Power & market: government and the economy

348 Pages·2006·1.54 MB·English

by  Rothbard, Murray Newton

&
P M
OWER ARKET
GOVERNMENT AND THE ECONOMY
MURRAY N. ROTHBARD
FOURTH EDITION
Ludwig
von Mises
Institute
AUBURN, ALABAMA
Front cover: The Money Lendersby Quentin Massys or Metsys (c. 1466–1530).
The picture hangs in the Museo de Bellas Artes, Bilbao, Spain. Permission was
obtained from The Bridgeman Art Library (IND54176).
Copyright © 1970 by Institute for Humane Studies
Copyright © 1977 by Institute for Humane Studies, second edition
Copyright © 2004 by Ludwig von Mises Institute, third edition, Scholar’s Edition,
Man, Economy, and State with Power and Market
Copyright © 2006 by Ludwig von Mises Institute, fourth edition
All rights reserved. Written permission must be secured from the publisher to
use or reproduce any part of this book, except for brief quotations in critical
reviews or articles.
Published by the Ludwig von Mises Institute,
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ISBN: 1-933550-05-8
13-Digit ISBN: 978-1-933550-05-3
To
Ludwig von Mises
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Young, Robert S. Young
CONTENTS
PREFACE TO THE FOURTH EDITION . . . . . . . . . . . . . . . . . . . . . . . ix
CHAPTER 1—DEFENSE SERVICES ON THE FREE MARKET . . . . . .1
CHAPTER 2—FUNDAMENTALS OF INTERVENTION
1. Types of Intervention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2. Direct Effects of Intervention on Utility. . . . . . . . . . . . . . 15
A. Intervention and Conflict . . . . . . . . . . . . . . . . . . . . . . . 15
B. Democracy and the Voluntary. . . . . . . . . . . . . . . . . . . . 19
C. Utility and Resistance to Invasion. . . . . . . . . . . . . . . . . 21
D. The Argument from Envy. . . . . . . . . . . . . . . . . . . . . . . 22
E. Utility Ex Post. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
CHAPTER 3—TRIANGULAR INTERVENTION
1. Price Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2. Product Control: Prohibition. . . . . . . . . . . . . . . . . . . . . . . 40
3. Product Control: Grant of Monopolistic Privilege. . . . . . 43
A. Compulsory Cartels. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
B. Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
C. Standards of Quality and Safety . . . . . . . . . . . . . . . . . . 50
D. Tariffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
E. Immigration Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 61
F. Child Labor Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
G. Conscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
H. Minimum Wage Laws and Compulsory
Unionism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
I. Subsidies to Unemployment . . . . . . . . . . . . . . . . . . . . . 69
J. Penalties on Market Forms . . . . . . . . . . . . . . . . . . . . . . 69
K. Antitrust Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
L. Outlawing Basing-Point Pricing. . . . . . . . . . . . . . . . . . 75
M. Conservation Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
vii
viii Power and Market: Government and the Economy
N. Patents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
O. Franchises and “Public Utilities” . . . . . . . . . . . . . . . . . 92
P. The Right of Eminent Domain. . . . . . . . . . . . . . . . . . . 93
Q. Bribery of Government Officials . . . . . . . . . . . . . . . . . 95
R. Policy Toward Monopoly . . . . . . . . . . . . . . . . . . . . . . . 97
Appendix A: On Private Coinage. . . . . . . . . . . . . . . . . . . . . . 98
Appendix B: Coercion and Lebensraum. . . . . . . . . . . . . . . . . 100
CHAPTER 4—BINARY INTERVENTION: TAXATION
1. Introduction: Government Revenues
and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
2. The Burdens and Benefits of Taxation
and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
3. The Incidence and Effects of Taxation. . . . . . . . . . . . . . . 110
Part I: Taxes on Incomes . . . . . . . . . . . . . . . . . . . . . . . . . 110
A. The General Sales Tax and the
Laws of Incidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
B. Partial Excise Taxes; Other Production Taxes . . . . . . 116
C. General Effects of Income Taxation. . . . . . . . . . . . . . 118
D. Particular Forms of Income Taxation. . . . . . . . . . . . . 125
(1) Taxes on Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
(2) Corporate Income Taxation. . . . . . . . . . . . . . . . . . 125
(3) “Excess” Profit Taxation . . . . . . . . . . . . . . . . . . . . 127
(4) The Capital Gains Problem . . . . . . . . . . . . . . . . . 128
(5) Is a Tax on Consumption Possible?. . . . . . . . . . . . 134
4. The Incidence and Effects of Taxation. . . . . . . . . . . . . . . 137
Part II: Taxation on Accumulated Capital. . . . . . . . . . . . 137
A. Taxation on Gratuitous Transfers:
Bequests and Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
B. Property Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
C. A Tax on Individual Wealth . . . . . . . . . . . . . . . . . . . .144
5. The Incidence and Effects of Taxation. . . . . . . . . . . . . . . 145
Part III: The Progressive Tax. . . . . . . . . . . . . . . . . . . . . . 145
6. The Incidence and Effects of Taxation. . . . . . . . . . . . . . . 150
Part IV: The “Single Tax” on Ground Rent . . . . . . . . . . 150
7. Canons of “Justice” in Taxation . . . . . . . . . . . . . . . . . . . . 168
A. The Just Tax and the Just Price. . . . . . . . . . . . . . . . . . 168
B. Costs of Collection, Convenience, and Certainty . . . 170
Contents ix
C. Distribution of the Tax Burden. . . . . . . . . . . . . . . . . . 172
(1) Uniformity of Treatment. . . . . . . . . . . . . . . . . . . . 172
a. Equality Before the Law: Tax Exemption. . . . . 172
b. The Impossibility of Uniformity . . . . . . . . . . . 175
(2) The “Ability-to-Pay” Principle. . . . . . . . . . . . . . . 178
a. The Ambiguity of the Concept. . . . . . . . . . . . . 178
b. The Justice of the Standard . . . . . . . . . . . . . . . 181
(3) Sacrifice Theory. . . . . . . . . . . . . . . . . . . . . . . . . . . 185
(4) The Benefit Principle . . . . . . . . . . . . . . . . . . . . . . 190
(5) The Equal Tax and the Cost Principle. . . . . . . . . 194
(6) Taxation “For Revenue Only”. . . . . . . . . . . . . . . . 198
(7) The Neutral Tax: A Summary. . . . . . . . . . . . . . . . 198
D. Voluntary Contributions to Government. . . . . . . . . . 199
CHAPTER 5—BINARY INTERVENTION: GOVERNMENT
EXPENDITURES
1. Government Subsidies: Transfer Payments. . . . . . . . . . . 207
2. Resource-Using Activities: Government
Ownership versus Private Ownership . . . . . . . . . . . . . . . 213
3. Resource-Using Activities: Socialism. . . . . . . . . . . . . . . . 226
4. The Myth of “Public” Ownership . . . . . . . . . . . . . . . . . . 230
5. Democracy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Appendix: The Role of Government Expenditures
in National Product Statistics . . . . . . . . . . . . . . . . . . . . . 246
CHAPTER 6—ANTIMARKET ETHICS: A PRAXEOLOGICAL
CRITIQUE
1. Introduction: Praxeological Criticism of Ethics. . . . . . . . 251
2. Knowledge of Self-Interest: An Alleged
Critical Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
3. The Problem of Immoral Choices. . . . . . . . . . . . . . . . . . 257
4. The Morality of Human Nature . . . . . . . . . . . . . . . . . . . 260
5. The Impossibility of Equality. . . . . . . . . . . . . . . . . . . . . . 262
6. The Problem of Security . . . . . . . . . . . . . . . . . . . . . . . . . 267
7. Alleged Joys of the Society of Status . . . . . . . . . . . . . . . . 269
8. Charity and Poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
9. The Charge of “Selfish Materialism”. . . . . . . . . . . . . . . . 275
10. Back to the Jungle? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
x Power and Market: Government and the Economy
11. Power and Coercion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280
A. “Other Forms of Coercion”: Economic Power . . . . . 280
B. Power Over Nature and Power Over Man. . . . . . . . . 283
12. The Problem of Luck. . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
13. The Traffic-Manager Analogy . . . . . . . . . . . . . . . . . . . . . 288
14. Over- and Underdevelopment . . . . . . . . . . . . . . . . . . . . . 288
15. The State and the Nature of Man . . . . . . . . . . . . . . . . . . 289
16. Human Rights and Property Rights. . . . . . . . . . . . . . . . . 291
Appendix: Professor Oliver on Socioeconomic Goals. . . . . . 294
A. The Attack on Natural Liberty. . . . . . . . . . . . . . . . . . 295
B. The Attack on Freedom of Contract. . . . . . . . . . . . . . 298
C. The Attack on Income According to Earnings. . . . . . 301
CHAPTER 7—CONCLUSION: ECONOMICS AND PUBLIC POLICY
1. Economics: Its Nature and Its Uses. . . . . . . . . . . . . . . . . 311
2. Implicit Moralizing: The Failures
of Welfare Economics. . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
3. Economics and Social Ethics . . . . . . . . . . . . . . . . . . . . . . 317
4. The Market Principle and the Hegemonic Principle. . . . . 319
INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325
P F E
REFACE TO THE OURTH DITION
DIRECTIONS FOR USE: IF YOU hate the state, read this book. If
you love the state, read this book! Students, educated laymen,
and academics can all profit from Power and Market. In this vol-
ume, Murray N. Rothbard uses positive economics to analyze
various schemes and proposals to alter or eliminate market out-
comes. Where government supporters come up with numerous
reasons why government “needs” to do this or that, Rothbard
puts constraints on people’s political fantasies. He shows how
the state is not a benign entity that can easily fix problems in the
world. Rather, the state is an imperfect and inherently coercive
apparatus.
Power and Market, now 35 years after its original publication,
is still one of the most systematic economic analyses of govern-
ment intervention around. Rothbard’s principles treatise Man,
Economy, and Statedescribes the economics of market exchange;
Power and Marketdescribes the economics of government inter-
vention.1 Rothbard makes it clear that economics is a value free
science that provides no ultimate ethical judgments, but he also
points out that economics can be used to criticize certain posi-
tions: “If an ethical goal can be shown to be self-contradictory
and conceptually impossible of fulfillment, then the goal is clearly
1Rothbard originally wrote this volume as the final third of the 1,500-
page manuscript for Man, Economy, and State. The length of the manu-
script and the nonmainstream political conclusions in his analysis of gov-
ernment were too much for some, however, so Man, Economy, and State
and Power and Market were published as separate volumes in 1962 and
xi