Bryan Caplan  

What Rothbard Missed: Error or Demagoguery?

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Murray Rothbard seems to misunderstand some elementary lessons about monetary economics. He was a brilliant polymath, so it's hard to believe that this was simple ignorance. Perhaps he got locked into these errors early in his career, and never broke out of them. But a passage from his The Betrayal of the American Right makes me wonder.

Context: Rothbard is talking about his strategy to bring down the welfare state during the McCarthy era:

It was a comfortable alliance of Wall Street, Big Business, Big Unions, and liberal Ivy League intellectuals; it seemed to me that while in the long run this unholy alliance could only be overthrown by educating a new generation of intellectuals, that in the short run the only hope to dislodge this new ruling elite was a populist short circuit. In sum, that there was a vital need to appeal directly to the masses, emotionally, even demagogically, over the heads of the Establishment... (italics original; bold-face mine)
Of course, this hardly proves that Rothbard was playing the demagogue when he railed against central bank independence, or claimed that the Fed shot for high inflation on purpose in order to fund Big Government. But the shoe fits: He admits his willingness to demagogue, and embraced some indefensible views about monetary economics despite his encyclopedic knowledge. Furthermore, Rothbard's populist objections to central bank independence are consistent with his proclivity for bizarre "strategic alliances." If William Greider asked Rothbard to form a left-right alliance against the Fed, Mr. Libertarian might have jumped at the chance.

So what do you think - did Rothbard know better, or not?


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COMMENTS (9 to date)
John V writes:

I gave up trying to fully understand Rothbard. I like him. He's like a funny crazy uncle who makes you nervous when you have guests over.

I think his total and utter hatred for government and his final position that nothing good could come of it got him to believe in the good for anything that could work toward that end.

But yes, his brilliance is undeniable.

I sometimes wonder if hundreds of years of hindsight will prove him mostly 100% right in his goals.

Will he be the fire cracker who had it right?

Alfred writes:

Rothbard although a libertarian was a conservative during parts of his political life. As a young man he was part of the Republican party. (He broke with conservatism when William Buckley entered the scene.) This might explain why an anti-statist on the issue of central bank independence has adopted the view of the right wing Buckley conservatism: Some things are better not left alone.

flix writes:

Of course whether what he said about central banks is true or not is irrelevant?

It's ironic that central bankers seem to forget their own research papers and public statements on money supply and inflation as soon as they get to their positions.

John Snow writes:
Error or Demagoguery?

False dichotomy!

There are other options, including the possibility that he saw further than you and realized that yes, CB independance would reduce inflation for a while, but eventually the Fed would suffer (as so many antitrust agencies) an insider takeover erasing that differential and also, because of reduced transparency, it would then be harder to denounce.

Rimfax writes:

He might have been right about a whole lot of things, but it appears that he didn't know better about demagoguery. See Who Wrote Ron Paul's Newsletters? by Julian Sanchez and David Weigel on January 16, 2008.

cvd writes:

Professor Caplan says that government doesn't print money like Professor Rothbard suggested they would. Instead, Professor Caplan explains that government has found less unpopular ways of inflating the currency.

Fair enough, but I always assumed that Rothbard used the phrase "printing money" rather broadly. You can see that the money supply has been growing rapidly. Who cares what form this growth takes?

Rothbard always seemed to cut to the heart of actions. So, for him, the complicated legal procedures surrounding taxation, for example, didn't change the fundamental nature of the act: theft. I always thought that the same was true for "printing money". Sure, the Fed has found complicated, "acceptable" ways of creating "new" money without printing currency, but the fundamental nature of these new actions is still: printing money.

Bryan Caplan writes:
cvd writes:

Professor Caplan says that government doesn't print money like Professor Rothbard suggested they would. Instead, Professor Caplan explains that government has found less unpopular ways of inflating the currency.

Fair enough, but I always assumed that Rothbard used the phrase "printing money" rather broadly. You can see that the money supply has been growing rapidly. Who cares what form this growth takes?

I wasn't talking about more sophisticated ways of inflating the currency; I was talking about taxation and borrowing. These provide the overwhelming majority of government revenue in the First World.
Travis writes:

John Snow provides some food for thought.

What if Rothbard saw an independent Fed who inflated, but at a lesser rate than politicians simply a prolonging of the inevitable.

Politicians inflate faster, collapse the money faster, and learn from their mistake faster, which is essentially what Rothbard was hoping for.

blejkrajli writes:

Bryan,

With your history of being fair to Rothbard and other Austrians, while still holding them to high standards, I'd be interested in your opinion of Rothbard's work in general. Which book or article of his would be most beneficial for an academic economist to read? For a layperson? On the other hand, which work should have never been written?

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