In praise of Rothbard the economist

It's usual to consider Murray Rothbard as the most eccentric, radical, intolerant, pure kind of Austrian economist, the remotest land to Neoclassicism.

I guess that this view about Rothbard comes from his anarcho-capitalistic political views, sharp tongue, and being author of a rare criticism on Adam Smith in which the otherwise deemed as the father of modern economics and a champion of the free market is left as an "inveterate plagiarist" inconsistent in his defense of laissez-faire. But note that this three "defects" of Rothbard deal with his activities as a political philosopher, agitator, and historian, but none essentially with his capability as an economist.

However, there's just no much of a picture of Rothbard the pure economist. I think that this is because people just don't use to read Rothbard's work on economics, in particular Man, Economy, and State. Why reading a 1441 pages long treatise which is merely a secondhand paraphrase to the original and in any case shorter Human Action?

Well, in order to understand the irreplaceable role of Rothbard in the tradition of the Austrian School in particular and the economic science in general we have to pay attention to Rothbard background in the first place.

Rothbard, at difference of the previous generations of the Austrian school economists, is a born American, natively speaking English, and being originally trained in the tradition of Neoclassical economics. He understands and feels Anglo-American culture and Anglo-American (aka Neoclassical) economics in a way in which no native Austrian could dream of, and which certainly neither Hayek nor Mises master at that level. Rothbard is a natural.

It is only after earning a BA and a MA on economics at Columbia University that he stumbled onto the Austrian school while reading a book by so orthodox authors as George Stigler and Milton Friedman.

He then begins to learn Austrian economics in a passionate, intense and deep way, eventually being guided by the Mises itself. Due to the early stage in which he begins to study under Mises in America (less than six years after Mises migrated) and the intensity of his learning, it can be hardly an exaggeration to call Rothbard the first Austrian economist of the American era of the school. (A few American economists, say Benjamin Anderson, had previously studied in the Austrian school tradition but they had done so in Austria and in a time in which Austrian economics wasn't seen as different of mainstream economics, i.e. before Keynes. They couldn't be bridges since there were no gaps.)

So, what is really Rothbard? If you take seriously Rothbard as an economist and pay no attention to his caustic rhetoric (if there were ten ways of saying something Rothbard was to choose the most upsetting), you're going to discover an originally Neoclassical trained economist then turned into conversant with Austrian economics and you can see all the way his strong Neoclassical influence, from the authors he quote, through the use of graphs, through the examples he uses, through the concepts he uses, through the very analysis he undertakes. Hide the author's name from his Man, Economy, and State and ask someone to guess if the analysis is either Austrian or Neoclassical, and, behold, you bet not anyone is going to be sure or give the same answer than anybody else.

Rothbard is no less than a bridge to teach Austrian economics to Neoclassical trained economists (notwithstanding being an utmost tool to learn economics from scratch). He goes far beyond the translation of Nationalökonomie into Human Action so that Anglo-American students learn Austrian economics. Because Man, Economy, and State is not a translation from German into English. It is a translation from Austrian into Neoclassical. Even more, he at once puts Neoclassical economics into Austrian dress and "Neoclassicalizes" Austrian economics.

Rothbard is a sort of Saint Paul, an apostle to the Gentiles. Because of that plus its neat exposition and Easter-bunny pieces of original contribution, I have no doubt in recommending,at least to the beginner, Man, Economy, and State over Human Action.

In this stage of the Austrian school's evolution, characterized by its being mostly American and flourishing in English language (with a terrific impulse of internet, the great Privatseminar where everybody from Costa Rican proletarians to Harvard mollycoddles can learn and teach), the potential contribution of Rothabard cannot be underestimated.

Clash of titans?

Are Mises's definition of "economics" and Hayek's definition of "market" incompatible with each other? Mises defines economics as the science whose study subject is purposeful behavior. On the other hand, Hayek stresses the fact that a spontaneous order is by itself purposeless, it doesn't have a purpose of its own. Relating these two odeas, one could be led to the perplexing conclusion that economics doesn't deal with the analysis of the spontaneous order of the market. Since this doesn't seem to match common sense or the usefulness of economics, then either Mises or Hayek or both have not the most useful definition of their respective concepts, or the relation above between the definitions of economics and spontaneous order is not the most suitable. I feel that the problem is with Mises.

A-realistic assumptions

Tons of mischief would have been saved in the epistemology of economics had Friedman referred to the a-realism of the assumptions rather than to its unrealism. Friedman's whole point is easily understood and made compatible with, say, praxeological epistemology if you realize that the role of assumptions is to describe only the relevant elements of reality, therefore remaining necessarily silent to the rest of the description of reality. Assumptions can't be fully descriptive. That's the essence of Friedman's. But this feature refers to a lack of conveying information, not to the conveying of false information.

When the assumption of "perfect information" is given, this is just an economic way of saying that no attempt of analysis will be made with the theory to explain the imperfection of information. The assumption is a clause of resignation. Yes, a very coarse, superficial, and ultimately wrong exegesis would state that perfect information is an unrealistic assumption because information isn't really perfect, but the true role of the assumptions is rather a-realistic: to give up the possibility of analyzing the role of the imperfection of information, to abstract the phenomenon to study from informational rough edges, to specialize the theory in certain other problems not related to information. But, what's of the most importance regarding Friedman's conclusions: this resignation is content-meaningful. It's not just irrelevant whether it's a-realistic or not: it is precisely the way in which the very boundaries of the explanatory power of the theory is defined, it alone tells us what for and what not for is the theory! You have to pay close attention to the propositions stated through assumptions because they tell you when can you use the theory. Maybe if we understand this, we can be not so harsh as Hayek when he bitterly criticizes the whole equilibrium analysis (see his "The Use of Knowledge in Society") or when Kirzner does the analogous with the model of perfect competition (in "Competition & Entrepreneurship)".

I think that the true contribution of Friedman can be stated as "the violation of the assumptions of a theory have no appreciable effect on the implications of such a theory". (Compare to page 18 in the original edition of the essay.)

Additionally, even if more implicitly and less frequently quoted, I think that an important contribution of Friedman's essay is the fact that every theory is a construction, a designed, and in this sense, artificial, explanation of reality; that there is no such a thing as a "real" or utopically true explanation beyond the theory.

Economists and the market

You can classify economists into two groups: on the one side, those radicals who believe that the market is the final solution to any economic problem, on the other side, those who don't understand the market.