Power & Market Murray N. Rothbard Cosponsored by the Institute for Humane Studies, Inc., Menlo Power and Market Park, California, and Cato Institute, San Francisco. Government and the Economy Power and Market copyright © 1970 by the Institute for by Humane Studies, Inc. Second edition, copyright © 1977 by the Institute for Humane Studies, Inc. All rights reserved. Printed Murray N. Rothbard in the United States of America. No part of this book may be used or reproduced in any manner whatsoever without written Sheed Andrews and Mcmeel, Inc. permission except in the case of reprints within the context of reviews. For information write Sheed Andrews and McMeel, Subsidiary of Universal Press Syndicate Inc., 6700 Squibb Road, Mission, Kansas 66202. Kansas City ISBN: 0-8362-0750-5 cloth 0-8362-0751-3 paper Library of Congress Catalog Card Number: 70-111536 [p. v] Books by Murray N. Rothbard The Panic of 1819 Man, Economy, and State America’s Great Depression For a New Liberty Conceived in Liberty 1 Power & Market Murray N. Rothbard discussed this concept have not bothered to justify the existence of taxation Preface itself. The search for a tax “neutral” to the market is also seen to be a hopeless This book emerges out of a comprehensive treatise on economics that I chimera. wrote several years ago, Man, Economy, and State (2 vols., Van Nostrand, In addition, this book sets forth a typology of government intervention, 1962). That book was designed to offer an economic analysis of Crusoe classifying different forms as autistic, binary, or triangular. In the analysis of economics, the free market, and of violent intervention—empirically, by triangular intervention in Chapter 3, particular attention is paid to the government almost ex clusively. For various reasons, the economic analysis of government as an indirect dispenser of grants of monopoly or monopolistic government intervention could only be presented in condensed and truncated privilege, and numerous kinds of intervention, almost never considered as forms form in the final, published volume. The present book serves to fill a of monopoly, are examined from this point of view. long-standing gap by presenting an extensive, revised and updated analysis of More space than is usual nowadays is devoted to a critique of Henry violent intervention in the economy. George’s proposal for a “single tax” on ground rent. Although this doctrine is, in Furthermore, this book discusses a problem that the published version of my view, totally fallacious, the Georgists are correct in noting that their Man, Economy, and State necessarily had to leave in the dark: the role of important claims and arguments are never mentioned, much less refuted, in protection agencies in a purely free-market economy. The problem of how the current works, while at the same time many texts silently incorporate Georgist purely free- market economy would enforce the rights of person and property concepts. A detailed critique of Georgist tax theory has been long overdue. against violent aggression was not faced there, and the book simply assumed, In recent years, economists such as Anthony Downs, James Buchanan, as a theoretical model, that no one in the free market would act to aggress and Gordon Tullock (many of them members of the “Chicago School” of against the person or property of his fellowmen. Clearly it is unsatisfactory to economics) have brought economic analysis to bear on the actions of leave the problem in such a state, for how would a purely free society deal with government and of democracy. But they have, in my view, taken a totally the problem of defending person and property from violent attacks? wrong turn in regarding government as simply another instrument of social Virtually all writers on political economy have rather hastily and a priori action, very much akin to action on the free market. Thus, this school of [p. assumed that a free market simply cannot provide defense or enforcement vii] writers assimilates State and market action by seeing little or no difference services and that therefore some form of coercive-monopoly governmental between them. My view is virtually the reverse, for I regard government action intervention and aggression must be superimposed upon the market in order to and voluntary market action as diametric opposites, the former necessarily provide [p. vi] such defense services. But the first chapter of the present book involving violence, aggression, and exploitation, and the latter being necessarily argues that defense and enforcement could be supplied, like all other services, harmonious, peaceful, and mutually beneficial for all. Similarly, my own by the free market and that therefore no government action is necessary, even discussion of democracy in Chapter 5 is a critique of some of the fallacies of in this area. Hence, this is the first analysis of the economics of government to democratic theory rather than the usual, implicit or explicit, naive celebration of argue that no provision of goods or services requires the existence of the virtues of democratic government. government. For this reason, the very existence of taxation and the government I believe it essential for economists, when they advocate public policy, to budget is considered an act of intervention into the free market, and the set forth and discuss their own ethical concepts instead of slipping them ad hoc consequences of such intervention are examined. Part of the economic analysis and unsupported, into their argument, as is so often done. Chapter 6 presents a of taxation in Chapter 4 is devoted to a thorough critique of the very concept detailed discussion of various ethical criticisms often raised against the free- of”justice” in taxation, and it is argued that economists who have blithely market economy and the free society. Although I believe that everyone, 2 Power & Market Murray N. Rothbard including the economist, should base his advocacy of public policies on an ethical system, Chapter 6 remains within the Wertfrei praxeological framework Contents by engaging in a strictly logical critique of anti-free-market ethics rather than Preface v trying to set forth a particular system of political ethics. The latter I hope to do Chapter in a future work. 1 Defense Services on the Free Market 1 The discussion throughout the book is largely theoretical. No attempt has been made to enumerate the institutional examples of government intervention 2 Fundamentals of Intervention 10 in the world today, an attempt that would, of course, require all too many 1. Types of Intervention 10 volumes. 2. Direct Effects of Intervention on Utility 13 a. Intervention and Conflict 13 Murray N. Rothbard b. Democracy and the Voluntary 16 New York, N.Y. c. Utility and Resistance to Invasion 17 July, 1969 [p. ix] d. The Argument from Envy 18 Acknowledgments e. Utility Ex Post 18 3 Triangular Intervention 24 In the broadest sense, this book owes a great intellectual debt to that hardy 1. Price Control 24 band of theorists who saw deeply into the essential nature of the State, and 2. Product Control: Prohibition 34 especially to that small fraction of these men who began to demonstrate how a 3. Product Control: Grant of Monopolistic Privilege 37 totally free, Stateless market might operate successfully. Here I might mention, a. Compulsory Cartels 41 in particular, Gustave de Molinari and Benjamin R. Tucker. b. Licenses 42 Coming more directly to the book itself, it would never have seen the light c. Standards of Quality and Safety 43 of day without the unflagging support and enthusiasm of Dr. F. A. Harper, d. Tariffs 47 President of the Institute for Humane Studies. Dr. Harper also read the e. Immigr ation Restrictions 52 manuscript and offered valuable comments and suggestions, as did Charles L. f. Child Labor Laws 55 Dickinson, Vice President of the Institute. Their colleague, Kenneth S. g. Conscription 56 Templeton, Jr., supervised the final stages and the publication of the work, read h. Minimum Wage Laws and Compulsory Unionism 56 the entire manuscript, and made important suggestions for improvement. i. Subsidies to Unemployment 57 Professor Robert L. Cunningham of the University of San Francisco offered a j. Penalties on Market Forms 58 detailed and provocative critique of the manuscript. Arthur Goddard edited the k. Antitrust Laws 59 book with his usual high competence and thoroughness and also offered l. Outlawing Basing-Point Pricing 63 [p. xii] valuable criticisms of the manuscript. Finally, I am grateful to the continuing m. Conservation Laws 63 and devoted interest of Charles G. Koch of Wichita, Kansas, whose dedication n. Patents 71 to inquiry into the field of liberty is all too rare in the present day. o. Franchises and “Public Utilities” 75 None of these men, of course, can be held responsible for the final p. The Right of Eminent Domain 76 product; that responsibility is wholly my own. [p. xi] q. Bribery of Government Officials 77 3 Power & Market Murray N. Rothbard r. Policy Toward Monopoly 79 (b) The Justice of the Standard 147 Appendix A. On Private Coinage 80 (3) Sacrifice Theory 149 Appendix B. Coercion and Lebensraum 81 (4) The Benefit Principle 153 4 Binary Intervention: Taxation 83 (5) The Equal Tax and the Cost Principle 158 1. Introduction: Government Revenues and Expenditures 83 (6) Taxa tion “For Revenue Only” 161 2. The Burdens and Benefits of Taxation and Expenditures 84 (7) The Neutral Tax: A Summary 161 3. The Incidence and Effects of Taxation, Part I: Taxes on Incomes d. Voluntary Contributions to Government 162 88 5 Binary Intervention: Government Expenditures 168 a. The General Sales Tax and the Laws of Incidence 88 1. Government Subsidies: Transfer Payments 169 b. Partial Excise Taxes; Other Production Taxes 93 2.