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David Friedman on Rothbard

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Bardock Posted: Mon, Jun 20 2011 8:23 AM

I found this post on David Friedman's blog to be interesting:

 

A correspondent points me at an old piece by Murray Rothbard criticizing me for my failure to hate the state, and asks for comment.
 
Rothbard's basic point is correct. I do not regard support for government as an act of willful evil but as an intellectual mistake; my arguments (and his) could be wrong, and some sort of government might be the least bad alternative among available human institutions. And even if we are correct, it is not unreasonable for other people to think we are not, as lots of intelligent people I know do.
 
The flip side of that is that I think one consequence of his attitude was to make him willing to be deliberately dishonest in his arguments—all being fair in war. That included being dishonest in the arguments he made to fellow libertarians.

My standard example was an exchange long ago, after a talk of his in which he claimed that Reagan did not really cut government and offered as evidence the increase in the nominal federal budget. I pointed out that, while his conclusion might for all I knew be true, his evidence combined whatever growth had occurred in the real size of the federal government with the effect of inflation over the period.

His response was that that was all right; because Reagan was responsible for the inflation, it was appropriate to use it to make his performance look worse. Think that through and he was saying that it was all right to misrepresent the evidence to his fellow libertarians as long as the result was to make them think badly of someone they should think badly of, to lead them to the correct conclusion for the wrong reason. I don't regard that as a desirable approach to political (or other discussion). Or, for that matter, a libertarian one—we are generally opposed to fraud as well as force.
 
I've written at some length online in the past on what I consider Rothbard's dishonesty with regard to economic history, in particular his misrepresentation of Smith (unfavorable) and his French contemporaries (favorable); see this old post for examples and further links. And there have been other examples. Murray was bright, articulate, and could be charming, but I don't think he could be trusted.
 

Labels: 

Thoughts?

 

http://www.youtube.com/watch?v=lteLWtfdbeM&feature=related
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James replied on Mon, Jun 20 2011 9:25 AM

Why does it matter how the government grew?  Even if Reagan himself would have admitted that he wasn't factoring in inflation when he claimed to be cutting back the government, it's still a lie to say that the government is being cut back when it isn't.  If inflation wipes out the effect of the tax cuts, it's lying BS to claim that they mean anything.  Why should one accept false parameters for judging whether or not government has grown?

Rothbard wasn't being deceptive, the state was being deceptive, and Friedman is being deceptive if he is implying that perpetual inflation is just an elegant inevitability of life and not a malevolent feature of the government fiat system, which he obviously doesn't believe.

Hard as it may be for Professor Friedman to accept, a slave who doesn't hate his bondage is more untrustworthy vis-a-vis his fellow slaves than one who does.

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Rothbard's hate yer state position is kind of...just a belief or taste.  Either he has to demonstrate that hating the state is the objectively correct value to hold or he has to show why hating the state is beneficial to the libertarian position.  But what he ends up doing is asserting over and over again that  people should hate the state, without ever explaining why.

I don't know if Friedman's anecdote about the Reagan conversation is all true or mostly true, but either way it falls in line with how Rothbard presents himself in his own article:  it is more important to hate the state than to be right.

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Nielsio replied on Mon, Jun 20 2011 9:53 AM

"Don't trust Rothbard because Rothbard doesn't trust the government saying that they cut the government."

 

Does he really believe Rothbard irrationally hated the state and was making up things to make the state look worse than it is? He really thinks we need to make up things to make the state look evil?

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Em_ptySkin replied on Mon, Jun 20 2011 10:12 AM

Rothbard makes sooooooooo many cases against the State.  To say that he was irrational in that belief is absurd.  Anyone have a copy of 'Egalitarianism as a revolt against nature'?  The nature of the state is to dominate, it is prefectly rational to not want to be dominated in all of the ways that the state has the power to do.

 

David Friedman is an apologist and a fake anarchist.  He does what Milton and glenn beck do and that is obfuscate a principled position on the matter.

 

Can we call Milton Friedman a libertarian?  No.  Libertarians, in PRINCIPLE, would never, when working in the War Dept. of the Treasury, scheme ways to take larger amounts of taxes so the government can build the a-bomb while trying to hide the true amount of money being taken through withholding.

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James replied on Mon, Jun 20 2011 10:22 AM

Either he has to demonstrate that hating the state is the objectively correct value to hold

Lol.

or he has to show why hating the state is beneficial to the libertarian position.

Ok, let's stop pissing in the wind and have a look at who has moved more books, who is famous, who is a libertarian icon and who is an anticlimactic nothing by comparison, whose name is a legend, and whose name is confused with a much more famous monetarist hack.

Do you think anyone wants to hear the argument, "Sure, we're slaves, and it is kinda silly, but our masters really do want what's best for us, and I bet if we ask them really nicely..."

How many libertarians would there be today if it had all been up to Professor David Friedman's gutless sophistries?

I don't want to be mean, but he is throwing sour grapes at a dead man, after all.

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Em_ptySkin replied on Mon, Jun 20 2011 10:37 AM

He throws sour grapes at a dead man because he has no class.

 

"Let's all stand here and call Jefferson a racist!  That's all he ever thought about was how to rape and enslave, right?"

 

Rothbard is a personal hero of mine.  Along with Ron Paul and Thomas Jefferson.

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Ok, let's stop pissing in the wind and have a look at who has moved more books, who is famous, who is a libertarian icon and who is an anticlimactic nothing by comparison, whose name is a legend, and whose name is confused with a much more famous monetarist hack.

Cool.  Rothbard is more popular and is more appealing to the general libertarian populace than David Friedman.  And Milton Friedman is more famous than Rothbard. 

Do you think anyone wants to hear the argument, "Sure, we're slaves, and it is kinda silly, but our masters really do want what's best for us, and I bet if we ask them really nicely..."

How many libertarians would there be today if it had all been up to Professor David Friedman's gutless sophistries?

Who's position is that?

Friedman's response to Rothbard's criticism isn't that we should love the state or work with it, but that the hate yer state attitude that Rothbard promoted was promoted to the extent that it was primary over other values like honesty or good science. 

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Jacob and James,

David Friedman, in addition to being a brilliant mind and an important anarcho-libertarian theorist (whatever the disposition of his "gut" or his propensity toward hatred may be), is a helpful and informative member of the Mises Community forums.  So tone it down.

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Em_ptySkin replied on Mon, Jun 20 2011 11:06 AM

awww i don't want to hurt anyone's feelings.

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James replied on Mon, Jun 20 2011 11:50 AM

I'm sure Professor Friedman isn't going to be perturbed by what silly young students like us think about him.  If he is nothing compared to Rothbard, we are much less than nothing. :-) 

Who's position is that?

Friedman's response to Rothbard's criticism isn't that we should love the state or work with it, but that the hate yer state attitude that Rothbard promoted was promoted to the extent that it was primary over other values like honesty or good science.

You may have to read beyond that blog post to get an idea of his theories, but he has this ridiculous idea that government can be incrementally rolled back using only perfect scientific arguments-from-effect.  You know, as if the guys running the show haven't realised that they're our owners, and that slave-owners don't typically give a damn about slavery being an inherently inefficient system based on a utilitarian cost-benefit analyses from the POV of society at large.

I can't help but feel that he can't tell the difference between a human being and a physical object, and that he cannot accept that the state is not merely an inefficient imperfection, but that it is conceptually and fundamentally evil by design.

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He's right. Rothbard was the same way about Israel.

Bottom line, there is no Santa Claus.

Read Rothbard for what he has to offer, ignore the dross, watch your back.

[Waits for storm to begin].

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You may have to read beyond that blog post to get an idea of his theories, but he has this ridiculous idea that government can be incrementally rolled back using only perfect scientific arguments-from-effect.  You know, as if the guys running the show haven't realised that they're our owners, and that slave-owners don't typically give a damn about slavery being an inherently inefficient system based on a utilitarian cost-benefit analyses from the POV of society at large.

To be honest, I haven't read much of anything from Friedman but I don't see the problem in the view you've presented.  There is nothing inherently ridiculous in advocating piece-meal reform over abolition, especially if it is unclear if the abolitionist effort would yield the results that they desire.

Plus, your analogy of government to slave holders is too simplistic.  If it can be demonstrated to the average man that liberal policies will benefit him, then its reasonable to turn the politician and say "your constituants want you to liberalize x, it will help your political career if you do so."  Slave holders aren't subject to electoral politics.

Also, if an appeal to cause-and-effect analyses and utilitarianism -is- unable to convince either the state leaders or the people who elect state leaders to adopt anarcho-capitalism, what reason is there to believe that calling them immoral will do the task? 

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Jacob:
Rothbard makes sooooooooo many cases against the State.  To say that he was irrational in that belief is absurd

He didn't say it was an irrational belief. Nielsio brought in the word irrational when restating Friedman's opinion of Rothbard, but Friedman himself did not say that.

I guess this whole 'honesty' thing is hard to get.

Jacob:
David Friedman is an apologist and a fake anarchist.

He is a scientist. And what does a "fake anarchist" even mean?

Jacob:
He does what Milton and glenn beck do and that is obfuscate a principled position on the matter.

Is it "obfuscating a principle" or trying to remain honest and precise in one's arguments? His point is that Rothbard's "principles" led Rothbard to be less than truthful and manipulate his audience, because the ends justify the means (a principle Rothbard nominally rejected).

"People kill each other for prophetic certainties, hardly for falsifiable hypotheses." - Peter Berger
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Clayton replied on Mon, Jun 20 2011 2:01 PM

I'm with Daniel James Sanchez on this. Friedman is definitely one of the good guys and his work stands on its own merit. He's contributed many original ideas and methods of thinking to the debate over the State. And, at the end of the day, he is frankly anti-state... he just merely disagrees with Rothbard on how viscerally the case against the State should be made. That said, I am with Rothbard on this particular point - the State is not just a bad idea, it is evil and digusting. I think the difference between Rothbard's visceral anti-statism and Friedman's clinical anti-statism is one of personal experience and empathy. Anyone who has been drug through the machinery of the State cannot but help hating it. Almost all of the people who are victimized by the churning gears of the State apparatus cannot formulate what is wrong with the State (dual morality, monopoly on law/security, coercive collection of revenues) but they know that what they have experienced is an encounter with evil, in the same sense that being mugged is an encounter with evil. Those who have never experienced the under-belly of the State or don't have any friends or family who have, or who simply are not interested in the empathic aspect of the case against the State will, like David Friedman, take a more clinical approach. However "evil" the State may be, it is an outworking of human action and the best approach - in this view - is not to let yourself take it personally and end up incidentally discrediting yourself in a moment of passion. While I take the visceral approach, I can see redeeming value in both approaches.

I'm actually dismayed by the disagreement between Rothbard and Friedman. When I read Rothbard, I see that he was honest and viscerally anti-state. I find it dismaying that Friedman suggests Rothbard was dishonest. Perhaps Rothbard was too sweeping or not rigorous enough because of his gut hatred of the State. Perhaps. But he was definitely not characteristically dishonest. And Rothbard's questioning of Friedman's sincerity was also definitely unnecessary. Friedman has been following the same lines of research for decades into the economic and legal arguments against the State through his research on alternative law systems, and so on. So Friedman doesn't feel it in his gut (or, at least, he doesn't tell us that he does)? He's still one of the good guys and I just find the whole Rothbard/Friedman disagreement dismaying. I'm like the child of divorced parents... I love them both and I just wish they could have loved each other.

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Eugene replied on Mon, Jun 20 2011 2:07 PM

Rothbard is a genius, but he is arrogant, I like David Friedman more. You simply can't be as arrogant as to think everyone who doesn't think like you is a evil or stupid. A state is a realistic option, and as long as we don't try anarchy we wouldn't know if state is trully a worse option.

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Clayton replied on Mon, Jun 20 2011 2:13 PM

@Eugene: Actually, I think the case for the State will be viewed centuries from now as worse than the case for a Universal Religion (State church), which we laugh at today. I think there's a great deal in common between the superstitious conviction that we need a church in order to "find salvation" and the superstitious conviction that we need a State in order to "be orderly and safe."

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Excellent point Clayton.  You're a genius:)

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Eugene replied on Mon, Jun 20 2011 2:35 PM

Either you are right, or you are wrong, and the state is a necessary evil. Socialists also thought capitalist will be viewed as stupid and evil as state church, but they were wrong. So who can really tell? We need to have some humility.

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James replied on Mon, Jun 20 2011 2:40 PM

There is nothing inherently ridiculous in advocating piece-meal reform over abolition, especially if it is unclear if the abolitionist effort would yield the results that they desire.

You mean the formation of a new state even worse than the last?  Abolition of the state is only possible when a large majority of people no longer believe in the state as a useful, morally neutral or appropriate mechanism for implementing the 'public will'.

By contrast, imagine that they merely believe that the state is inefficient and unnecessary, and don't have strong opinions one way or the other about its moral nature as an institution.  Unlike an ethical judgement, which every non-sociopathic person can make for themselves, the majority of people have to take something like that on faith from the expert economists, because they do not feel qualified to make a complex judgement about the macroeconomy for themselves.  If they aren't happy with the political situation four years down the line, it's really easy for them to come to believe that what that expert economist told them was bogus, because economists usually talk nonsense as far as they're concerned, and now some new politician is saying they can get all sorts of wonderful things by expanding the state's power in such-and-such a fashion.  After all, that one economist was just incorrect, as most economists end up being about their predictions.  Turns out there's nothing wrong with making the state bigger, and hey, all sorts of good things are going to be done by expanding the state.

If people no longer believe in the state, I'm inclined to wonder why they'd bother voting to do away with it.

Plus, your analogy of government to slave holders is too simplistic.  If it can be demonstrated to the average man that liberal policies will benefit him, then its reasonable to turn the politician and say "your constituants want you to liberalize x, it will help your political career if you do so."  Slave holders aren't subject to electoral politics.

Electoral politics is a bit of a charade and a ritual in real life, though, isn't it?

They do, however, need the consent of the governed, as the governed vastly outnumber them.  Every government, democratic in style or not, needs the consent of the governed for this reason.  It doesn't mean it isn't slavery - just that the slaveowners are vastly outnumbered by their slaves, such that they must employ more than just brute force to keep control.

What is it that they employ in addition to brute force?  It's the social conditioning, or whatever you want to call it, that when they tax, it isn't stealing, when they kill it isn't murder etc.  Everyone who is a part of society hates those crimes, unless the state casts its spell over them.

Obviously you aren't going to convince the slaveowners that they're evil, or bother trying, but if you convince all the billions of slaves that they are, what do you think is going to happen?  Do you think the government, which requires the consent of the governed, is going to last very long?

Convince people to withhold consent.  They will do so if they think the state is evil - not merely a particular government or administration, but the state as an institution and a concept generally.  If some economist tells them its merely inefficient, they can't really "know" for themselves unless they're also an economist who happens to be from the same school of economics. :p 

Obviously economists, and concerned scholars generally, need to know that the economy works just fine without a state, but people who are not economists need something more than the faith of these experts to go on.  Otherwise they will change their minds when things don't go their way, for whatever reason, and consent to be governed by expansionists instead.

If you leave the idea alive that people can ethically use this thing called the government to do whatever they desire, don't think that they won't use it just because you've got an economic theorem on a blackboard that you say proves them foolish.

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Clayton:
That said, I am with Rothbard on this particular point - the State is not just a bad idea, it is evil and digusting. I think the difference between Rothbard's visceral anti-statism and Friedman's clinical anti-statism is one of personal experience and empathy. Anyone who has been drug through the machinery of the State cannot but help hating it.

This illustrates how subjective the whole thing is though, which I think is to Rothbard's detriment.  If hating the state is a matter of taste, then getting on Friedman's (or anybody elses) case about not hating the state is ludicrous.  I've been arrested for a crime I never commited, so I hate the state as much as anyone else.  But that doesn't make a case as to why the state is evil or why anyone should agree with me.

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James replied on Mon, Jun 20 2011 3:08 PM

You're not arrogant for thinking that you're allowed to have ethical stances; you're arrogant for thinking that you can do without them.

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Coase replied on Mon, Jun 20 2011 3:10 PM

Some might say that lying is unethical.

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James:
You mean the formation of a new state even worse than the last?  Abolition of the state is only possible when a large majority of people no longer believe in the state as a useful, morally neutral or appropriate mechanism for implementing the 'public will'.

We agree here.

By contrast, imagine that they merely believe that the state is just inefficient and unnecessary, and don't have strong opinions one way or the other about its moral nature as an institution.  Unlike an ethical judgement, which every non-sociopathic person can make for themselves, the majority of people have to take something like that on faith from the expert economists, because they do not feel qualified to make a complex judgement about the macroeconomy for themselves.  If they aren't happy with the political situation four years down the line, it's really easy for them to come to believe that what that expert economist told them was bogus, because economists usually talk nonsense as far as they're concerned, and now some new politician is saying they can get all sorts of wonderful things by expanding the state's power in such-and-such a fashion.  After all, that one economist was just incorrect, as most economists end up being about their predictions.  Turns out there's nothing wrong with making the state bigger, and hey, all sorts of good things are going to be done by expanding the state.

This doesn't make sense to me.  If people came to the conclusion that the state is inefficient and unnecessary, then they wouldn't believe an economist who told them to expand government.  You already stipulated that they oppose govt on economic grounds, so all your really saying is that they might change their mind.  Well that can happen with anything, including the view that the state is evil or immoral.

With regards to ethics, you assume that libertarian ethics are self-evident and can be made by anyone who choses to do the right thing, as if people who support the state are trying to be unethical.  The fact that even among libertarians there are serious disagreements over the ethical statuses of IP and FRB tells me that individuals ethical judgements are not always aligned.  Convincing people to oppose the state on ethical grounds then is subject to the same situation that you painted: an expert would have to explain why X is bad, and if treating X as bad turns out poorly down the road, a layman might change his mind or call the ethicist wrong.

 

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DD5 replied on Mon, Jun 20 2011 3:30 PM

Eugene:
Either you are right, or you are wrong, and the state is a necessary evil.

First of all, a necessary evil is a contradictory of terms.  

 

Second,

Rothabard is not criticizing all people, but just certain libertarians.  If Friedman believes libertarianism may be incorrect as far as its logical conclusions imply regarding the nature of the State (that it is a criminal organization), then he is not a libertarian, but a non-libertarian who simply finds libertarianism a fascinating thought experiment.

 But if he is a libertarian, as most people agree that he is,  then he must agree that the State is nothing but a bunch of thieves and murderers.  It is in his perfect individual right to not hate thieves and murderers or to discriminate between "honest" criminals who wear their proper uniforms to work, and those who wear their costumes to work (suit, tie, etc...).  And it in Rothbard's right to point this out and make an ethical judgment about this sort of libertarianism.

 

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James replied on Mon, Jun 20 2011 3:40 PM

People know that murder and theft and sexual molestation and torture are wrong.  We're not talking about the finer points here, this is basic ethics that someone has to practice in order to not be incredibly dangerous for anyone else to be around.  Just stop believing in the ghosts and the uniforms and symbols for a second and appreciate that they don't have magic powers.  When the IRS taxes, it's the same as you extorting the money, when the Army kills, it's the same as you killing someone you don't like, when the CIA tortures someone, it's the same as if you did it, when the government locks someone in a cage for years for selling coins, it's the same as you doing it...

I mean, if someone doesn't get this, do you really want to be around them?  This doesn't require expert academic study.  It's obviously wrong.  A stateless society is not going to work if people don't get that these things are not allowable, I mean seriously...

Some might say that lying is unethical.

Some might say that you will never need to lie in order to demonstrate that the state is evil.

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Eugene replied on Mon, Jun 20 2011 3:43 PM

These things are not obviously wrong. If they were, everyone would be a libertarian. Many people think the state protects the weak and the poor, this is a legitimate point of view. They just see economic exploitation as evil just as we see aggression as evil.

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Jacob:

Rothbard makes sooooooooo many cases against the State.  To say that he was irrational in that belief is absurd

 

"He didn't say it was an irrational belief. Nielsio brought in the word irrational when restating Friedman's opinion of Rothbard, but Friedman himself did not say that.

I guess this whole 'honesty' thing is hard to get."

 

So because people are taking liberties in 'explaining' other's opinions I am made, by you, to be dishonest? 

Jacob:
David Friedman is an apologist and a fake anarchist.

 

"He is a scientist. And what does a "fake anarchist" even mean?"

I figured those points were self-evident.  a fake anarchist is someone who says they are against the ultimate power of the state, but then moves to justify it in various ways.  Especially through objectivity.  One of the most vague concepts in the same sense of democracy.  In science, objectivity is imperative, yes, but in regards to philosophy it cannot be held to that account, by any standard.  If 'proving' that the state is immoral by one example is only subjective, it is impossible for anyone to characterize the state as immoral, or moral, if it is required for the 'proofs' to be objective in evaluation.

If I smoke weed and, subjectively, think there is nothing wrong with it, but you say that it is bad we are both giving subjective interpretations of the situation, yes?  So if you come in and say, "you know, i have this idea, that i got a few others to agree with me on, and were going to imprison you based on our supposedly objective evaluation of smoking weed."

There is only a ghost of objectivity involved.  and that ghost is born of subjectivity that is lauded by many.  It takes pieces to make a whole.

 

Jacob:
He does what Milton and glenn beck do and that is obfuscate a principled position on the matter.

 

"Is it "obfuscating a principle" or trying to remain honest and precise in one's arguments? His point is that Rothbard's "principles" led Rothbard to be less than truthful and manipulate his audience, because the ends justify the means (a principle Rothbard nominally rejected)."

So you are saying that Rothbard is a straight up liar and manipulator and that his 'principles' led him to be so?  and by extension that i have a warped sense of all of the things involved?

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Clayton replied on Mon, Jun 20 2011 3:53 PM

These things are not obviously wrong. If they were, everyone would be a libertarian. Many people think the state protects the weak and the poor, this is a legitimate point of view. They just see economic exploitation as evil just as we see aggression as evil.

No, they are obviously wrong. The Spanish Inquisition was obviously wrong. That didn't stop it from happening. Many very smart people of the time fully assented to the practices and goals of the Inquisition. Guantanamo Bay and extraordinary rendition are also obviously wrong. Many very smart people today fully assent to the practices and goals of the War of Terror, oops, I mean the War on Terror.

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James replied on Mon, Jun 20 2011 4:02 PM

If they were, everyone would be a libertarian. Many people think the state protects the weak and the poor, this is a legitimate point of view. They just see economic exploitation as evil just as we see aggression as evil.

So why don't they just steal from the first suitable victim they find?  They know that theft is wrong, but they have an inexplicable belief in the power of the government mechanism to make their actions right.

Most socialists aren't just common criminals, and they'd be offended if someone stole something from them.  So what makes the government magical?  Why do they have a supernatural belief in the power of a secular institution to make wrong actions right?  Won't they admit that they're just playing a game, that a "government" is a pretend concept like a "corporation" or a "trust" or a "bank", or a "church", and maybe it has utility and maybe it doesn't, but the point is that this invented play-play kid's idea of a "government" is being used as an excuse to do things that are wrong, and cannot be made right by playing pretend.

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To be fair, i eralize that Rothbard is ULTRA critical, but i've never thought of him as dishonest because of it.

I like Thomas Sowell and Rothbard really lays into him on some things that are just misunderstandings/misapplications.

But this thread is a perfect example of why anarchy is so looked down upon.  We can't agree on anything, organization for like minds is nearly impossible. haha.

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As much as I love Rothbard and MES, from my own experience with some of his sources he wasn't above fudging/twisting some of the facts to support his theories. From an earlier thread about the money supply statistics during the boom of the 1860s/1870s, Rothbard deliberately seemed to miscontrue the data as to suggest the U.S was undergoing severe monetary inflation.

http://mises.org/Community/forums/p/22997/401827.aspx#401827

Hello,

I'm starting to research into the Panic of 1873 for a college project I have. Among other economic literature, I reviewed Rothbard's "A History of Money and Banking in the United States". Upon scrutinizing his money supply statistics, I've noticed either a vague (i.e, not explicitly distinguished) or downright false money aggregate of his.

At the beginning of his talk about the Civil War, Rothbard mentions that "over the entire war, the money supply rose from $745.4 [sic] million to$1.773 billion, an increase of 137.9 percent, or 27.9 percent per annum." (p.130).

However, on page 153, Rothbard writes that "Total state and national bank notes and deposits rose from $835 million in 1865 to $1.964 billion in 1873, an increase of 135.2 percent or an increase of 16.9 percent per year." (p.153)

So what happened here? At first I suspected that Rothbard was being ambiguous by referring to the later statistic as "bank money", but later Rothbard seems to use it as his total statistic of "money supply”. Even if this wasn't the true money supply, then that means Rothbard was lobbing off roughly $1billion (and more as currency increased) in all of his subsequent monetary calculations.

Did the total money supply drop by a "cataclysmic" 50% from 1865 to 1867, was Rothbard wrong on his money supply statistic for the Civil war or his later money supply statistic, or am I missing something here?

Note that if we treat $1.964 as the money supply as he seems to do, then using his earlier estimate (1.773) the expansion over nearly ten (8) years increased by a paltry10.77%, or 1.34% per year. In a similar statistic (though with different money aggregates), Friedman states that the money stock from 1867 to 1873 increased by 1.3% per year. Although this is inflationary, one wonders how such a small increase in the money supply could have caused a very serious banking panic/business cycle in 1873 (say what you will about the subsequent recession, the actual panic was very supposedly severe).

Although still optimistic theres a way to make sense of this, I'm a little disgruntled by this mistake/ambiguity made by Rothbard. Either he just wanted to calculate a "total money supply only for the Civil War" and then proceeded to concentrate solely on bank deposits, or there is a large error in his statistics. I know he gets his money sources from the historical statistics, which I plan on consulting, but that doesn’t seem to answer his ambiguity/incorrectness. 

 

Any thoughts on these money supply statistics? Any help is appreciated.

I later did go to the library and got the exact book edition Rothbard was using.

Well I got the book, 1957 and all. I felt an air of history as I pulled it off the shelf and sifted through its yellow and fading pages.

From what I can tell, there is good news and bad news.

The good news is that Rothbard's money supply statistics add up, at least according to this book. All of his Civil War totals are obtained by adding total bank deposits, state bank notes, gold coins, silver  susidiaries, fractional currencies, other U.S currency, greenbacks,  and national bank notes.

The bank news is that judging by this book, some of the statistics are questionable, and Rothbard should be severely criticized for his misleading interpretations. The most obvious is his 1865-1873, state and bank deposits and notes increased about 16.9% per annum. From the book, this is correct, but using highly suspect statistics. It is true that state and national bank notes and deposits increased from 1865 (roughly $869) to $1.964 in 1873, an increase of 16.9% per annum. However careful inspection reveals that according to the statistics, the number of deposits did not increase really increase 16.9% per annum, but rather 50% between last two reported years (1872-1332 and 1873-1964)! My guess is that the bank money (and to a greater extent total money supply) did not explode in one year, but rather the amount of banks voluntarily reported their deposits to the state banking authoritiy. It even says in the forward to the particular section Rothbard used that "Prior to 1896, figures shown here include all national banks and all State banks that voluntarily reported to Statebanking departments in the United States..". My guess is that with the Panic in 1873 and more banks under distrress, they contacted the state authorities moreso than before.

Taking out 1873, and just taking the totals from 1865 to 1872 (for whatever they are worth, considering that they are probably low due to faulty reports), the annual percentage increase was much lower, roughly 4% per year! For Rothbard to report these statistics that bank money increased 17% per annum when it reality it seems to have come only from 1)the last year 2)more likely bad statistics is downright sloppy and poor research.

Regardless of the factual accuracy of the Historical Statistics (I'm extremely hesistant to see bank totals increasing by 50% in one year), even with the statistics he is using they clearly did not increase 17% per year, as Rothbard is claiming.

The problem is he isn't really stating that the annual expansion in bank deposits wasn't 16.9%. It'd be one thing if the yearly averages were 10, 20, 12, 15, etc etc, which averaged out to 16.9%. But in the last year when you have a 50% increase lifting an otherwise 7-8 year statistical average of 4%, and then claiming that there was an average of 17% bank credit expansion,it  is very misleading and  resembles an outlier. In addition, it seems likely that the overall expansion wasn't that great and there were less banks reporting in the late 1860s/early 1870s their financial conditions, which means the bank deposit figures for that time period (1860s) was abnormally low, giving the illusion of great bank credit growth than what actually occured. Either the statistics are 1) Entirely truthful,which would give great doubt as to why no one has written about one of the U.S' greatest yearly MS expansions 2)Not accurate, and Rothbard was misleading to use these aggregates and conducted poor research. Even if he wanted to use these numbers, he should have at least written in a footnote that the totals weren't accurate, especially the 16.9% figure he was using.

 

The thread (and my criticisms of Rothbard) were never really responded to. Based on my gathering of the facts, Rothbard did fudge some numbers.

 

 

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Esuric replied on Mon, Jun 20 2011 6:03 PM

 Thoughts?

bah humbug!

 First of all, a necessary evil is a contradictory of terms.  

Absolutely not. Sometimes your options suck, and you must choose one that is relatively preferable. For example: I can let my cancer eat away at my brain and surely die, or I can take this poison (chemo therapy) and maybe survive. 

 

[Edited]

"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."

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This is disheartening.

So why don't we scower that book and find other inconsistencies?  I don't have a 1957 copy, obviously.  But i am left wondering if Salerno edited it or just if this has been noticed at all since the 1957 copy.  I am looking in a copy of the 2002 edition and am gonna have to read a chunk of it to find that as the pages numbers aren't near each other (43 page introduction, dimensions, etc.) and the book isn't necessarily time consistent...  Does the LvMI know this?  Seems like bad policy to promote false statistics. 

 

EDIT: I'm dumb, i was looking at P130 looking for the p 153 stats and they are as are.

 

I've been meaning to read what Rothbard said about Strauss, i guess i know now.

 

EDIT: "The problem is he isn't really stating that the annual expansion in bank deposits wasn't 16.9%. It'd be one thing if the yearly averages were 10, 20, 12, 15, etc etc, which averaged out to 16.9%. But in the last year when you have a 50% increase lifting an otherwise 7-8 year statistical average of 4%, and then claiming that there was an average of 17% bank credit expansion,it  is very misleading and  resembles an outlier. In addition, it seems likely that the overall expansion wasn't that great and there were less banks reporting in the late 1860s/early 1870s their financial conditions, which means the bank deposit figures for that time period (1860s) was abnormally low, giving the illusion of great bank credit growth than what actually occured. Either the statistics are 1) Entirely truthful,which would give great doubt as to why no one has written about one of the U.S' greatest yearly MS expansions 2)Not accurate, and Rothbard was misleading to use these aggregates and conducted poor research. Even if he wanted to use these numbers, he should have at least written in a footnote that the totals weren't accurate, especially the 16.9% figure he was using."

There could be many reasons for this error.  I don't think he was lying.  He states clearly that this is the result of pyramiding of state bank deposits on top of national bank deposits and it doesn't explicitly say that this happened in one year.  It says "...after 1870..." not in 1872.  Also, he says, "From then on [May 1871] paper money would be held consonant with the U.S. Constitution." (p. 153)  Although, his stating it as 'percent per year' could be considered dubious and was very generous to his argument.

If we are to assume that the statistics prior to May 1871 (the under-reporting) would not have counted all of the paper money as some states had made it illegal. (p. 152).  And my guess is that the unreported money that was being counted after 1871 was so because the state banks had a new Federal law forcing them to redeem all of the paper they had and were using. (Kind of an argument that if the Federal government would have stayed out of it there would never have been the statistical explosion that Rothbard is exploiting, which ironically Rothbard would have wanted. haha)  To me this could be an explantion as to the dramatic rise that Rothbard was seeing in total money supply.  Again, he could also have been following, or interpreting, again in a possibly conspicuous manner, along with the Federal law.  But lying i don't think.

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Ludwig von Mises:
Since nobody is in a position to substitute his own value judgments for those of the acting individual, it is vain to pass judgment on other people’s aims and volitions. No man is qualified to declare what would make another man happier or less contented. The critic either tells us what he believes he would aim at if he were in the place of his fellow; or, in dictatorial arrogance blithely disposing of his fellow’s will and aspirations, declares what condition of this other man would better suit himself, the critic.

I think this is pretty topical.

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Coase replied on Mon, Jun 20 2011 7:17 PM

I'm rather surprised that people are surprised at the news that Rothbard was a liar. Didn't he admit as much himself?

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Clayton replied on Mon, Jun 20 2011 7:18 PM

@BlackNumero: I'd like to hear someone like Bob Murphy weigh in on this issue. Rothbard wrote a ton so it is possible he made mistakes but that's not the same thing as lying. Furthermore, Austrian Business Cycle Theory is not an empirical theory (not derived to fit historical events), it is derived praxeologically from first principles. A recession which affects more or less all sectors of the economy is itself evidence that inflation is occuring, somewhere. As you note, these records are not rigorous so Rothbard may have made a mistake if he simply copy/pasted numbers from the book (as I said, I would want to hear from somebody like Murphy on this before I concluded that's what happened). However, the numbers in the book may be useful as showing evidence of inflationary expansion, even if they do not prove or even precisely quantify the inflation that was occurring.

Clayton -

http://voluntaryistreader.wordpress.com
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z1235 replied on Mon, Jun 20 2011 7:43 PM

Bardock:

I found this post on David Friedman's blog to be interesting:

My standard example was an exchange long ago, after a talk of his in which he claimed that Reagan did not really cut government and offered as evidence the increase in the nominal federal budget. I pointed out that, while his conclusion might for all I knew be true, his evidence combined whatever growth had occurred in the real size of the federal government with the effect of inflation over the period.

His response was that that was all right; because Reagan was responsible for the inflation, it was appropriate to use it to make his performance look worse. 

If this really happened then, in this case, Rothbard was wrong and Friedman was right. Regardless of who caused the inflation, one can't selectively include/exclude it to make their point appear stronger. 

 

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"My standard example was an exchange long ago, after a talk of his in which he claimed that Reagan did not really cut government and offered as evidence the increase in the nominal federal budget. I pointed out that, while his conclusion might for all I knew be true, his evidence combined whatever growth had occurred in the real size of the federal government with the effect of inflation over the period.

His response was that that was all right; because Reagan was responsible for the inflation, it was appropriate to use it to make his performance look worse. "
 
So...he wasn't wrong?  This seems like a politcal motivation not really a scholarly one.  So what if Rothbard thought Reagan could have vetoed the bills that Congress passed that ran huge deficits as he said he would cut spending?  The effect of inflation can easily be correlated with the growth in government debt.  And the president can prevent the federal debt from growing.  I think Rothbard's devil faced "power elite" outlook was chiming in on one of his shoulders saying..."You know Reagans a puppet for those bankers and GHWB.  He acquiesced  to the Trilateralists and the CFR," and his blue pacifist side was saying..."pretty much."

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DD5 replied on Mon, Jun 20 2011 9:20 PM

Esuric:
For example: I can let my cancer eat away at my brain and surely die, or I can take this poison (chemo therapy) and maybe survive. 

Why is chemo therapy evil when used as a therapeutic technique?   Because it destroys cells?  So what!  So does going under the knife for surgery. Is that evil too?

 

 

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