I won’t confess everything, but I will admit that I was once a great fan of Murray Rothbard (1926-1995), the economist who was nicknamed “Mr. Libertarian.” I was reminded of that when I saw him mentioned in a Financial Times column a few days ago: Jonathan Derbyshire, “Libertarianism Is Having a Moment With Argentina’s Milei,” August 31, 2023.
The column focuses on Javier Milei, who is the favorite to win the upcoming presidential election in Argentina (see also “Argentina Could Get Its First Libertarian President,” The Economist, January 14, 2023). Milei, who defines himself as an anarcho-capitalist à la Rothbard, is a fan of the latter and named one of his dogs after him. The fact that Milei is apparently also a fan of Donald Trump does not bode well for the future. The Financial Times columnist does get Trump’s anti-libertarianism right, albeit not to its full extent. But he is wrong in suggesting that Republican primaries candidate Vivek Ramaswamy could (or, at any rate, should) be embraced by the libertarian movement. Anti-libertarians have been elected before Trump, but this is not an excuse for libertarians to compete down to the bottom of the barrel. If we are to believe The Economist, many of Mr. Milei’s political allies are not exactly paragons of libertarianism either. I do think that libertarianism and classical liberalism should be a big tent, but there is a limit somewhere.
Rothbard’s system had an apparent advantage, which was also its big defect: it had an obvious, definitive, quasi-religious answer to any and all questions. I was bothered by some of his claims, like the right of a child to run away from home whenever he wants to because he is thereby asserting his natural right of self-ownership (The Ethics of Liberty, p. 102). I also had doubts about his economics, although it took me some time to recognize their significance. He had a deep distaste for, or fear of, anything that looked like mathematics. He did not realize that, as J. Williard Gibbs said, mathematics is a language. He did not see the relationship between mathematics and logic. For instance, he could not understand that his supposedly ordinal “marginal utility” is mathematically impossible if utility is ordinal (that is, just a ranking as opposed to a cardinal measure). It makes no sense to chop an ordinal value into identifiable (uniquely defined) marginal pieces. So he was unknowingly using a concept of cardinal utility.
What Rothbard was missing had been explained by John Hicks (a future Nobel economics laureate) and Roy Allen in two famous 1934 Economica articles, “A Reconsideration of the Theory of Value.” Hicks and Allen formalized an ordinal theory of utility, which Irving Fisher, Vilfredo Pareto, and perhaps other economists had already postulated but not exactly specified. As Hicks and Allen put it, “if total utility is not quantitatively definable, neither is marginal utility.” Lionel Robbins, who represented a mix of the Austrian and neoclassical schools of economics, mentioned Hicks and Allen’s advance in the 1935 edition of his Essay on the Nature of Significance of Economic Science.
Changing one’s opinion for good reasons is not a cardinal sin.
Sometime around the turn of the millennium, I asked Anthony de Jasay, who described himself as a liberal and an anarchist, why he did not use the anarcho-capitalist label. He answered, “I do not wish to be counted as one of that company,” or perhaps simply “I don’t like the company.” (Although I quoted the first sentence elsewhere, the latter also hangs in my memory. I should have written it down at the time.) I think Tony’s statement was meant as a criticism of the Rothbardian sort of anarcho-capitalism.
Let’s hope Mr. Milei wins the election in October and does not oblige libertarians all over the world to walk back their support or, worse, lead them to Trumpianize the libertarian movement.
READER COMMENTS
Richard W Fulmer
Sep 7 2023 at 11:51am
Doesn’t ordinal utility mean that, while I might subjectively prefer A to B, I cannot quantify that preference? If that’s correct, then doesn’t the assumption of ordinal utility preclude the possibility of cutting ordinal value into identifiable marginal pieces?
Pierre Lemieux
Sep 7 2023 at 12:23pm
Richard: You are correct. What you say is what I wanted to say. My sentence was not clear, and I just changed it. (A charitable interpretation is that I was trying to be too concise about a complicated matter and that it was too early in the morning to try to do such a thing.) Thanks for the criticism.
Richard W Fulmer
Sep 7 2023 at 12:55pm
Thanks for the explanation. If I understand correctly, you’re saying that it was Rothbard who held the two mutually exclusive beliefs: (1) marginal utility is ordinal and (2), marginal utility can be divided into identifiable pieces.
Pierre Lemieux
Sep 7 2023 at 1:21pm
Richard: “Marginal” comes out as a part of “total.” The two contradictory beliefs are: 1) Total utility is ordinal; 2) marginal utility (an increase or decrease in total utility) has a theoretically defined and unique value (for instance, you can say that it is decreasing or increasing).
If you have three things that are ordinally ranked as 1st, 2nd, and 3rd (or, by definition of ordinal, you could as well use the index: 100, 150, and 500), you cannot meaningfully say that the marginal increase between the 2nd and 3rd has a value of 1; nor can you say that it has a value of 350.
Knut P. Heen
Sep 8 2023 at 12:12pm
Gossen’s second law implies that marginal utility is cardinal. It is impossible to compare prices if you cannot compare marginal utilities. The consumer must know exactly how much he prefers potato to tomato before he can decide how much tomato he is willing to give up for potato.
Pierre Lemieux
Sep 9 2023 at 10:42am
Knut: That is not correct. That’s what economists thought before the 1930s, for lack of proper analytical tools. Read the Hicks-Allen article I linked to above, or else a good microeconomics text.
Craig
Sep 7 2023 at 1:06pm
Professor: “why he did not use the anarcho-capitalist label[?]”
I might suggest he took a marketing class or two?
‘ABC’ – Always Be Closing.
Maybe labels shouldn’t matter and maybe people shouldn’t judge a book by its cover, right? Perhaps, but go to the grocery store and tell me trade dress doesn’t matter? It does.
Remember, first place in the sales contest gets a Cadillac, second place gets a set of steak knives. And I am pretty sure the guy who comes in third gets fired.
Pierre Lemieux
Sep 7 2023 at 1:39pm
Craig: Perhaps you are saying the same thing as de Jasay was (I think) trying to suggest: one should not label one’s theory “QAnon” even if, and a fortiori if, it is an improved version of QAnon. (My apologies to Rothbard, who was of course at another level than QAnon; I am sure Tony would agree with that.)
Second, I am not sure I follow you after your first two paragraphs. (For parables, I know only one guy who could beat you; he lived 2,000 years ago.) Remember that de Jasay did not sell his wares in a Dollar store. With complex and non-intuitive arguments, he was trying to persuade his readers that anarchism and (classical-) liberalism were the solution to the problems raised by the state. I am not sure anyway that “anarchist” sells better than “anarcho-capitalist.”
Craig
Sep 7 2023 at 3:21pm
“Craig: Perhaps you are saying the same thing as de Jasay was (I think) ”
Yes
“I am not sure anyway that “anarchist” sells better than “anarcho-capitalist.”
Anything with anarch* is not going to work very well.
Craig
Sep 7 2023 at 3:25pm
“Remember that de Jasay did not sell his wares in a Dollar store. ”
Its a shame he hadn’t, perhaps America would be a better place if everybody could’ve read him at FD or DG!
john hare
Sep 7 2023 at 5:57pm
In the workplace when getting points across parables are often the best way. Not everyone knows the true version and often is not interested in learning.
There are those on the job that always think there should be more people per task. An explanation about how wages are tied to productivity is a waste of breath most of the time. So I explain it this way. “there’s only one pot of gravy on each job, and the more biscuits that are on the job, the less gravy for each biscuit, And I Like A lot of Gravy on My Biscuit.” Somehow that seems to get through.
David Seltzer
Sep 7 2023 at 6:52pm
John, “there’s only one pot of gravy on each job, and the more biscuits that are on the job, the less gravy for each biscuit, And I Like A lot of Gravy on My Biscuit.” Love it!! The Walmart model in real time. Several self-checkout machines and two expeditors to help with issues that slow the checkout process.
Pierre Lemieux
Sep 8 2023 at 11:00am
David (and John): What the economist would want to know is why there is so much money left on the table (of Walmart, for example) and nobody is grabbing it. Perhaps there is not.
Craig
Sep 8 2023 at 12:04pm
Walmart is a high volume/low margin business of course, but nevertheless since when are buyers in the habit of telling sellers that they would’ve paid more for something? Whether I am buying a car, a house, or somebody’s labor, I make it a point to suggest the price really could be lower, even if I’m actually willing to pay more [if I pay cash can you sharpen your pencil?]. I never let anybody know that they gave me a really good deal.
Mactoul
Sep 7 2023 at 9:04pm
I am unclear why Trump should be singled out as anti-libertarian since by libertarian standards, all mainstream politics is anti-libertarian (because libertarianism itself is denial of politics) .
Especially since Trump administration is credited with more deregulation than any other recent administration.
Also unclear about the multiple conjunctions of political philosophies– libertarianism and classic liberalism, anarchism and classic liberalism.
Why is it necessary to raise status of libertarianism and anarchism by associating them with classic liberalism?
Jon Murphy
Sep 7 2023 at 11:04pm
Because that’s the contradiction brought up in the character of Melei.
Pierre Lemieux
Sep 8 2023 at 1:15pm
Mactoul: You write:
It is as clear as anything can be. For Trump, anything is subject to political choice (as opposed to individual choice), including at what terms an American may import a doll from China or aluminum from Europe. Please see my TIR article on populism. Even the old classical-liberal have no interface with Trump. And to see how Trump at best presided over a plateauing of federal regulation, see QuantGov.org. See also my forthcoming (Fall) Regulation article on “Bidenonomics.”
Mactoul
Sep 8 2023 at 8:52pm
But this is true for all politicians and have been so forever. Trump didn’t invent tariff and trade sanctions, did he?
Mactoul
Sep 8 2023 at 11:02pm
Plateau in regulation?
No mean achievement in my opinion.
When was it last achieved?
Monte
Sep 8 2023 at 1:02am
His distaste for mathematical economics was almost pathological, as was his animus towards mainstream economics and economists of the non-praxeological persuasion. Rothbard alienated many of his colleagues and, as a result, was marginalized by the profession and led what has been described as a “fringe existence in academia.”
In his defense, math has become too ubiquitous in economics. It has become its master, not its servant, to paraphrase Krugman. The spontaneous order of a free market economy cannot be loaded into the breach of mathematical equations to produce solutions to the efficient allocation of resources. Deirdre McCloskey, in this piece, did a wonderful job of characterizing the abuse of mathematics in economics. To wit:
Starchild
Sep 8 2023 at 6:02am
Non-aggression is the heart of libertarianism, and anarchy the approach most consistent with it: Governments must commit aggression to retain the characteristics that make them governments (The Law™, having a monopoly on the initiation of force within a given territory, etc.). But I believe the path to sustainable anarchism clearly leads through limited government; that only after having a chance to grow more robust in a classical liberal society will the voluntary sector be healthy and strong enough for anarchy to flourish.
steve
Sep 8 2023 at 8:48am
One of my oldest friends is/was an anarcho-capitlaist who got me to read some Rothbard. A lot fo it was interesting but the extremes that you mentioned made me think he was nuts. The child think was just weird, like the old arguments about whether it was OK to sell yourself into slavery, but the math thing really cemented it for me.
Steve
David Gordon
Sep 10 2023 at 2:07pm
Murray Rothbard was well of Hicks-Allen utility theory and has a detailed criticism of it in his Toward a Reconstruction of Utility and Welfare Economics.” Here is a link to the relevant section: https://mises.org/library/toward-reconstruction-utility-and-welfare-economics-1/html/c/53
Rothbard’s criticisms of the use of math in economic theory weren’t the product of ignorance. He majored in math as as undergraduate at Columbia. He was especially interested in set theory.
Pierre Lemieux
Sep 10 2023 at 6:01pm
David: Thanks for your comment and for mentioning this Rothbard article, which I read twice over several decades. (I am surprised I cannot find, on my bookshelf, my physical copy, which was, I think, an offprint published perhaps by IHS.) I will read it again at the first opportunity, but I just looked up the section “Ordinal Marginal Utility and ‘Total Utility’,” which indeed mentions Hicks and Allen. I had forgotten this, but I recall that Rothbard’s confusion on utility theory was a big part of my original doubts about Rothbard, and this at the time I was a fan of him. He simply did not understand Hicks and Allen, as he did not understand indifference curves, which are the graphical representation of an ordinal utility function unique to a monotonic transformation. Consequently, he did not understand that he was himself still using cardinal utility. No wonder he had no credibility among economists.
It is difficult to believe that Rothbard majored in math, because what I just mentioned is not difficult to understand. (I read somewhere that he took one class of statistical theory and ran away as he had seen Satan in person; I might be wrong on that memory.) But he did want very much to believe—with my apologies to an idol of my youth!
Jim Glass
Sep 10 2023 at 11:50pm
Rothbard’s system …had an obvious, definitive, nearly religious answer to any and all questions. I was bothered by some of his claims, like the right of a child to run away from home whenever he wants…
You are very kind to Murray. He said a lot worse. E.g.: Fractional reserve banking is “fraud” and thus should be illegal because, by the irresistible power of his logic: 1) the free market is always right, & 2) fractional reserve banking is bad, only 100% reserve banking is good — yet somehow 3) the free market has always chosen fractional reserve banking over 100% reserve banking!!! How can this be possible??? Clearly, the only possible explanation is that fraud prevents market participants from realizing their banks aren’t operating with 100% reserves and are loaning out deposits. QED.
Thus Murray, to prove himself right, like Big Brother, went all Orwellian Ministry of Truth, to change the meaning of words. “Fraud” definitionally requires ‘willful deception to hide the truth’. That bank deposits are loaned out is stated in bank customer agreements, in pamphlets distributed by the Fed in banks of his time, and was famously proclaimed by George Bailey to all America via Hollywood. But … fraud! fraud! He used his power of pure reason like that a lot.
Like when he declared the only justifiable war in all American history was the South’s side of the Civil War. Yup, an anti-war libertarian proclaimed the only just war ever fought was the one with the goal to establish the first state in world history that proudly had a written constitution basing its existence on race slavery!
I always preferred Hayek.
Pierre Lemieux
Sep 11 2023 at 8:28am
Jim: I basically agree with you. Friedrich Hayek was one of the great thinkers of the 20th century. About American history, I would recommend Jeffrey Hummel’s Emancipating Slaves, Enslaving Free Men: A History of the American Civil War.
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