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Economic Thought Before Adam Smith (vol. I)

and Classical Economics (vol. II)
Murray N. Rothbard
Aldershot, England and Brookfield, Vt.: Edward Elgar, 1995

having agreed to review them, for they cover the history

of thought only up to about 1870, when, in my view,
economics begins to get really interesting. Actually reading them
changed my mind. Rothbard—not just the libertarian guru but
the joyful and indefatigable scholar—makes the thinkers even of
reputedly dreary epochs come alive.

As he says, his history “is much longer than most since it
insists on bringing in all the ‘lesser’ figures and their interactions
as well as emphasizing the importance of their religious and
social philosophies as well as their narrower strictly ‘economic’
views” (I, p. xiii). Lao Tzu (around sixth century B.C.), leader of
“the world’s first libertarians,” receives respectful attention (I,
pp- 23-26). So do the pre-Socratics, Xenophon, and, with much
qualification, Aristotle, whereas Plato is classified as a “right-
wing collectivist” (I, chap. 1). Even Amos Kendall gets credit for
his subjective value theory and “the first expression of the law of
diminishing marginal utility” in his Kentucky newspaper in 1820
(IT, pp. 130-32). Rothbard regrets that Ricardo and his epigones
did not read and understand Kendall’s rejection of any objective
standard of value.

Appropriately in volumes subtitled An Austrian Perspective
on the History of Economic Thought, Rothbard grades earlier
economists high or low according to how they anticipated subjec-
tivist and marginalist achievements or obstructed intellectual
progress. He writes smoothly and, especially in his appraisals,
with touches of humor.

O n first seeing Murray Rothbard’s two volumes, I regretted

Leland B. Yeager is professor emeritus of economics at Auburn University.

The Review of Austrian Economics Vol. 9, No. 1 (1996): 181-88
ISSN 0889-3047

181


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182 The Review of Austrian Economics Vol. 9, No. 1

His appraisals extend to earlier historians of thought. S.
Leon Levy’s biography of Nassau Senior is “chatty and uncom-
prehending” (II, p. 485). Samuel Hollander’s “massive and bi-
zarre project to transform all the classical economists into perfect
little propounders of neoclassical, general equilibrium doctrine”
suffered a “devastating and most welcome demolition” at the
hands of T. W. Hutchison (II, p. 492).

Mostly, of course, Rothbard appraises the economists them-
selves. He lambastes David Ricardo’s “abysmal writing, in style
and organization” and goes on to quote Alexander Gray’s similar
judgment. “For all too many people,” however, “obscurity and
bad writing equal profundity.” Obscurity has charms both for
the great man and for the adepts who cluster around him (II,
p. 103). With evident relish Rothbard quotes H. L. Mencken at
length on the flatulent banalities of Thorstein Veblen’s prose (II,
p. 153).

Bishop Berkeley wrote The Querist, containing his major
pronouncements on economic questions, “solely as a series of
900 loaded questions, by which [he] hoped to influence public
opinion through sheer rhetoric without having to engage in
reasoning” (I, pp. 331-32). “On his farm [J. C. L. Simonde de
Sismondi] fought against overproduction in his own dotty way:
making sure that production would be as low as possible by
choosing the feeblest workers for employment on his farm, and
deliberately having his house repaired by an incompetent
worker” (II, p. 34).

“[Jeremy] Bentham functioned as the Great Man, scribbling
chaotically on endless and prolix manuscripts elaborating on his
projected reforms and law codes. . . . The affluent Bentham lived
in a capacious house surrounded by flunkies and disciples, who
copied revision after revision of his illegible prose to get ready for
eventual publication. He conversed with his disciples in the same
made-up jargon with which he peppered his writings” (II, p. 49).
“[I]n 1804, Jeremy Bentham lost interest in economics, a fact for
which we must be forever grateful. It is only unfortunate that this
waning of zeal had not occurred a half-decade before” (II, p. 55).
(Rothbard reinforces my own impression of Bentham as an unat-
tractive person, illustrated by his obsession with his Panopticon
project. I doubt, though, that Bentham’s personality should auto-
matically discredit all philosophical doctrines linked, however
loosely, with his name.)

As for John Stuart Mill, “It is difficult to think of anyone in
the history of thought who has been more egregiously and


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Book Review 183

systematically overestimated” (II, p. 491). Despite Gertrude
Himmelfarb’s notion of two Mills, the (good) conservative moral-
ist and the (bad) libertarian, Rothbard sees “only one
Mill—multi-faceted, self-contradictory, kaleidic, devious, mud-
dled and filiopietistic” (II, p. 493). “It is impossible to estimate
how much of John Stuart Mill's inveterate and eternal contradic-
tions, qualifications and alterations were due to honest muddle-
headedness and how much to devious and evasive intellectual
broken-field running” (II, p. 279). (While not challenging Roth-
bard’s judgments on specific points, I'll confess to liking much
in Mill’s work, particularly parts of Utilitarianism, On Liberty,
and Considerations on Representative Government. Mill was
not as pervasively wrong or evil as, say, Karl Marx. A reader
may as well get what he can from a serious writer. When one is
trying to think one’s own way through some topic by pulling
together one’s own and other people’s ideas, the question of
overall assessment of those people, however unfavorable, need
not intrude.)

Rothbard crisply summarizes his judgments on a couple of
Marxian concepts. “Alienation’, to Marx, bears no relation to the
fashionable prattle of late twentieth century Marxoid intellectu-
als” (II, p. 349). Regarding the material dialectic, “It is difficult
to state this position without rejecting it immediately as drivel”
(II, p. 377).

As I have already suggested, Rothbard breaks away from the
second-handism and parroting that characterizes much history
of thought. He doubts the sainthood of Adam Smith (esp. I, chaps.
16 and 17). Smith slipped backward from David Hume’s insights
into monetary theory and balance-of-payments analysis. He
dropped earlier contributions about subjective value, en-
trepreneurship, and emphasis on real-world markets and pricing
and replaced it all “with a labor theory of value and a dominant
focus on the unchanging long-run ‘natural price’ equilibrium, a
world where entrepreneurship was assumed out of existence” (I,
p. xi; cf. summary judgment at I, p. 501). He mixed up Calvinism
with economics, as in supporting usury prohibition and distin-
guishing between productive and unproductive occupations. He
lapsed from the laissez faire of several eighteenth-century
French and Italian economists, introducing many waffles and
qualifications. His work was unsystematic and plagued by
contradictions. He came close to plagiarism while accusing
others of it. Rothbard credits Paul Douglas for a relatively
clear-eyed assessment at a University of Chicago commemoration


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184 The Review of Austrian Economics Vol. 9, No. 1

of the 150th anniversary of The Wealth of Nations. He also cites
Joseph Schumpeter’s dissent from the conventional admiration
of Smith.

David Ricardo also fares badly at Rothbard’s (and Schumpe-
ter’s) hands (II, chaps. 3 and 4). Ricardo dealt more in aggregates
and in supposed long-run equilibria and other abstractions than
in realities; he did not fully understand the principle of compara-
tive advantage, which was less his own idea, anyway, than James
Mill’s; he was less interested in what fosters and what impedes
the creation of wealth than in its distribution among broad social
classes; he clung to a cost theory and indeed mostly a labor theory
of value; he gave ammunition to Marx.

Reading Rothbard makes me more willing than before to
confess my own judgments (derived from reading The Wealth of
Nations and The Principles of Economics and Taxation longer ago
than I care to admit) that Smith and Ricardo are downright
tedious, especially taken in large doses.

Rothbard’s adverse assessments are perhaps more fun to read
and quote than the reverse, but I must not leave the impression
that he gives out little praise. His heroes include several of the
scholastics who flourished from the thirteenth century into the
seventeenth century, including members of the Spanish School of
Salamanca. They had insights into subjective-value theory and
understood the “just price” as the competitive market price rather
than as a theological concept. Richard Cantillon was “the found-
ing father of modern economics,” writing the first systematic
treatise. A. R. J. Turgot made brilliant contributions in several
areas, even though his writings on economics add up to fewer
than 200 pages. J. B. Say had sound insights into value theory,
macroeconomics, the role of the entrepreneur, the rationale of
laissez faire, and methodology. Nineteenth-century debates on
money and banking were instructive.

Anyone writing history, including intellectual history, must
focus attention selectively. Rothbard’s own preferences come
across, but without unpleasant obtrusiveness. While not trum-
peting it, he exudes an evident sympathy for workers, peas-
ants, and the poor; he is no apologist for the rich and powerful.
Repeatedly if briefly he shows sympathy with doctrines of
natural law and natural rights and, more broadly (and regret-
tably, in my own view), with some sort of anti-utilitarian ethics.
He takes a Lockean position on the origins of legitimate prop-
erty rights, correctly noting that a labor theory of property is
not at all the same as a labor theory of value (I, pp. 56-58).


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Book Review 185

Rather to my surprise, he manages to find several predecessors
for his own advocacy of 100-percent-reserve money (II, 210-16,
chap. 14, and passim).

On a few points, Rothbard seems to have changed his mind,
or his rhetoric. He does not insist as emphatically as before on a
purely subjective theory of value and a pure-time-preference
theory of interest. He explains that degrees of scarcity interact
with subjective appraisals to determine marginal valuations and
that objective factors help determine degrees of scarcity. In inter-
est theory he illuminates the interaction of subjective time pref-
erence with the greater productivity of well-chosen roundabout
methods of production (II, pp. 22-24, 139, 141); and he has words
of praise for Bohm-Bawerk, who recognized this interaction of
subjective and productivity factors.

In contrast with his own America’s Great Depression (esp.
chap. 4), where he used an imaginatively broadened definition of
the money supply to discuss monetary inflation in the 1920s,
Rothbard now reverts to the narrow medium-of-exchange defini-
tion (II, pp. 164, 183, 251). In scattered remarks on business-cycle
theory, he retains a monetary interpretation without always
insisting on the specific “Austrian” scenario of Mises and the
early Hayek.

Rothbard no longer endorses Hans-Hermann Hoppe’s claim
to derive libertarian policy positions purely from the circum-
stances of discussion itself, without any appeal to value judg-
ments (cf. Liberty, September and November 1988). On the
contrary, and as he had done earlier, Rothbard now correctly
observes that policy recommendations and decisions presup-
pose value judgments as well as positive analysis (II, p. 119 and
passim).

In welcome contrast with familiar Austrian maundering
about methodology, Rothbard makes sensible remarks, smoothly
working them into his appraisals of earlier writers. Nassau Sen-
ior gets good marks. Bad ones go to Sir William Petty, the sup-
posed father of econometrics, and to David Ricardo and John
Stuart Mill. Readers should not be misled by Ludwig von Mises’s
unusual use of the words a priori in characterizing economic
theory. Economics deduces its theorems from axioms, axioms of
such pervasive validity and crushing obviousness that we can
scarcely imagine persons, societies, and worlds of which they
were not true. (For example, resources are scarce relative to
almost unlimited wants; choices must be made; and people act
purposefully, taking account of the expected consequences of


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186 The Review of Austrian Economics Vol. 9, No. 1

alternative courses of action. Besides scattered passages in these
two volumes, see Rothbard’s article in the Southern Economic
Journal, January 1957).

If I had an opportunity to do so—which, sadly, none of us
ever will—I would quibble with Rothbard on several points. He
describes the function of the landlord as that of deciding or
administering the allocation of pieces of land among rival uses
(IT, p. 91). This view seems too narrow to explain the huge
rents that some landlords collect; it requires integration with
capital and interest theory. As a capitalist, the landlord collects
something closely akin to interest for waiting, meaning the
tying up over time of wealth that might otherwise have been
used to bid resources into serving his consumption or other
near-term purposes. At least potentially, furthermore, the land-
lord organizes the provision of spatially confined civic goods,
often called public goods (Fred Foldvary, Public Goods and
Private Communities [Aldershot, England and Brookfield, Vt.:
Edward Elgar, 1994]). I'd like to discuss Rothbard’s evident
complacency about monetary deflation (e.g., II, p. 174) and his
attacks on utilitarianism (esp. II, chap. 2).

I am approaching a conclusion. Rothbard’s riding his hobbies
contributes to the charm of his work. Although not evidently
religious himself, he took interest in religion as a social phenome-
non and as an influence on thinking about secular matters. He
may occasionally have been carried away, as in devoting a dozen
or so pages to the Anabaptists of the sixteenth century. Yet even
this digression is not entirely irrelevant to the emergence of
economic ideas—the Anabaptists were early communists—and it
and similar digressions do help make his history eminently read-
able.

No one surveying so many thinkers in such detail as Rothbard
does could have read every word of their every major work.
Reliance on secondary sources was inevitable. Rothbard is
frank and generous in recognizing the scholarship of their
authors, including ones who did not share his political
views. He often cites Joseph Schumpeter, Emil Kauder, Alex-
ander Gray, Marjorie Grice-Hutchinson, John T. Noonan, and
F. A. Hayek (whom he treats respectfully, although not with-
out plausible criticism on specific points, as at I, p. 527). I was
delighted to see recognition given to his and my Columbia pro-
fessor Joseph Dorfman and to my Oberlin professor Raymond
de Roover. In using secondary sources, Rothbard does not merely
pluck from them; he assesses them, as is important for identifying


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Book Review 187

understandings and misunderstandings about the history of the
discipline.

The degree of documentation given for specific statements
varies among sections of the two volumes. Even an occasional
direct quotation goes without citation. Trivial lapses like these,
coupled with my own merely amateur knowledge of Rothbard’s
subject matter, keep me from authoritatively vouching for the
accuracy of his every statement.

Rothbard’s work helps underline why economists should
study the history of thought. The Whig theory of history as
applied to science is wrong—the standard “complacent and infu-
riating Panglossian optimism” that forgets the real possibility of
deterioration. Rothbard shares Thomas Kuhn's “less than starry-
eyed view of science,” yet without adopting Kuhn’s “nihilistic
philosophic outlook.” Especially in economics, “[t]here can . .. be
no presumption whatever . . . that later thought is better than
earlier” (I, Introduction).

Although not using the term “frontiersmanship,” Rothbard is
aware of the phenomenon—the self-congratulatory attitude of
workers on the supposed frontiers of economic science who
scorn attention to work of earlier generations as mere anti-
quarianism on the ground that anything worth knowing is
already incorporated into their discipline’s current wisdom. Un-
like the frontiersmen, Rothbard knows that earlier progress can
get forgotten. So can earlier fallacies, which keep getting inde-
pendently rediscovered and commanding attention. Examples
are versions of the real-bills doctrine blaming balance-of-pay-
ments deficits for the depreciation on the foreign-exchange
market of currencies undergoing inflation.

Less so in economics than in the natural sciences do valid
discoveries get embodied not only into pure knowledge but also
into technology, many of whose users have a profit-and-loss in-
centive to get things straight. That incentive is notoriously per-
verted or weak for politicians and special-interest lobbyists. In
economics, therefore, we need scholars who specialize in keeping
us alert to old contributions—and old fallacies——masquerading as
new truths. Specialists in economic thought should also be alert
to the danger of an approach that stresses the work of a few great
men and strives mightily to interpret their writings as justifying
admiration traditionally accorded them. The resulting intellec-
tual atmosphere may well contribute to robbing Rothbard’s lesser
figures (like Kendall of Kentucky) of the attention that their
not-yet-fashionable ideas merited.


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188 The Review of Austrian Economics Vol. 9, No. 1

Rothbard occasionally (e.g., II, p. 456) mentions economists
to be covered or points to be developed in a “later volume” of his
mammoth project. These promises have now become poignant.
Anyway, Rothbard’s work will suggest research topics and pro-
vide inspiration for rising generations of Austrian economists.

Leland B. Yeager
Auburn University