Saturday, October 03, 2020

Rothbard, Reagan, and Rand

I recently wrote a chapter on Murray Rothbard for a section on libertarianism in a book I am working on. My central argument was that, because he viewed political conflict as a war between good and evil rather than a conversation among people about their differing beliefs, he was more interested in whether an argument reached the correct conclusion than whether it was true: All is fair in love and war. My first example was an exchange we had during a talk he gave. I wrote that that survived only in my memory, then went on to give other examples from his published work. 

I was wrong. Yesterday I downloaded from the Mises Institute the complete files of the Libertarian Forum, a magazine that Rothbard edited, initially with Karl Hess, from 1969 to 1984. After reading the article I was looking for, one by Rothbard relevant to a different chapter, I did a search on my name and found, among other things, an article by Rothbard clearly written after our exchange. In it he made precisely the same (bad) argument he had made in the talk, added that I and several other people had objected to it, and gave his defense.

The article is  “Are We Being Beastly to the Gipper? Part I," Libertarian Forum XVI Number 1, February 1982. The relevant volume is webbed here. Rothbard's thesis in  it is that, far from cutting government expenditure, Reagan increased it. He wrote:

In fiscal 1980, the last full year of the Carter regime, he of Big Spending and modern liberalism, total federal government spending was $579 billion. Originally, the Reagan projection of his own spending in the first full year of his regime, fiscal 1982, was $695 billion - thus keeping federal spending below the magic $700 billion mark. This "massive" and "historic" spending cut, dear reader, amounted to a 10% annual increase over the budget in the last days of the Bad Old Carter regime.

The problem with this, as should be obvious to any economist, is that these are nominal, not real, figures. From 1980 to 1982, prices increased by about 21%, so the real change implied by those numbers, the change in the quantity of goods and services consumed by government, is not +20% but -1%.

Rothbard went on to point out that the estimate had later increased and was likely to increase even more by the time the year was over. Using the new, higher, estimate for 1982 expenditure, the increase in expenditure was larger than the increase in prices, so his basic conclusion was correct. His argument was not. By using nominal instead of real figures, he had made the increase appear much larger than it actually was.

His response to my pointing that out was that the inflation was Reagan's fault, so it was appropriate to use it to make Reagan look bad. 

The expanded version in the article:

David Friedman, David Henderson, and other "libertarian" apologists for Reaganism have protested that such an attack is unfair since inflation can reduce the "real" level of government spending, as corrected for inflation. But while it is perfectly valid to correct yours and my incomes for inflation to see how well off we really are, it is impermissible to do this for the federal government, which, by its printing of counterfeit money, is itself responsible for the inflation. It is truly bizarre to try to excuse the growth of Reagan spending by pointing to inflation's reducing the "real" level of spending, for in that case, we should hope for an enormous amount of inflation and hail Reagan's spending "reductions" if such hyperinflation came about.  To take a deliberately extreme example to highlight the point: Suppose that the Reagan Administration suddenly doubled the money supply, thereby doubling or tripling the price level next year. Should we then hail Reagan for "cutting" "real" government spending by one-half or two-thirds?

Note the word "unfair" in the second line. The issue was not whether he was being fair to Reagan but whether he was being honest with his audience. Taking his argument seriously, if Reagan doubled the price level we should blame him for inflation, blame him for doubling government expenditure, and praise him for doubling the U.S. economy. I doubt that would have been his response.

Part of what struck me when I found the article was the implication of his publishing it. That implies either that he really believed his own argument, however implausible it seems to me, or that he believed his readers were sufficiently under his spell to accept his arguments, however bad, if given with sufficient confidence and passion.


Which brings me to Ayn Rand. Reading that article and others, I was struck by how similar Rothbard's approach was to Rand's. They disagreed on some issues, most notably anarchism and foreign policy. But they were both arrogantly certain of their positions, argued them with highly emotive language, believed that their natural rights position could be rigorously derived by reason along Aristotelian lines. Both saw political conflict as fundamentally good against evil. Both expected their followers to accept their current line without question.


Early on, Rothbard was an admirer or Rand, joining her circle and writing effusive praise of Atlas Shrugged. That did not last. He left her circle, ceased writing of her with admiration, eventually wrote a one-act play satirizing her and her circle.

There was not enough room for two captains in one boat.


So far as I know, nobody has yet written a book about Rand and Rothbard, their similarities, differences, and interactions. Someone should.


A Country Farmer said...

Instead of discussing inflation adjustment, wouldn't it be better to look at government expenditure as a percent of GDP? That would seem to control for all factors.

David Friedman said...

That might be even better, but I think it would have been easier for Rothbard to argue against that version. If government is still doing the same amount of stuff as before while the rest of us have gotten a little richer, it isn't clear if you can say that the size of government has been reduced.

SB said...

The problem with government expenditure divided by GDP is that GDP varies a lot from year to year, which can induce wild swings into the ratio.

Furthermore, there's a Keynesian argument (which you may or may not agree with, but it's reasonable enough to be worth debating) that government expenditure should be countercyclical: when GDP goes down, government expenditure should go up to stimulate the economy, and when GDP goes up, government expenditure should go down to cool off the economy. If a government actually follows this advice, it makes the "wild swings" mentioned above even wilder.

SB said...

As I recall, Reagan ran against Carter complaining of something he called the "misery index", which was the sum of inflation rates and interest rates. Which made no sense: for most purposes what matters is the difference between inflation rates and interest rates. But it was good politics.

LH said...


The misery index was the sum of an inflation rate and an unemployment rate - quite different.

Anonymous said...

You've probably read it-- but Radicals for Capitalism goes into some detail about the Rothbard/Rand relationship.

George Washington said...

Mr.Friedman, thank you for your works and prudence in judgement, like your great father.
I think Rothbard is too overvalued whithin among hard core libertarians.