Murray Rothbard began work on his magnum opus on January 1st, 1952.
On May 5th, 1959, Rothbard wrote to his mentor, Ludwig von Mises, informing him,
Hey, finito, it's finished.
The more than seven years that Rothbard took to complete Man Economy and State coincided with the greater part
of arguably the most sterile and retrogressive decade in the history of scientific economics,
dating back to the birth of the science in the systematic treatise of Richard Cantillon, published in 1755.
In view of the almost unfathomable depth to which economics had sunk by the 1950s,
the publication of Rothbard's treatise in 1962 was one of the most monumental achievements in the history of economics
and an event that rescued the science from self-destruction.
Modern economics emerged with the publication of Carl Menger's seminal work,
Principles of Economics, in 1871.
In this work, Menger set forth the correct approach to theoretical research in economics
and elaborated some of its immediate implications.
Menger sought to identify the true cause of laws
underlying the determination of prices that he observed
actually being paid in markets every day.
His stated goal was to formulate a realistic price theory
comprising universal laws of cause and effect
that would provide an integrated explanation
of the formation of market phenomena in all times and places.
Menger argued that all prices could ultimately be traced back
to the choices and actions of consumers
striving to satisfy their wants
by securing and allocating scarce means
to achieve their most highly valued ends.
While prices, rents, wage and interest rates
were the outcome of the value judgments of individual consumers
who chose between concrete units of different goods
according to their subjective values or marginal utilities.
With this insight was born modern economics.
Menger's causal realistic approach to economic theorizing
quickly began to attract outstanding followers both in Austria
and later throughout the continent and the Anglophone countries.
What came to be called the Austrian School
grew rapidly in prestige in numbers and by World War I,
Theoretical research based on its causal-realist approach
was considered the cutting edge of economic science.
For various reasons, the school suffered an amazingly rapid decline,
especially in Great Britain and the United States,
but also in Austria after the war.
Beginning in the 1920s, it was eclipsed by the Marshallian
and Volrasian theoretical approaches,
and later almost buried by the Keynesian Revolution.
By the mid-1930s, there ceased to be a self-conscious,
institutionally embedded group of economists
actively engage in teaching and research in the Mangerian tradition.
By the 1950s, a new and stifling orthodoxy, known as the neoclassical synthesis,
had descended on economics, especially in the United States.
This so-called synthesis was actually a forago,
it's one of Murray Rothbard's favorite words,
of the three disparate approaches that had overwhelmed the Mangerian causal realist approach in the 1930s.
It jumbled together the Marshallian partial equilibrium approach
and the Volrasian mathematical approach to price determination with Keynesian macroeconomics.
The latter denied the efficacy of the price system in coordinating the various sectors of the economy
in the face of, quote, the failure of aggregate demand,
which allegedly prevailed during the depression conditions of the 1930s.
The new orthodoxy also featured hyper-specialization
and a resulting fragmentation of economic theory into a conjuries of compartmentalized sub-disciplines
Even the theoretical core of economics was now split into microeconomics and macroeconomics.
Specialized journals proliferated and resulted in a radical change in research culture,
with a premium on the writing and reading of the latest journal articles.
The only books published were technical monographs or dumbed-down textbooks.
The era of the great systematic treatise on economic theory was at close.
Almost the sole holdout against this intellectual sea change was Ludwig von Mises.
With the publication of National Economie in 1940, the German language forerunner of human action,
Mises single-handedly recovered and greatly advanced the system of causal realist economic theory.
In particular, he integrated Mengerian value and price theory with his own restatement of monetary theory.
When Rothbard initiated work on what would turn out to be a full-blown treatise,
he conceived of the project of the book, in particular, he integrated,
in addition, he provided a rigorous foundation for the entire theoretical structure
in a broader science of human action that he himself had expounded in earlier works
and now further elaborated and dubbed praxeology.
Unfortunately, Mises's great treatise was almost completely ignored by post-war economics profession.
However, while it failed to inspire a renewal of the Hungarian scientific movement,
Human Action did lay the foundations for its later revival.
This revival was to be ignited by the publication of Man Economy and State in 1962.
When Rothbard initiated work on what would turn out to be a full-blown treatise,
he conceived of the book of the project as a book suitable both for lay readers and for college instruction
that would bring, quote, to the surface and clarify the step-by-step nature of the edifice
which Mises had constructed but more or less had taken for granted that his readers would understand, unquote.
This was necessary because human action was addressed to a scholarly audience
and Mises had accordingly assumed a great deal of familiarity among his readers
with many of the concepts and theorems of what Mises called modern subjectivist economics.
Thus, Rothbard intended, quote, to do for Mises what McCulloch did for Ricardo, unquote.
That is, to make his work comprehensible to an intelligent lay readership.
But Rothbard quickly realized that his original plan was flawed and had to be abandoned for three reasons.
First, the textbook format, even one that proceeded in a logical step-by-step method that Rothbard had proposed,
was too compartmentalized and disjointed in its treatment of various economic topics.
It was therefore inadequate to convey what Rothbard called
a sense of the grand sweep of the coherent system integrating and pervading
all aspects of sound economic doctrine."
Second, Rothbard discovered that there was,
what he referred to, a lot of gaps in Mises' economic organon
that he had to fill in himself, especially with respect to production theory.
In addition, Rothbard's step-by-step deductions led him to the conclusion
and that Mises' theory of monopoly, which was held by most economists in the Mangerian tradition,
was irreparably flawed and had to be completely revised.
Thus, the book was turning out, quote,
to involve a good deal of original contribution, unquote, on Rothbard's part.
Finally, Rothbard was beginning to recognize that Human Action was a product of a very broad tradition
that included many more economists than just Mises and his famous predecessors in the original Austrian school.
Indeed, as the writing of the book proceeded, Rothbard was concurrently researching literature and reading widely.
This compelled him to conclude, quote,
many essential points must be deduced originally or with the help of other works, unquote,
and therefore the book cannot simply be a paraphrase of human action.
Thus, Rothbard's proposed book was transformed in the very process of its writing
from a textbook uncritically expounding the principles of received doctrine
to a treatise elaborating a complete system of economic theory
featuring many original and even radically new deductions and theorems.
Mises himself immediately recognized profound originality
and significance of Rothbard's contribution.
In his review of Man Economy and State, Mises wrote that Rothbard, quote,
joins the ranks of eminent economists by publishing a voluminous work,
a systematic treatise on economics.
In every chapter of his treatise, Mises continued,
Rothbard adopts the best teaching of his predecessors
and adds to them highly important observations."
Mises went on to qualify Rothbard's work
as an ethical contribution to the general science
of human action, praxeology, and its practically most important
and up to now best elaborated part, economics.
Henceforth, all essential studies in these branches of knowledge
will have to take full account of the theories and criticisms
expounded by Dr. Rothbard."
Given Mises's exacting scholarly standards,
and his well-known parsimony in paying compliments for scientific contributions,
this is unstinting praise indeed for a book published by a 36-year-old economist.
But the more important point is that Mises viewed Rothbard's work
as a noteworthy advance in modern economic science.
This brings us to the heretofore neglected question of the relationship of Rothbard's treatise to the Austrian School of Economics
and how he himself viewed this connection.
It is disruptive to begin with Mises' attitude toward the Austrian School
because it is not as straightforward as is generally supposed by contemporary economists who refer to themselves as Austrians.
As early as 1932, Mises had argued that all essential ideas of the Austrian School of Economics
had been absorbed into the mainstream of what he called modern subjectivist economics.
According to Mises, quote,
the Austrian and the Anglo-American schools and the School of Lausanne
differ only in their mode of expressing the same fundamental idea
and are divided more by their terminology
and by peculiarities of presentation than by the substance of their teachings, unquote.
Now, admittedly, this opinion was delivered at an economics conference in Germany,
which was heavily attended by remnants of the German historical school
who were antagonistic to economic theory of all kinds.
It certainly can be reasonably argued that given this venue,
Mises' remarks were intended as a generic defense of theoretical research in economics.
In fact, a year earlier, Mises had written, quote,
Within the field of modern economics, the Austrian School has shown its superiority to the School of Lausanne
and the schools related to the latter, which favor mathematical formulations.
by clarifying the causal relationship between value and cost,
while at the same time avoiding the concept of function,
which in our science is misleading."
In spite of the foregoing caveat,
Mises continued to maintain that the label Austrian School was an anachronism,
arguing in the last publication of his career in 1969
that the Austrian School constituted a closed chapter in the history of economic thought
from around the time of Menger's death in 1921.
By that time, Mises contended,
all essential ideas of the Austrian School were by and large accepted
as an integral part of economic theory
and were no longer distinguished between an Austrian School and other economics.
The Appalachian Austrian School became the name given to an important chapter
of the history of economic thought.
It was no longer the name of the specific sect with doctrines different
from those held by other economists.
As noted, Mises used the term modern subjectivist economics
to describe the new synthesis of theoretical approaches
that he believed had begun to emerge in the 1920s.
There were two problems with his label, however,
which may have led to Mises's ambivalent attitude
toward the inclusion of the Marshallian and mathematical schools under its head.
First, by World War I, most theoretical economists at least paid lip service
to some version of subjective value theory,
so that subjectivism was no longer a distinguishing characteristic of a unique approach to theoretical research.
Second, as we have seen in our own time, the term subjectivism is a notoriously elastic term
that can be stretched to denote even the nihilistic approach to economic theory
propounded by postmodern and hermeneutical economists.
Rothbard evidently followed Mises in construing the term Austrian School
as the designation for an important movement in the history of economic thought.
In the main text of Man Economy and State, Rothbard uses the term Austrian or Austrian School
at least 10 times enclosed in quotation marks, as he naturally would if he were referring to a movement
that had only historical significance to the contemporary reader.
The few times he uses these terms without quotation marks, they clearly refer to historical doctrines
or controversies, such as the Austrian-Wikesteadian theory of price, or the Austrian versus Alfred,
The Austrian School versus Alfred Marshall on the relationship between prices and costs.
The single time that Rothbard mentions the Austrian economist in his preface to the first edition,
he places the word Austrian in quotation marks and uses it in a sentence featuring verbs in the past tense.
Now, this textual exegesis is not meant to imply that Rothbard did not consider the work as continuing the great tradition,
or did not consider his work as continuing the great tradition
originated by the early Austrian economists.
Indeed, Rothbard wrote of, quote,
the myth among economists that the Austrian school is effectively dead
and has no more to contribute and that everything of lasting worth
that it had to offer was effectively stated and integrated
in Alfred Marshall's principles, unquote.
Rather, the point is that Rothbard's goal was to recover
and advance a much broader doctrinal tradition
for which Menger's and Boehm-Bawerk's works were indisputably the taproot.
Thus in his preface, Rothbard stated,
this book then is an attempt to fill part of the enormous gap of 40 years' time.
The gap Rothbard is referring to separates the publication of Man, Economy and State
and that of the last three systematic economic treatises to appear in English
by Philip Wickstede, Frank Taussig, and Frank Fetter, respectively.
The first and third authors of these earlier treatises
were in what Rothbard called, quote, the praxeological tradition, unquote.
Their procedure, as was his, was, quote,
slowly and logically to build on the basic axioms,
an integrated and coherent edifice of economic truth, unquote.
In contrast to Mises's modern, subjectivist economics,
Rothbard's reference to the praxeological tradition
drew a bright line between those who employed Menger's procedure
in logically deducing economic laws from the basic facts of reality
and those who did not.
Praxeology was Mises' explicit and self-conscious elaboration of this procedure
for discovering the causal laws governing market phenomena.
The Austrian School and their followers,
and even some of the better classical economists,
had used this research method without being fully aware of it.
The praxeological method begins with the self-evident reality of human action
and its immediate implications and therefore is about real things.
It is for this reason that it has no use for fictions and figments like the representative firm,
the perfectly competitive market or the social welfare function,
nor does it concern itself with the existence, uniqueness and stability of general equilibrium.
The selective use that the praxeological method makes of imaginary constructs has a single aim
and that is the development of a unified system of causal realist economic theory.
It was precisely because Rothbard had immersed himself in such an endeavor for seven years
that he identified the use of the praxeological method
rather than a loose subjectivist orientation
as a hallmark and acid test of scientific economics.
Rothbard thus describes economic theory in causal realist terms,
very similar to those used by Menger who had pioneered praxeological research.
Rothbard refers to, quote,
the structure of reality as embodied in economic law, unquote.
He also maintains, quote,
economics provides us with the true laws, with two laws,
of the type, if A, then B, then C,
and, quote, economics does furnish existential laws, unquote.
Man economy and state then provides what remains to date,
The most advanced structure of causal-realist economic theory
as the product of the most sophisticated and consistent use of the praxeological method in the history of economic science.
Over 40 years after Mises' review, all studies in economics must still take, quote,
take full account of the theories and criticisms expounded by Rothbard.
Over the course of this week, all of us, both students and faculty, will be learning the theories of Murray Rothbard.
We will do so through the respectful mutual questioning and discourse
that will involve all our voices and hopefully expand all our minds
in the purely scholarly, pre-psychedelic sense, of course.
So, welcome to the Rothbard Graduate Seminar.
I hope you enjoy and learn from what we have prepared for you.
Let me now introduce the faculty.
Walter Block from Loyola University.
I'm the prettiest of the family.
and the more prolific, David Gordon, who writes for the Mises Review
and is a senior faculty member at the Mises University Institute,
Jeff Erbiner from Grove City College, Peter Klein from the University of Missouri,
Bob Murphy, Senior Fellow in Business and Economic Studies with the Pacific Research Institute,
and an economist with the Institute for Energy Research, Bob.
Myself, Mark Thornton, who is a Senior Fellow here at the Institute,
and Thomas Woods, also a Senior Fellow in History at the Mises Institute.
I'd also like to acknowledge the President and our host, Lew Rockwell,
and our gracious benefactor, Alice Lilly.