which nonetheless progresses the neo-Keynesian statist agenda.

Both parties will operate in tandem (under the beneficent guise of "bipartisanship") when statism is legitimately threatened. Rothbard points to Prop. 187 in California as an example. The proposition was designed to prevent illegal immigrants from receiving benefits at the taxpayer's expense. While most Californians were for the proposition, members of both parties spoke out against it, and even conservative publications (e.g. the Wall Street Journal) suggested that support of this measure was xenophobic and racist. We can more recently point to the government's massive bailout of the banking system, which received bipartisan support in spite of the public's overwhelming opposition.

Third, socialist societies exacerbate the economic inequalities that their proponents are so staunchly against. Statism, collectivism, and Keynesianism are all supported by big business (banks in particular, which could not leverage up the way they do without the Federal Reserve and the FDIC). A large, interventionist state is capable of preserving cartels and oligopolies through punitive regulations that make it impossible for small entrepreneurs to compete with the big players. Large companies can also use the government in order to get business abroad. For instance, Rothbard insinuates that the Iraq War (1990s) was largely a result of George H. W. Bush protecting his oil interests rather than protecting the freedom of Iraqi people or keeping the price of gas down. We can similarly point today to large companies that are seemingly capitalist, but which benefit dramatically from socialist and interventionist policies. For instance, McDonald's (NYSE:MCD) and Wal-Mart (NYSE:WMT) benefit dramatically from welfare and food stamp programs because they pay their workers so low while the government supplements the workers' incomes. McDonald's even helps its employees get these benefits. Without these programs, McDonald's workers would not be able to make a living and there wouldn't be enough people willing to work there for such low wages.

Fourth, socialist societies operate on the principle that a society is like a machine and that the individuals are cogs in this machine, and that the technocrats in charge (the CPU) invariably fail to improve the "machine." Austrian economics is based on praxeological and axiological principles, meaning that the best way to understand an economy is through understanding how individuals value scarce goods, services, and time, and understanding how this causes them to act.

Commerce is only possible insofar as we have subjective values, meaning that individuals value different things differently. An individual exchanges A for B only because he values B more than A, and the trading partner, with a different value system, values A more than B. Such values are subjective and therefore are not knowable on a mass scale via statistics and numbers from the technocrat's proverbial (or literal) ivory tower. Therefore, any attempt by a technocrat to control the economy by fixing exchange rates and interest rates, or by subsidizing certain industries causes a situation in which resources are not being allocated in a way that benefits society - as a collection of individuals - the most. It merely serves a megalomaniacal need of a narcissistic technocrat to exert control, and then when this fails the technocrat must "repair" the system with yet another intervention, and so on until the market distortions are so great that no intervention can prevent an economic calamity.

Those readers who are looking for a wealth of information on economics without highly technical and theoretical language, and those who are looking to be entertained as well as informed will find this book to be invaluable. It is a great book to read slowly, a little at a time, as there are so many chapters dealing with so many subjects. While the chapters are divided into broader sections, there is no particular reason to read it from beginning to end. It is also a great way for readers who want to know more about Rothbard as a human being through his less than formal approach, as well as through the numerous obituaries that are included at the end - all of which being of people whom Rothbard knew.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.