Power and Market, Chapter 1 Section 1

by Adam Alcorn

Man, Economy, and State with Power and Market

My goal here is to condense Power and Market into a series of short posts that allows you all to absorb the valuable information it contains, in a time saving manner, and to produce an archive for future readers. As always, I’m open to suggestions and insights!

– Adam Alcorn

Chapter 1, Part 1 of 2. Power and Market by Murray Rothbard

If we had to guess the way in which Rothbard would have begun his analysis of power and market, I would guess something along the lines of a chapter entitled “Defense Services on the Free Market,” and we would have been right. So here it goes.

Intro to the Intro…

Fittingly, Rothbard begins by exposing mainstream economists as negligent in their slighting of the “deeper implications” of the free market economy as would exist in a truly free economy. Mainstream economists have refused to do so, according to Rothbard. This is where Power and Market must come in, it must be the text “to inquire into the conditions and the nature of the property ownership that would obtain in the free society.” Rothbard then identifies the certainly non-controversial implication that a system of property rights is essential to an economists understanding of the structure of the free market.

What Property Structure Does he Mean?

Economists have “almost invariably and paradoxically” worked by a sort of naïve, uninvestigated law of economics that dictates the use of government force to keep the market free. Demonstrating brilliance in debate Rothbard here rephrased all of mainstream economics thereby revealing its study of “free markets” to have been an actual contradiction in terms. A study of government economics and unfree markets.

Why is this interesting, you might ask?

A supply of defense services on the free market would mean maintaining the axiom of the free society, namely, that there be no use of physical force except in defense against those using force to invade person or property. This would imply the complete absence of a State apparatus or government; for the State, unlike all other persons and institutions in society, acquires its revenue, not by exchanges freely contracted, but by a system of unilateral coercion called “taxation.”

Because mainstream economists do not study free markets!

The Theoretical Foundations for Free Market Defense Services and Common Objections

Providing a brief overview of a primarily Lockean homesteading/exchange model of property rights, Rothbard asserts that it is this “…firm property right in one’s own self…” that results in the “property structure” foundational to free markets. In order to provide private defense services the above principles must be upheld in a free society.

“That there be no use of physical force except in defense against those using force to invade person or property.”

The State is obviously not qualified, so what is? Rothbard provides two conditions. These institutions must be voluntarily funded, not tax supported, and they must not claim any “compulsory monopoly of police or judicial protection.”

Rothbard is simply demonstrating that all goods and services are subject to the failures of central planning and government monopoly, law and order are no exceptions.

“Defense services, like all other services, would be marketable and marketable only.” [Emphasis Added] – Murray N. Rothbard, Power and Market

Rothbard demonstrates the illegitimacy of laissez-faire advocates based on this theoretical concept. “For a laissez-faire government would necessarily have to seize its revenues by … (taxation).”

Previewing his refutations of laissez-faire advocates, Rothbard responds to the common objection that “since a free market of exchanges presupposes a system of property rights, therefore the State is needed to define and allocate the structure of such rights.” As derived above from the self-ownership principle the development of a system of property rights “can and will be done by the use of reason and through market processes themselves;” and with typically Rothbardian wit, he continues “any other allocation or definition would be completely arbitrary and contrary to the principles of the free society.”

Another common objection is that the service of defense is so crucial to human existence that it must be State produced. Rothbard identifies this as an extension of the mistake made my many classical economists, to “consider goods and services in terms of large classes.” Rothbard refutes this notion with the modern economic understanding of marginal units of goods and services. Any good or service could be a precondition of a modern market if viewed in a macro sense.

“Is not land room vital, or food for each participant, or clothing, or shelter? Can a market long exist without them? And what of paper…Must all these goods and services therefore be supplied by the State and the State only?”

The following refutation is in regards to the laissez-faire advocates objection that competing legal systems are impractical. However Rothbard points out the constant interactions, judicial and otherwise between citizens of different nations.

“The Argentinian court, and its decision is recognized by the Ceylonese courts – and vice versa if the Ceylonese is the aggrieved party. Although it is true that separate nation-States have warred interminably against each other, the private citizens of various countries, despite widely differing legal systems, have managed to live together in harmony without having a single government over the.”

Accepting this logic, backed up by historical reality leads one to Rothbard’s conclusion,

“that while laissez-faireists should by the logic of their position, be ardent believers in a single unified world government, so that no one will live in a state of ‘anarchy’ in relation to anyone else, they never are.”

That gets us through about half of Chapter 1.

Next Installment: What Might a Free Market Defense System Look Like? Chapter 1, Part 2

– Adam Alcorn