Rothbard on Mises’ Utilitarianism: Why the Systems of Mises and Rothbard both Collapse

In a previous post (see “Was Mises a Socialist?: Why Mises Refutes Himself on Government Intervention”), I reviewed the critique of Mises’s Human Action by George J. Schuller (1950; 1951) and his exchange with Rothbard (1951).

It appears that, after George J. Schuller’s (1951) reply to Rothbard, the latter realised that there was a devastating contradiction in Mises’ thought. In Rothbard’s book The Ethics of Liberty (first published in 1982), Rothbard makes a remarkable concession on government intervention:

“What can Mises reply to a majority of the public who have indeed considered all the praxeological consequences, and still prefer a modicum–or, for that matter, even a drastic amount—of statism in order to achieve some of their competing goals? As a utilitarian, he cannot quarrel with the ethical nature of their chosen goals, for, as a utilitarian, he must confine himself to the one value judgment that he favors the majority achieving their chosen goals. The only reply that Mises can make within his own framework is to point out that government intervention has a cumulative effect, that eventually the economy must move either toward the free market or toward full socialism, which praxeology shows will bring chaos and drastic impoverishment, at least to an industrial society. But this, too, is not a fully satisfactory answer. While many or most programs of statist intervention—especially price controls—are indeed cumulative, others are not. Furthermore, the cumulative impact takes such a long time that the time-preferences of the majority might well lead them, in full acknowledgment of the consequences, to ignore the effect.” (Rothbard 2002: 211–212)

Rothbard comes dangerously close to conceding that government intervention does not necessarily lead to chaos or socialism, just as Schuller (1951: 190) had argued. One might also note that Rothbard states that the “cumulative impact” of some intervention takes a long time, which makes his case even weaker. For example, how long does it take? (5 years? 10 years? 50? 100? 200?).

But Rothbard makes a perfectly valid point against Mises’ utilitarianism as well, and how Mises cannot possibly provide a convincing counterargument against state intervention once the cost and benefits are weighed and such interventions have been endorsed by democratic vote:

The point here is that Mises, not only as a praxeologist but even as a utilitarian liberal, can have no word of criticism against these statist measures once the majority of the public have taken their praxeological consequences into account and chosen them anyway on behalf of goals other than wealth and prosperity. Furthermore, there are other types of statist intervention which clearly have little or no cumulative effect, and which may even have very little effect in diminishing production or prosperity (Rothbard 2002: 213) ….

“Thus, while praxeological economic theory is extremely useful for providing data and knowledge for framing economic policy, it cannot be sufficient by itself to enable the economist to make any value pronouncements or to advocate any public policy whatsoever. More specifically, Ludwig von Mises to the contrary notwithstanding, neither praxeological economics nor Mises’s utilitarian liberalism is sufficient to make the case for laissez faire and the free-market economy. To make such a case, one must go beyond economics and utilitarianism to establish an objective ethics which affirms the overriding value of liberty, and morally condemns all forms of statism” (Rothbard 2002: 214).

The full implications of this passage are profound. Rothbard is rejecting Mises’ utilitarian case for laissez faire, and saying that Mises’ praxeology does not in itself allow any Austrian to advocate any public policy whatsoever. A Misesian cannot justify an economic policy as an actual public policy just because it can (allegedly) be shown to be an inference of praxeology.

So Rothbard abandoned Mises’ utilitarianism and instead made the case for anarcho-capitalism and laissez faire a moral issue, which could be justified by an objective moral theory. This was a fundamentally important difference between Rothbard and Mises.

Now Rothbard called himself an Aristotelian neo-Thomist, and held an objective natural law/natural rights view of ethics. He proceeded to make the case for a free market economy on objective moral grounds based on natural law (for example, his nonaggression axiom was justified by appealing to natural law).

So we can easily and totally refute Rothbard simply by showing his objective natural law/natural rights theory is untenable.

Frankly, that is not difficult. I will devote a larger post to it soon. Here philosophy of ethics is important, and there are very powerful arguments against the idea of natural law or natural rights, which even some libertarians accept (indeed Mises himself rejected natural law precisely because the case for it is utterly unconvincing). I will note here that one of the serious objections to natural law theory is that its main historical justification was the belief in a “divine order” and a divinely-created human nature that makes us conform to “natural law.” In the early modern period, rationalist European philosophers like Grotius tried to defend natural law theory by removing God and the previous supernatural justification for it. However, in doing so, they destroyed the only convincing explanation for belief in natural law (Tawney 1998: xxv-xxvi).

Anyone who rejects natural law has no reason to accept Rothbard’s ethics or his moral case for anarcho-capitalism derived from it. And, once the ethical case for Rothbard’s system is destroyed, that leaves Mises’ severely flawed system which must also be rejected, as it simply cannot provide any rational objection to intervention on moral or pragmatic grounds.

The case for the praxeological Austrian economics of Mises or Rothbard is a house built on sand.

BIBLIOGRAPHY

Rothbard. M. N. 1951. “Mises’ ‘Human Action’: Comment,” American Economic Review 41.1: 181–185.

Rothbard, M. N. 2002. The Ethics of Liberty, New York University Press, New York, N.Y. and London.

Schuller, G. J. 1950. Review of Human Action: A Treatise on Economics by Ludwig von Mises, American Economic Review 40.3: 418–422.

Schuller, G. J. 1951. “Mises’ ‘Human Action’: Rejoinder,” American Economic Review 41.1: 185–190.

Tawney, R. H. 1998. Religion and the Rise of Capitalism, Transaction, New Brunswick, N.J. and London.